Stop Tax Penalties on American Hostages Act of 2025

This bill amends the Internal Revenue Code to provide significant tax relief for United States nationals who are unlawfully or wrongfully detained or held hostage abroad . It introduces a new section, 7511, which mandates that the period during which an individual was detained or held hostage be disregarded when determining tax deadlines, interest, penalties, or credits and refunds. These crucial provisions also extend to the spouse of the affected individual, ensuring family financial stability during such crises. To facilitate the identification of eligible individuals, the Secretary of State and the Attorney General, acting through the Hostage Recovery Fusion Cell, are required to annually provide the Treasury Department with lists of these individuals. The Treasury Secretary must then update its databases to ensure these tax postponements are correctly applied. Importantly, any interest or penalties assessed or collected *before* an individual was officially identified as detained or a hostage must be promptly abated or refunded. The legislation further establishes a program, to be operational by January 1, 2026, allowing eligible individuals—or their spouses and dependents—to apply for refunds or abatements of interest and penalties incurred during the "applicable period," defined as January 1, 2021, to the bill's enactment date . The Treasury, in consultation with the State Department and Attorney General, must notify eligible individuals of this program within 90 days of the bill's enactment or their release. This program also extends the typical statute of limitations for refunds, ensuring that those affected can reclaim previously paid amounts.