The bill adds a new Chapter 50B to the Internal Revenue Code that imposes a tax equal to 100 percent of any damages a covered person receives in connection with a civil action filed by that person against the United States (including agencies and instrumentalities) where the filing, settlement, verdict, or judgment occurs while the individual is serving as President. "Covered person" includes the President, specified family members, and entities controlled by those individuals. The measure also amends section 275(a)(6) to prevent deductions linked to these tax‑exempt receipts and specifies the rule applies to amounts received after enactment.
This is a narrowly targeted tax-change designed to strip private financial gain from litigation involving the federal government and the sitting President. It creates a one-hundred percent tax on specified damages, defines the covered classes broadly, and sets administrative rules that treat the levy as an income tax while excluding those damages from gross income for other chapters of the Code — a design meant to avoid double counting while ensuring collection under income tax procedures.
At a Glance
What It Does
Adds IRC Chapter 50B (sec. 5000E) imposing a tax equal to 100% of the aggregate damages a covered person receives from civil actions that the person filed against the United States, where filing/settlement/verdict occurs during the President's term.
Who It Affects
Directly affects any individual who serves as President, that person's spouse and relatives defined by section 152(d)(2), and entities controlled by those individuals; also affects IRS/DOJ settlement practice and tax advisors handling presidential and related-party finances.
Why It Matters
It prevents a sitting President (and related parties) from retaining monetary awards paid in litigation against the federal government by converting those awards into taxable receipts at a 100% rate and closing common tax-deduction workarounds.
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What This Bill Actually Does
The bill creates a standalone tax regime for a narrow class of litigation receipts. It imposes a tax equal to the full amount of any money a President (and certain relatives or controlled entities) receives as damages in a civil case that the President filed against the United States or its agencies, provided the relevant event — filing, settlement, verdict, or judgment — occurred while the person served as President.
In short: if a President sues the federal government during the presidency and obtains damages (or settles while in office), this tax would capture those proceeds.
The coverage is broad on the beneficiary side: 'covered person' explicitly reaches the President, the spouse, relatives defined by the family‑tax rules in section 152(d)(2), and any person or entity 'controlled' by those individuals under standards like section 52(b). The bill treats the taxable amount as a special tax collected through income‑tax administration (subtitle A treatment) but simultaneously instructs that those same amounts are excluded from gross income elsewhere in the Code — a structural choice that makes the new chapter the sole path for taxing these receipts and avoids double counting across chapters.Practically, the bill also plugs a common tax planning escape hatch: it amends section 275(a)(6) to deny deductions related to the production of these tax‑exempt receipts, so parties cannot offset income or otherwise neutralize the 100% tax through ordinary deduction rules.
The statute applies only to amounts received after enactment. That timing, together with the definition of "applicable period" (the President's term), will be important in determining whether settlements that straddle a term are captured and whether preexisting claims later settled during a presidency are taxable under this chapter.Because the tax rate is full‑amount (100%), the economic effect is that covered recipients would not retain net proceeds from the targeted categories of damages.
The bill thus alters the incentives for both plaintiffs (the President) and defendants (the United States and its agencies) in negotiating suits brought by a sitting President, and it creates compliance and enforcement tasks for the IRS to identify covered receipts and affiliated controlled entities.
The Five Things You Need to Know
The bill adds Chapter 50B (sec. 5000E) to the Internal Revenue Code imposing a tax equal to 100% of a 'qualified civil action amount' received by a covered person in any taxable year.
A 'covered person' includes anyone who has served as President, the President's spouse and relatives defined by section 152(d)(2), and any person or entity controlled under rules comparable to section 52(b).
A 'qualified civil action amount' is the aggregate of damages (settlement, verdict, judgment, or otherwise) received by such persons on account of civil actions they filed against the United States or its agencies, where filing, settlement, or issuance of a verdict or judgment occurred during the President's term.
The bill instructs that those damages are excluded from gross income for other parts of the Code but are treated administratively as a tax under subtitle A, creating a single pathway for taxing and collecting the amount.
Section 275(a)(6) is amended to add chapter 50B (blocking related deductions), and the rule applies to amounts received after the date of enactment.
Section-by-Section Breakdown
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Short title
Designates the legislation as the "Prevent Presidential Profiteering Act." This is purely titular but sets the policy frame that the statutory provisions are intended to prevent private profit from litigation involving the President and the United States.
100% tax on covered damages
Imposes a tax equal to 100 percent of the 'qualified civil action amount' for each covered person in any taxable year. The single‑rate, full‑amount levy is the bill's core mechanism — it converts identified litigation receipts into a tax liability equal to the full award amount, effectively removing the net economic benefit to the recipient.
Who counts as a covered person
Defines covered persons to include the President, the President's spouse and relatives under section 152(d)(2), and individuals or entities 'controlled' by those people using principles like section 52(b). That language extends reach to family members and controlled entities to limit straightforward shifting of awards to avoid taxation.
What counts as a qualified civil action amount and timing rules
Defines the taxable amount as the aggregate damages received 'on account of' civil actions filed by the covered person against the United States (including agencies/instrumentalities). It ties coverage to events occurring during the 'applicable period' — from when the individual began serving as President to when they ceased — by specifying that filing, settlement, or issuance of a verdict/judgment during that period triggers capture even if receipts occur later.
Tax administration and income exclusion
Directs that the tax be administered under subtitle A rules (income tax procedures) for collection and enforcement, while also excluding qualified civil action amounts from gross income for other Code chapters. That structure is designed to centralize taxation under the new chapter and avoid counting the same receipt under multiple parts of the Code.
Deductions, clerical change, and effective date
Amends section 275(a)(6) to include Chapter 50B (preventing deductions tied to these receipts), inserts the Chapter 50B heading into the subtitle D table of chapters, and makes the amendments apply to amounts received after enactment. The deduction bar and timing clause are mechanically important for tax planning and for determining which settlements or awards fall within the rule.
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Explore Finance in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- U.S. Treasury/IRS — Gains revenue capture and a clear tax instrument to prevent net private enrichment from covered litigation outcomes, centralizing collection under income‑tax procedures.
- Department of Justice and federal agency litigators — Obtain a stronger negotiating position in settlements because awards that would enrich a covered president or relatives would be neutralized by a 100% tax, changing settlement calculus.
- Congressional oversight bodies and ethics offices — Receive a statutory tool that reduces monetary incentives for a sitting President to pursue or monetize litigation against the federal government, supporting oversight of conflicts of interest.
- General public/taxpayers — Indirectly benefit from the policy aim of denying private enrichment from lawsuits brought against federal institutions by an officeholder, which proponents argue reduces appearance or actuality of self‑dealing.
Who Bears the Cost
- Covered persons (President, spouse, specified relatives) and controlled entities — Face a complete tax bite on qualifying damages and limited planning options because of the 100% rate and the deduction ban.
- Tax advisers and estate planners working for covered persons — Must develop new compliance strategies and will face constrained planning opportunities to shelter such receipts.
- Federal agencies/DOJ — May face changed litigation dynamics and potential administrative overhead as settlement posture shifts; agencies might see longer litigation or different settlement structures to avoid producing taxable awards to covered parties.
- IRS and Treasury — Must develop rules, guidance, and enforcement systems to identify covered receipts, attribute them to covered persons or controlled parties, and administer the novel combination of exclusion from gross income yet taxation under a special chapter.
Key Issues
The Core Tension
The bill tries to eliminate any private financial incentive for a sitting President (and close affiliates) to obtain damages from the federal government by taxing the full award, but that objective conflicts with principles of remedial access and predictable tax administration: stripping all net proceeds limits the utility of civil remedies and invites complex disputes over timing, attribution, and avoidance, forcing a trade‑off between preventing perceived profiteering and preserving neutral, administrable rules for awards and settlements.
The statute raises several implementation and interpretive questions that will matter more to practitioners than the title. First, the definition of 'qualified civil action amount' depends on whether a filing, settlement, or verdict occurs during the President's term; that creates edge cases where a claim is filed before or after the term but settled during it (or vice versa).
The text captures receipts tied to events occurring during the term, but courts and IRS guidance will likely be needed to resolve precisely when an award is 'on account of' a covered filing and how to attribute multi‑stage litigation events.
Second, the reach to family members and 'controlled' persons is intentionally broad but vague. Applying section 52(b)-style control principles to private entities will create factual inquiries — ownership, voting power, and economic control — that enable litigation about whether a particular settlement to a related entity is taxable under Chapter 50B.
Taxpayers can be expected to explore entity structures, timing of settlements, and non‑damages forms of relief to avoid capture; the bill's amendment to section 275 closes a common deduction path but does not block every avoidance technique.
Finally, the bill's design — a 100% tax alongside exclusion from gross income and subtitle A administration — is administrable in principle but creates enforcement burdens for the IRS and raises fairness questions. Because the tax leaves no net proceeds to covered recipients, it effectively functions as a confiscatory measure targeted to a narrow group, which could prompt novel constitutional or statutory claims; resolving those risks will fall to courts and may affect how aggressively the IRS enforces the provision.
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