"Unfair Foreign Taxes" that could trigger Sec 899 were removed

The OBBB Act identifies three primary examples of “unfair foreign taxes” that could trigger Section 899. These taxes are viewed by U.S. lawmakers as discriminatory or extraterritorial measures that disproportionately impact U.S. companies operating abroad. Sec 899 was remove3d from the final version of the “One Big Beautiful Bill Act” that was enacted in July 2025. 

The taxes specifically targeted by Section 899 include:

• The Undertaxed Profits Rule (UTPR): A component of the OECD’s Pillar 2 global minimum tax agreement, the UTPR is designed to ensure that multinational corporations (MNCs) pay at least a minimum 15% tax on their earnings. Section 899 targets the UTPR because U.S. officials argue it could allow other countries to tax the U.S. profits of U.S. companies that have a low domestic tax burden.
• Digital Services Taxes (DSTs): Imposed by countries like Austria, Canada, France, Italy, Spain, Turkey, and the United Kingdom, DSTs are levied on the gross revenue of large digital companies, most of which are American tech firms. The U.S. views these taxes as unfairly targeting U.S. businesses and departing from traditional profit-based taxation.
• Diverted Profits Taxes (DPTs): Similar to DSTs, DPTs are a type of tax designed to target profit shifting by MNCs. The U.S. considers these taxes to be another example of a discriminatory foreign tax practice. 

Following negotiations and a tax agreement with G7 countries in June 2025, the controversial Section 899 targeting “unfair foreign taxes” was removed from the One Big Beautiful Bill Act before it was signed into law. Therefore, there are no tax consequences under Section 899 for individuals or corporations. 

Prior to its removal, the proposed tax consequences of Section 899 included: 

 

• Increased tax rates: Foreign persons from countries with “unfair foreign taxes” would have faced a progressive increase in U.S. tax rates on various types of income, including fixed, determinable, annual, or periodical (FDAP) income (such as dividends and interest) and effectively connected income (ECI).
• Expansion of the Base Erosion and Anti-Abuse Tax (BEAT): The “Super BEAT” provisions would have broadened the reach of the BEAT by eliminating the $500 million gross receipts threshold for certain U.S. corporations, making the tax applicable to smaller entities majority-owned by foreign persons from offending countries.
• Override of tax treaties: Section 899 was written to override the lower tax rates found in many U.S. income tax treaties, which would have increased the tax burden on residents of affected countries.
• Loss of foreign government exemptions: Foreign governmental entities, including sovereign wealth funds, from countries imposing unfair taxes would have lost their exemption from U.S. tax on passive income.