Tax Notes Talk International Tax in the Reconciliation Bill: House Versus Senate
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Jun 20, 2025 Jonathan Samford, President and CEO of the Global Business Alliance, and Kevin Klein, Senior VP of Government Affairs at the same organization, dive into the complexities of the proposed international tax provisions of the reconciliation bill. They examine the contentious Section 899 retaliatory tax, potential impacts on job creation, and the alarming implications for international businesses. Their discussion highlights the stark differences between the House and Senate's approaches, emphasizing concerns over U.S. competitiveness and the financial burden on taxpayers.
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Positive Impact of 2017 TCJA
- The 2017 Tax Cuts and Jobs Act (TCJA) created international tax frameworks that boosted U.S. competitiveness and foreign investment.
- Since 2017, global investment in the U.S. surged about 35%, showcasing the positive impact of these policies.
Section 899 Retaliatory Tax Risks Jobs
- Section 899 retaliatory tax penalizes foreign companies investing in the U.S. by targeting their global headquarters' countries.
- It risks 700,000 U.S. jobs and could cut $100 billion in annual U.S. GDP, negating a third of the bill's economic growth potential.
Mechanics of Section 899 Provision
- Section 899 imposes three punitive taxes: higher rates on effectively connected income, escalating withholding taxes up to 20%, and harsher BEAT tax rules.
- These affect mainly branch-structured and financial services companies, with withholding taxes potentially increasing from 0% to 50%.