hold on there's just too much going on in Congress lmao...
Exempts interest received from IRS after winning a tax dispute from income tax.
Mrs. Blackburn (Senator)
In committee, no Senate vote yet
This bill proposes to exclude interest paid by the Internal Revenue Service (IRS) to taxpayers from their gross income, meaning they wouldn't pay tax on it. This exclusion would apply when a taxpayer successfully challenges the IRS following an audit, a lawsuit for a tax refund, or a government attempt to collect taxes. Senator Marsha Blackburn introduced the bill, and it is currently under review by the Senate Finance Committee.
Introduced Jan 7, 2026
The bill was introduced in the Senate by Mrs. Blackburn on January 7, 2026, and has been referred to the Senate Committee on Finance. For the bill to become law, it must first pass out of this committee, then be approved by a majority vote in the full Senate. After that, it would need to pass the House of Representatives and then be signed by the President.
If this bill becomes law, individuals and businesses who receive interest payments from the IRS after successfully challenging a tax decision would no longer have to include that interest in their taxable income. This means they would keep the full amount of interest paid to them by the IRS in cases where the agency owed them money, such as after an overpayment is identified. The new rule would apply to tax years starting after December 31, 2025.
Supporters Say
Supporters would argue it is fair for taxpayers not to be taxed on interest paid by the IRS for an overpayment or error.
Critics Say
Critics might argue it could reduce federal tax revenue or complicate tax code administration.
Those in favor would likely highlight that this bill promotes fairness, ensuring taxpayers are fully compensated when the IRS has made an error or caused a delay. They might argue that taxing this interest essentially penalizes taxpayers for the government's mistake. Opponents, if any, might raise concerns about potential, albeit small, reductions in federal tax revenue or argue for consistent taxation of all income sources.