No Tax on Overtime for All Workers Act

Bill Number: H.R. 5475
Origin Chamber: House
Congress: 119th Congress, Session 1
Policy Area: Taxation
Status: Introduced
Latest Action: 2025-09-18: Referred to the House Committee on Ways and Means.
Last Updated: 2026-06-03T08:08:48Z

AI-Generated Summary

Purpose

The "No Tax on Overtime for All Workers Act" (H.R. 5475) aims to provide tax relief to workers by allowing a deduction for certain overtime pay from their federal income taxes. This would make qualifying overtime earnings non-taxable, increasing workers' take-home pay for extra hours worked.

Key Provisions

Definition of Qualified Overtime Compensation: The bill amends Section 225(c)(1) of the Internal Revenue Code (IRC) to define "qualified overtime compensation" as pay exceeding an employee's regular rate in two main scenarios:
Overtime required by Section 7 of the Fair Labor Standards Act (FLSA) of 1938, which mandates extra pay (typically 1.5 times the regular rate) for hours worked over 40 in a week for non-exempt employees.
Pay exceeding the regular rate under a pre-work agreement between the employee (or their union) and employer, where:
The work exceeds a standard number of hours (at least 40 hours per 7-day period) specified in the agreement.
For employees and employers covered by the Railway Labor Act (e.g., railroad or airline workers), the work goes beyond scheduled or anticipated duty hours or exceeds maximum hours limits set by agreement.
Deduction Availability: This allows workers to deduct the qualifying amount from their taxable income.
Effective Date: Applies to tax years starting after December 31, 2024.

Significant Changes to Existing Law

Expands the definition of deductible overtime in IRC Section 225 to include not only FLSA-mandated overtime but also overtime under voluntary agreements or for specific industries like transportation (under the Railway Labor Act).
Replaces the prior wording of Section 225(c)(1) with a broader scope, potentially making more types of extra-hour pay eligible for deduction than under current law, which may limit it to stricter FLSA requirements.

Potential Impacts

On Workers: Increases net income from overtime by reducing or eliminating federal income tax on it, benefiting hourly workers, shift employees, and those in labor-intensive fields; could encourage more overtime acceptance.
On Employers: May simplify payroll tax withholding for overtime but could indirectly boost hiring or overtime usage without tax disincentives; no direct compliance burden added.
On Government Agencies: The IRS would need to update forms, guidance, and processing for the expanded deduction, potentially increasing administrative workload; federal tax revenue could decrease, affecting funding for government programs.
On International Relations: Minimal direct impact, though reduced U.S. tax revenue might indirectly influence fiscal policy discussions in trade or economic agreements.

Main Stakeholders Affected

Workers: Primarily hourly and non-exempt employees under FLSA, unionized workers, and transportation sector employees (e.g., railroad crews, flight attendants) who rely on overtime pay.
Employers and Unions: Businesses offering overtime and labor organizations negotiating agreements; could strengthen bargaining for overtime terms.
Government: IRS for enforcement and revenue collection; Congress and Treasury Department for broader tax policy implications.
Taxpayers Generally: Indirectly affected through potential shifts in federal revenue and budget priorities.

Notable Legal, Constitutional, or Political Implications

Legal: A straightforward amendment to the tax code, aligning with Congress's authority under the 16th Amendment to levy and adjust income taxes; no apparent conflicts with labor laws like FLSA or Railway Labor Act, as it builds on their frameworks.
Constitutional: No significant challenges expected, as it involves permissible tax deductions without infringing on free speech, equal protection, or other rights.
Political: Introduced with bipartisan support (sponsors from both parties), it appeals to working-class voters by addressing wage stagnation; could spark debates on tax fairness, revenue loss (estimated in billions annually), and whether it favors certain industries over others.

This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.

Sponsor

Rep. Malliotakis, Nicole [R-NY-11]

Cosponsors (52)

Rep. Sykes, Emilia Strong [D-OH-13], Rep. LaLota, Nick [R-NY-1], Rep. Suozzi, Thomas R. [D-NY-3], Rep. Fitzpatrick, Brian K. [R-PA-1], Rep. Horsford, Steven [D-NV-4], Rep. Bresnahan, Robert P. [R-PA-8], Rep. Lawler, Michael [R-NY-17], Rep. Elfreth, Sarah [D-MD-3], Rep. Bacon, Don [R-NE-2], Rep. Vindman, Eugene Simon [D-VA-7], Rep. Kean, Thomas H. [R-NJ-7], Rep. Deluzio, Christopher R. [D-PA-17], Rep. Riley, Josh [D-NY-19], Rep. Mackenzie, Ryan [R-PA-7], Rep. Dingell, Debbie [D-MI-6], Rep. Smith, Christopher H. [R-NJ-4], Rep. Budzinski, Nikki [D-IL-13], Rep. Kennedy, Timothy M. [D-NY-26], Rep. Edwards, Chuck [R-NC-11], Rep. Garbarino, Andrew R. [R-NY-2], Rep. Neguse, Joe [D-CO-2], Rep. Kiggans, Jennifer A. [R-VA-2], Rep. Boyle, Brendan F. [D-PA-2], Rep. Cammack, Kat [R-FL-3], Rep. Waters, Maxine [D-CA-43], Rep. Stauber, Pete [R-MN-8], Rep. Miller, Max L. [R-OH-7], Rep. Garamendi, John [D-CA-8], Rep. Salazar, Maria Elvira [R-FL-27], Rep. Gillen, Laura [D-NY-4], Rep. Schmidt, Derek [R-KS-2], Rep. Levin, Mike [D-CA-49], Rep. Langworthy, Nicholas A. [R-NY-23], Rep. Tokuda, Jill N. [D-HI-2], Rep. McCaul, Michael T. [R-TX-10], Rep. Magaziner, Seth [D-RI-2], Rep. Rulli, Michael A. [R-OH-6], Rep. Mrvan, Frank J. [D-IN-1], Rep. Bost, Mike [R-IL-12], Del. Norton, Eleanor Holmes [D-DC-At Large], Rep. Wagner, Ann [R-MO-2], Rep. Lynch, Stephen F. [D-MA-8], Rep. Gimenez, Carlos A. [R-FL-28], Rep. Hoyle, Val T. [D-OR-4], Rep. McBride, Sarah [D-DE-At Large], Rep. Alford, Mark [R-MO-4], Rep. Bergman, Jack [R-MI-1], Rep. Pou, Nellie [D-NJ-9], Rep. Van Orden, Derrick [R-WI-3], Rep. Walkinshaw, James R. [D-VA-11] and 2 more