U.S. Senator Marsha Blackburn (R-Tenn.) is pushing forward with a new piece of legislation aimed at easing the financial burden on taxpayers who come out on top in disputes with the Internal Revenue Service. The proposed bill, titled the No Tax on Wrongful Delay Act, is designed to make the interest paid to taxpayers by the IRS tax-free when they win an audit or are successful in tax-related litigation. In an official statement on her website, Blackburn remarked, "The American people should not be forced to pay income taxes on the interest they are owed from the IRS when they prevail in an audit or in court."
The bill's intricacies specify that any interest received from the IRS under certain circumstances will no longer be considered taxable income. These situations include resolution of IRS audits, taxpayer-initiated lawsuits for refunds or credits, and civil actions by the U.S. to collect taxes, where the taxpayer prevails. According to the text of the bill available via Blackburn's Senate page, this measure would be applicable to taxable years starting after December 31, 2025.
The No Tax on Wrongful Delay Act aligns with other legislative efforts by Senator Blackburn, who has previously raised concerns alongside Senators Barrasso, Daines, and Lankford regarding an IRS initiative from the Biden era that targets Main Street businesses. Similarly, Blackburn and Senator Cortez Masto have introduced legislation to shield taxpayers from penalties that could arise due to IRS delays.
Blackburn's move positions her as a defender of taxpayer rights, reflecting a broader GOP sentiment against what they perceive as government overreach. "The No Tax on Wrongful Delay Act would protect taxpayers and ensure that interest paid on overpayments resulting from audits, refund actions, or IRS collection cases is not taxable income when the IRS gets it wrong," Senator Blackburn emphasized in her statement. The bill, if passed, promises to offer a more equitable financial resolution for individuals who engage in the arduous process of challenging the IRS and emerge victorious.
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