For the 99.5 Percent Act

II 117TH CONGRESS 1ST SESSION S. 994 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 MARCH 25, 2021 Mr. SANDERS (for himself, Mrs. GILLIBRAND, Mr. WHITEHOUSE, Mr. VAN HOLLEN, and Mr. REED) 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 Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘For the 99.5 Percent 4 Act’’. 5 SEC. 2. MODIFICATIONS TO ESTATE, GIFT, AND GENERA- 6 TION-SKIPPING TRANSFER TAXES. 7 (a) MODIFICATION OF RATES.—Section 2001(c) of 8 the Internal Revenue Code of 1986 is amended by striking 9 the last 2 rows and inserting the following: 10 VerDate Sep 11 2014 22:43 Apr 18, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S994.IS S994 kjohnson on DSK79L0C42PROD with BILLS 2 •S 994 IS ‘‘Over $750,000 but not over $3,500,000 ............. $248,300 plus 39 per- cent of the excess of such amount over $750,000. Over $3,500,000 but not over $10,000,000 ........ $1,320,800 plus 45 percent of the ex- cess of such amount over $3,500,000. Over $10,000,000 but not over $50,000,000 ...... $4,245,800 plus 50 percent of the ex- cess of such amount over $10,000,000. Over $50,000,000 but not over $1,000,000,000 $24,245,800 plus 55 percent of the ex- cess of such amount over $50,000,000. Over $1,000,000,000 ............................................. $546,745,800 plus 65 percent of the ex- cess of such amount over $1,000,000,000.’’. (b) EXCLUSION AMOUNT.— 1 (1) ESTATE TAX.—Paragraph (3) of section 2 2010(c) of the Internal Revenue Code of 1986 is 3 amended to read as follows: 4 ‘‘(3) BASIC EXCLUSION AMOUNT.—For pur- 5 poses of this section, the basic exclusion amount is 6 $3,500,000.’’. 7 (2) MODIFICATION TO GIFT TAX EXCLUSION 8 AMOUNT.—Paragraph (1) of section 2505(a) of the 9 Internal Revenue Code of 1986 is amended to read 10 as follows: 11 ‘‘(1) the applicable credit amount in effect 12 under section 2010(c) for such calendar year (deter- 13 mined as if the basic exclusion amount in section 14 2010(c)(2)(A) were $1,000,000), reduced by’’. 15 VerDate Sep 11 2014 22:43 Apr 18, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S994.IS S994 kjohnson on DSK79L0C42PROD with BILLS 3 •S 994 IS (c) EFFECTIVE DATE.—The amendments made by 1 this section shall apply to estates of decedents dying, and 2 generation-skipping transfers and gifts made, after De- 3 cember 31, 2021. 4 SEC. 3. MODIFICATION OF RULES FOR VALUE OF CERTAIN 5 FARM, ETC., REAL PROPERTY. 6 (a) IN GENERAL.—Paragraph (2) of section 7 2032A(a) of the Internal Revenue Code of 1986 is amend- 8 ed by striking ‘‘$750,000’’ and inserting ‘‘$3,000,000’’. 9 (b) INFLATION ADJUSTMENT.—Paragraph (3) of sec- 10 tion 2032A(a) of such Code is amended— 11 (1) by striking ‘‘1998’’ and inserting ‘‘2022’’, 12 (2) by striking ‘‘$750,000’’ each place it ap- 13 pears and inserting ‘‘$3,000,000’’, and 14 (3) by striking ‘‘calendar year 1997’’ and in- 15 serting ‘‘calendar year 2021’’ in subparagraph (B). 16 (c) EFFECTIVE DATE.—The amendments made by 17 this section shall apply to estates of decedents dying, and 18 gifts made, after December 31, 2021. 19 SEC. 4. MODIFICATION OF ESTATE TAX RULES WITH RE- 20 SPECT TO LAND SUBJECT TO CONSERVATION 21 EASEMENTS. 22 (a) MODIFICATION OF EXCLUSION LIMITATION.— 23 Subparagraph (B) of section 2031(c)(1) of the Internal 24 VerDate Sep 11 2014 22:43 Apr 18, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S994.IS S994 kjohnson on DSK79L0C42PROD with BILLS 4 •S 994 IS Revenue Code of 1986 is amended by striking ‘‘$500,000’’ 1 and inserting ‘‘$2,000,000’’. 2 (b) MODIFICATION OF APPLICABLE PERCENTAGE.— 3 Paragraph (2) of section 2031(c) of the Internal Revenue 4 Code of 1986 is amended by striking ‘‘40 percent’’ and 5 inserting ‘‘60 percent’’. 6 (c) EFFECTIVE DATE.—The amendments made by 7 this section shall apply to estates of decedents dying, and 8 gifts made, after December 31, 2021. 9 SEC. 5. DISALLOWANCE OF STEP-UP IN BASIS FOR PROP- 10 ERTY HELD IN CERTAIN GRANTOR TRUSTS. 11 (a) IN GENERAL.—Section 1014 of the Internal Rev- 12 enue Code of 1986 is amended— 13 (1) by redesignating subsection (f) as sub- 14 section (g), and 15 (2) by inserting after subsection (e) the fol- 16 lowing: 17 ‘‘(f) PROPERTY HELD IN CERTAIN GRANTOR 18 TRUSTS.—This section shall not apply to property— 19 ‘‘(1) held in a trust of which the transferor is 20 considered the owner under subpart E of part I of 21 subchapter J, and 22 ‘‘(2) if, after the transfer of such property to 23 the trust, such property is not includible in the gross 24 estate of the transferor for purposes of chapter 11.’’. 25 VerDate Sep 11 2014 22:43 Apr 18, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S994.IS S994 kjohnson on DSK79L0C42PROD with BILLS 5 •S 994 IS (b) CONFORMING AMENDMENT.—Section 6662(k) of 1 the Internal Revenue Code of 1986 is amended by striking 2 ‘‘1014(f)’’ and inserting ‘‘1014(g)’’. 3 (c) EFFECTIVE DATE.—The amendments made by 4 this section shall apply to transfers after the date of the 5 enactment of this Act. 6 SEC. 6. VALUATION RULES FOR CERTAIN TRANSFERS OF 7 NONBUSINESS ASSETS; LIMITATION ON MI- 8 NORITY DISCOUNTS. 9 (a) IN GENERAL.—Section 2031 of the Internal Rev- 10 enue Code of 1986 is amended by redesignating subsection 11 (d) as subsection (f) and by inserting after subsection (c) 12 the following new subsections: 13 ‘‘(d) VALUATION RULES FOR CERTAIN TRANSFERS 14 OF NONBUSINESS ASSETS.—For purposes of this chapter 15 and chapter 12— 16 ‘‘(1) IN GENERAL.—In the case of the transfer 17 of any interest in an entity other than an interest 18 which is actively traded (within the meaning of sec- 19 tion 1092)— 20 ‘‘(A) the value of any nonbusiness assets 21 held by the entity with respect to such interest 22 shall be determined as if the transferor had 23 transferred such assets directly to the trans- 24 feree (and no valuation discount shall be al- 25 VerDate Sep 11 2014 22:43 Apr 18, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S994.IS S994 kjohnson on DSK79L0C42PROD with BILLS 6 •S 994 IS lowed with respect to such nonbusiness assets), 1 and 2 ‘‘(B) such nonbusiness assets shall not be 3 taken into account in determining the value of 4 the interest in the entity. 5 ‘‘(2) NONBUSINESS ASSETS.—For purposes of 6 this subsection— 7 ‘‘(A) IN GENERAL.—The term ‘nonbusi- 8 ness asset’ means any asset which is not used 9 in the active conduct of 1 or more trades or 10 businesses. 11 ‘‘(B) EXCEPTION FOR CERTAIN PASSIVE 12 ASSETS.—Except as provided in subparagraph 13 (C), a passive asset shall not be treated for pur- 14 poses of subparagraph (A) as used in the active 15 conduct of a trade or business unless— 16 ‘‘(i) the asset is property described in 17 paragraph (1) or (4) of section 1221(a) or 18 is a hedge with respect to such property, 19 or 20 ‘‘(ii) the asset is real property used in 21 the active conduct of 1 or more real prop- 22 erty trades or businesses (within the mean- 23 ing of section 469(c)(7)(C)) in which the 24 transferor materially participates and with 25 VerDate Sep 11 2014 22:43 Apr 18, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S994.IS S994 kjohnson on DSK79L0C42PROD with BILLS 7 •S 994 IS respect to which the transferor meets the 1 requirements of section 469(c)(7)(B)(ii). 2 For purposes of clause (ii), material participa- 3 tion shall be determined under the rules of sec- 4 tion 469(h), except that section 469(h)(3) shall 5 be applied without regard to the limitation to 6 farming activity. 7 ‘‘(C) EXCEPTION FOR WORKING CAP- 8 ITAL.—Any asset (including a passive asset) 9 which is held as a part of the reasonably re- 10 quired working capital needs of a trade or busi- 11 ness shall be treated as used in the active con- 12 duct of a trade or business. 13 ‘‘(3) PASSIVE ASSET.—For purposes of this 14 subsection, the term ‘passive asset’ means any— 15 ‘‘(A) cash or cash equivalents, 16 ‘‘(B) except to the extent provided by the 17 Secretary, stock in a corporation or any other 18 equity, profits, or capital interest in any entity, 19 ‘‘(C) evidence of indebtedness, option, for- 20 ward or futures contract, notional principal con- 21 tract, or derivative, 22 ‘‘(D) asset described in clause (iii), (iv), or 23 (v) of section 351(e)(1)(B), 24 ‘‘(E) annuity, 25 VerDate Sep 11 2014 22:43 Apr 18, 2021 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S994.IS S994 kjohnson on DSK79L0C42PROD with BILLS 8 •S 994 IS ‘‘(F) real property used in 1 or more real 1 property trades or businesses (as defined in sec- 2 tion 469(c)(7)(C)), 3 ‘‘(G) asset (other than a patent, trade- 4 mark, or copyright) which produces royalty in- 5 come, 6 ‘‘(H) commodity, 7 ‘‘(I) collectible (within the meaning of sec- 8 tion 408(m)), or 9 ‘‘(J) any other asset specified in regula- 10 tions prescribed by the Secretary. 11 ‘‘(4) LOOK-THRU RULES.— 12 ‘‘(A) IN GENERAL.—If a nonbusiness asset 13 of an entity consists of a 10-percent interest in 14 any other entity, this subsection shall be ap- 15 plied by disregarding the 10-percent interest 16 and by treating the entity as holding directly its 17 ratable share of the assets of the other entity. 18 This subparagraph shall be applied successively 19 to any 10-percent interest of such other entity 20 in any other entity. 21 ‘‘(B) 10-PERCENT INTEREST.—The term 22 ‘10-percent interest’ means— 23 ‘‘(i) in the case of an interest in a cor- 24 poration, ownership of at least 10 percent 25 VerDate Sep 11 2014 22:43 Apr 18, 2021 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S994.IS S994 kjohnson on DSK79L0C42PROD with BILLS 9 •S 994 IS (by vote or value) of the stock in such cor- 1 poration, 2 ‘‘(ii) in the case of an interest in a 3 partnership, ownership of at least 10 per- 4 cent of the capital or profits interest in the 5 partnership, and 6 ‘‘(iii) in any other case, ownership of 7 at least 10 percent of the beneficial inter- 8 ests in the entity. 9 ‘‘(5) COORDINATION WITH SUBSECTION (b).— 10 Subsection (b) shall apply after the application of 11 this subsection. 12 ‘‘(e) LIMITATION ON MINORITY DISCOUNTS.—For 13 purposes of this chapter and chapter 12, in the case of 14 the transfer of any interest in an entity other than an in- 15 terest which is actively traded (within the meaning of sec- 16 tion 1092), no discount shall be allowed by reason of the 17 fact that the transferee does not have control of such enti- 18 ty, or by reason of the lack of marketability of the interest, 19 if the transferor, the transferee, and members of the fam- 20 ily (as defined in section 2032A(e)(2)) of the transferor 21 and transferee— 22 ‘‘(1) have control of such entity, or 23 ‘‘(2) own the majority of the ownership inter- 24 ests (by value) in such entity.’’. 25 VerDate Sep 11 2014 22:43 Apr 18, 2021 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S994.IS S994 kjohnson on DSK79L0C42PROD with BILLS 10 •S 994 IS (b) EFFECTIVE DATE.—The amendments made by 1 this section shall apply to transfers after the date of the 2 enactment of this Act. 3 SEC. 7. REQUIRED MINIMUM 10-YEAR TERM, ETC., FOR 4 GRANTOR RETAINED ANNUITY TRUSTS. 5 (a) IN GENERAL.—Subsection (b) of section 2702 of 6 the Internal Revenue Code of 1986 is amended— 7 (1) by redesignating paragraphs (1), (2), and 8 (3) as subparagraphs (A), (B), and (C), respectively, 9 and by moving such subparagraphs (as so redesig- 10 nated) 2 ems to the right; 11 (2) by striking ‘‘For purposes of’’ and inserting 12 the following: 13 ‘‘(1) IN GENERAL.—For purposes of’’; 14 (3) by striking ‘‘paragraph (1) or (2)’’ in para- 15 graph (1)(C) (as so redesignated) and inserting 16 ‘‘subparagraph (A) or (B)’’; and 17 (4) by adding at the end the following new 18 paragraph: 19 ‘‘(2) ADDITIONAL REQUIREMENTS WITH RE- 20 SPECT TO GRANTOR RETAINED ANNUITIES.—For 21 purposes of subsection (a), in the case of an interest 22 described in paragraph (1)(A) (determined without 23 regard to this paragraph) which is retained by the 24 VerDate Sep 11 2014 22:43 Apr 18, 2021 Jkt 019200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S994.IS S994 kjohnson on DSK79L0C42PROD with BILLS 11 •S 994 IS transferor, such interest shall be treated as de- 1 scribed in such paragraph only if— 2 ‘‘(A) the right to receive the fixed amounts 3 referred to in such paragraph is for a term of 4 not less than 10 years and not more than the 5 life expectancy of the annuitant plus 10 years, 6 ‘‘(B) such fixed amounts, when determined 7 on an annual basis, do not decrease during the 8 term described in subparagraph (A), and 9 ‘‘(C) the remainder interest has a value, as 10 determined as of the time of the transfer, which 11 is— 12 ‘‘(i) not less than an amount equal to 13 the greater of— 14 ‘‘(I) 25 percent of the fair mar- 15 ket value of the property in the trust, 16 or 17 ‘‘(II) $500,000, and 18 ‘‘(ii) not greater than the fair market 19 value of the property in the trust.’’. 20 (b) EFFECTIVE DATE.—The amendments made by 21 this section shall apply to transfers made after the date 22 of the enactment of this Act. 23 VerDate Sep 11 2014 22:43 Apr 18, 2021 Jkt 019200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S994.IS S994 kjohnson on DSK79L0C42PROD with BILLS 12 •S 994 IS SEC. 8. CERTAIN TRANSFER TAX RULES APPLICABLE TO 1 GRANTOR TRUSTS. 2 (a) IN GENERAL.—Subtitle B of the Internal Rev- 3 enue Code of 1986 is amended by adding at the end the 4 following new chapter: 5 ‘‘CHAPTER 16—SPECIAL RULES FOR 6 GRANTOR TRUSTS 7 ‘‘Sec. 2901. Application of transfer taxes. ‘‘SEC. 2901. APPLICATION OF TRANSFER TAXES. 8 ‘‘(a) IN GENERAL.—In the case of any portion of a 9 trust to which this section applies— 10 ‘‘(1) the value of the gross estate of the de- 11 ceased deemed owner of such portion shall include 12 all assets attributable to that portion at the time of 13 the death of such owner, 14 ‘‘(2) any distribution from such portion to one 15 or more beneficiaries during the life of the deemed 16 owner of such portion shall be treated as a transfer 17 by gift for purposes of chapter 12, and 18 ‘‘(3) if at any time during the life of the 19 deemed owner of such portion, such owner ceases to 20 be treated as the owner of such portion under sub- 21 part E of part 1 of subchapter J of chapter 1, all 22 assets attributable to such portion at such time shall 23 be treated for purposes of chapte [Text truncated for display. Full text available on Congress.gov.]