Congress blocks tax breaks for U.S. companies doing business in Russia
S. 327 — HONOR Act · Filed by Catherine Cortez Masto (D-NV) · 1 cosponsor · Introduced Jan 30, 2025 · Passed chamber
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What it does
This bill amends the tax code to prohibit U.S. companies and individuals from claiming foreign tax credits or deductions for taxes paid to Russia. The restriction begins 30 days after enactment and continues until the U.S. resumes normal trade relations with Russia. The effect is to increase the U.S. tax burden on income earned in Russia, making it more costly for American entities to do business there.
Why we flagged it
The bill's operative mechanism is a targeted tax penalty on Russian-source income, designed to increase the cost of doing business with Russia as a foreign-policy response to conflict. It is not a general tax reform but a sanctions measure embedded in the tax code.
What the text implies
- The restriction terminates automatically when the U.S. resumes normal trade relations with Russia (tied to the Suspending Normal Trade Relations with Russia and Belarus Act), creating a sunset mechanism that does not require future congressional action.
- The bill applies without regard to any U.S. treaty obligation, potentially overriding tax treaties that normally protect against double taxation — a significant assertion of unilateral tax authority.
The full analysis lists 4 implications of this text.
Who it affects
The bill serves a legitimate foreign-policy objective (economic pressure on Russia during conflict) and most U.S. citizens have no direct exposure to Russian-source income.