Sponsors (5)
The bill clarifies and standardizes tax treatment of damages awarded in suits against the United States—improving administration and certainty—but does so by creating new tax liabilities that reduce recipients' net recoveries and increase compliance burdens.
Recipients of damages from suits against the United States (individuals and businesses) will have those awards treated as taxable income, creating consistent tax treatment and removing ambiguity for the IRS which aids administration and enforcement.
Recipients of damages from suits against the United States will face a new tax liability that reduces the net compensation they receive from successful claims.
Taxpayers and tax administrators will face increased compliance and enforcement complexity because the bill expands the list of nondeductible items in §275, requiring more determinations about the character of claims.
Based on analysis of 2 sections of legislative text.
Makes damages paid to the President by the United States in a civil action taxable under the Internal Revenue Code.
Amends the Internal Revenue Code to treat damages paid to the President of the United States in a civil action filed against the United States as taxable amounts, by adding a new item into the list of nondeductible tax items in 26 U.S.C. § 275. The change applies to amounts received after the date of enactment and adds a new chapter entry to Subtitle D's chapter table for placement of the new provision.
Official title: Amend the Internal Revenue Code of 1986 to impose a tax on damages received by certain officers of the United States on account of any civil action filed against the United States, and for other purposes.
Introduced February 10, 2026 by Ronald Lee Wyden · Last progress February 10, 2026