No Capital Gains Allowance for American Adversaries Act
SB 2047, titled the No Capital Gains Allowance for American Adversaries Act, would change federal tax treatment for certain investments tied to designated “countries of concern.” The bill directs that gains from the sale or other disposition of specified property connected to those countries be taxed as ordinary income rather than capital gains, and it also excludes dividends from certain foreign corporations tied to those countries from preferential dividend tax treatment. In addition, it would deny a step-up in basis at death for that property, which could increase taxable gains for heirs.
The bill defines “countries of concern” to include the People’s Republic of China, including Hong Kong and Macao but excluding Taiwan, as well as Russia, Belarus, Iran, and North Korea. It covers securities of entities incorporated in, controlled by, or substantially tied to those countries, as well as non-security property located or used there. The legislation also requires the SEC and Treasury to create implementing rules, establish criteria for covered securities, publish a public list of covered securities, and require seller notice to purchasers that gains will be taxed as ordinary income. The changes would apply to dispositions and dividends on or after January 1, 2026.
If enacted, the bill would amend the Internal Revenue Code by creating a new tax rule that overrides capital gains treatment for covered foreign-linked assets and by modifying dividend and estate-tax basis provisions. It would affect investors, taxpayers, brokers, and issuers with exposure to entities or property connected to the listed countries, and it would place new rulemaking and disclosure responsibilities on the Treasury Department and the SEC. The bill would also require the SEC to identify covered securities publicly, which could affect compliance, reporting, and market transparency for affected assets.
Based on the available context, the bill appears to be framed as a national-security and economic pressure measure aimed at adversarial foreign governments, and there is no recorded committee debate or vote history in the provided materials. The absence of transcripts or votes means there is no documented bipartisan or partisan reaction in the record supplied here. The bill’s introduction and referral to the Senate Finance Committee suggest it is still at an early stage of consideration.
The main points of potential contention are the breadth of the definition of “country of concern” and the scope of assets covered, especially securities tied indirectly to foreign governments or businesses with substantial operations, assets, or value linked to those countries. Another likely issue is administrative complexity, since the bill requires Treasury and the SEC to define covered entities, publish lists, and enforce notice requirements. Tax policy concerns may also arise over whether treating these gains as ordinary income, denying dividend preferences, and eliminating step-up in basis is an appropriate or overly punitive response to foreign policy concerns.