Iran War Oil Crisis Windfall Profits Tax Act
- Sponsor
- Rep. Sherman, Brad [D-CA-32]
- Committees
- Ways and Means Committee (primary)
- Last action
- May 13, 2026
Bottom line
The bill establishes a temporary 100% windfall profits tax on large oil companies during a period of geopolitical crisis and high oil prices, with all collected revenue rebated directly to individual taxpayers to offset high gasoline costs.
What it actually does
This bill amends the Internal Revenue Code to impose a 100% excise tax on crude oil profits exceeding $75 per barrel for large producers and importers. The tax is temporary, lasting until the President declares an end to hostilities with Iran, the Strait of Hormuz is fully reopened, and oil prices fall below $75 per barrel. All revenues collected from this tax are deposited into a dedicated fund and then rebated directly to eligible individual taxpayers as a refundable tax credit.
Proponents argue
Supporters would argue that this bill ensures oil companies do not unduly profit from geopolitical crises that drive up energy prices, providing direct financial relief to consumers struggling with high gasoline costs. They contend it is a fair and temporary measure directly linked to the crisis it seeks to address, ensuring accountability and returning 'excess' profits to the public.
Opponents contend
Opponents would contend that this tax could disincentivize domestic oil production and investment, potentially leading to reduced supply, higher energy prices in the long run, and increased reliance on foreign oil. They might also argue it represents an unwarranted government intervention in free markets that could distort supply and demand dynamics.
The bill is relatively short and clearly structured, making it accessible for an informed reader to understand its core mechanisms within a reasonable timeframe.
Section 1
Short Title: Iran War Oil Crisis Windfall Profits Tax Act
This section establishes the official short title for the Act, making it easier to refer to the legislation. The chosen name explicitly links the tax to the 'Iran War Oil Crisis' and identifies it as a 'Windfall Profits Tax,' clearly stating the bill's intended purpose and context.
Supporters argue
Supporters would argue that a clear and descriptive short title helps communicate the bill's purpose and urgency to the public, setting the context for its provisions.
Critics contend
No specific opposition is typically raised against short titles, though the name itself could be seen as politically charged by opponents of the policy.
Tradeoffs
None significant for the title itself, beyond its framing of the policy.
Section 2(a), new Internal Revenue Code Chapter 56, Section 5896(a)
Imposition of Excise Tax on Crude Oil
This provision imposes a new excise tax on 'covered taxpayers' for each barrel of taxable crude oil they extract within the United States or import for consumption, use, or warehousing. This tax is explicitly stated to be in addition to any other existing taxes, establishing a new financial obligation for specific entities in the oil sector.
Section 2(a), new Internal Revenue Code Chapter 56, Section 5896(b)
Duration and Triggers for the Windfall Profits Tax
The tax is imposed during 'applicable calendar quarters,' starting with the quarter of the bill's enactment. It ceases when three specific conditions are met: the President declares an end to all hostilities with Iran, the Strait of Hormuz is fully reopened, AND the price of West Texas Intermediate (WTI) oil falls below $75 per barrel. All three conditions must be satisfied for the tax to end.
Section 2(a), new Internal Revenue Code Chapter 56, Section 5896(c)
Calculation of the Tax Rate
The tax rate is set at 100% of the amount by which the price of a barrel of West Texas Intermediate (WTI) oil exceeds $75 for any given calendar quarter. This means that all profits above the $75 threshold are subject to the tax. Starting in 2026, the $75 threshold will be adjusted for inflation to maintain its real value over time.
Section 2(a), new Internal Revenue Code Chapter 56, Section 5897(a)(1)
Definition of Covered Taxpayer
A 'covered taxpayer' is defined as any taxpayer whose average daily number of barrels of taxable crude oil extracted and imported exceeded 100,000 barrels in calendar year 2025, or whose average daily number of barrels exceeds this threshold in the current calendar quarter. The bill includes aggregation rules, treating related entities as a single employer for the purpose of meeting this threshold.
Section 3(a), new Internal Revenue Code Section 6436
Gasoline Price Rebates to Individual Taxpayers
This section establishes a new refundable tax credit for 'eligible individuals' for each taxable year beginning after December 31, 2025. The specific rebate amount is to be determined by the Secretary of the Treasury within 30 days after the end of each calendar quarter, taking into account the number of eligible individuals and the total revenues collected in the Iran War Gasoline Price Relief Fund from the windfall profits tax.
Section 4(a), new Internal Revenue Code Section 9512
Establishment of the Iran War Gasoline Price Relief Fund
This section establishes the 'Iran War Gasoline Price Relief Fund' as a dedicated trust fund within the U.S. Treasury. Amounts equivalent to the taxes collected under the new windfall profits tax (Section 5896) are appropriated directly to this fund. The Secretary of the Treasury is then authorized to pay amounts from this fund to the general fund of the Treasury to cover the costs of the gasoline price rebates (Section 6436).
The $75 per barrel threshold for the windfall profits tax will be adjusted for inflation for calendar quarters beginning after 2026. This adjustment uses the cost-of-living adjustment determined under section 1(f)(3) of the IRC, with 2025 serving as the base year for calculation.
Section 2(a), new IRC Sec. 5896(c)(2)
Why it matters:This is standard legislative practice for incorporating technical adjustments to maintain the real value of dollar thresholds over time, ensuring the policy's intended effect is preserved against inflation.
Case for: Supporters would argue that this inflation adjustment ensures the tax remains relevant and fair over time, preventing inflation from eroding the real value of the $75 threshold and ensuring the tax continues to target genuine 'windfall' profits.
Case against: Opponents might argue that any adjustment mechanism adds complexity to the tax code and that the initial threshold should be sufficient, or that such adjustments can lead to 'bracket creep' for the tax, increasing its reach over time without explicit legislative action.
Estimated impact: Ensures the tax continues to apply to 'windfall' profits in real terms, potentially increasing the tax base over time if oil prices rise with inflation, thus maintaining the revenue stream for rebates.
For the purpose of determining if a taxpayer meets the 100,000 barrel threshold to be a 'covered taxpayer,' all persons treated as a single employer under specific sections of the Internal Revenue Code (Section 52(a) or (b) or Section 414(m) or (o)) are to be treated as one person.
Section 2(a), new IRC Sec. 5897(a)(1)(B)
Why it matters:This is standard legislative practice for anti-avoidance rules, designed to prevent companies from structuring themselves (e.g., through subsidiaries or related entities) to avoid thresholds or other tax obligations by splitting their operations.
Case for: Supporters would argue that this aggregation rule is crucial to prevent large corporations from circumventing the tax by creating multiple smaller entities, thereby ensuring the tax applies as intended to major players in the oil industry and preventing significant revenue loss.
Case against: No specific opposition is typically raised against these types of aggregation rules, as they are common and generally accepted anti-abuse provisions in tax law designed to ensure equitable application.
Estimated impact: Ensures the tax applies to the intended large corporate groups, preventing significant revenue loss through corporate restructuring and maintaining the integrity of the 'covered taxpayer' definition.
The Secretary of the Treasury is tasked with determining the 'gasoline price rebate amount' not later than 30 days after the end of each calendar quarter, taking into account eligible individuals and fund revenues. Additionally, the Secretary must carry out a 'robust and comprehensive outreach program' within 30 days of enactment to ensure all taxpayers learn of their eligibility for and are provided assistance in claiming such credits.
Section 3(a), new IRC Sec. 6436(b) and 6436(f)
Why it matters:This represents a standard delegation of administrative authority to the Treasury for implementation, but the specific timing requirements and the emphasis on outreach are notable administrative directives.
Case for: Supporters would argue that granting the Secretary flexibility allows for efficient and timely distribution of rebates based on actual collected revenues, while a mandated 'robust' outreach program ensures maximum participation and benefit for eligible individuals, especially those who may not typically file for credits.
Case against: Critics might express concern that the Secretary's discretion in determining the rebate amount could lead to inconsistencies or political influence, and that a 'robust' outreach program could be costly and potentially inefficient.
Estimated impact: These provisions directly influence the actual per-person rebate amount received by individuals and ensure public awareness, potentially increasing the take-up rate of the credit and the overall effectiveness of the consumer relief program.