Reuven S. Avi-Yonah (Michigan; Google Scholar), Is Section 899 A Valid Treaty Override?:
[P][P]roposed section 899 clearly violates the non-discrimination provision of US tax treaties by subjecting a US branch of a foreign corporation to a higher tax rate than a domestic corporation. In addition, Section 899 amplifies the BEAT, which itself violates the non-discrimination provision, and raises withholding tax rates above the treaty rates, which is not an increase protected by the Saving Clause (Article 1(4)) since it applies directly to the foreign corporation or individual.
A legal challenge to section 899 if it is enacted seems inevitable because (a) it applies to foreign banks that do not have the option of incorporating their branches, (b) it applies to foreign shareholders receiving dividends or royalties as well as to controlling shareholders receiving interest from US payors, and (c) it is very unlikely that Canada, France or even the UK will repeal their DST under pressure given the political popularity of the DST and the extreme unpopularity of the current US administration in those countries. …
It would have been better if the GOP had bitten the bullet, included the explicit override language in section 899, and if the Senate parliamentarian had excluded it under the Byrd Rule, voted to overrule her. Given that this did not happen, there will be considerable uncertainty about the validity of section 899 until there is a Supreme Court decision, which will take years. Hopefully, given that section 899 is ineffective as drafted, a future Congress will repeal it before then.
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