No Tax on Takings Act

Bill Number

H.R. 7687

Origin Chamber

House

Congress

119th Congress, Session 2

Policy Area

Taxation

Status

Introduced

Latest Action

2026-02-25: Referred to the House Committee on Ways and Means.

Last Updated

2026-04-16T08:06:59Z

AI-Generated Summary

Purpose

The "No Tax on Takings Act" (H.R. 7687) aims to provide tax relief to property owners whose property is taken by the government through eminent domain. Eminent domain is the legal power of the government to seize private property for public use, such as building roads or schools, while providing fair compensation. The bill prevents the IRS from taxing any financial gain (profit) from this compensation as ordinary income.

Key Provisions

• Tax Exclusion: Any gain from the sale, exchange, or conversion of U.S.-based property due to eminent domain (or the threat of it) is excluded from gross income, meaning it is not counted as taxable income.
• Coordination with Existing Rules: The exclusion overrides Section 1033 of the Internal Revenue Code, which currently allows taxpayers to defer taxes on involuntary property conversions (like eminent domain takings) by reinvesting the proceeds. Under this bill, no tax deferral is needed because the gain is fully excluded.
• Opt-Out Option: Property owners can choose to not apply the exclusion by making an election with the IRS, allowing them to follow previous tax rules if preferred.
• Regulations: The Secretary of the Treasury must create rules and guidance to implement the exclusion effectively.
• Effective Date: Applies to eminent domain conversions in tax years ending after the bill's enactment.

Significant Changes to Existing Law

• Introduces a new Section 139M in the Internal Revenue Code, creating a permanent tax exclusion specifically for eminent domain gains, which were previously taxable or only deferrable under Section 1033.
• Removes the need for property owners to reinvest compensation to avoid taxes, simplifying the process and providing immediate tax-free relief.
• Adds a clerical update to the Code's table of sections for easy reference.

Potential Impacts

• On Citizens: Property owners facing eminent domain will keep more of their compensation without owing federal income taxes on the gain, potentially easing financial burdens during forced relocations or property losses.
• On Government Agencies: Agencies like state or federal departments that use eminent domain (e.g., for infrastructure projects) may face smoother processes, as owners are less likely to contest takings due to tax concerns. However, the IRS could see reduced tax revenue from these transactions.
• Broader Effects: Minimal impact on international relations, as the bill focuses on domestic U.S. property. It could indirectly support public projects by making eminent domain less financially punitive for individuals.

Main Stakeholders Affected

• Property Owners: Primary beneficiaries, including homeowners, businesses, and farmers whose land is taken for public use.
• Government Entities: Federal, state, and local agencies exercising eminent domain, such as the Department of Transportation for highway projects.
• Taxpayers and IRS: General taxpayers may see slight revenue shifts; the IRS will administer the new exclusion and handle opt-out elections.
• Legislators and Advocates: Sponsors (e.g., Representatives Cline, Fleischmann, and others) and groups supporting property rights or tax relief.

Notable Legal, Constitutional, or Political Implications

• Legal: Strengthens tax treatment for eminent domain under the 5th Amendment of the U.S. Constitution, which requires "just compensation" for takings. The bill clarifies and expands tax protections without altering eminent domain authority itself.
• Constitutional: Aligns with property rights protections by reducing the tax burden on compensation, potentially making "just compensation" more meaningful in practice.
• Political: Represents a targeted tax cut for a specific group, appealing to pro-property rights conservatives. It could spark debate on federal revenue loss (estimated impacts not specified in the bill) and whether similar exclusions should apply to other involuntary losses, like natural disasters. No major partisan divide is evident from the bipartisan sponsors, but it may influence future tax reform discussions.

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

Sponsor

Rep. Cline, Ben [R-VA-6]

Cosponsors (8)

Rep. Fleischmann, Charles J. "Chuck" [R-TN-3], Rep. Perry, Scott [R-PA-10], Rep. Moore, Barry [R-AL-1], Rep. Ogles, Andrew [R-TN-5], Rep. Goldman, Craig A. [R-TX-12], Rep. Biggs, Sheri [R-SC-3], Rep. Hurd, Jeff [R-CO-3], Rep. Mann, Tracey [R-KS-1]

Recent Actions

• 2026-02-25: Referred to the House Committee on Ways and Means.
• 2026-02-25: Introduced in House
• 2026-02-25: Introduced in House

Bill Versions

• No Tax on Takings Act — issued 2026-02-25 — PDF (3 pages)