Sensible Estate Tax Act of 2014 - Amends the Internal Revenue Code to: (1) establish new estate tax rates of between 41% (for estates with a value in excess of $1,000,000) and 55% (for estates with a value in excess of $10 million), (2) allow a $1 million estate tax exclusion, and (3) provide for an inflation adjustment to such amounts for decedents dying after 2014.
Restores the estate tax credit for any estate, inheritance, legacy, or succession taxes paid to a state (expired after 2004). Repeals the deduction currently allowed for such taxes.
Sets forth estate valuation rules for certain transfers of nonbusiness assets and limits estate tax discounts for certain individuals with minority interests in a business acquired from a decedent.
Requires that the value of the basis in any property acquired from a decedent or by gift be consistent with the basis as determined for estate and gift tax purposes. Requires executors of estates and donors of gifts required to file a gift tax return to disclose to the Secretary of the Treasury, and to recipients of any interest in an estate or a gift, information identifying the value of each interest received.
Expands rules for valuing assets in grantor retained annuity trusts to require that: (1) the right to receive fixed amounts from an annuity last for a term of not less than 10 years and that such fixed amounts not decrease during the first 10 years of the annuity term, and (2) the remainder interest have a value greater than zero when transferred.
Terminates the generation-skipping transfer exemption for certain long-term trusts (perpetual dynasty trusts) 90 years after the establishment of such trusts.
[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4061 Introduced in House (IH)]
113th CONGRESS
2d Session
H. R. 4061
To amend the Internal Revenue Code of 1986 to reform the estate and
gift tax.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
February 14, 2014
Mr. McDermott 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 reform the estate and
gift tax.
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 ``Sensible Estate Tax Act of 2014''.
SEC. 2. MODIFICATION OF ESTATE TAX EXCLUSION AND ESTATE TAX RATES.
(a) Exclusion Amount.--
(1) In general.--Subparagraph (A) of section 2010(c)(3) of
the Internal Revenue Code of 1986 is amended by striking
``$5,000,000'' and inserting ``$1,000,000''.
(2) Inflation adjustment.--Subparagraph (B) of section
2010(c)(3) of such Code is amended--
(A) by striking ``2011'' in the matter preceding
clause (i) and inserting ``2014'', and
(B) by striking ``2010'' in clause (ii) and
inserting ``2000''.
(b) Estate Tax Rates.--
(1) In general.--The table contained in subsection (c) of
section 2001 of such Code is amended by striking ``Over
$1,000,000'' and all that follows and inserting the following:
``Over $1,000,000 but not over $1,250,000.............. $345,800, plus 41 percent of the excess of such amount
over $1,000,000.
Over $1,250,000 but not over $1,500,000............... $448,300, plus 43 percent of the excess of such amount
over $1,250,000.
Over $1,500,000 but not over $5,000,000............... $555,800, plus 45 percent of the excess of such amount
over $1,500,000.
Over $5,000,000 but not over $10,000,000.............. $2,130,800, plus 50 percent of the excess of such
amount over $5,000,000.
Over $10,000,000...................................... $4,630,800, plus 55 percent of the excess of such
amount over $10,000,000.''.
(2) Adjustment for inflation.--Subsection (c) of section
2001 of such Code is amended--
(A) by inserting the following before the table
contained therein:
``(1) In general.--'', and
(B) by adding at the end the following new
paragraph:
``(2) Inflation adjustment.--In the case of any decedent
dying in a calendar year after 2014--
``(A) each minimum and maximum dollar amount for
each rate bracket in the table in paragraph (1) shall
be increased by an amount equal to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment
determined under section 1(f)(3) for such
calendar year, determined by substituting
`2000' for `1992' in subparagraph (B) thereof,
and
``(B) each of the amounts setting forth the tax
under such table shall be adjusted to the extent
necessary to reflect the adjustments in the rate
brackets made by subparagraph (A).
If any increase determined under subparagraph (A) is not a
multiple of $10,000, such increase shall be rounded to the
nearest multiple of $10,000.''.
(c) Coordination With Gift Tax To Reflect Decrease in Applicable
Credit Amount.--Subsection (g) of section 2001 of such Code is amended
to read as follows:
``(g) Modifications to Gift Tax Calculation.--For purposes of
applying subsection (b)(2) with respect to 1 or more gifts--
``(1) Modifications to reflect different tax rates.--The
rates of tax under subsection (c) in effect at the decedent's
death shall, in lieu of the rates of tax in effect at the time
of such gifts, be used both to compute--
``(A) the tax imposed by chapter 12 with respect to
such gifts, and
``(B) the credit allowed against such tax under
section 2505, including in computing--
``(i) the amount determined under section
2505(a)(1), and
``(ii) the sum of the amounts allowed as a
credit for all preceding periods under section
2505(a)(2).
``(2) Modification to reflect reduced applicable credit
amounts.--The amount determined under section 2505(a)(1) for
each calendar year shall not exceed the estate's applicable
credit amount under section 2010(c).''.
(d) Effective Date.--Except as otherwise provided by in this
subsection, the amendments made by this section shall apply to estates
of decedents dying, generation-skipping transfers, and gifts made,
after December 31, 2014.
SEC. 3. RESTORATION OF CREDIT FOR STATE TRANSFER TAX.
(a) In General.--Section 2011 of the Internal Revenue Code of 1986
is amended by striking subsection (f).
(b) Repeal of Deduction for State Transfer Taxes.--
(1) In general.--Section 2058 of such Code is amended by
adding at the end the following:
``(c) Termination.--This section shall not apply to the estates of
decedents dying after December 31, 2014.''.
(2) Conforming amendment.--Section 2106(a)(4) of such Code
is amended by adding at the end the following new sentence:
``This paragraph shall not apply to the estates of decedents
dying after December 31, 2014.''.
(c) Effective Date.--The amendments made by this section shall
apply to estates of decedents dying, and gifts made, after December 31,
2014.
SEC. 4. VALUATION RULES FOR CERTAIN TRANSFERS OF NONBUSINESS ASSETS;
LIMITATION ON MINORITY DISCOUNTS.
(a) In General.--Section 2031 of the Internal Revenue Code of 1986
is amended by redesignating subsection (d) as subsection (f) and by
inserting after subsection (c) the following new subsections:
``(d) Valuation Rules for Certain Transfers of Nonbusiness
Assets.--For purposes of this chapter and chapter 12--
``(1) In general.--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 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) the 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 which is not used in the active conduct
of 1 or more trades or businesses.
``(B) Exception for certain passive assets.--Except
as provided in subparagraph (C), a passive asset shall
not be treated for purposes of subparagraph (A) as used
in the active conduct of a trade or business 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).
For purposes of clause (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) Exception for working capital.--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) except to the extent provided by the
Secretary, 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
401(m)), or
``(J) any other asset specified in regulations
prescribed by the Secretary.
``(4) Look-thru rules.--
``(A) In general.--If a nonbusiness asset of an
entity 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. This subparagraph shall be
applied successively to any 10-percent interest of such
other entity in any other entity.
``(B) 10-percent interest.--The term `10-percent
interest' means--
``(i) in the case of an interest in a
corporation, 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, ownership of at least 10 percent
of the capital or profits interest in the
partnership, and
``(iii) in any other case, ownership of at
least 10 percent of the beneficial interests in
the entity.
``(C) Exception for actively traded interests.--
Subparagraph (A) shall not apply to any nonbusiness
asset which consists of an interest which is actively
traded (within the meaning of section 1092).
``(5) Coordination with subsection (b).--Subsection (b)
shall apply after the application of this subsection.
``(e) Limitation on Minority Discounts.--For purposes of this
chapter and chapter 12, 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), no discount shall be allowed by reason of the
fact that the transferee does not have control of such entity if the
transferee and members of the family (as defined in section
2032A(e)(2)) of the transferee have control of such entity (determined
immediately after such transfer).''.
(b) Effective Date.--The amendments made by this section shall
apply to transfers after the date of the enactment of this Act.
SEC. 5. CONSISTENT BASIS REPORTING BETWEEN ESTATE AND PERSON ACQUIRING
PROPERTY FROM DECEDENT.
(a) Consistent Use of Basis.--
(1) Property acquired from a decedent.--Section 1014 of the
Internal Revenue Code of 1986 is amended by adding at the end
the following new subsection:
``(f) Basis Must Be Consistent With Estate Tax Return.--
``(1) In general.--For purposes of this section, the value
used to determine the basis of any interest in property in the
hands of the person acquiring such property shall not exceed
the value of such interest as finally determined for purposes
of chapter 11.
``(2) Special rule where no final determination.--In any
case in which the final value of property has not been
determined under chapter 11 and there has been a statement
furnished under section 6035(a), the value used to determine
the basis of any interest in property in the hands of the
person acquiring such property shall not exceed the amount
reported on any statement furnished under section 6035(a).
``(3) Regulations.--The Secretary may by regulations
provide exceptions to the application of this subsection.''.
(2) Property acquired by gifts and transfers in trust.--
Section 1015 of the Internal Revenue Code of 1986 is amended by
adding at the end the following new subsection:
``(f) Basis Must Be Consistent Gift Tax Return.--
``(1) In general.--For purposes of this section, the value
used to determine the basis of any interest in property in the
hands of the person acquiring such property shall not exceed
the value of such interest as finally determined for purposes
of chapter 12.
``(2) Special rule where no final determination.--In any
case in which the final value of property has not been
determined under chapter 12 and there has been a statement
furnished under section 6035(b), the value used to determine
the basis of any interest in property in the hands of the
person acquiring such property shall not exceed the amount
reported on any statement furnished under section 6035(b).
``(3) Regulations.--The Secretary may by regulations
provide exceptions to the application of this subsection.''.
(b) Information Reporting.--
(1) In general.--Subpart A of part III of subchapter A of
chapter 61 of the Internal Revenue Code of 1986 is amended by
inserting after section 6034A the following new section:
``SEC. 6035. BASIS INFORMATION TO PERSONS ACQUIRING PROPERTY FROM
DECEDENT OR BY GIFT.
``(a) Information With Respect to Property Acquired From
Decedents.--
``(1) In general.--The executor of any estate required to
file a return under section 6018(a) shall furnish to the
Secretary and to each person acquiring any interest in property
included in the decedent's gross estate for Federal estate tax
purposes a statement identifying the value of each interest in
such property as reported on such return and such other
information with respect to such interest as the Secretary may
prescribe.
``(2) Statements by beneficiaries.--Each person required to
file a return under section 6018(b) shall furnish to the
Secretary and to each other person who holds a legal or
beneficial interest in the property to which such return
relates a statement identifying the information described in
paragraph (1).
``(3) Time for furnishing statement.--
``(A) In general.--Each statement required to be
furnished under paragraph (1) or (2) shall be furnished
at such time as the Secretary may prescribe, but in no
case at a time later than the earlier of--
``(i) the date which is 30 days after the
date on which the return under section 6018 was
required to be filed (including extensions, if
any), or
``(ii) the date which is 30 days after the
date such return is filed.
``(B) Adjustments.--In any case in which there is
an adjustment to the information required to be
included on a statement filed under paragraph (1) or
(2) after such statement has been filed, a supplemental
statement under such paragraph shall be filed not later
than the date which is 30 days after such adjustment is
made.
``(b) Information With Respect to Property Acquired by Gift.--
``(1) In general.--Each person making a transfer by gift
who is required to file a return under section 6019 with
respect to such transfer shall furnish to the Secretary and to
each person acquiring any interest in property by reason of
such transfer a statement identifying the value of each
interest in such property as reported on such return and such
other information with respect to such interest as the
Secretary may prescribe.
``(2) Time for furnishing statement.--
``(A) In general.--Each statement required to be
furnished under paragraph (1) shall be furnished at
such time as the Secretary may prescribe, but in no
case at a time later than the earlier of--
``(i) the date which is 30 days after the
date on which the return under section 6019 was
required to be filed (including extensions, if
any), or
``(ii) the date which is 30 days after the
date such return is filed.
``(B) Adjustments.--In any case in which there is
an adjustment to the information required to be
included on a statement filed under paragraph (1) after
such statement has been filed, a supplemental statement
under such paragraph shall be filed not later than the
date which is 30 days after such adjustment is made.
``(c) Regulations.--The Secretary shall prescribe such regulations
as necessary to carry out this section, including regulations relating
to--
``(1) the application of this section to property with
regard to which no estate or gift tax return is required to be
filed, and
``(2) situations in which the surviving joint tenant or
other recipient may have better information than the executor
regarding the basis or fair market value of the property.''.
(2) Penalty for failure to file.--
(A) Return.--Section 6724(d)(1) of the Internal
Revenue Code of 1986 is amended by striking ``and'' at
the end of subparagraph (B), by striking the period at
the end of subparagraph (C) and inserting ``, and'',
and by inserting after subparagraph (C) the following
new subparagraph:
``(D) any statement required to be filed with the
Secretary under section 6035.''.
(B) Statement.--Section 6724(d)(2) of such Code is
amended by striking ``or'' at the end of subparagraph
(GG), by striking the period at the end of subparagraph
(HH) and inserting ``, or'', and by inserting after
subparagraph (HH) the following new subparagraph:
``(II) section 6035 (other than a statement
described in paragraph (1)(D)).''.
(3) Clerical amendment.--The table of sections for subpart
A of part III of subchapter A of chapter 61 of the Internal
Revenue Code of 1986 is amended by inserting after the item
relating to section 6034A the following new item:
``Sec. 6035. Basis information to persons acquiring property from
decedent or by gift.''.
(c) Penalty for Inconsistent Reporting.--
(1) In general.--Subsection (b) of section 6662 of the
Internal Revenue Code of 1986 is amended by inserting after
paragraph (7) the following new paragraph:
``(8) Any inconsistent estate or gift basis.''.
(2) Inconsistent basis reporting.--Section 6662 of such
Code is amended by adding at the end the following new
subsection:
``(k) Inconsistent Estate or Gift Basis Reporting.--For purposes of
this section, the term `inconsistent estate or gift basis' means the
portion of the understatement which is attributable to--
``(1) in the case of property acquired from a decedent, a
basis determination with respect to such property which is not
consistent with the value of such property as determined under
section 1014(f), and
``(2) in the case of property acquired by gift, a basis
determination with respect to such property which is not
consistent with the value of such property as determined under
section 1015(f).''.
(d) Effective Date.--The amendments made by this section shall
apply to transfers for which returns are filed after the date of the
enactment of this Act.
SEC. 6. 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,
``(B) such fixed amounts, when determined on an
annual basis, do not decrease relative to any prior
year during the first 10 years of the term referred to
in subparagraph (A), and
``(C) the remainder interest has a value greater
than zero determined as of the time of the transfer.''.
(b) Effective Date.--The amendments made by this section shall
apply to transfers made after the date of the enactment of this Act.
SEC. 7. LIMITATION ON GST EXEMPTION OF PERPETUAL DYNASTY TRUSTS.
(a) In General.--Section 2642 of the Internal Revenue Code of 1986
is amended by adding at the end the following new subsection:
``(h) Expiration of GST Exemption 90 Years After Establishment of
Trust.--
``(1) In general.--In the case of any generation-skipping
transfer made from a trust after the date which is 90 years
after the date on which such trust is created, the inclusion
ratio with respect to any property transferred in such transfer
shall be 1.
``(2) Special rules.--For purposes of this subsection--
``(A) Date of creation of certain deemed separate
trusts.--In the case of any portion of a trust which is
treated as a separate trust under section 2654(b)(1),
such separate trust shall be treated as created on the
date of the first transfer described in such section
with respect to such separate trust.
``(B) Date of creation of pour-over trusts.--In the
case of any generation-skipping transfer of property
which involves the transfer of property from 1 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.
In the case of multiple transfers to which the
preceding sentence applies, the date of the creation of
the transferor trust shall be determined under the
preceding sentence before the application of the
preceding sentence to determine the date of the
creation of the transferee trust.
``(C) Exception for certain transfers for education
and medical expenses.--Subparagraph (B) shall not apply
to the transfer of property from 1 trust to another
trust if--
``(i) such transfer is described in section
2642(c)(2), and
``(ii) the individual referred to in such
section with respect to the transferee trust
was also a beneficiary of the transferor trust.
``(3) Regulations.--The Secretary may prescribe such
regulations or other guidance as may be necessary or
appropriate to carry out this subsection.''.
(b) Effective Date.--
(1) In general.--The amendments made this section shall
apply to--
(A) trusts created after the date of the enactment
of this Act, and
(B) generation-skipping transfers made from trusts
created on or before such date, but only to the extent
such transfer is made out of corpus added to the trust
after such date (or out of income attributable to
corpus so added).
(2) Determination of date of creation.--For purposes of
this subsection, the rules of sections 2642(h)(2) (as added by
this section) and 2654(b) of the Internal Revenue Code of 1986
shall apply for purposes of determining the date of the
creation of any trust.
(3) Exceptions.--The Secretary of the Treasury, or his
designee, shall issue regulations or other guidance which
provide exceptions to the application of the amendments made by
this section which are substantially similar to the relevant
exceptions under paragraph (2) of section 1433(b) of the Tax
Reform Act of 1986.
<all>
Sponsor introductory remarks on measure. (CR E203)
Introduced in House
Introduced in House
Referred to the House Committee on Ways and Means.
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