Treasury Looks to Revive ‘Revenge Tax’ if OECD Deal Falls Short

Treasury Department official Kenneth Kies told GOP House members the department will likely back Congress to resuscitate the so-called “revenge tax” if Europe doesn’t ultimately exempt US companies from the global minimum tax, House Ways and Means Committee Chair Jason Smith said Tuesday.

Treasury already was pressuring negotiating partners at the Organization for Economic Cooperation and Development to rewrite by year-end large parts of the global minimum tax framework to exempt US companies from two of the three main rules. Kies, who runs Treasury’s tax policy office, met privately with Republican House Ways and Means Committee members Tuesday.

But Kies’s assurances to those lawmakers behind closed doors escalates the US threat of resurrecting a retaliatory measure known as Section 899.

The provision, which would allow Washington to place additional taxes on individuals and companies from countries it deemed to have levied discriminatory taxes against the US, was dropped from Republicans’ megabill amid a frenzy of lobbying from companies fretting that it would dampen international investment.

“We will absolutely pass that bill” if European finance ministers don’t honor the US’s international tax structure, Smith (R-Mo.) said Tuesday.

He added that legislation could be included in a second budget reconciliation bill in order to turn it into law without Democratic votes, a process he has been skeptical of pursuing.

“That’s how important it is,” Smith said.

Spokespeople at Treasury and the IRS didn’t immediately return requests for comment.

Lawmakers pulled the language from their tax-and-spending bill after Treasury Secretary Scott Bessent secured concessions from G-7 allies to exempt US companies from Pillar Two taxes.

But House members have repeatedly threatened to renew the legislative push if the international compact falls short.

Adding the revenge tax to a year-end spending bill in Congress is “always an option,” Rep. Ron Estes (R-Kansas), a member of the tax-writing Ways and Means Committee and the lead House sponsor of the revenge tax, said Tuesday. He added that he’s still hoping for an agreement on the G-7 proposal.

The legislation Smith would pursue would look “very similar” to language that passed out of the House, he said.

International negotiators already were under pressure to reach an agreement by the end of the year to maintain the safe harbor that shields US companies operating on American soil from the global minimum tax, Rohit Kumar, principal and co-leader of PwC’s National Tax Services practice, said in an interview last week.

Plus, Kumar added, Congress is “not known for its patience.”