No Capital Gains Allowance for American Adversaries Act

The No Capital Gains Allowance for American Adversaries Act would amend the Internal Revenue Code to tax as ordinary income certain gains and dividends linked to assets located in or derived from a list of designated “countries of concern” (China—including Hong Kong and Macao but excluding Taiwan, Russia, Belarus, Iran, and North Korea). Specifically, gains from the sale, exchange, or disposition of “specified country of concern property” would no longer qualify for capital gains treatment; they would be taxed as ordinary income. The bill also would deny step-ups in basis at death for such property, require the SEC to notify buyers when a sale involves such property, and compel the SEC to publish a public list of qualifying securities while both the Treasury and SEC develop implementing rules. The changes would apply to dispositions and dividends paid on or after January 1, 2026. In short, the bill seeks to raise taxes on investments tied to certain adversarial countries by removing capital gains treatment, increasing transparency, and limiting the tax advantages of inheritance for these assets.