To amend the Internal Revenue Code of 1986 to establish the individual tariff refund credit.
- Sponsor
- Rep. Thompson, Mike [D-CA-4]
- Committees
- Ways and Means Committee (primary)
- Last action
- Feb 20, 2026
Bottom line
The bill aims to return unlawfully collected tariff revenues to households and prevent large corporations from profiting by passing tariff costs to consumers while later receiving full refunds.
What it actually does
This bill establishes an individual tariff refund credit, allowing eligible individuals to receive a payment for tariff revenues collected by the Federal Government pursuant to an unlawfully imposed tariff. It also imposes a 100% excise tax on certain tariff refunds received by large corporations, unless those corporations can demonstrate they did not pass on the costs of those tariffs to consumers.
Proponents argue
Proponents would argue that this bill ensures fairness by directly compensating American households for unlawfully collected tariff revenues and holds large corporations accountable for potentially profiting from tariffs that were ultimately deemed illegal, thereby protecting consumers from unjust enrichment.
Opponents contend
Opponents might contend that the 100% excise tax is overly punitive, creates an impractical and costly compliance burden for businesses, and could disincentivize companies from seeking legitimate refunds for unlawfully collected tariffs, potentially leading to further economic uncertainty.
The bill is relatively short and its core provisions are clearly articulated, making it accessible for an informed reader to understand its primary impacts.
Section 1(a), adding new IRC Section 6436
Establishment of Individual Tariff Refund Credit
This provision creates a new refundable tax credit for eligible individuals. The credit amount, termed the 'applicable tariff refund amount,' is calculated by dividing the total 'covered tariff revenues' (from unlawfully imposed tariffs) by the aggregate number of individuals in eligible households. Each eligible individual receives this amount multiplied by the number of individuals in their household, including themselves (or two for a joint return) and their dependents.
Supporters argue
Supporters argue this provision directly returns money to the American people who indirectly bore the cost of unlawfully imposed tariffs, ensuring that the government rectifies its errors by compensating citizens.
Critics contend
Critics might argue that distributing tariff refunds broadly to individuals may not accurately compensate those most affected by the tariffs, and that the administrative burden of calculating and distributing these refunds could be substantial.
Tradeoffs
This provision balances the desire to compensate citizens for government error against the administrative complexity and potential for broad distribution to dilute individual impact.
Section 1(a), new IRC 6436(e)
Defining 'Covered Court Order' and 'Unlawful Tariff'
This section defines a 'covered court order' as a final court order that mandates the Federal Government to repay tariff revenues collected due to an 'unlawfully imposed tariff.' An 'unlawful tariff' is specifically defined as a tariff imposed unlawfully after January 20, 2025, and before the date the bill is enacted.
Section 1(a), new IRC 6436(h) and (i)
Advance Payments and Credit Reduction
This provision mandates that the individual tariff refund credit will be reduced by any advance refunds or credits already made to the individual. It also establishes that eligible individuals will be treated as having made a payment against their tax for the covered taxable year, and the Secretary of the Treasury is directed to refund or credit any overpayment as rapidly as possible, notably without interest.
Section 2(a), adding new IRC Section 4969
Excise Tax on Non-Qualifying Tariff Refunds for Large Corporations
This section imposes a 100% excise tax on 'non-qualifying tariff refunds' received by 'covered taxpayers.' Covered taxpayers are defined as corporations or taxpayers that do not meet a gross receipts test, with a threshold of $1 billion. A non-qualifying refund is a repayment of tariff revenues collected from the taxpayer in the course of their trade or business.
Section 2(a), new IRC 4969(b)
Exception to Excise Tax for Non-Passed-On Costs
The excise tax does not apply if a covered taxpayer can demonstrate that any increase in the price of their products during the 'covered period' (January 20, 2025, until the date a covered court order is issued) did not exceed 50% of the tariffs imposed on those products or their inputs. Price increases specifically attributable to inflation are to be excluded from this calculation.
This section outlines how the individual tariff refund credit will be handled for U.S. possessions. It mandates payments from the Treasury to possessions with 'mirror code tax systems' for their revenue loss, and to other possessions for estimated aggregate benefits, provided they have an approved plan to distribute payments to residents. It also provides administrative expense payments to possessions and prevents individuals from receiving double benefits.
Section 1(c)
Why it matters:This is standard legislative practice for coordinating federal tax law changes with U.S. territories to ensure equitable treatment and address unique tax systems.
Case for: Ensures that residents of U.S. possessions receive equivalent benefits to mainland U.S. residents and that possessions are compensated for administrative costs and revenue losses incurred due to the federal tax changes.
Case against: No specific opposition is typically raised against such equity provisions. However, the administrative burden on possessions to create and implement distribution plans could be a practical challenge.
Estimated impact: Potentially millions of dollars in payments from the U.S. Treasury to possessions for revenue loss, aggregate benefits, and administrative costs, depending on the scale of tariff refunds.
Section 1(f) specifies that the amendments related to the individual tariff refund credit apply to taxable years beginning after December 31, 2024. Section 2(c) states that the amendments establishing the excise tax on certain tariff refunds apply to amounts received after December 31, 2025.
Section 1(f) and Section 2(c)
Why it matters:It is standard legislative practice to explicitly state the effective dates for new tax provisions, providing clarity for taxpayers and administrative agencies.
Case for: Provides clear guidance on the applicability of the new tax provisions, allowing taxpayers and the IRS to prepare for compliance and benefit eligibility. The differing dates reflect the distinct nature of the refund credit versus the excise tax.
Case against: No direct opposition, but the differing effective dates could introduce complexity in implementation and communication for both the IRS and affected parties.
Estimated impact: These dates determine the window of applicability for potentially billions of dollars in tariff revenues subject to refunds and excise taxes, significantly impacting the federal budget and affected entities.