A provision in the Trump Administration’s One Big Beautiful Bill is raising concern among a wide range of U.S. business leaders, including professionals in the commercial real estate finance industry.
The provision, known as Section 899, would have a chilling effect on cross border flows into commercial real estate and adds costs to lenders who fund U.S. borrowers.
To learn more about this provision and its implications for real estate market participants, MortgageOrb spoke with CRE Finance Council managing director and head of legislative affairs, David McCarthy.
Q: What is Section 899 and why is the CRE Finance Council concerned about it?
McCarthy: The One Big Beautiful Bill contains a tax provision known as “Section 899” that would impose retaliatory income taxes on foreign companies and investment in the U.S. The U.S. Treasury could impose annual income tax increases of 5% on any foreign individual, government, corporation, trust, foundation, and other similar entities in response to unfair tax treatment by a foreign country against U.S. companies.
This provision could add cost and uncertainty to cross-border investment in real estate. CREFC is concerned on the potential impact to foreign investment in U.S. real estate, both on a debt and equity basis.
Q: How does Section 899 work if it is implemented?
McCarthy: While the House and Senate bills are slightly different, the policy goal is to discourage or change tax law in foreign countries that implement global minimum taxes or extraterritorial taxes on income outside of their borders. The bill sets up criteria for the Treasury Secretary to identify countries with extraterritorial taxes, discriminatory taxes, and unfair taxes. Some taxes specifically identified, such as the Undertaxed Profits Rule (UTPR) and the Digital Services Tax, already exist in Canada, Europe, Japan, and the U.K.
The tax rate on foreign companies connected
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