Bill Summary
This legislation establishes the American Opportunity Fund (AO Fund) in the Treasury of the United States, with specific purposes and funding sources outlined. It also creates AO accounts for eligible individuals, managed by an Executive Director and overseen by a board. The section also outlines fiduciary responsibilities for the fund, provisions for insurance, and annual reporting requirements. Changes are made to the required minimum term for grantor retained annuity trusts and simplifies the gift tax exclusion for annual gifts. It also explains that any capital asset transferred by gift or upon death shall be treated as sold for its fair market value and provides an extension for payment of capital gains tax on certain assets.
Possible Impacts
1. Eligible individuals born after December 31, 2019 will receive an initial contribution of $1,000 to their American Opportunity (AO) account, with annual contributions based on income tiers and adjusted for inflation each year.
2. The American Opportunity Fund Advisory Board will provide guidance on savings and asset-building, home financing, education financing, and consumer financial protection for individuals with AO accounts.
3. Changes to the required minimum term for grantor retained annuity trusts will be effective for transactions made after the date of the enactment of this Act, and any capital asset transferred by gift or upon death will be treated as sold for its fair market value with exceptions for tangible personal property, transfers to a spouse or charitable organization, and special rules for determining basis for gifts and bequests.
[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[S. 2231 Introduced in Senate (IS)]
<DOC>
116th CONGRESS
1st Session
S. 2231
To establish American opportunity accounts, to modify estate and gift
tax rules, to reform the taxation of capital income, and for other
purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
July 23, 2019
Mr. Booker introduced the following bill; which was read twice and
referred to the Committee on Finance
_______________________________________________________________________
A BILL
To establish American opportunity accounts, to modify estate and gift
tax rules, to reform the taxation of capital income, 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; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``American
Opportunity Accounts Act''.
(b) Table of Contents.--The table of contents for this Act is as
follows:
Sec. 1. Short title; table of contents.
TITLE I--AMERICAN OPPORTUNITY ACCOUNTS
Sec. 101. Definitions.
Sec. 102. American Opportunity Fund.
Sec. 103. AO accounts.
Sec. 104. Assignment, alienation, and treatment of deceased
individuals.
Sec. 105. Rules governing AO accounts relating to investment,
accounting, and reporting.
Sec. 106. American Opportunity Fund Board.
Sec. 107. Fiduciary responsibilities.
Sec. 108. Accounts disregarded in determining eligibility for Federal
benefits.
Sec. 109. Reports.
Sec. 110. Programs for promoting financial capability.
Sec. 111. Tax treatment.
TITLE II--REVENUE PROVISIONS
Subtitle A--Estate and Gift Tax Provisions
Sec. 201. Modification of estate tax rate and basic exclusion amount.
Sec. 202. Required minimum 10-year term, etc., for grantor retained
annuity trusts.
Sec. 203. Certain transfer tax rules applicable to grantor trusts.
Sec. 204. Simplifying gift tax exclusion for annual gifts.
Sec. 205. Modification of rules for value of certain farm real
property.
Subtitle B--Reform of Taxation of Capital Income
Sec. 211. Increase in capital gains rate.
Sec. 212. Deemed realization of capital gains at time of gift or death.
Sec. 213. Exclusion of certain amounts of realized capital gain.
Sec. 214. Extension of time for payment of tax.
Sec. 215. Waiver of penalty for underpayment of estimated tax.
Sec. 216. Effective date.
TITLE I--AMERICAN OPPORTUNITY ACCOUNTS
SEC. 101. DEFINITIONS.
For purposes of this title--
(1) American opportunity fund.--The term ``American
Opportunity Fund'' means the fund established under section
102.
(2) AO account.--The term ``AO account'' means an American
opportunity account established under section 103.
(3) Secretary.--The term ``Secretary'' means the Secretary
of the Treasury or the Secretary's delegate.
(4) American opportunity fund board.--The term ``American
Opportunity Fund Board'' means the board established pursuant
to section 106.
(5) Executive director.--The term ``Executive Director''
means the executive director appointed pursuant to section 106.
SEC. 102. AMERICAN OPPORTUNITY FUND.
(a) Establishment.--There is established in the Treasury of the
United States a fund to be known as the ``American Opportunity Fund''.
(b) Amounts Held by Fund.--The American Opportunity Fund consists
of the sum of all amounts paid into the Fund under this title,
increased by the total net earnings from investments of sums held in
the Fund or reduced by the total net losses from investments of sums
held in the Fund, and reduced by the total amount of payments made from
the Fund (including payments for administrative expenses).
(c) Use of Fund.--
(1) In general.--The sums in the American Opportunity Fund
are appropriated and shall remain available without fiscal year
limitation--
(A) to make contributions to AO accounts;
(B) to invest under section 105;
(C) to make distributions in accordance with this
title;
(D) to pay the administrative expenses of carrying
out this title; and
(E) to purchase insurance as provided in section
107(c)(2).
(2) Exclusive purposes.--The sums in the American
Opportunity Fund shall not be appropriated for any purpose
other than the purposes specified in this section and may not
be used for any other purpose.
(d) Transfers to American Opportunity Fund.--The Secretary shall
make transfers from the general fund of the Treasury to the American
Opportunity Fund as follows:
(1) Initial contribution for eligible individuals born
after december 31, 2019.--Upon receipt of a certification under
section 103(b)(2) with respect to an individual born after
December 31, 2019, the Secretary shall transfer $1,000 to the
AO account of the individual.
(2) Annual contributions.--
(A) In general.--Each year which occurs after the
year in which an AO account is established for an
eligible individual and before the year the eligible
individual attains the age of 18, the Secretary shall
transfer the annual contribution amount to the AO
account of the individual.
(B) Annual contribution amount.--The annual
contribution amount shall be the amount such that the
annual contribution amount for any taxpayer whose
household income is within an income tier specified in
the following table shall decrease, on a sliding scale
in a linear manner, from the initial amount to the
final amount specified in such table for such income
tier:
------------------------------------------------------------------------
In the case of household income (expressed as The initial
a percent of the poverty line) within the amount is-- The final
following income tier: amount is--
------------------------------------------------------------------------
Up to 100 percent............................. $2,000 $2,000
100 percent up to 125 percent................. 2,000 1,500
125 percent up to 175 percent................. 1,500 1,000
175 percent up to 225 percent................. 1,000 500
225 percent up to 325 percent................. 500 250
325 percent up to 500 percent................. 250 0
500 percent or more........................... 0 0
------------------------------------------------------------------------
(C) Applicable household income; poverty line.--For
purposes of this paragraph--
(i) Applicable household income.--The term
``applicable household income'' means household
income (as defined in section 36B(d) of the
Internal Revenue Code of 1986), except that--
(I) with respect to any calendar
year, the Secretary shall use the
income of the most recent taxable year
for which information is available; and
(II) in determining household
income the Secretary shall aggregate
the income of married individuals
filing separate tax returns.
(ii) Poverty line.--The term ``poverty
line'' has the meaning given such term under
section 36B(d) of the Internal Revenue Code of
1986.
(D) Authority to provide tax information.--
(i) In general.--Section 6103(l) of the
Internal Revenue Code of 1986 is amended by
adding at the end the following new paragraph:
``(23) Disclosure of return information to carry out
eligibility requirements for certain programs.--
``(A) In general.--The Secretary shall disclose to
officers and employees of the Department of Treasury or
the American Opportunity Fund Board return information
of any taxpayer whose income is relevant in determining
any annual contribution to an American Opportunity
Account under section 102 of the American Opportunity
Accounts Act. Such return information shall be limited
to--
``(i) taxpayer identity information with
respect to such taxpayer,
``(ii) the filing status of such taxpayer,
``(iii) the number of individuals for whom
a deduction is allowed under section 151 with
respect to the taxpayer (including the taxpayer
and the taxpayer's spouse),
``(iv) the modified adjusted gross income
(as defined in section 36B) of such taxpayer,
of any spouse of such taxpayer who filed a
separate return, and of each of the other
individuals included under clause (iii) who are
required to file a return of tax imposed by
chapter 1 for the taxable year,
``(v) such other information as is
prescribed by the Secretary by regulation as
might indicate whether the taxpayer is eligible
for such an annual contribution (and the amount
thereof), and
``(vi) the taxable year with respect to
which the preceding information relates or, if
applicable, the fact that such information is
not available.
``(B) Restriction on use of disclosed
information.--Return information disclosed under
subparagraph (A) may be used by officers and employees
of the Department of Treasury or the American
Opportunity Fund Board for the purposes of, and to the
extent necessary in establishing eligibility for, and
verifying the appropriate amount of, any annual
contribution described in subparagraph (A).''.
(ii) Procedures and recordkeeping related
to disclosures.--Paragraph (4) of section
6103(p) of such Code is amended by striking
``or (22)'' each place it appears and inserting
``(22), or (23)''.
(E) Study on incorporation of other wealth
factors.--Not later than 2 years after the date of the
enactment of this Act, the Comptroller General shall
submit to Congress and the Secretary of Treasury a
report on the feasibility and distributive impacts of a
new measure for determining the amount of the annual
contribution amount under this paragraph based on
family wealth, total assets, and overall net worth.
Such measure may--
(i) include financial assets, the value of
family home, retirement accounts, business and
entrepreneurial ventures, potential future
inheritances, and any other assets or debts;
and
(ii) continue to factor in current or past
income to the extent such information is useful
in estimating overall household wealth.
(3) Adjustment for inflation.--
(A) In general.--For each calendar year beginning
after 2020, each of the dollar amounts under paragraphs
(1) and (2)(B)(i) shall be increased by such dollar
amount multiplied by the cost-of-living adjustment
determined under section 1(f)(3) of the Internal
Revenue Code of 1986 determined by substituting
``calendar year 2019'' for ``calendar year 2016'' in
subparagraph (A)(ii) thereof.
(B) Rounding.--If any amount adjusted under
paragraph (1) is not a multiple of $50, such amount
shall be rounded to the next lowest multiple of $50.
(e) Prohibition on Use of Payroll Taxes To Fund AO Accounts.--The
American Opportunity Fund and AO accounts are wholly separate and
unique from the Social Security system. No amount from any tax on
employment may be contributed to the American Opportunity Fund or AO
accounts.
SEC. 103. AO ACCOUNTS.
(a) In General.--
(1) Establishment.--The Executive Director shall establish
in the American Opportunity Fund an account (to be known as an
``American Opportunity account'' or an ``AO account'') for each
eligible individual certified under subsection (b). Each such
account shall be identified to its account holder by means of a
unique personal identifier currently recognized by the Internal
Revenue Service and shall remain in the American Opportunity
Fund.
(2) Account balance.--The balance in an account holder's AO
account at any time is the excess of--
(A) the sum of--
(i) all deposits made into the American
Opportunity Fund and credited to the account
under paragraph (3); and
(ii) the total amount of allocations made
to and reductions made in the account pursuant
to paragraph (4); over
(B) the amounts paid out of the account with
respect to such individual under subsection (c).
(3) Crediting of contributions.--Pursuant to regulations
which shall be prescribed by the Executive Director, the
Executive Director shall credit to each AO account the amounts
paid into the American Opportunity Fund under section 102(d)
which are attributable to the account holder of such account.
(4) Allocation of earnings and losses.--The Executive
Director shall allocate to each AO account an amount equal to
the net earnings and net losses from each investment of sums in
the American Opportunity Fund which are attributable, on a pro
rata basis, to sums credited to such account, reduced by an
appropriate share of the administrative expenses paid out of
the net earnings, as determined by the Executive Director.
(b) Eligible Individual.--For purposes of this title--
(1) In general.--The term ``eligible individual'' means any
individual who--
(A) was born after December 31, 2003;
(B) has not yet attained the age of 18 years; and
(C) has a valid, unique, Federal Government issued
identification number recognized by the Internal
Revenue Service.
(2) Certification of account holders.--
(A) Automatic certification for certain individuals
born after december 31, 2019.--On any date after
December 31, 2019, on which an eligible individual is
issued a social security account number under section
203(c)(2) of the Social Security Act, the Commissioner
of Social Security shall certify to the Executive
Director and the Secretary of the Treasury the name of,
and social security number issued to, such eligible
individual.
(B) Other individuals.--In the case of an eligible
individual who is not certified under subparagraph (A),
such individual may request the establishment an AO
account under this subparagraph by application to the
Executive Director, and the Executive Director shall
certify such individual under this subparagraph.
(c) Restrictions on Distributions.--
(1) Age-related restrictions.--
(A) In general.--Except as otherwise provided in
this paragraph, no amount may be distributed from an AO
account before the date on which the account holder
attains the age of 18.
(B) Higher education expenses.--Subparagraph (A)
shall not apply to amounts paid for qualified tuition
and related expenses (as defined in section 25A(f)(1)
of the Internal Revenue Code of 1986) of the account
holder if the account holder is an eligible student (as
defined in section 25A(b)(3) of such Code) with respect
to such expenses.
(C) Authority to provide higher age limit for
certain distributions.--The Secretary, in consultation
with the American Opportunity Fund Advisory Board, may
by regulations provide for a higher age limitation with
respects to distributions relating to certain
categories of qualified expenses if the Secretary
determines that such higher age limitation is
appropriate.
(2) Use-related restrictions.--
(A) In general.--No amount may be distributed from
an AO account unless the account holder establishes,
under rules established by the Executive Director in
consultation with the American Opportunity Fund
Advisory Board, that such amount shall be used for a
qualified expense.
(B) Qualified expense.--For purposes of this
subsection--
(i) In general.--The term ``qualified
expense'' means expenses for any of the
following:
(I) Education of the account
holder.
(II) Ownership of a home by the
account holder.
(III) Any expenses paid or incurred
on or after the date on which the
account holder attains age 59\1/2\.
(IV) Any other investment in
financial assets or personal capital
that provides long-term gains to wages
and wealth, as established under
regulations promulgated by the
Secretary, in consultation with the
Executive Director and the American
Opportunity Fund Advisory Board.
(ii) Exception.--Such term shall not
include any expense described in clause (i)
which is paid to a person who does not meet
such standards as are prescribed by the
Secretary, in consultation with the Executive
Director and the American Opportunity Fund
Advisory Board.
(3) American opportunity account advisory board.--For
purposes of this subsection, the term ``American Opportunity
Fund Advisory Board'' means an advisory board established by
the Secretary consisting of individuals with expertise in
savings and asset-building, home financing, education
financing, consumer financial protection, and such other areas
as the Secretary may determine appropriate.
SEC. 104. ASSIGNMENT, ALIENATION, AND TREATMENT OF DECEASED
INDIVIDUALS.
(a) Assignment and Alienation.--Under regulations which shall be
prescribed by the Executive Director, rules relating to assignment and
alienation applicable under chapter 84 of title 5, United States Code,
with respect to amounts held in accounts in the Thrift Savings Fund
shall apply with respect to amounts held in AO accounts in the American
Opportunity Fund.
(b) Treatment of Accounts of Deceased Individuals.--In the case of
a deceased account holder of an AO account which has an account balance
greater than zero, upon receipt of notification of such individual's
death, the Executive Director shall close the account and shall
transfer the balance in such account to the AO account of such account
holder's surviving spouse or, if there is no such account of a
surviving spouse, to the duly appointed legal representative of the
estate of the deceased account holder, or if there is no such
representative, to the person or persons determined to be entitled
thereto under the laws of the domicile of the deceased account holder.
SEC. 105. RULES GOVERNING AO ACCOUNTS RELATING TO INVESTMENT,
ACCOUNTING, AND REPORTING.
(a) Investment Program.--The Secretary shall establish, and the
American Opportunity Fund Board shall invest in debt obligations of the
United States Government with a term of 30 years.
(b) Independent Public Accountant.--
(1) In general.--Under regulations which shall be
prescribed by the Executive Director, and subject to the
provisions of this title, section 8439(b) of title 5, United
States Code (relating to engagement of independent qualified
public accountant), shall apply with respect to the American
Opportunity Fund and accounts maintained in such Fund in the
same manner and to the same extent as such section relates to
the Thrift Savings Fund and the accounts maintained in the
Thrift Savings Fund.
(2) Application rules.--For purposes of paragraph (1),
references in such section 8439(b) to an employee, Member,
former employee, or former Member shall be deemed references to
an account holder of an AO account in the American Opportunity
Fund.
(c) Confidentiality and Disclosure.--
(1) In general.--Except as otherwise authorized by Federal
law, the American Opportunity Fund Board, the Executive
Director, and any employee of the American Opportunity Fund
Board shall not disclose information with respect to the
American Opportunity Fund or any account maintained in such
Fund.
(2) Disclosure to designee of beneficiary.--The Executive
Director may, subject to such requirements and conditions as he
may prescribe by regulations, disclose such information with
respect to the AO account of the beneficiary to such person or
persons as the beneficiary may designate in a request for or
consent to such disclosure, or to any other person at the
beneficiary's request to the extent necessary to comply with a
request for information or assistance made by the beneficiary
to such other person.
SEC. 106. AMERICAN OPPORTUNITY FUND BOARD.
(a) In General.--There is established in the executive branch of
the Government an American Opportunity Fund Board.
(b) Composition, Duties, and Responsibilities.--Subject to the
provisions of this title, the following provisions shall apply with
respect to the American Opportunity Fund Board in the same manner and
to the same extent as such provisions relate to the Federal Retirement
Thrift Investment Board:
(1) Section 8472 of title 5, United States Code (relating
to composition of Federal Retirement Thrift Investment Board).
(2) Section 8474 of such title (relating to Executive
Director).
(3) Section 8476 of such title (relating to administrative
provisions).
SEC. 107. FIDUCIARY RESPONSIBILITIES.
(a) In General.--Under regulations of the Secretary of Labor, the
provisions of sections 8477 and 8478 of title 5, United States Code,
shall apply in connection with the American Opportunity Fund and the
accounts maintained in such Fund in the same manner and to the same
extent as such provisions apply in connection with the Thrift Savings
Fund and the accounts maintained in the Thrift Savings Fund.
(b) Investigative Authority.--Any authority available to the
Secretary of Labor under section 504 of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1134) is hereby made available to the
Secretary of Labor, and any officer designated by the Secretary of
Labor, to determine whether any person has violated, or is about to
violate, any provision applicable under subsection (a).
(c) Exculpatory Provisions; Insurance.--
(1) In general.--Any provision in an agreement or
instrument which purports to relieve a fiduciary from
responsibility or liability for any responsibility, obligation,
or duty under this title shall be void.
(2) Insurance.--Amounts in the American Opportunity Fund
available for administrative expenses shall be available and
may be used at the discretion of the Executive Director to
purchase insurance to cover potential liability of persons who
serve in a fiduciary capacity with respect to the Fund and
accounts maintained therein, without regard to whether a policy
of insurance permits recourse by the insurer against the
fiduciary in the case of a breach of a fiduciary obligation.
SEC. 108. ACCOUNTS DISREGARDED IN DETERMINING ELIGIBILITY FOR FEDERAL
BENEFITS.
Amounts in any AO account shall not be taken into account in
determining any individual's or household's financial eligibility for,
or amount of, any benefit or service, paid for in whole or in part with
Federal funds, including student financial aid.
SEC. 109. REPORTS.
(a) Reports to Congress.--The Executive Director, in consultation
with the Secretary, shall annually transmit a written report to the
Congress. Such report shall include--
(1) a detailed description of the status and operation of
the American Opportunity Fund and the management of the AO
accounts; and
(2) a detailed accounting of the administrative expenses in
carrying out this title, including the ratio of such
administrative expenses to the balance of the American
Opportunity Fund and the methodology adopted by the Executive
Director for allocating such expenses among the AO accounts.
(b) Reports to Account Holders.--The American Opportunity Fund
Board shall prescribe regulations under which each individual for whom
an AO account is maintained shall be furnished with an annual statement
relating to the individual's account, which shall include--
(1) a statement of the balance of individual's AO account;
(2) a projection of the account's growth by the time the
individual attains the age of 18; and
(3) such other information as the Secretary deems relevant.
SEC. 110. PROGRAMS FOR PROMOTING FINANCIAL CAPABILITY.
The Secretary of the Treasury, in coordination with the Financial
Literacy and Education Commission, shall develop programs to promote
the financial capability of account holders of AO accounts.
SEC. 111. TAX TREATMENT.
(a) Contributions and Distributions.--Part III of subchapter B of
chapter 1 of the Internal Revenue Code of 1986 is amended by inserting
after section 139G the following new section:
``SEC. 139H. CONTRIBUTIONS TO AND DISTRIBUTIONS FROM AO ACCOUNTS.
``Gross income shall not include--
``(1) any contribution credited to the AO account of the
taxpayer under section 103(a)(3) of the American Opportunity
Accounts Act, and
``(2) any distribution from such an AO account.''.
(b) Tax Treatment of Earnings and Distributions.--Subchapter F of
chapter 1 of the Internal Revenue Code of 1986 is amended by adding at
the end the following new part:
``PART IX--AMERICAN OPPORTUNITY FUND AND AO ACCOUNTS
``Sec. 530A. American Opportunity Fund and AO accounts.
``SEC. 530A. AMERICAN OPPORTUNITY FUND AND AO ACCOUNTS.
``(a) General Rule.--The American Opportunity Fund and AO accounts
shall be exempt from taxation under this subtitle. Notwithstanding the
preceding sentence, a AO account shall be subject to the taxes imposed
by section 511 (relating to imposition of tax on unrelated business
income of charitable organizations).
``(b) Definitions.--For purposes of this section, the terms
`American Opportunity Fund' and `AO account' have the meanings given
such terms under title I of the American Opportunity Accounts Act.''.
(c) Conforming Amendments.--
(1) The table of sections for part III of subchapter B of
chapter 1 of the Internal Revenue Code of 1986 is amended by
inserting after the item related to section 139G the following
new item:
``Sec. 139H. Contributions to and distributions from AO accounts.''.
(2) The table of parts for subchapter F of chapter 1 of
such Code is amended by adding at the end the following new
item:
``Part IX--American Opportunity Fund and AO Accounts''.
(d) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2019.
TITLE II--REVENUE PROVISIONS
Subtitle A--Estate and Gift Tax Provisions
SEC. 201. MODIFICATION OF ESTATE TAX RATE AND BASIC EXCLUSION AMOUNT.
(a) Permanent Extension of Maximum Estate Tax Rate and Basic
Exclusion Amount as in Effect in 2009.--
(1) Maximum estate tax rate.--The last row of the table
contained in subsection (c) of section 2001 of the Internal
Revenue Code of 1986 is amended by striking ``40 percent'' and
inserting ``45 percent''.
(2) Basic exclusion amount.--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.''.
(b) Additional Taxes for Estates Over $10,000,000.--The table
contained in section 2001(c), as amended by subsection (a), is
amended--
(1) by inserting ``but not over $10,000,000'' after ``Over
$1,000,000'' in the last row; and
(2) by adding at the end the following:
``Over $10,000,000 but not over
$50,000,000.
$4,395,800, plus 55 percent of
the excess of such
amount over
$10,000,000.
Over $50,000,000...............
$26,395,800, plus 65 percent of
the excess of such
amount over
$50,000,000.''.
(c) Effective Date.--The amendments made by this section shall
apply to estates of decedents dying and gifts made after December 31,
2019.
SEC. 202. REQUIRED MINIMUM 10-YEAR TERM, ETC., FOR GRANTOR RETAINED
ANNUITY TRUSTS.
(a) In General.--Subsection (b) of section 2702 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. 203. CERTAIN TRANSFER TAX RULES APPLICABLE TO GRANTOR TRUSTS.
(a) In General.--Subtitle B 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--
``(1) any trust that is includible in the gross estate of
the deemed owner (without regard to subsection (a)(1)), and
``(2) any other type of trust that the Secretary determines
by regulations or other guidance does not have as a significant
purpose the avoidance of transfer taxes.
``(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 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. 204. SIMPLIFYING GIFT TAX EXCLUSION FOR ANNUAL GIFTS.
(a) In General.--Section 2503 of the Internal Revenue Code of 1986
is amended--
(1) by striking paragraph (1) of subsection (b) and
inserting the following:
``(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 $50,000.
``(ii) Transfers subject to limitation.--
The transfers described in this clause are--
``(I) a transfer in trust (with the
exception of any transfer to a trust
described in section 2642(c)(2)),
``(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.'', and
(2) by striking subsection (c).
(b) Conforming Amendments.--
(1) Subparagraph (B) of section 529(c)(2) of the Internal
Revenue Code of 1986 is amended by striking ``section 2503(b)''
and inserting ``section 2503(b)(1)(A).
(2) Clause (i) of section 529A(b)(2)(B) of such Code is
amended by striking ``section 2503(b)'' and inserting ``section
2503(b)(1)(A)''.
(3) Paragraph (2) of section 2523(i) of such Code is
amended by striking ``section 2503(b)'' and inserting ``section
2503(b)(1)(A)''.
(4) Subsection (c) of such Code of section 2801 is amended
by striking ``2503(b)'' and inserting ``2503(b)(1)(A)''.
(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. 205. MODIFICATION OF RULES FOR VALUE OF CERTAIN FARM REAL
PROPERTY.
(a) Increase in Limitation.--
(1) 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''.
(2) Inflation adjustment.--Paragraph (3) of section
2032A(a) of such Code is amended--
(A) by striking ``1998'' and inserting ``2020'';
(B) by striking ``$750,000'' and inserting
``$3,000,000'' in subparagraph (A); and
(C) by striking ``calendar year 1997'' and
inserting ``calendar year 2019'' in subparagraph (B).
(b) Qualified Use Limited to Farming Purposes.--
(1) In general.--Section 2032A(b)(2) is amended by striking
``the devotion of the property'' and all that follows and
inserting ``the devotion of the property to use as a farm for
farming purposes.''.
(2) Conforming amendments.--
(A) Subsections (c)(6)(A), (h)(3), and (i)(3) of
section 2032A of the such Code are each amended by
striking ``subparagraph (A) or (B) of''.
(B) The heading of section 2032A of such Code (and
the item relating to section 2032A in the table of
sections for part III of subchapter A of chapter 11 of
such Code) is amended by striking ``, etc.,''.
(c) Effective Date.--The amendments made by this section shall
apply to estates of decedents dying, and gifts made, after December 31,
2019.
Subtitle B--Reform of Taxation of Capital Income
SEC. 211. INCREASE IN CAPITAL GAINS RATE.
(a) In General.--Section 1(h)(1)(D) of the Internal Revenue Code of
1986 is amended by striking ``20 percent'' and inserting ``24.2
percent''.
(b) Minimum Tax.--Section 55(b)(3)(D) of the Internal Revenue Code
of 1986 is amended by striking ``20 percent'' and inserting ``24.2
percent''.
(c) Conforming Amendments.--The following provisions are each
amended by striking ``20 percent'' and inserting ``20.4 percent'':
(1) Section 531 of the Internal Revenue Code of 1986.
(2) Section 541 of the Internal Revenue Code of 1986.
(3) Section 1445(e)(1) of the Internal Revenue Code of
1986.
(4) Section 1445(e)(6) of the Internal Revenue Code of
1986.
(5) The second sentence of section 7518(g)(6)(A) of the
Internal Revenue Code of 1986.
(6) Section 53511(f)(2) of title 46, United States Code.
(d) Effective Dates.--
(1) In general.--Except as otherwise provided, the
amendments made by this section shall apply to taxable years
beginning after December 31, 2019.
(2) Withholding.--The amendments made by paragraphs (3) and
(4) of subsection (c) shall apply to amounts paid on or after
January 1, 2019.
SEC. 212. DEEMED REALIZATION OF CAPITAL GAINS AT TIME OF GIFT OR DEATH.
(a) Treatment as Sale.--
(1) In general.--Part IV of subchapter P of chapter 1 of
the Internal Revenue Code of 1986 is amended by adding at the
end the following new section:
``SEC. 1261. GAINS FROM CERTAIN PROPERTY TRANSFERRED BY GIFT OR UPON
DEATH.
``(a) In General.--Any capital asset which is transferred by gift
or upon death shall be treated as sold for its fair market value on the
date of such gift, death, or transfer.
``(b) Exceptions.--
``(1) Tangible property.--This section shall not apply to
any tangible personal property other than a collectible (as
defined in section 408(m) without regard to paragraph (3)
thereof).
``(2) Spousal exception.--This section shall not apply to
any transfer if such transfer is made to the spouse or
surviving spouse of the transferor.
``(3) Gifts to charity.--This section shall not apply to
any transfer if such transfer is made to an organization
described in section 170(c).''.
(2) Clerical amendment.--The table of sections for part IV
of subchapter P of chapter 1 of such Code is amended by adding
at the end the following new item:
``Sec. 1261. Gains from certain property transferred by gift or upon
death.''.
(b) Treatment of Basis for Gifts and Bequests to Which Tax
Applies.--
(1) Elimination of carryover basis for gifts.--Subsection
(a) section 1015 of the Internal Revenue Code of 1986 is
amended--
(A) by striking ``If the property'' and inserting
the following:
``(1) Gifts before january 1, 2020.--If the property'';
(B) by inserting ``and before January 1, 2020''
after ``after December 31, 1920''; and
(C) by adding at the end the following new
paragraph:
``(2) Gifts after december 31, 2019.--
``(A) In general.--If the property was acquired by
gift after December 31, 2019, the basis shall be the
fair market value of such property at the time of the
gift.
``(B) Special rules for charitable organizations.--
In the case of any property acquired by an organization
described in section 170(c) by gift, subparagraph (A)
shall not apply and paragraph (1) shall be applied
without regard to the phrase `and before January 1,
2020'.''.
(2) Property acquired from decedent spouses.--Section 1014
of such Code is amended by adding at the end the following new
subsection:
``(g) Property Acquired From Decedent Spouses.--In the case of any
property acquired from or which has passed from a decedent in a
transfer described in section 1041(a)(1), the basis of such property in
the hands of the transferee shall be determined under section 1041(b)
and not this section.''.
(3) Rule for transfers between spouses.--
(A) In general.--Section 1041(b) of the Internal
Revenue Code of 1986 is amended to read as follows:
``(b) Transferee Has Transferor's Basis.--In the case of any
transfer of property described in subsection (a), the basis of the
transferee in the property shall be the adjusted basis of the
transferor.''.
(B) Conforming amendment.--Section 1015(e) of such
Code is amended by striking ``1041(b)(2)'' and
inserting ``1041(b)''.
SEC. 213. EXCLUSION OF CERTAIN AMOUNTS OF REALIZED CAPITAL GAIN.
(a) In General.--Part III of subchapter B of chapter 1 of the
Internal Revenue Code of 1986, as amended by section 111, is amended by
inserting after section 139H the following new section:
``SEC. 139I. EXCLUSION GAIN FROM TRANSFERS OF APPRECIATED ASSETS BY
GIFT OR AT DEATH.
``(a) In General.--Gross income shall not include so much of the
aggregate gain from transfers at death described in 1261(a) of any
capital asset as does not exceed $100,000.
``(b) Special Rules for Real Property Used for Farming.--
``(1) In general.--
``(A) Application of section.--In the case of
qualified real property--
``(i) subsection (a) shall be applied
separately to such qualified real property and
other property, and
``(ii) in applying subsection (a) to such
qualified real property, `the applicable
amount' shall be substituted for `$100,000'.
``(B) Applicable amount.--For purposes of
subparagraph (A), the applicable amount is an amount
equal to the sum of--
``(i) $1,000,000, plus
``(ii) the excess (not less than zero) of
the amount in effect under subsection (a) over
the aggregate amount of gain from transfers at
death described in section 1261(a) of capital
assets other than qualified real property.
``(2) Imposition of additional tax.--
``(A) In general.--The Secretary shall, by
regulations, provide for recapturing the benefit under
any exclusion allowable under paragraph (1) with
respect to any qualified real property if, within 10
years after the decedent's death and before the death
of the qualified heir--
``(i) the qualified heir disposes of any
interest in qualified real property (other than
by a disposition to a member of his family), or
``(ii) the qualified heir ceases to use for
the qualified use the qualified real property
which was acquired (or passed) from the
decedent.
``(B) Liability.--The benefit recaptured under
subparagraph (A) shall be recaptured from the qualified
heir.
``(3) Definitions.--Any term used in this subsection which
is also used in section 2032A shall have the meaning given such
term under section 2032A.
``(c) Inflation Adjustment.--
``(1) In general.--In the case of any taxable year
beginning after 2020, the $100,000 amount in subsection (a) and
the $1,000,000 in subsection (b)(1)(B)(i) shall each be
increased by an amount equal to--
``(A) such dollar amount, multiplied by
``(B) the cost-of-living adjustment determined
under section 1(f)(3) for the calendar year in which
the taxable year begins, determined by substituting in
subparagraph (A)(ii) thereof `calendar year 2019' for
`calendar year 2016'.
``(2) Rounding.--
``(A) In general.--If the dollar amount in
subsection (a), after being increased under paragraph
(1), is not a multiple of $10,000, such dollar amount
shall be rounded to the next lowest multiple of
$10,000.
``(B) Qualified real property.--If the dollar
amount in subsection (b)(1)(B)(i), after being
increased under paragraph (1), is not a multiple of
$100,000, such amount shall be rounded to the next
lowest multiple of $100,000.''.
(b) Clerical Amendment.--The table of sections for part III of
subchapter B of chapter 1 of such Code is amended by inserting after
section 139H the following new item:
``Sec. 139I. Exclusion gain from transfers of appreciated assets by
gift or at death.''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2019.
SEC. 214. EXTENSION OF TIME FOR PAYMENT OF TAX.
(a) Extension of Time.--
(1) In general.--Subpart B of chapter 62 of the Internal
Revenue Code of 1986 is amended by adding at the end the
following new section:
``SEC. 6168. EXTENSION OF TIME FOR PAYMENT OF CAPITAL GAINS ON CERTAIN
ASSETS REALIZED BY REASON OF DEATH.
``(a) 15-Year Installment Payment.--
``(1) In general.--In the case of any gain with respect to
an eligible capital asset that is recognized under section 1261
by reason of the death of the taxpayer, the taxpayer may elect
to pay part or all of tax imposed on such gain in 2 or more
(but not exceeding 15) equal installments.
``(2) Date for payment of installments.--If an election is
made under paragraph (1), the first installment shall be paid
not later than the date on which the tax for the taxable year
in which the gain described in paragraph (1) occurs is due, and
each succeeding installment shall be paid on or before the date
which is 1 year after the date prescribed by this paragraph for
payment of the preceding installment.
``(b) Eligible Capital Asset.--For purposes of this section, the
term `eligible capital asset' means any capital asset other than
personal property of a type which is actively traded (within the
meaning of section 1092(d)(1)).
``(c) Portion of Tax Eligible.--The amount of tax to which this
section applies shall not exceed the excess of--
``(1) the tax computed under chapter 1 (determined after
application of section 1261), over
``(2) the tax computed under chapter 1 (determined without
regard to section 1261).
``(d) Election.--Any election under subsection (a) shall be made
not later than the time prescribed by section 6072 for filing the
return of tax imposed under chapter 1 (including extensions thereof),
and shall be made in such manner as the Secretary shall by regulations
prescribe. If an election under subsection (a) is made, the provisions
of this subtitle shall apply as though the Secretary were extending the
time for payment of the tax.
``(e) Proration of Deficiency to Installments.--If an election is
made under subsection (a) to pay any part of the tax imposed under
chapter 1 in installments and a deficiency has been assessed, the
deficiency shall (subject to the limitation provided by subsection
(a)(2)) be prorated to the installments payable under subsection (a).
The part of the deficiency so prorated to any installment the date for
payment of which has not arrived shall be collected at the same time
as, and as a part of, such installment. The part of the deficiency so
prorated to any installment the date for payment of which has arrived
shall be paid upon notice and demand from the Secretary. This
subsection shall not apply if the deficiency is due to negligence, to
intentional disregard of rules and regulations, or to fraud with intent
to evade tax.
``(f) Time for Payment of Interest.--If the time for payment of any
amount of tax has been extended under this section, interest payable
under section 6601 on any unpaid portion shall be paid annually at the
same time as, and as part of, each installment payment of the tax.
``(g) Regulations.--The Secretary shall prescribe such regulations
as may be necessary to the application of this section.
``(h) Cross References.--
``(1) Security.--For authority of the Secretary to require
security in the case of an extension under this section, see
section 6165.
``(2) Interest.--For provisions relating to interest on tax
payable in installments under this section, see subsection (k)
of section 6601.''.
(2) Clerical amendment.--The table of sections for subpart
B of chapter 62 is amended by adding at the end the following
new item:
``Sec. 6168. Extension of time for payment of capital gains on certain
assets realized by reason of death.''.
(b) Interest.--Section 6601 of the Internal Revenue Code of 1986 is
amended by redesignating subsection (k) as subsection (l) and by
inserting after subsection (j) the following new subsection:
``(k) Special Rate for Tax Extended Under Section 6168.--If the
time for payment of an amount of tax imposed by chapter 11 is extended
as provided in section 6168, in lieu of the annual rate provided by
subsection (a), interest shall be paid at a rate equal to 45 percent of
the annual rate provided by subsection (a). For purposes of this
subsection, the amount of any deficiency which is prorated to
installments payable under section 6168 shall be treated as an amount
of tax payable in installments under such section.''.
SEC. 215. WAIVER OF PENALTY FOR UNDERPAYMENT OF ESTIMATED TAX.
Section 6654(e)(3) of the Internal Revenue Code of 1986 is amended
by adding at the end the following new subparagraph:
``(C) Capital gains payable upon death.--No
addition to tax shall be imposed under subsection (a)
with respect to any underpayment if the taxpayer died
during the taxable year and the Secretary determines
that the amount of the underpayment is due to capital
gains that were realized by reason of section 1261.''.
SEC. 216. EFFECTIVE DATE.
Except as otherwise provided, the amendments made by this subtitle
shall apply to transfers after December 31, 2019, in taxable years
beginning after such date.
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