‘Collateral damage’: Fund managers lobby Congress over Section 899 to avert foreign investors leaving the U.S.

American fund managers are lobbying Congress over a provision tucked inside President Donald Trump’s tax bill that they say could lead to foreign investors “quickly” pulling investments out of the U.S.

The “One Big Beautiful Bill Act,” which passed through the U.S. House of Representatives in May, aims to penalize foreign-owned firms operating in the U.S. and that are from countries with “unfair foreign taxes” under a provision known as Section 899. It is currently being considered by the Senate.

The Investment Company Institute (ICI), which represents fund houses in the U.S., is lobbying Congress for an amendment as it warns the bill in its current form also impacts most foreign investments in U.S. stock markets, according to documents seen by CNBC.

“In order to avoid the impact of section 899, portfolio investors are likely to retreat quickly from US equities, leading to capital outflows from the United States,” the ICI said in a letter sent to Senator Mike Crapo, the chairman of the Senate Finance Committee, on June 5. “If sustained selling by foreign investors depresses US equity markets, this would harm both US companies and investors.”