H.R. 1868 — Stop Tax Penalties on American Hostages Act of 2025

This section establishes a new Internal Revenue Code (IRC) §7511 that disregards, for applicable individuals and their spouses, any period of unlawful or wrongful detention abroad (as determined under 22 U.S.C. §1741) or being held hostage abroad (as determined by the Hostage Recovery Fusion Cell under 22 U.S.C. §1741b) when computing tax filing deadlines under IRC §7508(a)(1), post-detention interest or penalties, or credits and refunds. It further (1) requires the Secretary of State and Attorney General to provide Treasury with lists of such individuals starting January 1, 2026, and annually thereafter; (2) directs Treasury to update relevant databases; and (3) mandates abatement and refund of any prior interest, penalties, or additions to tax assessed against such individuals for taxable years ending during the detention period. The provision applies to taxable years ending after enactment.

This section establishes an IRS program, to be implemented by January 1, 2026, to refund or abate penalties, interest, additional amounts, or additions to tax (including interest) paid by eligible individuals (i.e., applicable individuals such as U.S. nationals held hostage or wrongfully detained abroad who failed to perform required tax acts during such detention) for taxable years ending during the applicable period of January 1, 2021, through the date of enactment. The program requires (1) the Secretary of State and Attorney General, acting through the Hostage Recovery Fusion Cell (which coordinates U.S. government efforts to recover hostages and unlawfully detained U.S. nationals abroad), to compile and provide to the IRS Secretary a list of applicable individuals; (2) the IRS to notify identified individuals within 90 days of enactment (for those released by enactment) or release; and (3) refunds to be issued like tax overpayment refunds, with the three-year limitations period under IRC §6511(a) extended to one year after notice and the §6511(b)(2) limitation waived. The amendment applies to taxable years ending on or before the date of enactment.