This bill would make strike benefits tax-free. Specifically, it adds a new provision to the Internal Revenue Code (Sec. 139J) that excludes from an individual’s gross income any compensation provided by a labor organization (a union, described in Section 501(c)(5)) if that compensation is paid as a replacement for wages the member did not receive from their employer because of a strike. In other words, union-provided strike benefits would no longer be subject to federal income tax. The bill also adds the new section to the table of sections and specifies an effective date of January 1, 2025 for compensation received after that date. The bill is titled the “Picket Line Protection Act of 2025,” and was introduced in the House (H.R. 5561) by Rep. Dan Thanedar on September 23, 2025, and referred to the Ways and Means Committee.
Key Points
1Creates a new tax exclusion: Sec. 139J provides that compensation paid by a labor organization (501(c)(5) union) to replace wages lost due to a strike is not included in gross income.
2Specific trigger: The exclusion applies only when the union payment is a replacement for wages the member did not receive from their employer because of a strike.
3Scope: Applies to members of labor organizations described in 501(c)(5) (i.e., typical labor unions); payments must be compensation for lost wages due to a strike.
4Administrative steps: Clerical amendment to insert Sec. 139J into the table of sections for Part III of Subchapter B, so it is formally codified.
5Effective date: Applies to compensation received after January 1, 2025.
Impact Areas
Primary group/area affected- Members of labor organizations (unions) who receive strike benefits intended to replace lost wages during a work stoppage.Secondary group/area affected- Labor organizations themselves (unions) that pay strike benefits; may need to adjust internal accounting and how benefits are reported or documented for tax purposes.Additional impacts- Federal revenue: Recognizing strike benefits as tax-free could reduce federal income tax revenue by the amount of the excluded benefits, depending on the frequency and size of such payments.- Tax administration and compliance: Not addressing payroll taxes (FICA) or other taxes beyond federal income tax. Beneficiaries and unions may need to consider any other tax implications outside gross income, such as Social Security/Medicare treatment.- Labor relations and behavior: By removing income tax on strike benefits, the policy could influence unions’ financial support for strikes and workers’ financial resilience during work stoppages. It does not change the legality or permissibility of striking itself, just the tax treatment of certain payments.“Gross income” refers to all income from any source unless a specific exclusion applies, per federal tax law.“Labor organization described in section 501(c)(5)” means unions and similar organizations that are tax-exempt under that category.The bill specifies that the exclusion is for compensation that replaces the wages not received due to a strike, not general union payments or non-wage benefits.This is a bill in the introductory stage; no Senate companion or enactment status is stated, and sponsor is Rep. Thanedar.