Sponsor
Mark Pocan
Representative · D-WI
Representative · D-WI
The bill provides statutory clarity and enforcement authority to tax qualified settlement fund payments—improving administration and certainty—but does so by creating potential new tax liabilities, added compliance costs, and greater enforcement/litigation risk for recipients and payors.
Recipients of qualified settlement fund payments will have clearer, statutory tax treatment for amounts received after enactment, reducing uncertainty when filing taxes.
The IRS and Treasury are given explicit statutory authority and an administrative schema to tax and collect on these payments, improving tax administration and compliance.
Recipients of qualified settlement fund payments may face new taxable income and therefore higher tax liability on those amounts after enactment.
Taxpayers, payors, and financial institutions will incur additional compliance costs and administrative burden to implement the new tax rules and amended §275(a)(6) language.
Expanded IRS enforcement and collection activity under the new chapter could increase disputes and litigation over which settlement payments are taxable, raising legal risks and costs for taxpayers.
Based on analysis of 2 sections of legislative text.
Imposes a new federal tax on payments from qualified settlement funds and integrates that tax into Subtitle D of the Internal Revenue Code.
Creates a new federal tax on payments from qualified settlement funds and updates the Internal Revenue Code to reflect that tax. The change adds a new chapter to Subtitle D of the tax code, adjusts a related code cross-reference, updates the chapter table, and applies to amounts received after the date of enactment.
Official title: To amend the Internal Revenue Code of 1986 to impose a tax on payments received from any settlement fund established as a result of a civil action filed by the President of the United States against the Internal Revenue Service.
Introduced May 29, 2026 by Mark Pocan · Last progress May 29, 2026