Sponsors (10)
This bill provides immediate federal tax relief to owners of condemned U.S. property while creating some federal revenue loss and adding decision and compliance risks for affected taxpayers.
Property owners (homeowners and small-business owners) whose U.S. real property is condemned can exclude the gain from eminent domain takings from their federal taxable income, reducing their immediate federal tax bills.
Property owners can choose to elect out of the new exclusion and instead use the ordinary involuntary conversion (§1033) rules, preserving the option to defer gain when that treatment is more favorable.
Taxpayers generally — and therefore the federal budget — will face lower federal revenue because gains from condemned property excluded from income reduce taxable receipts, which could increase the deficit or crowd out other spending.
Property owners who fail to timely elect out could lose the familiar §1033 involuntary conversion deferral mechanics and their associated tax-deferral benefits.
Taxpayers may face increased complexity and compliance costs deciding whether to elect out and understanding the new exclusion rules while awaiting Treasury guidance and regulations.
Based on analysis of 2 sections of legislative text.
Excludes gains from U.S. eminent domain takings (including threatened takings) from federal gross income, with a taxpayer opt-out and Treasury guidance required.
Excludes gains from compulsory takings in the United States (eminent domain or sales under threat of eminent domain) from taxable gross income, creating a new Internal Revenue Code section 139M. Taxpayers may opt out of the exclusion on a timely election; the Treasury Secretary must issue implementing guidance or regulations. The change applies to conversions in taxable years ending after enactment.
Official title: To amend the Internal Revenue Code of 1986 to exclude from gross income gain from the conversion of property by reason of eminent domain.
Introduced February 25, 2026 by Benjamin Cline · Last progress February 25, 2026