The Treasury Department is nearing a deal that would make the so-called “revenge tax” irrelevant, the agency’s second-in-command said, a development that could bring great relief to Wall Street investors worried about punitive tax measures on foreigners.
“We continue to have negotiations with our OECD partners and continue to hope that in the very short run we have a breakthrough that would make conversations about 899 irrelevant,” Deputy Treasury Secretary Michael Faulkender said in an interview, referring to a part of President Donald Trump’s signature tax legislation that would impose a levy on foreign companies and investors from countries that the U.S. determines have been unfairly imposing digital taxes on American technology companies.
The Organization for Economic Co-operation and Development has been hosting global talks over corporate taxes, with some of the proposals drawing opposition from the U.S.
Republicans are weighing whether to pull the revenge tax provision as it nears a deal with European nations and other countries that impose a minimum tax on multinational corporations as part of a global agreement. That accord may also include the digital services taxes that are imposed on technology firms based in the US by countries such as Canada, the U.K. and France.
Kevin Hassett, the director of the National Economic Council, said of the Section 899 provision earlier in the day that “maybe it doesn’t have to be in the bill.” He added that the Trump administration has been pushing U.S. trading partners to move swiftly on deals that make the provision unnecessary.
He told Fox Business that Section 899 could be removed from the bill making its way through Congress if countries “issue policy pronouncements today or tomorrow.”
The measure has come to be known as the revenge tax because it would increase rates only for countries whose tax policies the US deems discriminatory. Critics of the measure argue that the proposal would deter foreign investment, either contravening the Trump administration’s stated goal of encouraging additional manufacturing and business activity or adding confusion and hurting the economy amid changing trade policies and a potentially worsening fiscal outlook.
Earlier in the day, Treasury officials convened a meeting with members of the National Association of Manufacturers trade group, including Kyle Taylor, a finance manager at Hydro, a Norwegian aluminum company.
Taylor told Faulkender that Section 899 “does lead to some uncertainty” when it comes to company’s investments in the US and could cost his firm an additional $2 million to $10 million a year on debt service if it is included in Trump’s “One Big Beautiful Bill Act” in its current form.
Jay Timmons, the president of the association, said in a statement that his organization “will continue to support targeted changes to the OBBBA’s Section 899 to ensure Treasury has the discretion it needs to achieve success in these vital negotiations, without punishing foreign-headquartered manufacturers investing in the U.S.”
Representative Ron Estes of Kansas, who wrote the Section 899 provision that was included in the House-passed version of the bill, told reporters he hoped it never goes into effect and instead convinces other countries to change their tax policy.
The giant tax measure is now being considered by the Senate, and that chamber’s rule keepers have yet to determine whether Section 899 comports with budget rules.
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