For the 99.5 Percent Act

I 117TH CONGRESS 1ST SESSION H. R. 2576 To amend the Internal Revenue Code of 1986 to reinstate estate and generation-skipping taxes, and for other purposes. IN THE HOUSE OF REPRESENTATIVES APRIL 15, 2021 Mr. GOMEZ (for himself, Mr. BLUMENAUER, Ms. BUSH, Mr. CARSON, Ms. CHU, Mr. COHEN, Mr. DANNY K. DAVIS of Illinois, Mr. DEFAZIO, Ms. DELAURO, Mr. DESAULNIER, Mr. ESPAILLAT, Mr. GARCI´A of Illinois, Mr. GRIJALVA, Ms. NORTON, Ms. JAYAPAL, Mr. JONES, Mr. KHANNA, Ms. LEE of California, Mr. LEVIN of Michigan, Mr. LIEU, Mr. LOWENTHAL, Mrs. CAROLYN B. MALONEY of New York, Ms. MENG, Mrs. NAPOLITANO, Ms. NEWMAN, Ms. OMAR, Mr. PAYNE, Mr. POCAN, Ms. PRESSLEY, Ms. ROYBAL-ALLARD, Mr. RUSH, Ms. SCHAKOWSKY, Mr. TAKANO, Ms. TLAIB, and Mrs. WATSON COLEMAN) introduced the fol- lowing bill; which was referred to the Committee on Ways and Means 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 VerDate Sep 11 2014 03:42 Jun 02, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H2576.IH H2576 kjohnson on DSK79L0C42PROD with BILLS 2 •HR 2576 IH SEC. 2. MODIFICATIONS TO ESTATE, GIFT, AND GENERA- 1 TION-SKIPPING TRANSFER TAXES. 2 (a) MODIFICATION OF RATES.—Section 2001(c) of 3 the Internal Revenue Code of 1986 is amended by striking 4 the last 2 rows and inserting the following: 5 ‘‘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.— 6 (1) ESTATE TAX.—Paragraph (3) of section 7 2010(c) of the Internal Revenue Code of 1986 is 8 amended to read as follows: 9 ‘‘(3) BASIC EXCLUSION AMOUNT.—For pur- 10 poses of this section, the basic exclusion amount is 11 $3,500,000.’’. 12 (2) MODIFICATION TO GIFT TAX EXCLUSION 13 AMOUNT.—Paragraph (1) of section 2505(a) of the 14 VerDate Sep 11 2014 03:42 Jun 02, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H2576.IH H2576 kjohnson on DSK79L0C42PROD with BILLS 3 •HR 2576 IH Internal Revenue Code of 1986 is amended to read 1 as follows: 2 ‘‘(1) the applicable credit amount in effect 3 under section 2010(c) for such calendar year (deter- 4 mined as if the basic exclusion amount in section 5 2010(c)(2)(A) were $1,000,000), reduced by’’. 6 (c) EFFECTIVE DATE.—The amendments made by 7 this section shall apply to estates of decedents dying, and 8 generation-skipping transfers and gifts made, after De- 9 cember 31, 2021. 10 SEC. 3. MODIFICATION OF RULES FOR VALUE OF CERTAIN 11 FARM, ETC., REAL PROPERTY. 12 (a) IN GENERAL.—Paragraph (2) of section 13 2032A(a) of the Internal Revenue Code of 1986 is amend- 14 ed by striking ‘‘$750,000’’ and inserting ‘‘$3,000,000’’. 15 (b) INFLATION ADJUSTMENT.—Paragraph (3) of sec- 16 tion 2032A(a) of such Code is amended— 17 (1) by striking ‘‘1998’’ and inserting ‘‘2022’’, 18 (2) by striking ‘‘$750,000’’ each place it ap- 19 pears and inserting ‘‘$3,000,000’’, and 20 (3) by striking ‘‘calendar year 1997’’ and in- 21 serting ‘‘calendar year 2021’’ in subparagraph (B). 22 (c) EFFECTIVE DATE.—The amendments made by 23 this section shall apply to estates of decedents dying, and 24 gifts made, after December 31, 2021. 25 VerDate Sep 11 2014 03:42 Jun 02, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H2576.IH H2576 kjohnson on DSK79L0C42PROD with BILLS 4 •HR 2576 IH SEC. 4. MODIFICATION OF ESTATE TAX RULES WITH RE- 1 SPECT TO LAND SUBJECT TO CONSERVATION 2 EASEMENTS. 3 (a) MODIFICATION OF EXCLUSION LIMITATION.— 4 Subparagraph (B) of section 2031(c)(1) of the Internal 5 Revenue Code of 1986 is amended by striking ‘‘$500,000’’ 6 and inserting ‘‘$2,000,000’’. 7 (b) MODIFICATION OF APPLICABLE PERCENTAGE.— 8 Paragraph (2) of section 2031(c) of the Internal Revenue 9 Code of 1986 is amended by striking ‘‘40 percent’’ and 10 inserting ‘‘60 percent’’. 11 (c) EFFECTIVE DATE.—The amendments made by 12 this section shall apply to estates of decedents dying, and 13 gifts made, after December 31, 2021. 14 SEC. 5. DISALLOWANCE OF STEP-UP IN BASIS FOR PROP- 15 ERTY HELD IN CERTAIN GRANTOR TRUSTS. 16 (a) IN GENERAL.—Section 1014 of the Internal Rev- 17 enue Code of 1986 is amended— 18 (1) by redesignating subsection (f) as sub- 19 section (g), and 20 (2) by inserting after subsection (e) the fol- 21 lowing: 22 ‘‘(f) PROPERTY HELD IN CERTAIN GRANTOR 23 TRUSTS.—This section shall not apply to property— 24 VerDate Sep 11 2014 03:42 Jun 02, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H2576.IH H2576 kjohnson on DSK79L0C42PROD with BILLS 5 •HR 2576 IH ‘‘(1) held in a trust of which the transferor is 1 considered the owner under subpart E of part I of 2 subchapter J, and 3 ‘‘(2) if, after the transfer of such property to 4 the trust, such property is not includible in the gross 5 estate of the transferor for purposes of chapter 11.’’. 6 (b) CONFORMING AMENDMENT.—Section 6662(k) of 7 the Internal Revenue Code of 1986 is amended by striking 8 ‘‘1014(f)’’ and inserting ‘‘1014(g)’’. 9 (c) EFFECTIVE DATE.—The amendments made by 10 this section shall apply to transfers after the date of the 11 enactment of this Act. 12 SEC. 6. VALUATION RULES FOR CERTAIN TRANSFERS OF 13 NONBUSINESS ASSETS; LIMITATION ON MI- 14 NORITY DISCOUNTS. 15 (a) IN GENERAL.—Section 2031 of the Internal Rev- 16 enue Code of 1986 is amended by redesignating subsection 17 (d) as subsection (f) and by inserting after subsection (c) 18 the following new subsections: 19 ‘‘(d) VALUATION RULES FOR CERTAIN TRANSFERS 20 OF NONBUSINESS ASSETS.—For purposes of this chapter 21 and chapter 12— 22 ‘‘(1) IN GENERAL.—In the case of the transfer 23 of any interest in an entity other than an interest 24 VerDate Sep 11 2014 03:42 Jun 02, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H2576.IH H2576 kjohnson on DSK79L0C42PROD with BILLS 6 •HR 2576 IH which is actively traded (within the meaning of sec- 1 tion 1092)— 2 ‘‘(A) the value of any nonbusiness assets 3 held by the entity with respect to such interest 4 shall be determined as if the transferor had 5 transferred such assets directly to the trans- 6 feree (and no valuation discount shall be al- 7 lowed with respect to such nonbusiness assets), 8 and 9 ‘‘(B) such nonbusiness assets shall not be 10 taken into account in determining the value of 11 the interest in the entity. 12 ‘‘(2) NONBUSINESS ASSETS.—For purposes of 13 this subsection— 14 ‘‘(A) IN GENERAL.—The term ‘nonbusi- 15 ness asset’ means any asset which is not used 16 in the active conduct of 1 or more trades or 17 businesses. 18 ‘‘(B) EXCEPTION FOR CERTAIN PASSIVE 19 ASSETS.—Except as provided in subparagraph 20 (C), a passive asset shall not be treated for pur- 21 poses of subparagraph (A) as used in the active 22 conduct of a trade or business unless— 23 ‘‘(i) the asset is property described in 24 paragraph (1) or (4) of section 1221(a) or 25 VerDate Sep 11 2014 03:42 Jun 02, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H2576.IH H2576 kjohnson on DSK79L0C42PROD with BILLS 7 •HR 2576 IH is a hedge with respect to such property, 1 or 2 ‘‘(ii) the asset is real property used in 3 the active conduct of 1 or more real prop- 4 erty trades or businesses (within the mean- 5 ing of section 469(c)(7)(C)) in which the 6 transferor materially participates and with 7 respect to which the transferor meets the 8 requirements of section 469(c)(7)(B)(ii). 9 For purposes of clause (ii), material participa- 10 tion shall be determined under the rules of sec- 11 tion 469(h), except that section 469(h)(3) shall 12 be applied without regard to the limitation to 13 farming activity. 14 ‘‘(C) EXCEPTION FOR WORKING CAP- 15 ITAL.—Any asset (including a passive asset) 16 which is held as a part of the reasonably re- 17 quired working capital needs of a trade or busi- 18 ness shall be treated as used in the active con- 19 duct of a trade or business. 20 ‘‘(3) PASSIVE ASSET.—For purposes of this 21 subsection, the term ‘passive asset’ means any— 22 ‘‘(A) cash or cash equivalents, 23 VerDate Sep 11 2014 03:42 Jun 02, 2021 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H2576.IH H2576 kjohnson on DSK79L0C42PROD with BILLS 8 •HR 2576 IH ‘‘(B) except to the extent provided by the 1 Secretary, stock in a corporation or any other 2 equity, profits, or capital interest in any entity, 3 ‘‘(C) evidence of indebtedness, option, for- 4 ward or futures contract, notional principal con- 5 tract, or derivative, 6 ‘‘(D) asset described in clause (iii), (iv), or 7 (v) of section 351(e)(1)(B), 8 ‘‘(E) annuity, 9 ‘‘(F) real property used in 1 or more real 10 property trades or businesses (as defined in sec- 11 tion 469(c)(7)(C)), 12 ‘‘(G) asset (other than a patent, trade- 13 mark, or copyright) which produces royalty in- 14 come, 15 ‘‘(H) commodity, 16 ‘‘(I) collectible (within the meaning of sec- 17 tion 408(m)), or 18 ‘‘(J) any other asset specified in regula- 19 tions prescribed by the Secretary. 20 ‘‘(4) LOOK-THRU RULES.— 21 ‘‘(A) IN GENERAL.—If a nonbusiness asset 22 of an entity consists of a 10-percent interest in 23 any other entity, this subsection shall be ap- 24 plied by disregarding the 10-percent interest 25 VerDate Sep 11 2014 03:42 Jun 02, 2021 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H2576.IH H2576 kjohnson on DSK79L0C42PROD with BILLS 9 •HR 2576 IH and by treating the entity as holding directly its 1 ratable share of the assets of the other entity. 2 This subparagraph shall be applied successively 3 to any 10-percent interest of such other entity 4 in any other entity. 5 ‘‘(B) 10-PERCENT INTEREST.—The term 6 ‘10-percent interest’ means— 7 ‘‘(i) in the case of an interest in a cor- 8 poration, ownership of at least 10 percent 9 (by vote or value) of the stock in such cor- 10 poration, 11 ‘‘(ii) in the case of an interest in a 12 partnership, ownership of at least 10 per- 13 cent of the capital or profits interest in the 14 partnership, and 15 ‘‘(iii) in any other case, ownership of 16 at least 10 percent of the beneficial inter- 17 ests in the entity. 18 ‘‘(5) COORDINATION WITH SUBSECTION (b).— 19 Subsection (b) shall apply after the application of 20 this subsection. 21 ‘‘(e) LIMITATION ON MINORITY DISCOUNTS.—For 22 purposes of this chapter and chapter 12, in the case of 23 the transfer of any interest in an entity other than an in- 24 terest which is actively traded (within the meaning of sec- 25 VerDate Sep 11 2014 03:42 Jun 02, 2021 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H2576.IH H2576 kjohnson on DSK79L0C42PROD with BILLS 10 •HR 2576 IH tion 1092), no discount shall be allowed by reason of the 1 fact that the transferee does not have control of such enti- 2 ty, or by reason of the lack of marketability of the interest, 3 if the transferor, the transferee, and members of the fam- 4 ily (as defined in section 2032A(e)(2)) of the transferor 5 and transferee— 6 ‘‘(1) have control of such entity, or 7 ‘‘(2) own the majority of the ownership inter- 8 ests (by value) in such entity.’’. 9 (b) EFFECTIVE DATE.—The amendments made by 10 this section shall apply to transfers after the date of the 11 enactment of this Act. 12 SEC. 7. REQUIRED MINIMUM 10-YEAR TERM, ETC., FOR 13 GRANTOR RETAINED ANNUITY TRUSTS. 14 (a) IN GENERAL.—Subsection (b) of section 2702 of 15 the Internal Revenue Code of 1986 is amended— 16 (1) by redesignating paragraphs (1), (2), and 17 (3) as subparagraphs (A), (B), and (C), respectively, 18 and by moving such subparagraphs (as so redesig- 19 nated) 2 ems to the right; 20 (2) by striking ‘‘For purposes of’’ and inserting 21 the following: 22 ‘‘(1) IN GENERAL.—For purposes of’’; 23 VerDate Sep 11 2014 03:42 Jun 02, 2021 Jkt 019200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H2576.IH H2576 kjohnson on DSK79L0C42PROD with BILLS 11 •HR 2576 IH (3) by striking ‘‘paragraph (1) or (2)’’ in para- 1 graph (1)(C) (as so redesignated) and inserting 2 ‘‘subparagraph (A) or (B)’’; and 3 (4) by adding at the end the following new 4 paragraph: 5 ‘‘(2) ADDITIONAL REQUIREMENTS WITH RE- 6 SPECT TO GRANTOR RETAINED ANNUITIES.—For 7 purposes of subsection (a), in the case of an interest 8 described in paragraph (1)(A) (determined without 9 regard to this paragraph) which is retained by the 10 transferor, such interest shall be treated as de- 11 scribed in such paragraph only if— 12 ‘‘(A) the right to receive the fixed amounts 13 referred to in such paragraph is for a term of 14 not less than 10 years and not more than the 15 life expectancy of the annuitant plus 10 years, 16 ‘‘(B) such fixed amounts, when determined 17 on an annual basis, do not decrease during the 18 term described in subparagraph (A), and 19 ‘‘(C) the remainder interest has a value, as 20 determined as of the time of the transfer, which 21 is— 22 ‘‘(i) not less than an amount equal to 23 the greater of— 24 VerDate Sep 11 2014 03:42 Jun 02, 2021 Jkt 019200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H2576.IH H2576 kjohnson on DSK79L0C42PROD with BILLS 12 •HR 2576 IH ‘‘(I) 25 percent of the fair mar- 1 ket value of the property in the trust, 2 or 3 ‘‘(II) $500,000, and 4 ‘‘(ii) not greater than the fair market 5 value of the property in the trust.’’. 6 (b) EFFECTIVE DATE.—The amendments made by 7 this section shall apply to transfers made after the date 8 of the enactment of this Act. 9 SEC. 8. CERTAIN TRANSFER TAX RULES APPLICABLE TO 10 GRANTOR TRUSTS. 11 (a) IN GENERAL.—Subtitle B of the Internal Rev- 12 enue Code of 1986 is amended by adding at the end the 13 following new chapter: 14 ‘‘CHAPTER 16—SPECIAL RULES FOR 15 GRANTOR TRUSTS 16 ‘‘Sec. 2901. Application of transfer taxes. ‘‘SEC. 2901. APPLICATION OF TRANSFER TAXES. 17 ‘‘(a) IN GENERAL.—In the case of any portion of a 18 trust to which this section applies— 19 ‘‘(1) the value of the gross estate of the de- 20 ceased deemed owner of such portion shall include 21 all assets attributable to that portion at the time of 22 the death of such owner, 23 VerDate Sep [Text truncated for display. Full text available on Congress.gov.]