he United States has been a major destination for foreign direct investment for years. In 2022, foreign firms invested over $177 billion in the country. In May 2025, the U.S. House of Representatives passed the One Big Beautiful Bill Tax Act (OBB). Beyond the potential impact on foreign direct investment in the U.S. overall, certain provision of the OBB may have a broader impact, especially affecting common asset protection and wealth planning strategies. The increased rate on withholding, investments, corporate holdings, and more, is designed as a retaliatory measure on taxes, especially digital taxes, imposed by other countries which the U.S. describes as discriminatory foreign countries. The broader application of Section 899 would create additional reporting obligations, complicate foreign asset protection trust holdings, and subject investors to penalties and taxes that were previously unexpected.
Form 5472: Reporting Obligations for Foreign-Owned U.S. Corporations With Form 5472
Foreign individuals or entities that own at least 25% of a U.S. corporation or foreign corporations engaged in a trade or business in the U.S. are subject to reporting requirements under Internal Revenue Code (IRC) Section 6038A. The IRS requires filing Form 5472 to disclose transactions between the implicated corporations and its holders accordingly. Failure to file Form 5472 accurately and timely can result in significant and repeated penalties of $25,000 in each instance and more. Corporations may be subject to the filing requirement regardless of its level of activity. Oftentimes, U.S. investments, whether in real estate, private equity, intellectual property, or otherwise, are held in U.S. Corporations and foreign asset protection vehicles are used in conjunction with such entities to further tax-efficiency, privacy, and creditor protection. These layered wealth protection structures may face additional tax burdens if proposed Section 899 becomes final.
Foreign Asset Protection Trusts Holding U.S. Entities: Navigating Tax Implications With Proposed Section 899
Foreign asset protection trusts (FAPTs) often hold U.S. entities with U.S. investments. This structure presents additional challenges with compliance and reporting. Unless structured otherwise, the transfer of assets by a U.S. person to a foreign trust is treated as a grantor trust where the U.S. person is taxed on the trust’s income. Distributions by the foreign trust, especially to U.S. beneficiaries subjects the beneficiaries to tax also and additional foreign trust reporting requirements, including filing Forms 3520 and 3520-A. Substantial penalties of $10,000 or 35% of the gross value of any property transferred to the foreign trust, and more may apply for noncompliance.
Wealth planning incorporating ownership and transfer of business interests to multinational beneficiaries, and investors abroad or considered foreigners even if located in the U.S. may be impacted by the legislation. The underlying investment in U.S. companies or assets where potential beneficiaries or other investors may be foreign and from the list of discriminatory countries would be subject to the additional tax rates that range from 5% to 20%. Restructuring investments and ownerships to mitigate any potential tax exposure in light of proposed Section 899 would be prudent. Additionally, in conjunction with enforcing the increased rates and compliance obligations under proposed Section 899, increased enforcement of penalties for noncompliance on foreign trust reporting and foreign corporate holdings can be expected if Section 899 is passed and impacted taxpayers would be prudent in ensuring that all prior reporting obligations have been met.
Before Section 899 Hits: Proactive Planning and Compliance
For foreign investors and global families with U.S. investments and connections, ensuring comprehensive review of their existing investment and asset protection structures along with ensuring full compliance with U.S. tax reporting requirements is critical. Proactively filing any required returns that may have been inadvertently delayed or omitted will start applicable statutes of limitations on audits and provide potential relief from some penalties where a reasonable cause of noncompliance failure exists. Additionally, preparing for potential legislative changes, including the implementation of proposed Section 899 by restructuring investments, ownerships, and transfers, can prevent additional tax exposure before it is too late.
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