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Standard Summary
Comprehensive overview in 1-2 paragraphs
The HONOR Act would make a targeted change to the U.S. tax code regarding taxes paid to Russia. For a defined period after the bill becomes law, it would deny U.S. taxpayers the ability to claim foreign tax credits for Russian taxes and, with a related provision, would alter how deductions for those taxes are treated. The period begins 30 days after enactment and ends when tariffs on Russian goods resume under a separate sanctions-related law. The changes are intended to operate independently of any treaty obligations. In short: for a limited window, U.S. taxpayers would face tighter (and potentially altered) treatment of Russian taxes for federal tax purposes.
Key Points
- 1Special rule for Russia: A new subparagraph (C) to the foreign tax credit rules would apply to the Russian Federation during a defined period after enactment (roughly 30 days after enactment up to the moment tariffs on Russia resume under the Suspending Normal Trade Relations with Russia and Belarus Act).
- 2Credit denial: During that period, Russian taxes would be denied as eligible for the foreign tax credit.
- 3Deduction rule adjusted: The bill adds a sentence to the deduction rule (901(j)(3)) with a carve-out. The preceding restriction on deductions would not apply to taxes of any country to which the Russia-specific paragraph (2)(C) applies. Practically, this creates a carve-out for deductions related to Russian taxes during the same period.
- 4Effective dates:
- 5- The credit rules (and most changes) take effect on the date of enactment.
- 6- The deduction carve-out applies to taxes paid or accrued after 90 days after enactment.
- 7- The changes are to be applied without regard to any treaty obligations.
- 8No treaty constraints: The act explicitly overrides treaty considerations for its provisions.
Impact Areas
Primary group/area affected- U.S. individual and corporate taxpayers who have Russian-sourced taxes and would otherwise be eligible for foreign tax credits or deductions during the defined period.Secondary group/area affected- Tax professionals and multinational companies planning cross-border activities with Russia.- The Russian government’s revenue, since U.S. tax credits for Russian taxes would be restricted during the period.Additional impacts- Border of sanctions policy: The bill ties its window to the suspension/resumption of tariff treatment under a separate sanctions law, creating a temporary, policy-driven tax change rather than a permanent one.- Administrative/tax planning uncertainty: Taxpayers and advisers will need to track the enactment date and the tariff-resumption date to determine when credits are disallowed and when the deduction carve-out applies. The provision also states the rule applies regardless of treaty obligations, reinforcing unilateral U.S. policy.
Generated by gpt-5-nano on Nov 1, 2025