[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[S. 1178 Introduced in Senate (IS)]
<DOC>
118th CONGRESS
1st Session
S. 1178
To amend the Internal Revenue Code of 1986 to reinstate estate and
generation-skipping taxes, and for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
April 18, 2023
Mr. Sanders (for himself and Ms. Warren) introduced the following bill;
which was read twice and referred to the Committee on Finance
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to reinstate estate and
generation-skipping taxes, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``For the 99.5 Percent Act''.
SEC. 2. MODIFICATIONS TO ESTATE, GIFT, AND GENERATION-SKIPPING TRANSFER
TAXES.
(a) Modification of Rates.--Section 2001(c) of the Internal Revenue
Code of 1986 is amended by striking the last 2 rows and inserting the
following:
``Over $750,000 but not over $248,300 plus 39 percent of the
$3,500,000. excess of such amount over
$750,000.
Over $3,500,000 but not over $1,320,800 plus 45 percent of
$10,000,000. the excess of such amount over
$3,500,000.
Over $10,000,000 but not over $4,245,800 plus 50 percent of
$50,000,000. the excess of such amount over
$10,000,000.
Over $50,000,000 but not over $24,245,800 plus 55 percent of
$1,000,000,000. the excess of such amount over
$50,000,000.
Over $1,000,000,000.................. $546,745,800 plus 65 percent of
the excess of such amount over
$1,000,000,000.''.
(b) Exclusion Amount.--
(1) Estate tax.--Paragraph (3) of section 2010(c) of the
Internal Revenue Code of 1986 is amended to read as follows:
``(3) Basic exclusion amount.--For purposes of this
subsection, the basic exclusion amount is $3,500,000.''.
(2) Modification to gift tax exclusion amount.--Paragraph
(1) of section 2505(a) of the Internal Revenue Code of 1986 is
amended to read as follows:
``(1) the applicable credit amount in effect under section
2010(c) for such calendar year (determined as if the basic
exclusion amount in section 2010(c)(2)(A) were $1,000,000),
reduced by''.
(c) Effective Date.--The amendments made by this section shall
apply to estates of decedents dying, and generation-skipping transfers
and gifts made, after December 31, 2023.
SEC. 3. MODIFICATION OF RULES FOR VALUE OF CERTAIN FARM, ETC., REAL
PROPERTY.
(a) In General.--Paragraph (2) of section 2032A(a) of the Internal
Revenue Code of 1986 is amended by striking ``$750,000'' and inserting
``$3,000,000''.
(b) Inflation Adjustment.--Paragraph (3) of section 2032A(a) of
such Code is amended--
(1) by striking ``1998'' and inserting ``2024'',
(2) by striking ``$750,000'' each place it appears and
inserting ``$3,000,000'', and
(3) by striking ``calendar year 1997'' and inserting
``calendar year 2023'' in subparagraph (B).
(c) Effective Date.--The amendments made by this section shall
apply to estates of decedents dying, and gifts made, after December 31,
2023.
SEC. 4. MODIFICATION OF ESTATE TAX RULES WITH RESPECT TO LAND SUBJECT
TO CONSERVATION EASEMENTS.
(a) Modification of Exclusion Limitation.--Subparagraph (B) of
section 2031(c)(1) of the Internal Revenue Code of 1986 is amended by
striking ``$500,000'' and inserting ``$2,000,000''.
(b) Modification of Applicable Percentage.--Paragraph (2) of
section 2031(c) of the Internal Revenue Code of 1986 is amended by
striking ``40 percent'' and inserting ``60 percent''.
(c) Effective Date.--The amendments made by this section shall
apply to estates of decedents dying, and gifts made, after December 31,
2023.
SEC. 5. CLARIFICATION REGARDING DISALLOWANCE OF STEP-UP IN BASIS FOR
PROPERTY HELD IN CERTAIN GRANTOR TRUSTS.
(a) In General.--Section 1014 of the Internal Revenue Code of 1986
is amended--
(1) by redesignating subsection (f) as subsection (g), and
(2) by inserting after subsection (e) the following:
``(f) Property Held in Certain Grantor Trusts.--This section shall
not apply to property--
``(1) held in a trust of which the transferor is considered
the owner under subpart E of part I of subchapter J, and
``(2) if, after the transfer of such property to the trust,
such property is not includible in the gross estate of the
transferor for purposes of chapter 11.''.
(b) Conforming Amendment.--Section 6662(k) of the Internal Revenue
Code of 1986 is amended by striking ``1014(f)'' and inserting
``1014(g)''.
(c) Effective Date.--The amendments made by this section shall
apply to transfers after the date of the enactment of this Act.
(d) No Inference.--No inference may be drawn from the amendments
made by this section with respect to the application of section 1014 of
the Internal Revenue Code of 1986 to property described in subsection
(f) of such section (as added by subsection (a)) which was transferred
on or before the date of enactment of this Act.
SEC. 6. LIMITATION ON DISCOUNTS; VALUATION RULES FOR CERTAIN TRANSFERS
OF NONBUSINESS ASSETS.
(a) In General.--Chapter 14 of subtitle B of the Internal Revenue
Code of 1986 is amended by adding at the end the following new section:
``SEC. 2705. LIMITATION ON DISCOUNTS; VALUATION RULES FOR CERTAIN
TRANSFERS OF NONBUSINESS ASSETS.
``(a) Limitation on Discount by Reason of Family Control.--
``(1) In general.--For purposes of this subtitle, in the
case of the transfer of any interest in an entity other than an
interest which is actively traded (within the meaning of
section 1092), if the transferor, the transferee, and members
of the family of the transferor and transferee have control of
such entity immediately before such transfer, no discount shall
be allowed--
``(A) by reason of the fact that the transferor or
transferee does not have control of such entity,
``(B) by reason of the lack of marketability of the
interest, or
``(C) for any other reason.
``(2) Definitions.--In this subsection, the terms `control'
and `member of the family' have the same meanings given such
terms in section 2704(c).
``(3) Attribution.--For purposes of this section, the rule
of section 2701(e)(3) shall apply for purposes of determining
the interests held by any individual.
``(b) Valuation Rules for Certain Transfers of Nonbusiness
Assets.--
``(1) In general.--For purposes of this subtitle, in the
case of the transfer of any interest in an entity other than an
interest which is actively traded (within the meaning of
section 1092)--
``(A) the value of any nonbusiness assets held by
the entity with respect to such interest shall be
determined as if the transferor had transferred such
assets directly to the transferee (and no valuation
discount shall be allowed with respect to such
nonbusiness assets), and
``(B) such nonbusiness assets shall not be taken
into account in determining the value of the interest
in the entity.
``(2) Nonbusiness assets.--For purposes of this
subsection--
``(A) In general.--The term `nonbusiness asset'
means any asset other than an asset which is used in
the active conduct of a trade or business.
``(B) Passive assets treated as nonbusiness
assets.--
``(i) In general.--For purposes of
subparagraph (A), a passive asset shall be
treated as a nonbusiness asset unless--
``(I) the asset is property
described in paragraph (1) or (4) of
section 1221(a) or is a hedge with
respect to such property, or
``(II) the asset is real property
used in the active conduct of 1 or more
real property trades or businesses
(within the meaning of section
469(c)(7)(C)) in which the transferor
materially participates and with
respect to which the transferor meets
the requirements of section
469(c)(7)(B)(ii).
``(ii) Material participation.--For
purposes of clause (i)(II), material
participation shall be determined under the
rules of section 469(h), except that section
469(h)(3) shall be applied without regard to
the limitation to farming activity.
``(C) Working capital treated as used in trade or
business.--Any asset (including a passive asset) which
is held as a part of the reasonably required working
capital needs of a trade or business shall be treated
as used in the active conduct of a trade or business.
``(3) Passive asset.--For purposes of this subsection, the
term `passive asset' means any--
``(A) cash or cash equivalents,
``(B) stock in a corporation or any other equity,
profits, or capital interest in any entity,
``(C) evidence of indebtedness, option, forward or
futures contract, notional principal contract, or
derivative,
``(D) asset described in clause (iii), (iv), or (v)
of section 351(e)(1)(B),
``(E) annuity,
``(F) real property used in 1 or more real property
trades or businesses (as defined in section
469(c)(7)(C)),
``(G) asset (other than a patent, trademark, or
copyright) which produces royalty income,
``(H) commodity,
``(I) collectible (within the meaning of section
408(m)), or
``(J) any other asset specified in regulations
prescribed by the Secretary.
``(4) Look-thru rule.--
``(A) In general.--If a nonbusiness asset of an
entity described in paragraph (1) consists of a 10-
percent interest in any other entity, this subsection
shall be applied by disregarding the 10-percent
interest and by treating the entity as holding directly
its ratable share of the assets of the other entity.
``(B) 10-percent interest.--The term `10-percent
interest' means--
``(i) in the case of an interest in a
corporation, direct ownership of at least 10
percent (by vote or value) of the stock in such
corporation,
``(ii) in the case of an interest in a
partnership, direct ownership of at least 10
percent of the capital or profits interest in
the partnership, and
``(iii) in any other case, direct ownership
of at least 10 percent of the beneficial
interests in the entity.''.
(b) Conforming Amendments.--
(1) Section 2031(b) of the Internal Revenue Code of 1986 is
amended by inserting ``(after application of section 2705(b))''
after ``shall be determined''.
(2) The table of sections of chapter 14 of subtitle B of
such Code is amended by adding at the end the following:
``Sec. 2705. Limitation on discounts; valuation rules for certain
transfers of nonbusiness assets.''.
(c) Effective Date.--The amendments made by this section shall
apply to transfers after the date of the enactment of this Act.
SEC. 7. REQUIRED MINIMUM 10-YEAR TERM, ETC., FOR GRANTOR RETAINED
ANNUITY TRUSTS.
(a) In General.--Subsection (b) of section 2702 of the Internal
Revenue Code of 1986 is amended--
(1) by redesignating paragraphs (1), (2), and (3) as
subparagraphs (A), (B), and (C), respectively, and by moving
such subparagraphs (as so redesignated) 2 ems to the right;
(2) by striking ``For purposes of'' and inserting the
following:
``(1) In general.--For purposes of'';
(3) by striking ``paragraph (1) or (2)'' in paragraph
(1)(C) (as so redesignated) and inserting ``subparagraph (A) or
(B)''; and
(4) by adding at the end the following new paragraph:
``(2) Additional requirements with respect to grantor
retained annuities.--For purposes of subsection (a), in the
case of an interest described in paragraph (1)(A) (determined
without regard to this paragraph) which is retained by the
transferor, such interest shall be treated as described in such
paragraph only if--
``(A) the right to receive the fixed amounts
referred to in such paragraph is for a term of not less
than 10 years and not more than the life expectancy of
the annuitant plus 10 years,
``(B) such fixed amounts, when determined on an
annual basis, do not decrease during the term described
in subparagraph (A), and
``(C) the remainder interest has a value, as
determined as of the time of the transfer, which is--
``(i) not less than an amount equal to the
greater of--
``(I) 25 percent of the fair market
value of the property in the trust, or
``(II) $500,000, and
``(ii) not greater than the fair market
value of the property in the trust.''.
(b) Effective Date.--The amendments made by this section shall
apply to transfers made after the date of the enactment of this Act.
SEC. 8. CERTAIN TRANSFER TAX RULES APPLICABLE TO GRANTOR TRUSTS.
(a) In General.--Subtitle B of the Internal Revenue Code of 1986 is
amended by adding at the end the following new chapter:
``CHAPTER 16--SPECIAL RULES FOR GRANTOR TRUSTS
``Sec. 2901. Application of transfer taxes.
``SEC. 2901. APPLICATION OF TRANSFER TAXES.
``(a) In General.--In the case of any portion of a trust to which
this section applies--
``(1) the value of the gross estate of the deceased deemed
owner of such portion shall include all assets attributable to
that portion at the time of the death of such owner,
``(2) any distribution from such portion to one or more
beneficiaries during the life of the deemed owner of such
portion shall be treated as a transfer by gift for purposes of
chapter 12, and
``(3) if at any time during the life of the deemed owner of
such portion, such owner ceases to be treated as the owner of
such portion under subpart E of part 1 of subchapter J of
chapter 1, all assets attributable to such portion at such time
shall be treated for purposes of chapter 12 as a transfer by
gift made by the deemed owner.
``(b) Portion of Trust to Which Section Applies.--This section
shall apply to--
``(1) the portion of a trust with respect to which the
grantor is the deemed owner, and
``(2) the portion of the trust to which a person who is not
the grantor is a deemed owner by reason of the rules of subpart
E of part 1 of subchapter J of chapter 1, and such deemed owner
engages in a sale, exchange, or comparable transaction with the
trust that is disregarded for purposes of subtitle A.
For purposes of paragraph (2), the portion of the trust described with
respect to a transaction is the portion of the trust attributable to
the property received by the trust in such transaction, including all
retained income therefrom, appreciation thereon, and reinvestments
thereof, net of the amount of consideration received by the deemed
owner in such transaction.
``(c) Exceptions.--This section shall not apply to any trust that
is includible in the gross estate of the deemed owner (without regard
to subsection (a)(1)).
``(d) Deemed Owner Defined.--For purposes of this section, the term
`deemed owner' means any person who is treated as the owner of a
portion of a trust under subpart E of part 1 of subchapter J of chapter
1.
``(e) Reduction for Taxable Gifts to Trust Made by Owner.--The
amount to which subsection (a) applies shall be reduced by the value of
any transfer by gift by the deemed owner to the trust previously taken
into account by the deemed owner under chapter 12.
``(f) Liability for Payment of Tax.--Any tax imposed pursuant to
subsection (a) shall be a liability of the trust.''.
(b) Clerical Amendment.--The table of chapters for subtitle B of
such Code is amended by adding at the end the following new item:
``Chapter 16. Special Rules for Grantor Trusts''.
(c) Effective Date.--The amendments made by this section shall
apply--
(1) to trusts created on or after the date of the enactment
of this Act,
(2) to any portion of a trust established before the date
of the enactment of this Act which is attributable to a
contribution made on or after such date, and
(3) to any portion of a trust established before the date
of the enactment of this Act to which section 2901(a) of the
Internal Revenue Code of 1986 (as added by subsection (a))
applies by reason of a transaction described in section
2901(b)(2) of such Code on or after such date.
SEC. 9. ELIMINATION OF GENERATION-SKIPPING TRANSFER TAX EXEMPTION FOR
TRANSFERS TO CERTAIN PERSONS.
(a) In General.--Section 2642 of the Internal Revenue Code of 1986
is amended by adding at the end the following new subsection:
``(h) Elimination of GST Exemption for Transfers to Certain
Persons.--
``(1) In general.--
``(A) Transfer to non-exempt person.--In the case
of any direct skip or taxable distribution made to any
person who is not an exempt person, the inclusion ratio
shall be 1.
``(B) Taxable termination.--In the case of any
taxable termination which occurs at any time
immediately after no exempt person is a beneficiary of
the trust, the inclusion ratio shall be 1.
``(C) Exempt person.--
``(i) In general.--For purposes of this
subsection, the term `exempt person' means--
``(I) a natural person--
``(aa) who is assigned to a
generation which is 2 or fewer
generations below the
generation assignment of the
transferor, or
``(bb) whose date of birth
precedes the date on which the
trust was created, or
``(II) a trust in which all
interests are held by persons described
in subclause (I).
``(ii) Exception.--For purposes of clause
(i)(II), any interest which is used primarily
to postpone or avoid the application of this
subsection shall be disregarded.
``(2) Date of creation.--
``(A) In general.--For purposes of determining the
date on which a trust was created under paragraph
(1)(C)(i)(I)(bb), if the trust was created before
January 1, 2024, such trust shall be deemed to have
been created on January 1, 2024.
``(B) Date of creation of pour-over trusts.--
``(i) In general.--In the case of any
generation-skipping transfer of property which
involves the transfer of property from one
trust to another trust, the date of the
creation of the transferee trust shall be
treated as being the earlier of--
``(I) the date of the creation of
such transferee trust, or
``(II) the date of the creation of
the transferor trust.
``(ii) Multiple transfers.--In the case of
multiple transfers to which clause (i)
applies--
``(I) the date of the creation of
the transferor trust shall be
determined under such clause, and
``(II) subsequent to the
determination described in subclause
(I), the date of the creation of the
transferee trust shall be determined
under such clause.
``(3) Generation assignment.--For purposes of this
subsection, the provisions of section 2653(a) shall not apply.
``(4) Regulations.--The Secretary may prescribe such
regulations or other guidance as may be necessary or
appropriate to carry out this subsection.''.
(b) Repeal.--Section 1433(b)(2) of the Tax Reform Act of 1986
(Public Law 99-514) is repealed.
(c) Effective Dates.--
(1) In general.--The amendment made by subsection (a) shall
take effect on the date of the enactment of this Act.
(2) Repeal.--The amendment made by subsection (b) shall
apply to generation-skipping transfers (within the meaning of
section 2611 of the Internal Revenue Code of 1986) made after
the date of enactment of this Act.
SEC. 10. SIMPLIFYING GIFT TAX EXCLUSION FOR ANNUAL GIFTS.
(a) In General.--Paragraph (1) of section 2503(b) of the Internal
Revenue Code of 1986 is amended to read as follows:
``(1) In general.--
``(A) Limit per donee.--In the case of gifts made
to any person by the donor during the calendar year,
the first $10,000 of such gifts to such person shall
not, for purposes of subsection (a), be included in the
total amount of gifts made during such year.
``(B) Cumulative limit per donor.--
``(i) In general.--The aggregate amount
excluded under subparagraph (A) with respect to
all transfers described in clause (ii) made by
the donor during the calendar year shall not
exceed twice the dollar amount in effect under
such subparagraph for such calendar year.
``(ii) Transfers subject to limitation.--
The transfers described in this clause are--
``(I) a transfer in trust,
``(II) a transfer of an interest in
a passthrough entity,
``(III) a transfer of an interest
subject to a prohibition on sale, and
``(IV) any other transfer of
property that, without regard to
withdrawal, put, or other such rights
in the donee, cannot immediately be
liquidated by the donee.''.
(b) Conforming Amendment.--Section 2503 of the Internal Revenue
Code of 1986 is amended by striking subsection (c).
(c) Regulations.--The Secretary of the Treasury, or the Secretary
of the Treasury's delegate, may prescribe such regulations or other
guidance as may be necessary or appropriate to carry out the amendments
made by this section.
(d) Effective Date.--The amendments made by this section shall
apply to any calendar year beginning after the date of the enactment of
this Act.
SEC. 11. GROSS UP FOR TAXABLE GIFTS.
(a) In General.--Section 2503 of the Internal Revenue Code of 1986,
as amended by section 10, is amended--
(1) in subsection (a), by striking ``The term'' and
inserting ``Subject to subsection (c), the term'', and
(2) by inserting after subsection (b) the following:
``(c) Gross Up.--An amount equal to the taxes paid by an individual
under section 2501 for any calendar year on the transfer of property by
gift during such calendar year shall be treated for purposes of this
subtitle as a taxable gift made during such calendar year.''.
(b) Effective Date.--The amendments made by this section shall
apply to calendar years beginning after the date of enactment of this
Act.
SEC. 12. DEFINITION OF EXECUTOR.
(a) Establishment of General Definition of Executor for Internal
Revenue Code of 1986.--
(1) Subchapter C of chapter 11 of subtitle B of the
Internal Revenue Code of 1986 is amended by striking section
2203.
(2) Section 7701(a) of such Code is amended by adding at
the end the following:
``(51) Executor.--
``(A) In general.--The term `executor' means--
``(i) the executor or administrator of the
decedent, or
``(ii) if there is no executor or
administrator appointed, qualified, and acting
within the United States, any person in actual
or constructive possession of any property of
the decedent.
``(B) Authority.--For purposes of this title, an
executor shall be authorized to act on behalf of the
decedent, including with respect to any liability or
obligation incurred under this title which preceded the
death of the decedent.
``(C) Regulations.--The Secretary shall issue such
regulations or other guidance as may be necessary or
appropriate to determine the executor of a decedent in
the case where 2 or more persons satisfy the applicable
requirements under subparagraph (A) with respect to the
decedent.''.
(b) Conforming Amendments.--
(1) Section 2652 of the Internal Revenue Code of 1986 is
amended by striking subsection (d).
(2) Section 6036 of such Code is amended by striking ``(as
defined in section 2203)''.
(3) The table of sections for subchapter C of chapter 11 of
subtitle B of such Code is amended by striking the item
relating to section 2203.
(c) Effective Date.--The amendments made by this section shall take
effect on the date of enactment of this Act.
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