The forgiven debt of Americans who are unlawfully or wrongfully detained abroad would be excluded from income taxes under a bipartisan bill sponsored by U.S. Rep. Don Bacon (R-NE).
Specifically, the Hostage Private Debt Tax Freedom Act, H.R. 9431, which Rep. Bacon proposed on Aug. 30 alongside lead original cosponsor U.S. Rep. Josh Gottheimer (D-NJ), would amend the Internal Revenue Code of 1986 to exclude debt such as credit card debt that is forgiven. Such debt is typically taxed as income.
“Individuals unlawfully detained abroad should not have to endure thousands of dollars of additional income tax when they return,” said Rep. Bacon. “If a citizen is taken hostage and must report any taxable amount of a canceled debt as ordinary income, this bill would provide some tax relief for those individuals.”
The congressman mentioned Paul Whelan, a former U.S. Marine who was arrested in Russia on Dec. 28, 2018, and accused of spying, receiving a 16-year sentence. He was “wrongfully detained,” according to the U.S., and following diplomatic discussions and prisoner swaps, Whelan returned to the United States on Aug. 1.
“I’ve spoken with members of Paul Whelan’s family who shared his situation with me,” Rep. Bacon said. “Imagine finally being freed and given a grand welcome home, to only have the IRS send you a large tax bill.”
The lawmaker also noted that the freed hostages typically have late fines for failing to file taxes while being wrongfully detained.
“After being held for days, weeks, and months as hostages by terrorists and our adversaries, facing unimaginable horrors, and making it home, no one should be hit with extra income taxes,” said Rep. Gottheimer. “That’s why I’m proud to lead the Hostage Private Debt Tax Freedom Act with my friend and fellow Problem Solvers Caucus colleague Don Bacon.”
The bill has been referred for consideration to the U.S. House Ways and Means Committee.