Bill Summary
This is a bill that aims to amend the Internal Revenue Code of 1986 in three ways. First, it repeals the limitation on deductions for certain taxes, including state and local property and income taxes. Second, it limits the step-up in basis for property acquired from a decedent to $5,000,000. Finally, it deems any contribution of property to a private foundation as a sale for tax purposes. The bill is titled the "Cutting Local Taxes by Reinstating SALT Act" and will apply to taxable years beginning after December 31, 2017. The first amendment will remove the limitation on certain tax deductions, while the second will limit the amount by which the basis of property can be increased upon the death of the owner. The third amendment will treat contributions of property to a private foundation as a sale for tax purposes, with certain restrictions on deductions and gains and losses. These changes will apply to estates of decedents dying after December 31, 2019.
Possible Impacts
1. Individuals who own property and pay state and local taxes may see a decrease in their tax deductions if the limitation on deductions for certain taxes is repealed. This could result in individuals having to pay more in taxes and potentially impacting their financial stability.
2. Families who inherit property from a decedent may see a decrease in the step-up in basis allowed for the property, limiting the amount of tax-free gain they can have when they sell the property. This could affect their financial planning and potentially result in them having to pay more in taxes when they sell the inherited property.
3. Donors who contribute property to a private foundation may have to pay taxes on the fair market value of the property at the time of contribution, potentially resulting in a higher tax liability for the donor. This could discourage individuals from making contributions to private foundations, impacting the funding and operations of these organizations.
[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4274 Introduced in House (IH)]
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116th CONGRESS
1st Session
H. R. 4274
To amend the Internal Revenue Code of 1986 to repeal the limitation on
the deduction for certain taxes, including State and local property and
income taxes, to limit the step-up in basis allowed in the case of
property acquired from a decedent, and to deem a sale on any
contribution of property to a private foundation.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
September 10, 2019
Mr. Gottheimer (for himself and Mr. Zeldin) 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 repeal the limitation on
the deduction for certain taxes, including State and local property and
income taxes, to limit the step-up in basis allowed in the case of
property acquired from a decedent, and to deem a sale on any
contribution of property to a private foundation.
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 ``Cutting Local Taxes by Reinstating
SALT Act''.
SEC. 2. REPEAL OF LIMITATION ON DEDUCTION FOR STATE AND LOCAL, ETC.
TAXES.
(a) In General.--Section 164(b) of the Internal Revenue Code of
1986 is amended by striking paragraph (6) (as added by Public Law 115-
97) and all that follows.
(b) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2017.
SEC. 3. STEP-UP IN BASIS OF PROPERTY ACQUIRED FROM DECEDENT LIMITED TO
$5,000,000.
(a) In General.--Section 1014(a) of the Internal Revenue Code of
1986 is amended to read as follows:
``(a) In General.--Except as otherwise provided in this section,
the basis of property in the hands of a person acquiring the property
from a decedent or to whom the property passed from a decedent shall,
if not sold, exchanged, or otherwise disposed of before the decedent's
death by such person, be the lesser of--
``(1) the adjusted basis of the decedent, or
``(2) the fair market value of the property at the date of
the decedent's death.''.
(b) $5,000,000 Basis Increase.--Section 1014 of such Code is
amended by adding at the end the following new subsection:
``(g) $5,000,000 Basis Increase.--
``(1) In general.--The basis of a decedent's property to
which subsection (a) applies shall be increased by an amount
equal to a portion of the aggregate basis increase, which shall
be allocated amongst property of the decedent in proportion to
the net appreciation in value of the property.
``(2) Aggregate basis increase.--For purposes of this
subsection, the aggregate basis increase shall be an amount
equal to the lesser of--
``(A) $5,000,000, or
``(B) the aggregate net appreciation in value of
all the decedent's property to which subsection (a)
applies.
``(3) Net appreciation.--For purposes of this subsection,
the net appreciation in value of any property is the amount by
which (if any) the fair market value of the property exceeds
the decedent's adjusted basis as of the date of the decedent's
death.
``(4) Special rules for certain property.--For purposes of
determining net appreciation in value of property, in lieu of
fair market value, the following shall be used:
``(A) In the case of an election under 2032, the
property value at the applicable valuation date
prescribed by such section.
``(B) In the case of an election under section
2032A, the property value determined under such
section.
``(C) To the extent of the applicability of the
exclusion described in section 2031(c), the basis in
the hands of the decedent.''.
(c) Conforming Amendments.--
(1) Section 1014(d) of such Code is amended by striking
``under subsection (a), such basis (determined before the
application of this subsection)'' and inserting ``under this
section (determined without regard to this subsection), such
basis''.
(2) Section 1014(e) of such Code is amended by inserting
before the period at the end the following: ``and subsection
(g) shall not apply to such property''.
(d) Effective Date.--The amendments made by this section shall
apply to the estates of decedents dying after December 31, 2019.
SEC. 4. TAX TREATMENT OF CONTRIBUTIONS OF PROPERTY TO PRIVATE
FOUNDATION.
(a) In General.--Part IV of subchapter P of the Internal Revenue
Code of 1986 is amended by adding at the end the following new section:
``SEC. 1261. TREATMENT OF CONTRIBUTIONS OF PROPERTY TO PRIVATE
FOUNDATION.
``(a) In General.--Any property contributed by a taxpayer to a
private foundation shall be treated for purposes of this title as sold
by the taxpayer on the date of such contribution for its fair market
value.
``(b) Determination and Recognition of Gain and Loss.--In the case
of any sale for the taxable year under subsection (a)--
``(1) this subchapter shall be applied separately with
respect to all gains and losses from such sales,
``(2) losses shall be allowed only to the extent of gains,
and
``(3) the tax imposed by this chapter for such taxable year
shall not be less than the amount of such tax (determined
without regard to this section) increased by an amount equal to
the increase in such tax which would result solely from the
inclusion of any net gain from all such sales.
``(c) Coordination With Deduction.--No deduction shall be allowed
under any other provision of this chapter by reason of any contribution
to which subsection (a) applies.''.
(b) Clerical Amendment.--The table of sections for subchapter P of
such Code is amended by adding at the end the following new item:
``Sec. 1261. Treatment of contributions of property to private
foundation.''.
(c) Effective Date.--The amendments made by this section shall
apply to contributions of property in taxable years beginning after
December 31, 2019.
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