US to drop ‘Unfair Foreign Taxes’ from budget bill, G7 to exempt US companies from Pillar Two

The US Treasury and G7 nations agreed to exempt US companies from Pillar Two taxes in exchange for removing section 899 from the “One Big Beautiful Bill”. 

US Treasury Secretary Scott Bessent announced, on 27 June 2025, that the US has reached an agreement with the other G7 countries (Canada, France, Germany, Italy, Japan, and the UK) to exclude US companies from Pillar Two taxes.

In return, the US will remove the proposed section 899 from the budget reconciliation bill, “One Big Beautiful Bill” (OBBB), currently under consideration by Congress.

US President Donald Trump has opposed the global tax agreement.

“After months of productive dialogue with other countries on the OECD Global Tax Deal, we will announce a joint understanding among G7 countries that defends American interests,” he said on multiple posts on X. 

The deal includes two “pillars,” with the second establishing a 15% minimum global tax rate. “OECD Pillar Two taxes won’t apply to US companies,” Basset wrote, noting efforts to implement the agreement across the OECD-G20 Inclusive Framework in the coming months.

In 2021, nearly 140 countries reached an OECD-negotiated deal to tax multinational companies.

“Given this progress, I have asked the Senate and House to remove the Section 899 protective measure from the One, Big, Beautiful Bill,” Bessent said. 

Also dubbed a “revenge tax,” Section 899, “Enforcement of Remedies Against Unfair Foreign Taxes,” allows for increased US taxes on foreign countries with taxes, such as the Pillar Two UTPR, digital services taxes (DSTs), diverted profits taxes (DPTs), or other extraterritorial taxes. Although the specifics of the agreement have not been made public, it is believed that the exclusion for US companies is limited to the Pillar Two UTPR.

OECD Pillar Two, or the Global Anti-Base Erosion (GloBE) rules, is part of the OECD/G20 Two-Pillar solution addressing digital economy tax challenges. It sets a 15% global minimum tax rate for multinational enterprises (MNEs) with revenues over EUR 750 million, ensuring large MNEs pay a minimum tax on profits, regardless of where they’re reported.

After Secretary of the Treasury Scott Bessent announced a forthcoming international tax agreement, Senate Finance Committee Chairman Mike Crapo (R-Idaho) and House Ways and Means Committee Chairman Jason Smith (R-Missouri) issued statements regarding Section 899 and the OECD Pillar Two / global minimum tax project:

“We applaud President Trump and his team for protecting the interests of American workers and businesses after years of congressional Republicans sounding the alarm on the Biden Administration’s unilateral global tax surrender under Pillar Two. Reaching a joint understanding with the G7 means the US can reclaim tens of billions of dollars that had been ceded from our tax base by Democrats’ America-Last policy.

At the request of Secretary Bessent and in light of this joint understanding to preserve US tax sovereignty and allow US tax laws to co-exist with the Pillar Two 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.

We are committed to restoring Americans’ confidence in our representative government by putting America first. Congressional Republicans stand ready to take immediate action if the other parties walk away from this deal or slow walk its implementation.”