Sponsors
The bill gives taxpayers who receive certain tax-overpayment interest a small after-tax benefit and simpler reporting in exchange for a modest loss of federal revenue and added administrative complexity for the IRS and affected taxpayers.
Taxpayers who receive interest on certain tax overpayments (interest under section 6611 for covered proceedings) will get that interest excluded from taxable income, increasing their after-tax refund amounts.
Taxpayers who receive that covered interest will have simpler tax reporting because the interest is tax-free and generally need not be reported as taxable income, reducing small-item reporting burdens.
Federal revenues will be modestly reduced because the excluded interest is no longer taxable, which could slightly increase deficits or create pressure for other tax or spending changes.
The IRS and taxpayers may face added administrative complexity and compliance costs because the exclusion applies only to interest from specific proceedings, requiring identification and potential disputes over qualifying interest.
Based on analysis of 2 sections of legislative text.
Introduced January 7, 2026 by Marsha Blackburn · Last progress January 7, 2026
Excludes from taxable gross income interest that taxpayers receive under IRC section 6611 when the interest arises from overpayments of tax tied to IRS examinations, taxpayer suits for refunds, or civil actions by the United States to collect or recover taxes. The change applies to taxable years beginning after December 31, 2025. The act also provides a short title and updates the subsection table to insert the new code section.