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Yahoo
10 hours ago
- Business
- Yahoo
Analysis-Wall Street, Main Street push for foreign tax rethink in US budget bill
By Carolina Mandl and Bo Erickson NEW YORK/WASHINGTON (Reuters) -Industry groups representing sectors including real estate, finance and multinational companies are pushing for the reduction or exclusion of a retaliatory tax targeting foreign investors in the U.S. in the Republican tax bill, as they see it as a threat to their businesses and to the broader markets and economy. The proposed tax, known as Section 899, applies a progressive tax burden of up to 20% on foreign investors' U.S. income as pushback against countries that impose taxes the U.S. considers unfair, such as digital service taxes. It could raise $116 billion in taxes over 10 years. Some individual companies are also pushing for action, according to two lawyers familiar with their clients' plans, who did not name specific companies due to client confidentiality. 'Lobbying surrounding Section 899 is at peak levels,' said Jeff Paravano, a former Treasury Department official who is now chair of law firm BakerHostetler's tax group. The move comes as Senate Finance Committee Chairman Mike Crapo, the Republican in charge of the chamber's tax writing provisions, and other Republicans are in close coordination with President Donald Trump on the tax bill, having met on Wednesday. The White House declined to comment. Crapo said he would not comment on ongoing discussions about the bill. Global investors hold almost $40 trillion in U.S. assets, such as securities, loans and deposits, according to the U.S. Treasury International Capital Reporting System. This raises concerns about the ripple impact of the bill. "It has the potential to be a very negative impact on the free flow of capital from the U.S. and through businesses that are multinational," said Gabriel Grossman, a U.S. tax partner at Linklaters, adding he has seen some clients put planned investments in the U.S. on pause until they have more clarity on the new levies. The broader bill itself is also creating much debate as it is forecast to add about $2.4 trillion to the U.S. debt and has sparked an explosive feud between Trump and his erstwhile key ally Elon Musk, the billionaire CEO of Tesla. COLLATERAL DAMAGE Industries across different sectors are on high alert. The new levy could increase taxes from rents and real estate investment trusts, gains from property sales and securitized products. "There is a legitimate fear among investors that, if this goes through, it could impact investments, and that it would create higher costs for real estate in terms of getting financing," said David McCarthy, managing director at the CRE Finance Council, a nonpartisan trade group. "It could depress the value of real estate if you don't have as much money to finance property purchases." The asset management industry is concerned about outflows. "We encourage the Senate to make this provision more targeted to respond to unfair foreign taxes and other concerning measures rather than disincentivizing beneficial foreign investment in the U.S.," a spokesperson for the Investment Company Institute said. The investment community is also working to clarify whether Treasuries and corporate bonds will remain exempt as they are currently subject to a portfolio interest exception that applies no taxation, lawyers and industry sources said. "There's reason to believe that fixed-income assets wouldn't be in scope, but there's still considerable uncertainty about this point," Morgan Stanley strategist Michael Zezas said in a note to clients. A footnote part of the Budget Committee report, which provides direction to taxpayers, courts and the Treasury in interpreting the statute, says that Section 899 "does not apply to portfolio interest." Foreigners' equity investments, however, do not count with the portfolio interest protection and could be taxed, lawyers and banks said. MULTINATIONALS Multinational companies could face a new tax burden on dividends and inter-company loans, potentially reducing profit, according to Section 899. Jonathan Samford, president of the Global Business Alliance, a lobbying group for international companies in the U.S., said many multinationals could decide to shut down operations in the U.S., risking 8.4 million jobs in the country. "Those companies will not be paying U.S. tax whatsoever because they will not be able to operate in that punitive, high-tax environment," he said. Morgan Stanley said in a note to clients a repatriation of profits out of the U.S. and pressure on the U.S. dollar. Corporate loans could also become more expensive, as loans extended by foreign banks might be subject to the new tax burden if section 899 overrides current treaties, lawyers said, adding that companies could end up paying more for the debt to make up for the tax increase. SENATE PASSAGE Investors are hoping for some changes in the Senate. Senator Steve Daines, a Montana Republican on the Finance Committee, said it may be necessary to clarify the language in Section 899. 'We want to make sure we don't have tax policies that in some way would diminish the fact that we are the gold standard in the world,' Daines said. Morgan Stanley said in a note that it expects "sufficient Senate Republicans to take notice and clarify the policy to mitigate this risk" of increasing the cost of capital for the U.S. "It actually is pretty much of a nuclear bomb," said Pascal Saint-Amans, partner at Brunswick Group, who is also the former tax chief of the Organization for Economic Cooperation and Development, who led the 2021 global tax treaty. "The coverage (of Section 899) seems extremely broad and the terms are not extremely well-defined."
Mint
10 hours ago
- Business
- Mint
Wall Street, Main Street push for foreign tax rethink in US budget bill
Concerns over potential negative impact on U.S. investments and jobs Senate Republicans may clarify impact on Treasuries to mitigate risks Multinationals may shut U.S. operations, risking 8.4 million jobs, says association By Carolina Mandl, Bo Erickson NEW YORK/WASHINGTON, - Industry groups representing sectors including real estate, finance and multinational companies are pushing for the reduction or exclusion of a retaliatory tax targeting foreign investors in the U.S. in the Republican tax bill, as they see it as a threat to their businesses and to the broader markets and economy. The proposed tax, known as Section 899, applies a progressive tax burden of up to 20% on foreign investors' U.S. income as pushback against countries that impose taxes the U.S. considers unfair, such as digital service taxes. It could raise $116 billion in taxes over 10 years. Some individual companies are also pushing for action, according to two lawyers familiar with their clients' plans, who did not name specific companies due to client confidentiality. 'Lobbying surrounding Section 899 is at peak levels,' said Jeff Paravano, a former Treasury Department official who is now chair of law firm BakerHostetler's tax group. The move comes as Senate Finance Committee Chairman Mike Crapo, the Republican in charge of the chamber's tax writing provisions, and other Republicans are in close coordination with President Donald Trump on the tax bill, having met on Wednesday. The White House declined to comment. Crapo said he would not comment on ongoing discussions about the bill. Global investors hold almost $40 trillion in U.S. assets, such as securities, loans and deposits, according to the U.S. Treasury International Capital Reporting System. This raises concerns about the ripple impact of the bill. "It has the potential to be a very negative impact on the free flow of capital from the U.S. and through businesses that are multinational," said Gabriel Grossman, a U.S. tax partner at Linklaters, adding he has seen some clients put planned investments in the U.S. on pause until they have more clarity on the new levies. The broader bill itself is also creating much debate as it is forecast to add about $2.4 trillion to the U.S. debt and has sparked an explosive feud between Trump and his erstwhile key ally Elon Musk, the billionaire CEO of Tesla. Industries across different sectors are on high alert. The new levy could increase taxes from rents and real estate investment trusts, gains from property sales and securitized products. "There is a legitimate fear among investors that, if this goes through, it could impact investments, and that it would create higher costs for real estate in terms of getting financing," said David McCarthy, managing director at the CRE Finance Council, a nonpartisan trade group. "It could depress the value of real estate if you don't have as much money to finance property purchases." The asset management industry is concerned about outflows. "We encourage the Senate to make this provision more targeted to respond to unfair foreign taxes and other concerning measures rather than disincentivizing beneficial foreign investment in the U.S.," a spokesperson for the Investment Company Institute said. The investment community is also working to clarify whether Treasuries and corporate bonds will remain exempt as they are currently subject to a portfolio interest exception that applies no taxation, lawyers and industry sources said. "There's reason to believe that fixed-income assets wouldn't be in scope, but there's still considerable uncertainty about this point," Morgan Stanley strategist Michael Zezas said in a note to clients. A footnote part of the Budget Committee report, which provides direction to taxpayers, courts and the Treasury in interpreting the statute, says that Section 899 "does not apply to portfolio interest." Foreigners' equity investments, however, do not count with the portfolio interest protection and could be taxed, lawyers and banks said. Multinational companies could face a new tax burden on dividends and inter-company loans, potentially reducing profit, according to Section 899. Jonathan Samford, president of the Global Business Alliance, a lobbying group for international companies in the U.S., said many multinationals could decide to shut down operations in the U.S., risking 8.4 million jobs in the country. "Those companies will not be paying U.S. tax whatsoever because they will not be able to operate in that punitive, high-tax environment," he said. Morgan Stanley said in a note to clients a repatriation of profits out of the U.S. and pressure on the U.S. dollar. Corporate loans could also become more expensive, as loans extended by foreign banks might be subject to the new tax burden if section 899 overrides current treaties, lawyers said, adding that companies could end up paying more for the debt to make up for the tax increase. Investors are hoping for some changes in the Senate. Senator Steve Daines, a Montana Republican on the Finance Committee, said it may be necessary to clarify the language in Section 899. 'We want to make sure we don't have tax policies that in some way would diminish the fact that we are the gold standard in the world,' Daines said. Morgan Stanley said in a note that it expects "sufficient Senate Republicans to take notice and clarify the policy to mitigate this risk" of increasing the cost of capital for the U.S. "It actually is pretty much of a nuclear bomb," said Pascal Saint-Amans, partner at Brunswick Group, who is also the former tax chief of the Organization for Economic Cooperation and Development, who led the 2021 global tax treaty. "The coverage seems extremely broad and the terms are not extremely well-defined." This article was generated from an automated news agency feed without modifications to text.
Yahoo
30-05-2025
- Business
- Yahoo
Tax bill contains 'sledgehammer' for Trump to retaliate against foreign digital taxes
By Bo Erickson WASHINGTON (Reuters) -U.S. President Donald Trump would have the power to retaliate against countries that impose special digital service taxes on large U.S. technology companies like Amazon and Alphabet, under a provision in the sweeping tax bill that Congress is considering. "If foreign countries want to come in the United States and tax US businesses, then those foreign-based businesses ought to be taxed as well," said Representative Ron Estes, a Kansas Republican who helped craft the provision. Some 17 countries in Europe and others around the world impose or have announced such taxes on U.S. tech products like Meta's Instagram. Germany announced on Thursday it was considering a 10% tax on platforms like Google. The levies have drawn bipartisan ire in Washington. Democrats who oppose much of the tax bill have not spoken out against the retaliatory tax provision, found in Section 899 of the 1,100-page bill. Trump has been pressing foreign countries to lower barriers to U.S. commerce. Under the bill, Congress would empower his administration to impose tax hikes on foreign residents and companies that do business in the U.S. The U.S. Constitution gives Congress, not the president, the power to decide on taxes and spending. The provision could raise $116 billion over the next decade, according to the Joint Committee on Taxation. But some experts warned that an unintended consequence of retaliatory taxes could be less foreign investment in the U.S. "This new Section 899 provision brings a sledgehammer to the idea that the United States will allow itself to be characterized as a tax haven by anyone," said Peter Roskam, former Republican congressman and head of law firm Baker Hostetler's federal policy team. The House of Representatives narrowly passed the bill on May 22, and it now heads to the Senate. Democrats broadly oppose the Republicans' tax and spending bill, which advances many of Trump's top priorities such as an immigration crackdown, extending Trump's 2017 tax cuts and ending some green energy incentives. Section 899 would allow the Treasury Department to label the foreign tech taxes "unfair" and place the country in question on a list of "discriminatory foreign countries." Some other foreign taxes also would be subject to scrutiny. Once on the list, a country's individuals and its companies that operate in the U.S. could face stiffer tax rates that could increase each year, up to 20 percentage points. Joseph Wang, chief investment officer at Monetary Macro, said Section 899 could help Trump reduce trade imbalances because if foreign investment decreases it could depreciate the U.S. dollar. This in turn could spur exports of U.S. products by making them cheaper overseas. Portfolio interest would remain exempt from any tax Trump imposes, but some experts cautioned that taxing foreigners could quell foreign investment in the U.S. "Foreign investors may change their behavior to avoid the taxes in various ways, including potentially by simply investing elsewhere," said Duncan Hardell, an advisor at New York University's Tax Law Center. PUSH BACK TO GLOBAL MINIMUM TAX The new approach follows the 15% minimum global corporate tax deal negotiated by the administration of Democratic former President Joe Biden. Republicans, led by Representative Jason Smith of Missouri, chairman of the House tax committee, opposed that approach, arguing it unfairly benefits Chinese companies. Foreign countries have invoked that global minimum to slap higher taxes on U.S. tech firms, if they concluded that generous U.S. tax credits for research and development pushed their tax burden below that 15% threshold. Trump in February directed his administration to combat foreign digital taxes, but they were not addressed in the trade deal announced in May between the U.S. and the United Kingdom, which imposes a 2% levy on foreign digital services. It was unclear if the Treasury Department would actually use the new authority if it becomes law, or if the mere threat of action would convince other countries to change course. The department did not share its intended strategy when asked. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
21-05-2025
- Business
- Yahoo
Trump tax-cut bill faces rare overnight stress test with US House Republicans
By Bo Erickson and David Morgan WASHINGTON (Reuters) -President Donald Trump's tax cut and spending bill faces a critical stress test on Wednesday as Republicans in the U.S. House of Representatives try to overcome internal divisions about cuts to the Medicaid health program and tax breaks in high-cost coastal states. The gate-keeping House Rules Committee has scheduled an unusual 1 a.m. ET (0500 GMT) hearing that is expected to run well into daylight hours where members will debate details of the measure. If passed by Congress, it would reduce some health and food benefits for low-income Americans, cancel green-energy programs and provide tens of billions of dollars for immigration enforcement. Trump huddled with lawmakers on Tuesday to try to persuade holdouts within his party to get in line on what he calls a "big, beautiful bill," but the visit failed to sway the wide array of lawmakers who object to specific features. House Speaker Mike Johnson has little room for error, as his party holds a narrow 220-213 majority and a handful of "no" votes from his side could scuttle the bill, which Democrats say favors the wealthy and cuts needed social programs. Fiscal hawks blocked the package in another committee on Friday, before relenting late on Sunday night. That scenario could play out again in the Rules Committee, which includes several Republicans who are calling for deeper cuts to the Medicaid health program, which serves 71 million Americans. The bill would extend the 2017 tax cuts that were Trump's signature first-term legislative achievement, and also add tax breaks on income from tips and overtime pay that were part of his populist push on the campaign trail. Nonpartisan analysts say it could add $3 trillion to $5 trillion to the federal government's $36.2 trillion in debt. If it clears the committee, Johnson could push for a vote on the House floor as soon as Wednesday. Medicaid has proven to be a major sticking point, with fiscal hawks pushing for cuts to partly offset the cost of the bill's tax components, which moderate Republicans say would hurt voters whose support they will need in the 2026 midterm elections. The bill also faces objections from a handful of centrist Republican lawmakers from high-tax states including New York and California, who are pushing to loosen a $30,000 cap on deductions for state and local taxes. Trump is pushing for unanimous support from Republicans, and said on Tuesday that holdouts could be drummed out of the party. Credit-rating firm Moody's last week stripped the U.S. government of its top-tier credit rating, citing the nation's growing debt. If the package passes the House, it would then head to the Senate, where Republicans hold a 53-47 majority. That would not be expected until next month, as Congress is preparing to leave Washington next week for a week-long break.
Yahoo
14-05-2025
- Business
- Yahoo
US Republican budget proposal has removal of gun silencer tax in its sights
By Bo Erickson WASHINGTON (Reuters) -U.S. Republican tax writers pushing through President Donald Trump's signature tax cut priorities proposed to eliminate a customer tax on firearm silencers, a tax potentially undoing the almost 100-year-old tax. If the bill is passed by Congress and enacted into law, Americans would no longer be charged $200 when purchasing a firearm silencer, also called a suppressor, an add-on feature that reduces the sound of a gunshot. The firearm silencer tweak is only 12 lines in the almost-400-page bill, but represents a potential grassroots win for gun-rights groups that want to deregulate purchases of firearm suppressors, which currently require special approval from the Bureau of Alcohol, Tobacco, Firearms and Explosives. The suppressor tax has been on the books since the 1934 National Firearms Act, and 4.5 million suppressors were registered with the federal government by the end of 2024, according to data from the National Shooting Sports Foundation. On average, a firearm suppressor costs about $830 at retail, the group said. House Republicans applauded Representative Eric Burlison, from Missouri, when he rose at his party's January meeting in Miami to push tax committee leadership to eliminate the suppressor tax. "This is about making sure that people keep their hearing at the end of the day," Burlison said in an interview, noting he also questions whether the tax infringes the right to bear arms enshrined in the Second Amendment of the U.S. Constitution. Burlison said he worked with Representative Rudy Yakym, a Republican tax writer from Indiana, to make progress on the silencer tax cut while foregoing a repeal of the same tax for short barrel rifle purchases due to "heartburn" from the larger tax committee. Democrats tried to strike this silencer tax provision from the bill during legislative debate in the middle of Tuesday night. Republicans defeated the amendment. Representative Mike Thompson, a California Democrat, argued the silencer change will "make it harder for victims of mass shootings to know where the shots are coming from as they're trying to run for cover." 'As a combat veteran, a lifelong hunter and gun owner, I can tell you this has nothing to do with hearing protection, but everything to do about making money for one segment of the gun industry," Thompson said. The Fraternal Order of Police and the National Association of Police Organizations did not respond to requests for comment about the tax change. Meanwhile, pro-gun lobbyists like the American Firearms Association said this tax tweak does not go far enough, calling the change "nothing more than a crumb dropped from the King's table." "It's vital that Republicans use the majorities they have in the House, Senate and control of the White House to completely deregulate suppressors and short barrel rifles, and even more importantly, abolish the ATF and repeal the National Firearms Act," said vice president Patrick Parsons.
