Sponsors (3)
The bill lets unions provide tax-free strike replacement pay to help striking workers and strengthen labor support, but it reduces federal revenue, risks improper recharacterization of payments, and may unintentionally cut EITC benefits for some low-income workers while delaying relief until after 2026.
Union members receiving qualified strike benefits would keep more of their replacement pay because those payments would be excluded from federal taxable income, increasing their net income during work stoppages.
Labor organizations (501(c)(5)) would be able to provide tax-favored replacement pay, strengthening unions' capacity to support members during strikes and potentially improving collective bargaining leverage.
Individuals receiving qualified strike benefits would face simpler tax reporting for those payments, reducing administrative burden for recipients.
All taxpayers could be affected by reduced federal revenue because excluding strike benefits from taxable income would lower tax receipts and could increase the deficit or require offsets elsewhere.
Low-income workers could lose or see reduced Earned Income Tax Credit (EITC) benefits if the rule change lowers 'earned income' calculations, eroding support for the lowest-income households.
Tax administration and other taxpayers could be harmed if organizations recharacterize non-strike payments as 'qualified strike benefits,' creating opportunities for abuse and tax avoidance without clear guardrails.
Based on analysis of 2 sections of legislative text.
Excludes qualified strike-replacement payments from gross income when paid by tax-exempt labor organizations, effective for payments after Dec 31, 2026.
Official title: To amend the Internal Revenue Code of 1986 to exclude strike benefits from gross income.
Introduced May 14, 2026 by Steven Horsford · Last progress May 14, 2026
Creates a new federal tax exclusion for “qualified strike benefits” paid by tax-exempt labor organizations to members who lose wages because of a strike, lockout, or Railway Labor Act work stoppage. The exclusion removes those replacement payments from gross income for federal income tax purposes for compensation received after December 31, 2026, and includes an apparent but incomplete cross-reference to earned income tax credit treatment.