New IDEA (Illegal Deduction Elimination Act)

The New IDEA (Illegal Deduction Elimination Act) would change the federal tax code to prohibit businesses from claiming tax deductions for wages or benefits paid to undocumented workers. Under current law, businesses can generally deduct all labor costs as a business expense; this bill would categorize payments made to unauthorized employees as non-deductible.

For the average citizen, the practical impact would primarily be felt by business owners, who would face higher tax liabilities if they are found to be employing individuals not authorized to work in the United States. The bill also includes provisions to coordinate data between the Internal Revenue Service and the Social Security Administration to verify employment eligibility. While this specific version of the bill was introduced in 2005 and did not become law, the concept has been reintroduced in various forms in subsequent sessions of Congress.