“A bill to amend the Internal Revenue Code of 1986 to treat certain gains and dividends derived from countries of concern as ordinary income.”
No CRS summary available for this bill.
This section adds new IRC §1261 treating gain from the sale, exchange, or other disposition of specified country of concern property as ordinary income (notwithstanding other Code provisions), effective for dispositions on or after January 1, 2026. Specified country of concern property includes (1) securities of entities incorporated in, with majority assets/employees in, controlled by, or deriving majority value from a country of concern (i.e., People's Republic of China including Hong Kong and Macao but excluding Taiwan, Russia, Belarus, Iran, or North Korea); or (2) non-security property located or used in such a country. (Thus, such gains lose preferential long-term capital gains rates of 0%-20% and are taxed at ordinary income rates up to 37%.) The section also (1) amends IRC §1(h)(11)(C)(iii) to deny qualified dividend treatment (and thus preferential rates) to dividends from foreign corporations meeting the securities criteria, effective for dividends paid on or after January 1, 2026; (2) amends IRC §1014(a) to deny step-up in basis at death for such property (retaining the decedent's basis); (3) directs the SEC to issue rules within 180 days of enactment requiring sellers of qualifying securities to notify buyers of the ordinary income treatment; (4) requires the SEC to publish and maintain a public list of qualifying securities (with authority for related reporting); and (5) directs joint Treasury-SEC rulemaking within 180 days to implement the provision, including criteria for identifying qualifying entities.