Sponsors (8)
The bill gives property owners selling under threat or condemnation clearer tax relief and optional flexibility to defer, at the cost of reduced federal revenue and potential complications or changes to existing deferral mechanics and implementation.
Homeowners, small-business owners, and other property owners whose property is taken (including threatened or imminent condemnation) can exclude eminent-domain proceeds from federal taxable income, lowering their federal tax bills and reducing tax uncertainty when selling under threat.
Taxpayers receiving eminent-domain proceeds can elect to opt out of the exclusion and instead use the involuntary conversion rules under §1033 if they prefer deferral or different tax timing, preserving flexibility for those who want to roll proceeds into replacement property.
All taxpayers: excluding eminent-domain gains from income will reduce federal tax receipts, which could increase budget pressures or require offsets elsewhere in the federal budget.
Property owners and small businesses that rely on §1033 deferral mechanics may lose automatic deferral treatment or face changes to how deferral applies, potentially forcing immediate tax recognition unless they properly elect alternative treatment.
Taxpayers and tax preparers: Treasury's authority to prescribe the election procedure and issue implementing guidance could create administrative complexity or uncertainty during implementation and transition.
Based on analysis of 2 sections of legislative text.
Introduced February 25, 2026 by Benjamin Cline · Last progress February 25, 2026
Excludes from federal gross income any gain a taxpayer realizes when property located in the United States is taken by eminent domain or sold/exchanged because of an imminent or threatened taking. Taxpayers may elect out so the exclusion does not apply; the Treasury Secretary must issue rules on the timing and manner of that election. The change adds a new Internal Revenue Code section (139M), prevents the involuntary conversion rules of section 1033 from applying to these excluded conversions, updates the tax code table of sections, and applies to taxable years ending after the date of enactment.