KPMG article: Evaluating revised retaliatory measures in House bill

House bill would add new section 899 which would provide two retaliatory mechanisms.

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June 17, 2025

The U.S. House of Representatives on May 22, 2025, passed a budget reconciliation package (H.R. 1, the “One Big Beautiful Bill Act”) that would add a new section 899 (“Enforcement of Remedies Against Unfair Foreign Taxes”) which would provide two mechanisms for retaliating against foreign countries that have implemented an “unfair tax” (including the UTPR (formerly known as the undertaxed profits rule) of Pillar 2, digital services taxes (DSTs), diverted profits taxes (DPTs), and potentially others):

  • Increases to the rates of tax imposed on certain non-U.S. individuals and entities (drawing from a measure previously introduced by House Ways and Means Committee Chair Jason Smith (R-MO))
  • Modifications to the base erosion and anti-abuse tax (drawing from a measure previously introduced by House Ways and Means Committee member Ron Estes, R-KS)

KPMG tax professionals recently published a close examination of the Smith and Estes bills (read TaxNewsFlash), in which we pointed out aspects of each proposal that could frustrate their policy objective of encouraging countries to remove the offending tax regimes. Many of these issues were addressed in the revised versions of the measures included in proposed section 899, although some new issues have emerged.

Read a June 2025 article* prepared by KPMG LLP tax professionals that analyzes the revised versions of two proposed retaliatory tax measures consolidated in proposed section 899, assessing whether the more significant modifications to those now-combined proposals are consistent with Congress’s stated policy goals in responding to “unfair” taxes imposed by foreign countries.

*This article appears in Tax Notes International (June 9, 2025) and is provided with permission.

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