PlainBillCongress, translated.Legislation. Context. Public interest.Referred to the House Committee on Ways and Means.
Congressional Research Service
No official summary is available in the imported record yet.
People & committees
Rep. Davidson, Warren [R-OH-8] · R–OH
Legislative record
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Referred to the House Committee on Ways and Means.
Introduced in House
Introduced in House
Primary sources
Text links open the official source. We also preserved the text version used in the PlainBill explanation below.
Source last updated: May 21, 2026. Consult Congress.gov for the current record.
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PlainBill explanation
Based on the full Introduced in House · 2025-03-05 text. This explanation has not received human editorial review. This overview describes the proposal’s major provisions; it does not establish what its real-world effects would be.
This proposal would generally increase eligible assets’ tax basis—the amount subtracted from sale proceeds to calculate gain or loss—to reflect inflation. That would generally reduce the calculated gain or increase the calculated loss, subject to the bill’s exceptions and loss rules. The general rule would apply when individuals and other noncorporate taxpayers sell or otherwise dispose of eligible assets held for more than three years. Eligible assets would include specified stocks, digital assets, and qualifying physical property, including property used in a trade or business. Taxpayers would need written purchase-price records. The amendments would apply to eligible assets acquired after December 31, 2025, in taxable years ending after that date. Special rules would address assets held through funds and other entities. The inflation adjustment would use the gross domestic product deflator.
Solely for purposes of determining gain or loss on the sale or other disposition by a taxpayer (other than a corporation) of an indexed asset which has been held for more than 3 years, the indexed basis of the asset shall be substituted for its adjusted basis.
The indexed basis for any asset is— (A) the adjusted basis of the asset, increased by (B) the applicable inflation adjustment.
The applicable inflation adjustment for any asset is an amount equal to— (A) the adjusted basis of the asset, multiplied by (B) the percentage (if any) by which— (i) the gross domestic product deflator for the last calendar quarter ending before the asset is disposed of, exceeds (ii) the gross domestic product deflator for the last calendar quarter ending before the asset was acquired by the taxpayer.
Paragraph (1) shall apply only with respect to indexed assets for which the taxpayer has written documentation of the original purchase price paid or incurred by the taxpayer to acquire such asset.
the term indexed asset means— (A) any common stock in a C corporation (other than a foreign corporation), (B) any digital asset, or (C) any tangible property, which is a capital asset or property used in the trade or business (as defined in section 1231(b)).
Except as otherwise provided in this paragraph, the adjustment under subsection (a) shall be allowed to any qualified investment entity (including for purposes of determining the earnings and profits of such entity).
In the case of a partnership, the adjustment made under subsection (a) at the partnership level shall be passed through to the partners.
To the extent that (but for this paragraph) this section would create or increase a net ordinary loss to which section 1231(a)(2) applies or an ordinary loss to which any other provision of this title applies, such provision shall not apply. The taxpayer shall be treated as having a long-term capital loss in an amount equal to the amount of the ordinary loss to which the preceding sentence applies.
The amendments made by this section shall apply to indexed assets acquired by the taxpayer after December 31, 2025, in taxable years ending after such date.
Section 1 would name the proposal the Capital Gains Inflation Relief Act of 2025.
This Act may be cited as the Capital Gains Inflation Relief Act of 2025.
Section 2 would renumber existing tax-code section 1023 as section 1024 and add a new section 1023. Its general rule would replace an eligible asset’s adjusted basis—the tax value used to calculate gain or loss—with an inflation-adjusted basis for sales or other dispositions by noncorporate taxpayers after more than three years of ownership. Written documentation of the taxpayer’s original purchase price would be required.
is amended by redesignating section 1023 as section 1024 and by inserting after section 1022 the following new section: 1023. Indexing of certain assets for purposes of determining gain or loss
Solely for purposes of determining gain or loss on the sale or other disposition by a taxpayer (other than a corporation) of an indexed asset which has been held for more than 3 years, the indexed basis of the asset shall be substituted for its adjusted basis.
Paragraph (1) shall apply only with respect to indexed assets for which the taxpayer has written documentation of the original purchase price paid or incurred by the taxpayer to acquire such asset.
The proposal would leave deductions for depreciation, depletion, and amortization unaffected by this basis adjustment.
The deductions for depreciation, depletion, and amortization shall be determined without regard to the application of paragraph (1) to the taxpayer or any other person.
Eligible assets would include common stock in domestic C corporations, qualifying digital assets, and tangible—physical—property, subject to the requirement that the property be a capital asset or qualifying business property under section 1231(b).
the term indexed asset means— (A) any common stock in a C corporation (other than a foreign corporation), (B) any digital asset, or (C) any tangible property, which is a capital asset or property used in the trade or business (as defined in section 1231(b)).
Foreign common stock regularly traded on an established securities market would also qualify, subject to exclusions for foreign investment companies, passive foreign investment companies, foreign personal holding companies, and foreign-corporation stock held by a United States person meeting section 1248(a)(2). An American depository receipt for foreign common stock would be treated as that stock.
The term indexed asset includes common stock in a foreign corporation which is regularly traded on an established securities market.
Subparagraph (A) shall not apply to— (i) stock of a foreign investment company, (ii) stock in a passive foreign investment company (as defined in section 1297), (iii) stock in a foreign corporation held by a United States person who meets the requirements of section 1248(a)(2), and (iv) stock in a foreign personal holding company.
An American depository receipt for common stock in a foreign corporation shall be treated as common stock in such corporation.
A qualifying digital asset would have to exist natively in electronic form, be recorded on a distributed ledger secured by cryptography, and be designed to confer only economic or access rights.
the term digital asset means any natively electronic asset which— (A) is recorded on a cryptographically secured distributed ledger, and (B) is designed to confer only economic or access rights.
The proposed indexed basis would equal adjusted basis plus an inflation adjustment. That adjustment would multiply adjusted basis by the percentage increase, if any, in the gross domestic product deflator between the quarters immediately before acquisition and disposition. The percentage would be rounded to the nearest tenth of a percentage point.
The indexed basis for any asset is— (A) the adjusted basis of the asset, increased by (B) the applicable inflation adjustment.
The applicable inflation adjustment for any asset is an amount equal to— (A) the adjusted basis of the asset, multiplied by (B) the percentage (if any) by which— (i) the gross domestic product deflator for the last calendar quarter ending before the asset is disposed of, exceeds (ii) the gross domestic product deflator for the last calendar quarter ending before the asset was acquired by the taxpayer. The percentage under subparagraph (B) shall be rounded to the nearest 1/10 of 1 percentage point.
For each quarter’s price measure, the proposal would use the last revision released by the Secretary of Commerce before the following quarter ends.
The gross domestic product deflator for any calendar quarter is the implicit price deflator for the gross domestic product for such quarter (as shown in the last revision thereof released by the Secretary of Commerce before the close of the following calendar quarter).
An asset would lose indexed-asset treatment during any period when a transaction by the taxpayer or a related person substantially reduces the risk of loss from holding it. The inflation adjustment would also be reduced for periods when the asset did not qualify.
If the taxpayer (or a related person) enters into any transaction which substantially reduces the risk of loss from holding any asset, such asset shall not be treated as an indexed asset for the period of such reduced risk.
The applicable inflation adjustment shall be appropriately reduced for periods during which the asset was not an indexed asset.
For a short sale of an indexed asset that remains open for more than three years, the proposal would increase the amount realized from the sale by the inflation adjustment. It would measure the period from the initial sale to the closing date, using those dates as acquisition and disposition dates for the calculation.
In the case of a short sale of an indexed asset with a short sale period in excess of 3 years, for purposes of this title, the amount realized shall be an amount equal to the amount realized (determined without regard to this paragraph) increased by the applicable inflation adjustment.
the date on which the property is sold short shall be treated as the date of acquisition and the closing date for the sale shall be treated as the date of disposition.
the short sale period begins on the day that the property is sold and ends on the closing date for the sale.
Regulated investment companies and real estate investment trusts would generally receive the adjustment at the entity level, including when calculating earnings and profits. These are the two investment-entity categories covered by the proposal’s special fund rules.
Except as otherwise provided in this paragraph, the adjustment under subsection (a) shall be allowed to any qualified investment entity (including for purposes of determining the earnings and profits of such entity).
the term qualified investment entity means— (A) a regulated investment company (within the meaning of section 851), and (B) a real estate investment trust (within the meaning of section 856).
Regulations would prevent corporate shareholders from receiving these investment entities’ indexing benefits directly or indirectly. Dividend status would be determined without indexing, and the amount treated as gain on receipt of a capital-gain dividend would be increased under the specified formula. For these rules, S corporations would not count as corporations, and amounts included in income under section 852(b)(3)(D) would count as capital-gain dividends.
in the case of a distribution by a qualified investment entity (directly or indirectly) to a corporation— (I) the determination of whether such distribution is a dividend shall be made without regard to this section, and (II) the amount treated as gain by reason of the receipt of any capital gain dividend shall be increased by the percentage by which the entity’s net capital gain for the taxable year (determined without regard to this section) exceeds the entity’s net capital gain for such year determined with regard to this section
there shall be other appropriate adjustments (including deemed distributions) so as to ensure that the benefits of this section are not allowed (directly or indirectly) to corporate shareholders of qualified investment entities.
any amount includible in gross income under section 852(b)(3)(D) shall be treated as a capital gain dividend and an S corporation shall not be treated as a corporation.
Indexing would not apply to the investment-entity qualification rules referenced in sections 851(b) and 856(c). Certain amounts taxed at the entity level would be increased using the corporate-shareholder percentage adjustment, with an exception for designated amounts under section 852(b)(3)(D). Indexing would also be excluded when calculating taxes under section 857(b)(4), (5), or (6).
Exception for qualification purposes This section shall not apply for purposes of sections 851(b) and 856(c).
If any amount is subject to tax under section 852(b)(3)(A) for any taxable year, the amount on which tax is imposed under such section shall be increased by the percentage determined under subparagraph (B)(i)(II). A similar rule shall apply in the case of any amount subject to tax under paragraph (2) or (3) of section 857(b) to the extent attributable to the excess of the net capital gain over the deduction for dividends paid determined with reference to capital gain dividends only.
The first sentence of this clause shall not apply to so much of the amount subject to tax under section 852(b)(3)(A) as is designated by the company under section 852(b)(3)(D).
This section shall not apply for purposes of determining the amount of any tax imposed by paragraph (4), (5), or (6) of section 857(b).
Shares in a regulated investment company would qualify proportionally to its eligible assets, using average month-end market values within each quarter. Shares in a real estate investment trust would use quarter-end market values. A qualified investment entity’s partnership interests would be treated as its proportionate share of the partnership’s underlying assets.
Stock in a regulated investment company (within the meaning of section 851) shall be an indexed asset for any calendar quarter in the same ratio as— (i) the average of the fair market values of the indexed assets held by such company at the close of each month during such quarter, bears to (ii) the average of the fair market values of all assets held by such company at the close of each such month.
Stock in a real estate investment trust (within the meaning of section 856) shall be an indexed asset for any calendar quarter in the same ratio as— (i) the fair market value of the indexed assets held by such trust at the close of such quarter, bears to (ii) the fair market value of all assets held by such trust at the close of such quarter.
a qualified investment entity which holds a partnership interest shall be treated (in lieu of holding a partnership interest) as holding its proportionate share of the assets held by the partnership.
The proportional fund-share rules would have two cutoffs: an eligible-asset ratio of at least 80 percent would become 100 percent, while a ratio of 20 percent or less would become zero.
If the ratio for any calendar quarter determined under subparagraph (A) or (B) would (but for this subparagraph) be 80 percent or more, such ratio for such quarter shall be 100 percent.
If the ratio for any calendar quarter determined under subparagraph (A) or (B) would (but for this subparagraph) be 20 percent or less, such ratio for such quarter shall be zero.
Unless the Secretary provided otherwise, a nondividend distribution from a covered investment entity that reduces a shareholder’s stock basis would be assigned to the shareholder’s oldest shares first.
Except as otherwise provided by the Secretary, a distribution with respect to stock in a qualified investment entity which is not a dividend and which results in a reduction in the adjusted basis of such stock shall be treated as allocable to stock acquired by the taxpayer in the order in which such stock was acquired.
Partnerships, S corporations, and common trust funds would pass their indexing adjustments through to partners, shareholders, and participants. S corporations would not use indexing to calculate taxes imposed under sections 1374 or 1375.
In the case of a partnership, the adjustment made under subsection (a) at the partnership level shall be passed through to the partners.
In the case of an S corporation, the adjustment made under subsection (a) at the corporate level shall be passed through to the shareholders. This section shall not apply for purposes of determining the amount of any tax imposed by section 1374 or 1375.
In the case of a common trust fund, the adjustment made under subsection (a) at the trust level shall be passed through to the participants.
When a partnership interest is transferred with a section 754 election in effect, the adjustment under section 743(b)(1) would be treated as a sale of partnership assets for the transferring partner for purposes of indexing. For the receiving partner, the partnership’s holding period in those assets for indexing purposes would restart on the adjustment date.
In the case of a transfer of an interest in a partnership with respect to which the election provided in section 754 is in effect— (i) the adjustment under section 743(b)(1) shall, with respect to the transferor partner, be treated as a sale of the partnership assets for purposes of applying this section, and (ii) with respect to the transferee partner, the partnership’s holding period for purposes of this section in such assets shall be treated as beginning on the date of such adjustment.
Indexing adjustments would be disregarded in determining the basis used to calculate a loss on the sale or exchange of an ownership interest in a partnership, S corporation, or common trust fund.
for purposes of determining the amount of any loss on a sale or exchange of an interest in a partnership, S corporation, or common trust fund, the adjustment made under subsection (a) shall not be taken into account in determining the adjusted basis of such interest.
Sales or other dispositions between related persons would generally be excluded. An exception would apply to the extent the property’s basis in the recipient’s hands is a substituted basis, a term not defined in the supplied text. The proposal defines related persons by references to sections 267(b) and 414(b) or (c); those referenced provisions are not reproduced in the supplied source.
This section shall not apply to any sale or other disposition of property between related persons except to the extent that the basis of such property in the hands of the transferee is a substituted basis.
the term related persons means— (A) persons bearing a relationship set forth in section 267(b), and (B) persons treated as single employer under subsection (b) or (c) of section 414.
The Secretary could deny some or all of an indexing adjustment or increase if a transfer of cash, debt, or other property had the principal purpose of obtaining or increasing that adjustment.
If any person transfers cash, debt, or any other property to another person and the principal purpose of such transfer is to secure or increase an adjustment under subsection (a), the Secretary may disallow part or all of such adjustment or increase.
For the proposed indexed-basis calculation, annual additions to basis from physical-property improvements or corporate capital contributions would receive special treatment. Additions totaling less than $1,000 for the property or stock would be excluded from the adjusted-basis component of that calculation. Additions totaling $1,000 or more would be treated as a separate asset acquired at year-end. Similar separate treatment would apply to other portions of an asset to the extent appropriate to the section’s purposes.
If there is an addition to the adjusted basis of any tangible property or of any stock in a corporation during the taxable year by reason of an improvement to such property or a contribution to capital of such corporation— (A) such addition shall never be taken into account under subsection (c)(1)(A) if the aggregate amount thereof during the taxable year with respect to such property or stock is less than $1,000, and (B) such addition shall be treated as a separate asset acquired at the close of such taxable year if the aggregate amount thereof during the taxable year with respect to such property or stock is $1,000 or more.
A rule similar to the rule of the preceding sentence shall apply to any other portion of an asset to the extent that separate treatment of such portion is appropriate to carry out the purposes of this section.
A nondividend distribution with respect to corporate shares would be treated as a disposition for these rules. If indexing had already applied to an asset while the taxpayer held it, its acquisition date for subsequent indexing could not precede the most recent application.
A distribution with respect to stock in a corporation which is not a dividend shall be treated as a disposition.
If there has been a prior application of subsection (a)(1) to an asset while such asset was held by the taxpayer, the date of acquisition of such asset by the taxpayer shall be treated as not earlier than the date of the most recent such prior application.
Indexing could not create or increase an ordinary loss under the specified tax rules. The affected amount would instead be classified as a long-term capital loss, a different tax category.
To the extent that (but for this paragraph) this section would create or increase a net ordinary loss to which section 1231(a)(2) applies or an ordinary loss to which any other provision of this title applies, such provision shall not apply. The taxpayer shall be treated as having a long-term capital loss in an amount equal to the amount of the ordinary loss to which the preceding sentence applies.
The Secretary would be required to issue regulations necessary or appropriate to implement the new section. The amendments would apply to eligible assets acquired after December 31, 2025, in taxable years ending after that date.
The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section.
The amendments made by this section shall apply to indexed assets acquired by the taxpayer after December 31, 2025, in taxable years ending after such date.
The supplied official-actions snapshot, updated May 21, 2026, records introduction in the House and referral to the House Committee on Ways and Means on March 5, 2025.
Source snapshot updated 2026-05-21T16:27:23Z. 2025-03-05: Referred to the House Committee on Ways and Means. 2025-03-05: Introduced in House
A closer look
Reviewed version: Introduced in House · 2025-03-05. These findings describe provisions and who may benefit; they are not judgments of waste, corruption, or motive.
This review covers the supplied bill text. “None identified” does not rule out provisions in later versions or accompanying reports and disclosures.
Provisions outside the bill’s main subject, or policy changes attached to appropriations.
None identified in the reviewed text
No unrelated provision or policy rider was identified in the complete supplied introduced text. This conclusion is limited to that version and does not establish the contents or attachment history of other versions or accompanying materials.
Spending directed to particular recipients or places outside ordinary competitive or formula-based allocation.
None identified in the reviewed text
No congressionally directed spending for particular recipients or places was identified in the complete supplied introduced text. This conclusion is limited to that version and does not establish formal earmark status in accompanying materials or other versions.
Narrow exceptions, exemptions, or preferential treatment that warrant a closer look.
Findings to examine
The supplied introduced text contains a preferential threshold exception within the main indexing policy. This classification does not imply improper purpose.
Eligible holders of regulated investment company or real estate investment trust shares would receive full indexed-asset treatment when the entity’s eligible-asset ratio is at least 80 percent, even if some underlying assets do not qualify. This is a favorable exception to proportional treatment for those shares within the bill’s indexing policy. The same framework sets ratios of 20 percent or less to zero.
Stock in a regulated investment company (within the meaning of section 851) shall be an indexed asset for any calendar quarter in the same ratio as— (i) the average of the fair market values of the indexed assets held by such company at the close of each month during such quarter, bears to (ii) the average of the fair market values of all assets held by such company at the close of each such month.
Stock in a real estate investment trust (within the meaning of section 856) shall be an indexed asset for any calendar quarter in the same ratio as— (i) the fair market value of the indexed assets held by such trust at the close of such quarter, bears to (ii) the fair market value of all assets held by such trust at the close of such quarter.
If the ratio for any calendar quarter determined under subparagraph (A) or (B) would (but for this subparagraph) be 80 percent or more, such ratio for such quarter shall be 100 percent.
If the ratio for any calendar quarter determined under subparagraph (A) or (B) would (but for this subparagraph) be 20 percent or less, such ratio for such quarter shall be zero.
Full text preserved for this analysis. Legislative record snapshot: May 21, 2026. How PlainBill uses AI