House GOP members on Thursday announced they would remove a retaliatory tax
The change follows a request by Treasury Secretary Scott Bessent, who said a newly struck understanding on a global tax deal makes it unnecessary, according to a joint statement by House Ways and Means Committee Chairman Jason Smith, R-Mo., and Senate Finance Committee Chairman Mike Crapo, R-Idaho.
“At the request of Secretary Bessent and in light of this joint understanding to preserve U.S. tax sovereignty and allow U.S. tax laws to co-exist with the Pillar 2 regime, we will remove proposed tax code Section 899 from the One Big, Beautiful Bill Act, and we look forward to active engagement with Treasury on these important issues,” they wrote. “Republicans stand ready to take immediate action if the other parties walk away from this deal or slow walk its implementation.”
Section 899 — dubbed a “revenge tax” by critics — aims to deter foreign tax policies the U.S. considers discriminatory.
Under Section 899, foreign banks operating in the U.S. but incorporated in countries the current administration sees as having unfair tax rules — like digital service taxes or diverted profits taxes — would have faced as high as 20% in additional corporate taxation rate on both profits, or dividends or service fees U.S.-based branches paid to parent companies overseas. Critics of the measure have argued the provisions would punish countries and harm foreign banks’ ability to lend.
While industry advocates see 899’s removal as positive, GOP lawmakers will be left with a more costly price tag without the measure. The tax would have raised as high as an estimated $52 billion, further complicating GOP efforts to fund the sweeping bill after the Senate parliamentarian ruled several other provisions out of bounds.
The Institute of International Bankers praised Republican leaders on Thursday for dropping Section 899, calling it productive for U.S. financial markets and international investment.
“U.S. markets are stronger and more resilient with international investments and these efforts will ensure that the U.S. economy continues to thrive,” said IIB CEO Beth Zorc in a release. “The U.S. operations of international banks underwrite more than 70% of debt issuance for internationally headquartered companies issuing in the U.S., which supports the $5.4 trillion in foreign direct investment. Removing Section 899 will help preserve and grow these investments in American businesses and jobs across the country.”
Industry voices like Dubravko Lakos-Bujas, head of Global Markets Strategy at JPMorgan, said the tax measure could make the U.S. less attractive as a destination for investment.
“America’s appeal as a destination for capital lies in its openness, rule of law and availability of high-quality assets,” Lakos-Bujas said in a press release. “The Trump administration’s goal of driving more foreign investment onshore could be undermined by the introduction of ‘soft’ capital controls on income earned by foreign entities and individuals, souring foreign investor appetite on the margin.”