I 118TH CONGRESS 1ST SESSION H. R. 2676 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 18, 2023 Mr. GOMEZ (for himself, Ms. NORTON, Mrs. WATSON COLEMAN, Mr. BLU- MENAUER, Ms. PRESSLEY, Ms. STANSBURY, Ms. TLAIB, Ms. BUSH, Ms. LEE of California, Ms. SCHAKOWSKY, Ms. TOKUDA, Ms. CHU, Mr. GARCI´A of Illinois, Ms. MENG, Ms. JAYAPAL, Mr. GRIJALVA, Mr. ESPAILLAT, Mr. DAVIS of Illinois, Ms. DELAURO, Mr. CASAR, Ms. BARRAGA´N, Mr. POCAN, Mr. PAYNE, Mr. DESAULNIER, Mr. TAKANO, Ms. OMAR, and Mr. MCGOVERN) introduced the following 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 23:25 Apr 23, 2023 Jkt 039200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H2676.IH H2676 pbinns on DSKJLVW7X2PROD with $$_JOB 2 •HR 2676 IH SEC. 2. MODIFICATIONS TO ESTATE, GIFT, AND GENERA- 1 TION-SKIPPING TRANSFER TAXES. 2 (a) MODIFICATION OF RATES.—Section 2001(c) of 3 the Internal Revenue Code of 1986 is amended by striking 4 the last 2 rows and inserting the following: 5 ‘‘Over $750,000 but not over $3,500,000 ............. $248,300 plus 39 per- cent of the excess of such amount over $750,000. Over $3,500,000 but not over $10,000,000 ......... $1,320,800 plus 45 percent of the ex- cess of such amount over $3,500,000. Over $10,000,000 but not over $50,000,000 ....... $4,245,800 plus 50 percent of the ex- cess of such amount over $10,000,000. Over $50,000,000 but not over $1,000,000,000 .. $24,245,800 plus 55 percent of the ex- cess of such amount over $50,000,000. Over $1,000,000,000 ............................................. $546,745,800 plus 65 percent of the ex- cess of such amount over $1,000,000,000.’’. (b) EXCLUSION AMOUNT.— 6 (1) ESTATE TAX.—Paragraph (3) of section 7 2010(c) of the Internal Revenue Code of 1986 is 8 amended to read as follows: 9 ‘‘(3) BASIC EXCLUSION AMOUNT.—For pur- 10 poses of this subsection, the basic exclusion amount 11 is $3,500,000.’’. 12 (2) MODIFICATION TO GIFT TAX EXCLUSION 13 AMOUNT.—Paragraph (1) of section 2505(a) of the 14 VerDate Sep 11 2014 23:25 Apr 23, 2023 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H2676.IH H2676 pbinns on DSKJLVW7X2PROD with $$_JOB 3 •HR 2676 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, 2023. 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 ‘‘2024’’, 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 2023’’ 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, 2023. 25 VerDate Sep 11 2014 23:25 Apr 23, 2023 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H2676.IH H2676 pbinns on DSKJLVW7X2PROD with $$_JOB 4 •HR 2676 IH SEC. 4. MODIFICATION OF ESTATE TAX RULES WITH RE- 1 SPECT TO LAND SUBJECT TO CONSERVATION 2 EASEMENTS. 3 (a) MODIFICATION OF EXCLUSION LIMITATION.— 4 Subparagraph (B) of section 2031(c)(1) of the Internal 5 Revenue Code of 1986 is amended by striking ‘‘$500,000’’ 6 and inserting ‘‘$2,000,000’’. 7 (b) MODIFICATION OF APPLICABLE PERCENTAGE.— 8 Paragraph (2) of section 2031(c) of the Internal Revenue 9 Code of 1986 is amended by striking ‘‘40 percent’’ and 10 inserting ‘‘60 percent’’. 11 (c) EFFECTIVE DATE.—The amendments made by 12 this section shall apply to estates of decedents dying, and 13 gifts made, after December 31, 2023. 14 SEC. 5. CLARIFICATION REGARDING DISALLOWANCE OF 15 STEP-UP IN BASIS FOR PROPERTY HELD IN 16 CERTAIN GRANTOR TRUSTS. 17 (a) IN GENERAL.—Section 1014 of the Internal Rev- 18 enue Code of 1986 is amended— 19 (1) by redesignating subsection (f) as sub- 20 section (g), and 21 (2) by inserting after subsection (e) the fol- 22 lowing: 23 ‘‘(f) PROPERTY HELD IN CERTAIN GRANTOR 24 TRUSTS.—This section shall not apply to property— 25 VerDate Sep 11 2014 23:25 Apr 23, 2023 Jkt 039200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H2676.IH H2676 pbinns on DSKJLVW7X2PROD with $$_JOB 5 •HR 2676 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 (d) NO INFERENCE.—No inference may be drawn 13 from the amendments made by this section with respect 14 to the application of section 1014 of the Internal Revenue 15 Code of 1986 to property described in subsection (f) of 16 such section (as added by subsection (a)) which was trans- 17 ferred on or before the date of enactment of this Act. 18 SEC. 6. LIMITATION ON DISCOUNTS; VALUATION RULES 19 FOR CERTAIN TRANSFERS OF NONBUSINESS 20 ASSETS. 21 (a) IN GENERAL.—Chapter 14 of subtitle B of the 22 Internal Revenue Code of 1986 is amended by adding at 23 the end the following new section: 24 VerDate Sep 11 2014 23:25 Apr 23, 2023 Jkt 039200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H2676.IH H2676 pbinns on DSKJLVW7X2PROD with $$_JOB 6 •HR 2676 IH ‘‘SEC. 2705. LIMITATION ON DISCOUNTS; VALUATION RULES 1 FOR CERTAIN TRANSFERS OF NONBUSINESS 2 ASSETS. 3 ‘‘(a) LIMITATION ON DISCOUNT BY REASON OF FAM- 4 ILY CONTROL.— 5 ‘‘(1) IN GENERAL.—For purposes of this sub- 6 title, in the case of the transfer of any interest in 7 an entity other than an interest which is actively 8 traded (within the meaning of section 1092), if the 9 transferor, the transferee, and members of the fam- 10 ily of the transferor and transferee have control of 11 such entity immediately before such transfer, no dis- 12 count shall be allowed— 13 ‘‘(A) by reason of the fact that the trans- 14 feror or transferee does not have control of 15 such entity, 16 ‘‘(B) by reason of the lack of marketability 17 of the interest, or 18 ‘‘(C) for any other reason. 19 ‘‘(2) DEFINITIONS.—In this subsection, the 20 terms ‘control’ and ‘member of the family’ have the 21 same meanings given such terms in section 2704(c). 22 ‘‘(3) ATTRIBUTION.—For purposes of this sec- 23 tion, the rule of section 2701(e)(3) shall apply for 24 purposes of determining the interests held by any in- 25 dividual. 26 VerDate Sep 11 2014 23:25 Apr 23, 2023 Jkt 039200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H2676.IH H2676 pbinns on DSKJLVW7X2PROD with $$_JOB 7 •HR 2676 IH ‘‘(b) VALUATION RULES FOR CERTAIN TRANSFERS 1 OF NONBUSINESS ASSETS.— 2 ‘‘(1) IN GENERAL.—For purposes of this sub- 3 title, in the case of the transfer of any interest in 4 an entity other than an interest which is actively 5 traded (within the meaning of section 1092)— 6 ‘‘(A) the value of any nonbusiness assets 7 held by the entity with respect to such interest 8 shall be determined as if the transferor had 9 transferred such assets directly to the trans- 10 feree (and no valuation discount shall be al- 11 lowed with respect to such nonbusiness assets), 12 and 13 ‘‘(B) such nonbusiness assets shall not be 14 taken into account in determining the value of 15 the interest in the entity. 16 ‘‘(2) NONBUSINESS ASSETS.—For purposes of 17 this subsection— 18 ‘‘(A) IN GENERAL.—The term ‘nonbusi- 19 ness asset’ means any asset other than an asset 20 which is used in the active conduct of a trade 21 or business. 22 ‘‘(B) PASSIVE ASSETS TREATED AS NON- 23 BUSINESS ASSETS.— 24 VerDate Sep 11 2014 23:25 Apr 23, 2023 Jkt 039200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H2676.IH H2676 pbinns on DSKJLVW7X2PROD with $$_JOB 8 •HR 2676 IH ‘‘(i) IN GENERAL.—For purposes of 1 subparagraph (A), a passive asset shall be 2 treated as a nonbusiness asset unless— 3 ‘‘(I) the asset is property de- 4 scribed in paragraph (1) or (4) of sec- 5 tion 1221(a) or is a hedge with re- 6 spect to such property, or 7 ‘‘(II) the asset is real property 8 used in the active conduct of 1 or 9 more real property trades or busi- 10 nesses (within the meaning of section 11 469(c)(7)(C)) in which the transferor 12 materially participates and with re- 13 spect to which the transferor meets 14 the requirements of section 15 469(c)(7)(B)(ii). 16 ‘‘(ii) MATERIAL PARTICIPATION.—For 17 purposes of clause (i)(II), material partici- 18 pation shall be determined under the rules 19 of section 469(h), except that section 20 469(h)(3) shall be applied without regard 21 to the limitation to farming activity. 22 ‘‘(C) WORKING CAPITAL TREATED AS 23 USED IN TRADE OR BUSINESS.—Any asset (in- 24 cluding a passive asset) which is held as a part 25 VerDate Sep 11 2014 23:25 Apr 23, 2023 Jkt 039200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H2676.IH H2676 pbinns on DSKJLVW7X2PROD with $$_JOB 9 •HR 2676 IH of the reasonably required working capital 1 needs of a trade or business shall be treated as 2 used in the active conduct of a trade or busi- 3 ness. 4 ‘‘(3) PASSIVE ASSET.—For purposes of this 5 subsection, the term ‘passive asset’ means any— 6 ‘‘(A) cash or cash equivalents, 7 ‘‘(B) stock in a corporation or any other 8 equity, profits, or capital interest in any entity, 9 ‘‘(C) evidence of indebtedness, option, for- 10 ward or futures contract, notional principal con- 11 tract, or derivative, 12 ‘‘(D) asset described in clause (iii), (iv), or 13 (v) of section 351(e)(1)(B), 14 ‘‘(E) annuity, 15 ‘‘(F) real property used in 1 or more real 16 property trades or businesses (as defined in sec- 17 tion 469(c)(7)(C)), 18 ‘‘(G) asset (other than a patent, trade- 19 mark, or copyright) which produces royalty in- 20 come, 21 ‘‘(H) commodity, 22 ‘‘(I) collectible (within the meaning of sec- 23 tion 408(m)), or 24 VerDate Sep 11 2014 23:25 Apr 23, 2023 Jkt 039200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H2676.IH H2676 pbinns on DSKJLVW7X2PROD with $$_JOB 10 •HR 2676 IH ‘‘(J) any other asset specified in regula- 1 tions prescribed by the Secretary. 2 ‘‘(4) LOOK-THRU RULE.— 3 ‘‘(A) IN GENERAL.—If a nonbusiness asset 4 of an entity described in paragraph (1) consists 5 of a 10-percent interest in any other entity, this 6 subsection shall be applied by disregarding the 7 10-percent interest and by treating the entity 8 as holding directly its ratable share of the as- 9 sets of the other entity. 10 ‘‘(B) 10-PERCENT INTEREST.—The term 11 ‘10-percent interest’ means— 12 ‘‘(i) in the case of an interest in a cor- 13 poration, direct ownership of at least 10 14 percent (by vote or value) of the stock in 15 such corporation, 16 ‘‘(ii) in the case of an interest in a 17 partnership, direct ownership of at least 10 18 percent of the capital or profits interest in 19 the partnership, and 20 ‘‘(iii) in any other case, direct owner- 21 ship of at least 10 percent of the beneficial 22 interests in the entity.’’. 23 (b) CONFORMING AMENDMENTS.— 24 VerDate Sep 11 2014 23:25 Apr 23, 2023 Jkt 039200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H2676.IH H2676 pbinns on DSKJLVW7X2PROD with $$_JOB 11 •HR 2676 IH (1) Section 2031(b) of the Internal Revenue 1 Code of 1986 is amended by inserting ‘‘(after appli- 2 cation of section 2705(b))’’ after ‘‘shall be deter- 3 mined’’. 4 (2) The table of sections of chapter 14 of sub- 5 title B of such Code is amended by adding at the 6 end the following: 7 ‘‘Sec. 2705. Limitation on discounts; valuation rules for certain transfers of nonbusiness assets.’’. (c) EFFECTIVE DATE.—The amendments made by 8 this section shall apply to transfers after the date of the 9 enactment of this Act. 10 SEC. 7. REQUIRED MINIMUM 10-YEAR TERM, ETC., FOR 11 GRANTOR RETAINED ANNUITY TRUSTS. 12 (a) IN GENERAL.—Subsection (b) of section 2702 of 13 the Internal Revenue Code of 1986 is amended— 14 (1) by redesignating paragraphs (1), (2), and 15 (3) as subparagraphs (A), (B), and (C), respectively, 16 and by moving such subparagraphs (as so redesig- 17 nated) 2 ems to the right; 18 (2) by striking ‘‘For purposes of’’ and inserting 19 the following: 20 ‘‘(1) IN GENERAL.—For purposes of’’; 21 (3) by striking ‘‘paragraph (1) or (2)’’ in para- 22 graph (1)(C) (as so redesignated) and inserting 23 ‘‘subparagraph (A) or (B)’’; and 24 VerDate Sep 11 2014 23:25 Apr 23, 2023 Jkt 039200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H2676.IH H2676 pbinns on DSKJLVW7X2PROD with $$_JOB 12 •HR 2676 IH (4) by adding at the end the following new 1 paragraph: 2 ‘‘(2) ADDITIONAL REQUIREMENTS WITH RE- 3 SPECT TO GRANTOR RETAINED ANNUITIES.—For 4 purposes of subsection (a), in the case of an interest 5 described in paragraph (1)(A) (determined without 6 regard to this paragraph) which is retained by the 7 transferor, such interest shall be treated as de- 8 scribed in such paragraph only if— 9 ‘‘(A) the right to receive the fixed amounts 10 referred to in such paragraph is for a term of 11 not less than 10 years and not more than the 12 life expectancy of the annuitant plus 10 years, 13 ‘‘(B) such fixed amounts, when determined 14 on an annual basis, do not decrease during the 15 term described in subparagraph (A), and 16 ‘‘(C) the remainder interest has a value, as 17 determined as of the time of the transfer, which 18 is— 19 ‘‘(i) not less than an amount equal to 20 the greater of— 21 ‘‘(I) 25 percent of the fair mar- 22 ket value of the property in the trust, 23 or 24 ‘‘(II) $500,000, and 25 VerDate Sep 11 2014 23:25 Apr 23, 2023 Jkt 039200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6 [Text truncated for display. 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