Budget Reconciliation Update

Further to our article of 26 June on the proposed s 899 of the US budget reconciliation bill, which would see penal taxes imposed on companies tax resident in countries that impose “unfair foreign taxes” such as the Digital Services Tax or the Undertaxed Profits Rule, s 899 has now been removed from the bill.

On 26 June, Treasury Secretary Scott Bessent announced that following negotiations with other G7 countries, a solution has been proposed that would exempt American companies from some provisions of Pillar Two. Secretary Bessent accordingly instructed Congress to remove s 899 from the budget reconciliation bill that same day.

G7 discussions are not binding on the entire OECD and US-OECD negotiations are still in progress. It remains to be seen what US-OECD compromise will be reached, and it is possible that if OECD discussions do not produce a result the US agrees with, s 899 will be reintroduced into the budget reconciliation bill. At present however, this is a result that will be welcomed by many Irish companies with taxable presence in the US such as branches.

For more information, please contact the Eversheds Sutherland tax team or your usual Eversheds Sutherland contact.