The US Senate's consideration of their version of the House-passed budget reconciliation bill, the One Big, Beautiful Bill Act (OBBBA, H.R. 1), has been delayed after the Senate Parliamentarian ruled that the bill's approach to Medicaid provider taxes would violate reconciliation rules. The Parliamentarian also found certain other proposed tax provisions could not be enacted using reconciliation.

An initial Senate vote on the package is not expected today (27 June) and work on the bill is set to continue through the weekend. Other issues remain unsettled in addition to Medicaid, including the state and local tax deduction cap and Inflation Reduction Act energy tax credit changes. The timeline for debate and a final vote in the Senate is uncertain.

In a major development, US Treasury Secretary Scott Bessent, on 26 June, asked the House and the Senate to remove the new IRC Section 899 retaliatory tax proposal from consideration in the expected budget reconciliation bill. The Trump Administration made the request in advance of a joint understanding among G7 countries in regard to the BEPS 2.0 project. The Secretary posted on social media: "OECD Pillar [Two] taxes will not apply to U.S. companies, and we will work cooperatively to implement this agreement across the OECD-G20 Inclusive Framework in coming weeks and months."

On the same day, House Ways & Means Committee Chairman Jason Smith (R-MO) and Senate Finance Committee Chairman Mike Crapo (R-ID) issued statements regarding IRC Section 899 and the OECD Pillar Two/global minimum tax project, noting that: "At the request of Secretary Bessent and in light of this joint understanding to preserve U.S. tax sovereignty and allow U.S. tax laws to co-exist with the Pillar [Two] regime, we will remove proposed tax code Section 899 from the One, Big, Beautiful Bill Act, and we look forward to active engagement with Treasury on these important issues." The statements also provided that they are, "committed to restoring Americans' confidence in our representative government by putting America first. Congressional Republicans stand ready to take immediate action if the other parties walk away from this deal or slow walk its implementation."

Proposed IRC Section 899 — with different versions in both the House budget reconciliation bill and the Senate Finance Committee budget bill — would have increased income tax and withholding tax rates and expanded the application of the base erosion and anti-abuse tax (BEAT) rules on certain foreign-parented groups and inbound investors resident in countries with "unfair foreign taxes."

The IRC Section 899 proposal was rooted in bills introduced earlier this year by House Ways & Means Committee Chairman Jason Smith (R-MO) and Rep. Ron Estes (R-KS) and prompted concerns about foreign investment.

The Senate, on June 26, confirmed Ken Kies to be Treasury Assistant Secretary for Tax Policy. Kies is a former Chief of Staff of the Joint Committee on Taxation and Republican Tax Counsel to the House Ways & Means Committee.

A senior OECD official speaking at a Washington, D.C. conference this week was quoted as saying Working Party No. 6 of the OECD's Committee on Fiscal Affairs is currently updating portions of Chapter Vll of the Transfer Pricing Guidelines. In addition, the OECD official noted that the OECD is continuing to study global mobility issues concerning the taxation of cross-border employees. The official said the OECD welcomes input from the business community and recognizes the need for some standardization while allowing for some flexibility to accommodate particular concerns and provide some solutions from which countries may choose.