[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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