No Tax on Wrongful Delay Act of 2026

This bill proposes to amend the Internal Revenue Code of 1986 to create a new exemption from gross income for certain interest payments. It specifies that gross income shall not include any interest paid by the Internal Revenue Service (IRS) to taxpayers on an overpayment of internal revenue tax. This exemption is applicable when the taxpayer has prevailed in specific circumstances, including an examination (audit) by the IRS or any litigation related to tax credits, refunds, or collection actions. The intent is to prevent taxpayers from being taxed on interest received as compensation for IRS delays or errors. These amendments are slated to apply to taxable years beginning after December 31, 2025.