Tax Cut for Striking Workers Act of 2026

Overview

HR 8816, the Tax Cut for Striking Workers Act of 2026, proposes to exclude certain strike-related benefits from an individual’s gross income for federal income tax purposes. The bill creates a new tax provision (section 139M) that treats qualified strike benefits as non-taxable compensation, effectively increasing take-home pay for eligible workers during strikes or work stoppages.

Main purpose and intent

• Provide tax-free treatment for compensation paid to labor organization members during strikes, lockouts, or work stoppages.
• Align tax policy to support workers who lose wages due to labor disputes, by ensuring replacement wages are not taxable income.

Key provisions and changes

• New provision: Section 139M added to the Internal Revenue Code.
  • (a) Non-taxability: Gross income shall not include qualified strike benefits.
  • (b) Qualified strike benefits: Benefits must be provided by a labor organization described in section 501(c)(5) (labor unions) and exempt from tax under section 501(a). Benefits must replace, in whole or in part, compensation not received from the member’s employer due to a strike/lockout arising from a labor dispute (as defined by the National Labor Relations Act) or a work stoppage under the Railway Labor Act.
  • (c) Clerical amendment: The Internal Revenue Code’s table of sections is updated to include 139M after 139L.
  • (d) Effective date: Applies to compensation received after December 31, 2026.
• Interaction with other credits: The provision amends the calculation of the Earned Income Tax Credit (EITC) by inserting the new section after the term "by reason of section 112" in the applicable clause (section 32(c)(2)(B)(vi)).

Who/what is affected

• Individuals who are members of labor organizations described in section 501(c)(5) (unions) who receive qualified strike benefits as replacement wages during a strike, lockout, or work stoppage.
• Employers and unions indirectly, insofar as the tax treatment of strike benefits changes for members.
• Taxpayers claiming the Earned Income Tax Credit, due to the amendment related to the inclusion of section 139M in EITC provisions.

Procedural and timeline aspects

• Legislative status: Introduced May 14, 2026; referred to the House Committee on Ways and Means.
• Sponsor details: Co-sponsors include Sydney Kamlager, Dina Titus, and Steven Horsford.
• Effective date: The tax treatment applies to compensation received after December 31, 2026, creating a prospective change for eligible benefits from 2027 onward.

Potential impact

• Financial: Eligible workers receiving qualified strike benefits would no longer owe federal income tax on those benefits, potentially increasing after-tax income during disputes.
• Tax credits: The modification to EITC calculations ensures consistency with the new non-taxable status.
• Administrative: Unions and employers may need to implement or confirm reporting of qualified strike benefits to ensure proper tax treatment for recipients.

If you’d like, I can add a brief comparison to how similar benefits are taxed in other contexts or provide a plain-language example of how a hypothetical strike benefit would be taxed under current law versus under this bill.