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House Ways and Means Committee Chair Jason Smith, R-Mo., warned during a Dec. 3 congressional hearing on international taxation that he needs to see “technical work” shortly related to efforts to carve the U.S. out from elements of the Pillar 2 global minimum tax framework.
Smith was one of the architects of the proposed Section 899, a retaliatory tax proposal initially included in drafts of the broad economic and security policy law known as the One Big Beautiful Bill Act (OBBBA). However, domestic companies and industry groups raised concerns over the potential chilling effect that measure could have on foreign direct investment, and in June, before the law’s passage, the Trump administration and G7 countries announced an agreement that would forestall the need for including Section 899 in the law.
Under the informal accord, the other G7 nations agreed that U.S. multinationals should be exempt from certain elements of the global minimum tax rules and that the U.S. regime would operate “side by side” with Pillar 2.
“I intend to see that June announcement through to the finish line,” Smith said. “And the time for action is now for those G7 countries. We expect to see the technical work that has been done in these negotiations move forward this week.”
Smith’s comments raised the specter of reviving the retaliatory tax proposal as negotiators among the broader group of Pillar 2 jurisdictions work on treatment of U.S. companies.
“We have been patient to allow for all negotiating parties to reach agreement, but they must reach agreement soon,” Smith continued. “Congressional Republicans stand ready to take immediate action if the other parties walk away from this deal or slow walk its implementation.”
OECD Secretary-General Mathias Cormann said last month that negotiators working to bring the agreement to fruition are making progress and that he hopes for “a solution acceptable to all members by the end of the year.”
Grant Thornton insight:
More than 140 countries have committed to the two-pillar solution, and more than 60 of those have already enacted Pillar 2 legislation into law. Regardless of the agreement in principle made within the G7, key deadlines for registration and reporting remain in place, and U.S. multinationals should ensure they are prepared to comply with current laws.
Bill requiring IRS to highlight return errors signed into law
On Dec. 1, President Donald Trump signed a bill requiring the IRS to communicate why it believes the math on a tax return is incorrect and provide 60 days to challenge the agency’s finding. H.R. 998, the Internal Revenue Service Math and Taxpayer Help Act, passed both chambers of Congress by unanimous consent prior to arriving at the president’s desk.
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