What This Bill Does
The Tax the Grift Act would create a new tax rule in the Internal Revenue Code that imposes a 100 percent tax on certain settlement-fund payments. It applies to money received from any fund created because of a civil action filed by the President of the United States against the Internal Revenue Service. In practical terms, anyone who receives one of these covered payments would owe a tax equal to the full amount of that payment, and the bill also says those payments would not count as gross income for chapter 1 purposes. The change would take effect for amounts received after the date of enactment.
- Creates new Internal Revenue Code chapter 50B for "Qualified Settlement Fund Payments."
- Imposes a tax equal to 100% of any covered settlement-fund payment.
- Applies only to funds from a civil action filed by the President against the IRS.
- Takes effect for amounts received after the date of enactment.
- Amends section 275(a)(6) so the tax cannot be deducted.
Who This Bill Affects
For a typical member of the public, this bill would have no direct effect unless they receive money from a settlement fund created by a civil action filed by the President against the IRS. If that happens, the bill would impose a tax equal to 100 percent of the payment, and the payment would not be included in gross income for chapter 1 purposes. The practical result is that covered recipients would keep none of the settlement payment after the new tax applies.
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- Taxpayers who want to block perceived windfalls They may argue that payments from a settlement fund tied to a lawsuit against the IRS should not produce a net gain for recipients. A 100 percent tax ensures the payment does not become an untaxed benefit from a politically charged settlement.
- Fiscal conservatives They may support the bill as a way to prevent special settlement structures from creating tax advantages. The bill is narrowly targeted and designed to capture the full amount of the covered payment.
- Critics of IRS-related litigation payouts They may see the measure as a way to discourage using settlement funds to distribute money in a way that looks like a workaround or bonus payment.
- Recipients of the covered settlement payments They would likely oppose the bill because it eliminates the economic value of the payment by taxing it at 100 percent. Even though the payment is excluded from gross income, the separate tax leaves the recipient with no net benefit.
- Tax policy advocates favoring neutral treatment of settlements They may argue that settlement payments should generally be taxed under ordinary rules rather than singled out for a special 100 percent tax. The bill creates a highly specific exception that departs from standard tax treatment.
- Civil-litigation and consumer advocates They may contend that the bill could undermine the purpose of settlement funds by redirecting the entire payment back to the government through tax. That could reduce the practical value of resolving disputes through settlement.
Key Implications
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“"a tax equal to 100 percent of any qualified settlement fund payment"”
Any covered payment is fully offset by tax, so the recipient does not retain a net cash benefit from that payment.
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“"any fund established as a result of a civil action filed by the President of the United States against the Internal Revenue Service"”
The bill is narrowly limited to settlement funds tied to a specific kind of lawsuit involving the President and the IRS, not all settlements or all IRS-related payments.
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“"the gross income ... shall not include any qualified settlement fund payment"”
The bill removes the payment from gross income for chapter 1, but that does not eliminate the separate 100 percent tax imposed by section 5000E.
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“"shall apply with respect to amounts received after the date of the enactment"”
The tax applies only prospectively, so it would affect future receipts after enactment rather than payments already received before the law changes.
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“"Section 275(a)(6) ... inserting '50B,' after '50A,'"”
This prevents taxpayers from deducting the new tax, reinforcing that the covered payment is not meant to generate a tax benefit through offsetting deductions.
Latest Status
May 29, 2026
Referred to the House Committee on Ways and Means.
Will It Pass?
14% estimated chance of becoming law
The bill was introduced in the House on May 29, 2026, by Mr. Pocan and was referred to the House Committee on Ways and Means. At this stage it is a committee-level House bill with no recorded co-sponsors in the provided text, and the legislative dynamics are likely to turn on whether members view the measure as a targeted tax penalty or as a narrow anti-windfall provision. Bills that create highly specific tax rules for settlement proceeds are typically uncommon and face a more limited path than broad tax legislation.
Pass percentages are model estimates and may be inaccurate.
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