No Tax on Restored Benefits Act

Bill Number

H.R. 7361

Origin Chamber

House

Congress

119th Congress, Session 2

Policy Area

Taxation

Status

Introduced

Latest Action

2026-02-04: Referred to the House Committee on Ways and Means.

Last Updated

2026-06-16T14:55:19Z

AI-Generated Summary

Purpose

The "No Tax on Restored Benefits Act" (H.R. 7361) aims to prevent certain restored Social Security benefits from being taxed as income. It specifically excludes from taxable income the portion of benefits increased due to the Social Security Fairness Act of 2023, which addressed reductions in benefits for some retirees with public pensions.

Key Provisions

• Tax Exclusion for Specific Benefits: Amends Section 86(d) of the Internal Revenue Code of 1986 to add a new rule excluding from the definition of "social security benefit" (for tax purposes) any monthly insurance payments under Title II of the Social Security Act that:
• Result from changes made by the 2023 Social Security Fairness Act (e.g., repealing rules like the Windfall Elimination Provision, which reduced benefits for workers with non-Social Security-covered jobs).
• Apply to benefits paid for months starting after December 31, 2024, and ending before January 1, 2026 (effectively covering only 2025).
• Short Title: The bill is titled the "No Tax on Restored Benefits Act."

Significant Changes to Existing Law

• Under current law, up to 85% of Social Security benefits can be taxable as gross income if a recipient's total income exceeds certain thresholds.
• This bill introduces a temporary carve-out, making the restored portion of benefits non-taxable for one year (2025), without altering the overall taxation framework for other Social Security payments.

Potential Impacts

• On Citizens: Provides tax relief to affected Social Security recipients, increasing their after-tax income by an estimated amount equal to the restored benefits (potentially thousands of dollars per person, depending on individual circumstances). This could improve financial security for retirees, such as teachers, firefighters, and other public employees who previously faced benefit reductions.
• On Government Agencies: The Internal Revenue Service (IRS) will need to adjust tax forms and processing to implement the exclusion, potentially complicating 2025 tax filings. The U.S. Treasury may see reduced revenue from foregone taxes on these benefits, though the impact is limited to one year.
• On International Relations: No direct impacts, as the bill focuses on domestic Social Security and tax policy.

Main Stakeholders Affected

• Primary Beneficiaries: Social Security recipients whose benefits were restored or increased under the 2023 Act, including public sector workers (e.g., state and local employees) previously impacted by benefit offset rules.
• Government Entities: IRS (for tax administration), Social Security Administration (for benefit calculations), and the Department of the Treasury (for revenue implications).
• Secondary Groups: Taxpayers and advocacy organizations for retirees, who may benefit from or lobby on similar future reforms.

Notable Legal, Constitutional, or Political Implications

• Legal: The change is narrowly tailored to a one-year period, avoiding broad alterations to tax code stability, but it requires precise IRS guidance to define "attributable" restored amounts, potentially leading to administrative challenges or disputes in tax courts.
• Constitutional: No apparent issues, as it involves Congress's authority over taxation and Social Security under Article I of the U.S. Constitution.
• Political: Builds on the 2023 Act's reforms, appealing to bipartisan support for retiree protections (introduced by Rep. Gooden, R-TX, and Rep. Pingree, D-ME). It could influence future debates on Social Security solvency and tax equity, with potential for extension if the temporary measure proves popular, though it raises questions about long-term federal budget effects from reduced tax revenue.

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

Sponsor

Rep. Gooden, Lance [R-TX-5]

Cosponsors (6)

Rep. Pingree, Chellie [D-ME-1], Rep. Davids, Sharice [D-KS-3], Rep. Gray, Adam [D-CA-13], Rep. Mannion, John W. [D-NY-22], Rep. Lee, Susie [D-NV-3], Rep. Latimer, George [D-NY-16]

Recent Actions

• 2026-02-04: Referred to the House Committee on Ways and Means.
• 2026-02-04: Introduced in House
• 2026-02-04: Introduced in House

Bill Versions

• No Tax on Restored Benefits Act — issued 2026-02-04 — PDF (2 pages)