S. 3587: No Tax on Wrongful Delay Act of 2026

This bill, known as the No Tax on Wrongful Delay Act of 2026, proposes to amend the Internal Revenue Code of 1986 regarding the taxation of interest that the Internal Revenue Service (IRS) must pay to taxpayers. The key points of the bill include:

Exemption from Gross Income

The bill states that interest paid to taxpayers by the IRS after an audit or legal proceedings will not be considered as gross income. This means that taxpayers will not have to pay taxes on this interest amount. The interest is required to be paid when:

• The taxpayer has undergone an examination or audit by the IRS.
• The taxpayer has initiated a suit or legal action seeking a refund or credit for taxes.
• The government has started a civil action to collect or recover taxes from the taxpayer.

Amendment Details

The bill includes an amendment to the Internal Revenue Code, specifically adding a new section (139M) that outlines these provisions for interest payments. The change aims to clarify that such interest payments, under specified circumstances, will not count as taxable income. Additionally, it requires a conforming amendment to the table of sections in the Internal Revenue Code to reflect this new section.

Effective Date

The provisions regarding the exemption of interest from gross income will apply to taxable years that begin after December 31, 2025. This means taxpayers will start seeing this exemption in their tax filings for the 2026 tax year and onward.

Relevant Companies

None found