HONOR Act

Bill Number

S. 327

Origin Chamber

Senate

Congress

119th Congress, Session 2

Policy Area

Taxation

Status

Passed Senate

Latest Action

2026-03-16: Held at the desk.

Last Updated

2026-03-17T11:30:50Z

AI-Generated Summary

Purpose

The HONOR Act (Hindering Oppressive Nations from Obtaining Revenue Act) aims to limit the financial benefits Russia gains from U.S. taxpayers by denying them the ability to claim foreign tax credits or deductions for taxes paid to the Russian government. This is intended as an economic sanction to reduce Russia's revenue streams tied to U.S. economic activity.

Key Provisions

• Denial of Foreign Tax Credits: Amends Section 901(j)(2) of the Internal Revenue Code (IRC) to add a special rule for Russia, suspending foreign tax credits for taxes paid or accrued to Russia during a specified period.
• The suspension begins 30 days after the bill's enactment.
• It ends when normal trade relations with Russia resume, as determined under the Suspending Normal Trade Relations with Russia and Belarus Act (specifically, when standard tariff rates in the Harmonized Tariff Schedule are reinstated).
• Denial of Deductions: Amends Section 901(j)(3) of the IRC to prohibit deductions for taxes paid to Russia during the suspension period.
• This applies to taxes paid or accrued (or deemed paid under IRC Section 960) more than 90 days after enactment.
• Override of Treaties: The changes apply regardless of any U.S. treaty obligations, ensuring the denial takes precedence over international agreements.
• Effective Dates: Most provisions start on the date of enactment, with the deduction denial delayed by 90 days.

Significant Changes to Existing Law

• Expands the existing IRC Section 901(j), which already denies foreign tax credits for certain "sanctioned" countries, by adding Russia as a target under a new subparagraph (C).
• Modifies the deduction rules in Section 901(j)(3) to explicitly exclude taxes to Russia, closing a potential loophole where deductions could still offset U.S. tax liability even without credits.
• Introduces a time-limited application tied to trade relations status, unlike permanent denials for some other countries.

Potential Impacts

• On U.S. Taxpayers: Individuals and businesses with income or operations in Russia will face higher effective U.S. tax burdens, as they cannot offset U.S. taxes with credits or deductions for Russian taxes paid. This could increase costs for U.S. companies doing business in Russia.
• On Government Agencies: The Internal Revenue Service (IRS) will need to administer and enforce the new rules, potentially requiring updates to tax forms, guidance, and audits for affected taxpayers.
• On International Relations: Strengthens U.S. sanctions against Russia by targeting its tax revenue from U.S. sources, potentially straining diplomatic ties and encouraging similar actions by allies. It may deter U.S. investment in Russia but could complicate trade if normal relations resume.
• Broader Economic Effects: Reduces indirect financial support to Russia through U.S. tax benefits, aligning with ongoing geopolitical pressures, but might lead to retaliatory measures from Russia affecting U.S. interests.

Main Stakeholders Affected

• U.S. Taxpayers and Businesses: Especially multinational corporations, energy firms, or individuals with Russian-sourced income, who lose tax relief and may incur double taxation (paying full taxes to both the U.S. and Russia).
• Russian Government: Loses revenue from taxes on U.S.-related activities, as U.S. entities pay those taxes without U.S. tax offsets.
• U.S. Government (IRS and Treasury): Responsible for implementation, compliance monitoring, and potential treaty negotiations.
• International Businesses and Allies: U.S. partners in sanctions regimes may be indirectly affected through aligned policies, while non-U.S. firms could gain competitive edges in Russia.

Notable Legal, Constitutional, or Political Implications

• Legal: Overrides U.S. tax treaties with Russia (treaties that normally prevent double taxation), which could invite challenges in U.S. courts over treaty supremacy under the Constitution (Article VI). However, as statutory law, it takes precedence unless struck down.
• Constitutional: Raises questions about Congress's taxing power (Article I, Section 8) and foreign affairs authority, but aligns with established sanction mechanisms without apparent due process issues for U.S. citizens.
• Political: Reinforces bipartisan U.S. efforts to isolate Russia economically (e.g., post-2022 Ukraine invasion), signaling sustained pressure. It ties tax policy to trade status, potentially influencing future foreign policy debates on resuming relations with Russia. No direct impact on civil liberties, but it exemplifies "economic warfare" tools in U.S. legislation.

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

Sponsor

Sen. Cortez Masto, Catherine [D-NV]

Cosponsors (1)

Sen. Cornyn, John [R-TX]

Recent Actions

• 2026-03-16: Held at the desk.
• 2026-03-16: Received in the House.
• 2026-03-16: Message on Senate action sent to the House.
• 2026-03-10: Passed Senate without amendment by Unanimous Consent. (consideration: CR S953; text: CR S953)
• 2026-03-10: Passed/agreed to in Senate: Passed Senate without amendment by Unanimous Consent.
• 2026-03-10: Senate Committee on Finance discharged by Unanimous Consent.
• 2026-03-10: Senate Committee on Finance discharged by Unanimous Consent.
• 2025-01-30: Read twice and referred to the Committee on Finance.
• 2025-01-30: Introduced in Senate

Bill Versions

• Hindering Oppressive Nations from Obtaining Revenue Act — issued 2026-03-10 — PDF (6 pages)
• Hindering Oppressive Nations from Obtaining Revenue Act — issued 2025-01-30 — PDF (3 pages)