The One Big Beautiful Bill Act of 2025 (OBBBA) is a comprehensive legislative package passed by the U.S. House of Representatives on May 22, 2025. Encompassing over 1,000 pages, the bill aims to extend and modify various tax provisions, implement significant spending changes, and introduce new fiscal measures.
Section 899 of the One Big Beautiful Bill Act of 2025 marks a decisive moment in the evolution of U.S. fiscal policy. Far from being a simple tax response to foreign levies, this provision introduces a complex and far-reaching architecture that blends taxation, geopolitical strategy, and macrofinancial control. At its core, Section 899 transforms the U.S. tax code into a tool of capital filtration and jurisdictional alignment—disciplining cross-border financial flows through graduated penalties rather than outright bans.
What Section 899 Does
Section 899 empowers the U.S. government to impose progressive surtaxes on individuals, corporations, and institutions from jurisdictions that the Treasury deems to have enacted “unfair foreign taxes.” These include:
- The OECD’s Under-Taxed Profits Rule (UTPR);
- Various Digital Services Taxes (DSTs) adopted by EU member states, the UK, India, and others;
- Diverted Profits Taxes (DPTs), such as those in the UK and Australia;
- Any tax considered by the U.S. Treasury to be extraterritorial, discriminatory, or disproportionately burdensome to U.S. persons.
The penalties under Section 899 start with a 5-percentage-point surcharge and escalate annually by 5%, up to a maximum of 20%. These surcharges apply to a range of income categories, including:
- Withholding tax on U.S.-source payments (dividends, interest, royalties, services);
- Tax on effectively connected income (ECI) from U.S. business activities;
- Tax on U.S. real property interests;
- A newly expanded Base Erosion and Anti-Abuse Tax (BEAT)—dubbed the Super BEAT—for domestic firms interacting with “non-compliant” jurisdictions.
The law is designed to bypass formal treaty override rules while effectively neutralizing treaty benefits through domestic tax code escalation.
Strategic Logic and Capital Control
Section 899 operates within a context in which capital is no longer treated as a neutral market input, but as a strategic asset to be governed. Rather than imposing traditional capital controls—such as licenses, repatriation mandates, or outright restrictions—Section 899 controls capital through pricing. The more a jurisdiction diverges from U.S.-preferred tax policy, the more expensive it becomes for its firms and investors to access or interact with the U.S. financial system.
In this regime:
- Capital outflows are discouraged by taxing U.S. payments to foreign jurisdictions;
- Inflows from “disfavored” countries are made more burdensome through higher ECI rates;
- A de-escalation mechanism offers relief if a foreign state rescinds its “offending” tax, creating a powerful tool of geopolitical leverage.
The Super BEAT and Internal Enforcement
Domestically, the Super BEAT reinforces the external logic of Section 899. U.S. corporations that make payments to affiliated entities in “targeted” jurisdictions lose the ability to deduct those payments and face elevated tax exposure. This transforms intra-group transactions into acts of strategic alignment or misalignment, forcing multinational firms to weigh fiscal penalties against political geography. Internal structures once optimized for tax efficiency now must account for Section 899 compliance.
Implications for Italy and the European Union
The repercussions of Section 899 for Italy and the broader EU are significant:
- Increased Tax Burdens for European Investors – Italian and other European firms or residents with financial interests in the United States could face sharply higher tax rates—up to 50% in the case of compounded withholding and corporate taxes. This undermines the attractiveness of U.S. markets and could lead to capital reallocation or strategic disengagement.
- Strained Transatlantic Relations – By effectively punishing countries that assert digital tax sovereignty, Section 899 challenges the EU’s own tax initiatives, such as DSTs. This could ignite fiscal retaliation, complicate negotiations within OECD frameworks, and exacerbate trade tensions.
- Reevaluation of Fiscal Sovereignty – European governments, including Italy, may face pressure to rethink or water down digital tax regimes in order to avoid retaliatory U.S. measures. This raises questions about the limits of fiscal autonomy in a world dominated by U.S. capital leverage.
- Corporate Realignment and Strategic Vetting – European multinational corporations with U.S. operations will be forced to restructure their intra-group arrangements, shifting away from jurisdictions penalized under Section 899. This adds administrative complexity, increases tax planning costs, and could erode operational efficiency.
- Fragmentation of the Global Investment OrderSection 899 reflects a shift from multilateral tax treaties to bloc-based fiscal alignment. Cross-border investment is no longer governed by neutral rules but by political compatibility. This trend may prompt the EU to explore countermeasures, such as mirrored taxes or outbound capital controls, further accelerating fiscal decoupling.
Section 899 is not an isolated measure. It embodies a broader doctrinal shift in U.S. economic strategy. Facing the trilemma between capital mobility, monetary autonomy, and industrial policy, the U.S. has chosen to sacrifice openness, but through legal sophistication rather than brute force. Section 899 does not say “no” to capital; it makes capital flow only where strategic logic permits.
For Italy and Europe, this is both a challenge and a wake-up call. In a world where capital costs reflect political alignment, tax policy becomes geopolitics by other means. The question for governments and firms alike is no longer just how to comply with international norms—but whose norms they are willing to accept.
U.S. Capital Controls in the 1960s: Managing Outflows to Stabilize the Dollar
In the 1960s, the United States faced a significant balance-of-payments deficit, primarily due to substantial capital outflows as American investors increasingly purchased foreign securities. To address this, President John F. Kennedy introduced the Interest Equalization Tax (IET) in 1963, imposing a tax on U.S. investors acquiring foreign stocks and bonds. This measure aimed to discourage capital outflows and bolster the dollar’s stability. Concurrently, in 1959, President Dwight D. Eisenhower implemented the Mandatory Oil Import Quota Program, restricting oil imports to protect domestic production and address national security concerns. These policies reflect a strategic approach to managing both current and capital accounts to maintain economic equilibrium.
Contrastingly, in the present context, the U.S. experiences a significant current account deficit, but this is offset by substantial capital inflows, leading to a strong dollar. This robust dollar, however, poses challenges for exports and domestic manufacturing competitiveness. In response, contemporary policy discussions consider measures to manage capital inflows, such as taxing foreign investments in U.S. securities, aiming to moderate the dollar’s strength and address trade imbalances.
This represents a reversal from the 1960s approach, where the focus was on curbing capital outflows to protect the dollar, highlighting the evolving dynamics of international economic policy.