Document Type
Article
Publication Date
11-2025
Abstract
The original version of the One Big Beautiful Bill Act (P.L. 119-21) included section 899, which would have imposed retaliatory taxes on individuals and corporations from countries that apply “discriminatory or extraterritorial” taxes to U.S. corporations, defined specifically to include digital services taxes and the undertaxed profits rule of pillar 2.
However, on June 26 Treasury Secretary Scott Bessent announced that a compromise was reached on the UTPR, and as a result, section 899 was removed from the OBBBA. Now that section 899 is gone, section 891 is the most important part of the United States’ legislative armory against “discriminatory or extraterritorial” foreign taxation.
While some may regard section 891 as a vestige of a bygone era — its origins date to the 1934 Revenue Act and were grounded in a specific dispute with France over the extraterritorial application of its dividend tax — the provision warrants renewed scrutiny in light of ongoing efforts to codify a modern response to foreign tax practices that deviate from OECD norms and treaty-based standards. If the UTPR compromise falls through, invoking section 891 is the most likely retaliatory tax response to the UTPR or to DSTs because only presidential action is required.
This article discusses the origins of section 891, and compares the French tax it was intended to counter with similar U.S. tax provisions. It also considers the possible effects of invoking section 891.
Recommended Citation
Avi-Yonah, Reuven S. and Gianluca Mazzoni. "The Forgotten Weapon: Section 891 and the Origins of U.S. Retaliatory Tax Policy." Tax Notes 120, no. 8 (2025): 1301-1311.
Comments
Reprinted with the permission of Tax Analysts.