,,ii #aacth ,,congress #b;d ,session ,s4 #bhii ,,in ,,the ,,senate ,,of ,,the ,,united ,,states ,september #ah1 #bjad ,mr4 ,sanders introduced the following bill2 which was read twice and referred to the ,committee on ,finance ,a ,,bill ,to amend the ,internal ,revenue ,code of #aihf to reinstate estate and generation-skipping taxes1 and for other purposes4 #a4 ,short title ,this ,act may be cited as the ,responsible ,estate ,tax ,act4 #b4 ,modifications to estate1 gift1 and generation-skipping transfer taxes 7a7 ,modification of rates 7#a7 ,in general ,section #bjja7;c7 of the ,internal ,revenue ,code of #aihf is amended by striking the last #b rows and inserting the following3 ,over #gej1jjj but not over #c1ejj1jjjbdh1cjj plus #ci percent of the excess of such amount over #gej1jjj4 ,over #c1ejj1jjj but not over #aj1jjj1jjj #a1cbj1hjj plus #dj percent of the excess of such amount over #c1ejj1jjj4 ,over #aj1jjj1jjj but not over #ej1jjj1jjjd1bde1hjj plus #ej percent of the excess of such amount over #aj1jjj1jjj4 ,over #ej1jjj1jjjbd1bde1hjj plus #ee percent of the excess of such amount over #ej1jjj1jjj4 4 7#b7 ,surtax on wealthy estates ,subsection 7c7 of section #bjaa7;c7 of such ,code is amended-- 7,a7 by inserting before the table the following3 7#a7 ,in general 1 and 7,b7 by adding at the end the following new paragraph3 7#b7 ,surtax on estates over #ejj1jjj1jjj ,notwithstanding paragraph 7#a71 if the amount with respect to which the tentative tax to be computed is over #ejj1jjj1jjj1 the rate of tax otherwise in effect under this subsection with respect to the amount in excess of #ejj1jjj1jjj shall be increased by #aj percent4 4 7b7 ,exclusion amount 7#a7 ,estate tax ,paragraph 7#c7 of section #bjaj7;c7 of the ,internal ,revenue ,code of #aihf is amended to read as follows3 7#c7 ,basic exclusion amount ,for purposes of this section1 the basic exclusion amount is #c1ejj1jjj4 4 7#b7 ,modification to gift tax exclusion amount ,paragraph 7#a7 of section #beje7;a7 of the ,internal ,revenue ,code of #aihf is amended to read as follows3 7#a7 the applicable credit amount in effect under section #bjaj7;c7 for such calendar year 7determined as if the basic exclusion amount in section #bjaj7;c77#b77;,a7 were #a1jjj1jjj71 reduced by 4 7#c7 ,modifications of estate and gift taxes to reflect differences in credit resulting from different exclusion amounts 7,a7 ,estate tax adjustment ,section #bjja of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new subsection3 7h7 ,adjustment ,to reflect changes in exclusion amount 7#a7 ,in general ,if1 with respect to any gift to which subsection 7b77#b7 applies1 the applicable exclusion amount in effect at the time of the decedent's death is less than such amount in effect at the time such gift is made by the decedent1 the amount of tax computed under subsection 7b7 shall be reduced by the amount of tax which would have been payable under chapter #ab at the time of the gift if the applicable exclusion amount in effect at such time had been the applicable exclusion amount in effect at the time of the decedent's death and the modifications described in subsection 7g7 had been applicable at the time of such gifts4 7#b7 ,limitation ,the aggregate amount of gifts made in any calendar year to which the reduction under paragraph 7#a7 applies shall not exceed the excess of-- 7,a7 the applicable exclusion amount in effect for such calendar year1 over 7,b7 the applicable exclusion amount in effect at the time of the decedent's death4 7#c7 ,applicable exclusion amount ,the term applicable exclusion amount means1 with respect to any period1 the amount determined under section #bjaj7;c7 for such period1 except that in the case of any period for which such amount includes the deceased spousal unused exclusion amount 7as defined in section #bjaj7;c77#d771 such term shall mean the basic exclusion amount 7as defined under section #bjaj7;c77#c71 as in effect for such period74 4 7,b7 ,gift tax adjustment ,section #bejb of such ,code is amended by adding at the end the following new subsection3 7d7 ,adjustment ,to reflect changes in exclusion amount 7#a7 ,in general ,if the taxpayer made a taxable gift in an applicable preceding calendar period1 the amount of tax computed under subsection 7a7 shall be reduced by the amount of tax which would have been payable under chapter #ab for such applicable preceding calendar period if the applicable exclusion amount in effect for such preceding calendar period had been the applicable exclusion amount in effect for the calendar year for which the tax is being computed and the modifications described in subsection 7g7 had been applicable for such preceding calendar period4 7#b7 ,limitation ,the aggregate amount of gifts made in any applicable preceding calendar period to which the reduction under paragraph 7#a7 applies shall not exceed the excess of-- 7,a7 the applicable exclusion amount for such preceding calendar period1 over 7,b7 the applicable exclusion amount for the calendar year for which the tax is being computed4 7#c7 ,applicable preceding calendar year period ,the term applicable preceding calendar year period means any preceding calendar year period in which the applicable exclusion amount exceeded the applicable exclusion amount for the calendar year for which the tax is being computed4 7#d7 ,applicable exclusion amount ,the term applicable exclusion amount means1 with respect to any period1 the amount determined under section #bjaj7;c7 for such period1 except that in the case of any period for which such amount includes the deceased spousal unused exclusion amount 7as defined in section #bjaj7;c77#d771 such term shall mean the basic exclusion amount 7as defined under section #bjaj7;c77#c71 as in effect for such period74 4 7c7 ,effective date ,the amendments made by this section shall apply to estates of decedents dying1 and generation-skipping transfers and gifts made1 after ,december #ca1 #bjad4 #c4 ,modification of rules for value of certain farm1 etc41 real property 7a7 ,in general ,paragraph 7#b7 of section #bjcb;,a7a7 of the ,internal ,revenue ,code of #aihf is amended by striking #gej1jjj and inserting #c1jjj1jjj4 7b7 ,inflation adjustment ,paragraph 7#c7 of section #bjcb;,a7a7 of such ,code is amended-- 7#a7 by striking #aiih and inserting #bjad1 7#b7 by striking #gej1jjj and inserting #c1jjj1jjj in subparagraph 7,a71 and 7#c7 by striking calendar year #aiig and inserting calendar year #bjac in subparagraph 7,b74 7c7 ,effective date ,the amendments made by this section shall apply to estates of decedents dying1 and gifts made1 after ,december #ca1 #bjad4 #d4 ,modification of estate tax rules with respect to land subject to conservation easements 7a7 ,modification of exclusion limitation ,the table in paragraph 7#c7 of section #bjca7;c7 of the ,internal ,revenue ,code of #aihf is amended-- 7#a7 by striking or thereafter in the last row and inserting through #bjad1 and 7#b7 by adding at the end the following row3 #bjae and thereafter#b1jjj1jjj 4 7b7 ,modification of applicable percentage ,paragraph 7#b7 of section #bjca7;c7 of the ,internal ,revenue ,code of #aihf is amended by striking #dj percent and inserting #fj percent4 7c7 ,effective date ,the amendments made by this section shall apply to estates of decedents dying1 and gifts made1 after ,december #ca1 #bjad4 #e4 ,consistent basis reporting between estate and person acquiring property from decedent 7a7 ,consistent use of basis 7#a7 ,property acquired from a decedent ,section #ajad of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new subsection3 7f7 ,basis must be consistent with estate tax return 7#a7 ,in general ,for purposes of this section1 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 #aa4 7#b7 ,special rule where no final determination ,in any case in which the final value of property has not been determined under chapter #aa and there has been a statement furnished under section #fjce7;a71 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 #fjce7;a74 7#c7 ,regulations ,the ,secretary may by regulations provide exceptions to the application of this subsection4 4 7#b7 ,property acquired by gifts and transfers in trust ,section #ajae of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new subsection3 7f7 ,basis must be consistent gift tax return 7#a7 ,in general ,for purposes of this section1 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 #ab4 7#b7 ,special rule where no final determination ,in any case in which the final value of property has not been determined under chapter #ab and there has been a statement furnished under section #fjce7;b71 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 #fjce7;b74 7#c7 ,regulations ,the ,secretary may by regulations provide exceptions to the application of this subsection4 4 7b7 ,information reporting 7#a7 ,in general ,subpart ,a of part ,,iii of subchapter ,a of chapter #fa of the ,internal ,revenue ,code of #aihf is amended by inserting after section #fjcd;,a the following new section3 #fjce4 ,basis information to persons acquiring property from decedent or by gift 7a7 ,information with respect to property acquired from decedents 7#a7 ,in general ,the executor of any estate required to file a return under section #fjah7;a7 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 prescribe4 7#b7 ,statements by beneficiaries ,each person required to file a return under section #fjah7;b7 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 7#a74 7#c7 ,time for furnishing statement 7,a7 ,in general ,each statement required to be furnished under paragraph 7#a7 or 7#b7 shall be furnished at such time as the ,secretary may prescribe1 but in no case at a time later than the earlier of-- 7i7 the date which is #cj days after the date on which the return under section #fjah was required to be filed 7including extensions1 if any71 or 7ii7 the date which is #cj days after the date such return is filed4 7,b7 ,adjustments ,in any case in which there is an adjustment to the information required to be included on a statement filed under paragraph 7#a7 or 7#b7 after such statement has been filed1 a supplemental statement under such paragraph shall be filed not later than the date which is #cj days after such adjustment is made4 7b7 ,information with respect to property acquired by gift 7#a7 ,in general ,each person making a transfer by gift who is required to file a return under section #fjai 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 prescribe4 7#b7 ,time for furnishing statement 7,a7 ,in general ,each statement required to be furnished under paragraph 7#a7 shall be furnished at such time as the ,secretary may prescribe1 but in no case at a time later than the earlier of-- 7i7 the date which is #cj days after the date on which the return under section #fjai was required to be filed 7including extensions1 if any71 or 7ii7 the date which is #cj days after the date such return is filed4 7,b7 ,adjustments ,in any case in which there is an adjustment to the information required to be included on a statement filed under paragraph 7#a7 after such statement has been filed1 a supplemental statement under such paragraph shall be filed not later than the date which is #cj days after such adjustment is made4 7c7 ,regulations ,the ,secretary shall prescribe such regulations as necessary to carry out this section1 including regulations relating to-- 7#a7 the application of this section to property with regard to which no estate or gift tax return is required to be filed1 and 7#b7 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 property4 4 7#b7 ,penalty for failure to file 7,a7 ,return ,section #fgbd7;d77#a7 of the ,internal ,revenue ,code of #aihf is amended by striking and at the end of subparagraph 7,b71 by striking the period at the end of subparagraph 7,c7 and inserting 1 and1 and by inserting after subparagraph 7,c7 the following new subparagraph3 7,d7 any statement required to be filed with the ,secretary under section #fjce4 4 7,b7 ,statement ,section #fgbd7;d77#b7 of such ,code is amended by striking or at the end of subparagraph 7,,gg71 by striking the period at the end of subparagraph 7,,hh7 and inserting 1 or1 and by inserting after subparagraph 7,,hh7 the following new subparagraph3 7,,ii7 section #fjce 7other than a statement described in paragraph 7#a77;,d774 4 7#c7 ,clerical amendment ,the table of sections for subpart ,a of part ,,iii of subchapter ,a of chapter #fa of the ,internal ,revenue ,code of #aihf is amended by inserting after the item relating to section #fjcd;,a the following new item3 ,sec4 #fjce4 ,basis information to persons acquiring property from decedent or by gift4 4 7c7 ,penalty for inconsistent reporting 7#a7 ,in general ,subsection 7b7 of section #fffb of the ,internal ,revenue ,code of #aihf is amended by inserting after paragraph 7#g7 the following new paragraph3 7#h7 ,any inconsistent estate or gift basis4 4 7#b7 ,inconsistent basis reporting ,section #fffb of such ,code is amended by adding at the end the following new subsection3 7k7 ,inconsistent estate or gift basis reporting ,for purposes of this section1 the term inconsistent estate or gift basis means the portion of the understatement which is attributable to-- 7#a7 in the case of property acquired from a decedent1 a basis determination with respect to such property which is not consistent with the value of such property as determined under section #ajad7;f71 and 7#b7 in the case of property acquired by gift1 a basis determination with respect to such property which is not consistent with the value of such property as determined under section #ajae7;f74 4 7d7 ,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 ,act4 #f4 ,valuation rules for certain transfers of nonbusiness assets2 limitation on minority discounts 7a7 ,in general ,section #bjca of the ,internal ,revenue ,code of #aihf is amended by redesignating subsection 7d7 as subsection 7f7 and by inserting after subsection 7c7 the following new subsections3 7d7 ,valuation rules for certain transfers of nonbusiness assets ,for purposes of this chapter and chapter #ab-- 7#a7 ,in general ,in the case of the transfer of any interest in an entity other than an interest which is actively traded 7within the meaning of section #ajib7-- 7,a7 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 7and no valuation discount shall be allowed with respect to such nonbusiness assets71 and 7,b7 such nonbusiness assets shall not be taken into account in determining the value of the interest in the entity4 7#b7 ,nonbusiness assets ,for purposes of this subsection-- 7,a7 ,in general ,the term nonbusiness asset means any asset which is not used in the active conduct of #a or more trades or businesses4 7,b7 ,exception for certain passive assets ,except as provided in subparagraph 7,c71 a passive asset shall not be treated for purposes of subparagraph 7,a7 as used in the active conduct of a trade or business unless-- 7i7 the asset is property described in paragraph 7#a7 or 7#d7 of section #abba7;a7 or is a hedge with respect to such property1 or 7ii7 the asset is real property used in the active conduct of #a or more real property trades or businesses 7within the meaning of section #dfi7;c77#g77;,c77 in which the transferor materially participates and with respect to which the transferor meets the requirements of section #dfi7;c77#g77;,b77ii74 ,for purposes of clause 7ii71 material participation shall be determined under the rules of section #dfi7;h71 except that section #dfi7;h77#c7 shall be applied without regard to the limitation to farming activity4 7,c7 ,exception for working capital ,any asset 7including a passive asset7 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 business4 7#c7 ,passive asset ,for purposes of this subsection1 the term passive asset means any-- 7,a7 cash or cash equivalents1 7,b7 except to the extent provided by the ,secretary1 stock in a corporation or any other equity1 profits1 or capital interest in any entity1 7,c7 evidence of indebtedness1 option1 forward or futures contract1 notional principal contract1 or derivative1 7,d7 asset described in clause 7iii71 7iv71 or 7v7 of section #cea7;e77#a77;,b71 7,e7 annuity1 7,f7 real property used in #a or more real property trades or businesses 7as defined in section #dfi7;c77#g77;,c771 7,g7 asset 7other than a patent1 trademark1 or copyright7 which produces royalty income1 7,h7 commodity1 7,i7 collectible 7within the meaning of section #dja7m771 or 7,j7 any other asset specified in regulations prescribed by the ,secretary4 7#d7 ,look-thru rules 7,a7 ,in general ,if a nonbusiness asset of an entity consists of a #aj-percent interest in any other entity1 this subsection shall be applied by disregarding the #aj-percent interest and by treating the entity as holding directly its ratable share of the assets of the other entity4 ,this subparagraph shall be applied successively to any #aj-percent interest of such other entity in any other entity4 7,b7 #aj-percent interest ,the term #aj-percent interest means-- 7i7 in the case of an interest in a corporation1 ownership of at least #aj percent 7by vote or value7 of the stock in such corporation1 7ii7 in the case of an interest in a partnership1 ownership of at least #aj percent of the capital or profits interest in the partnership1 and 7iii7 in any other case1 ownership of at least #aj percent of the beneficial interests in the entity4 7#e7 ,coordination with subsection 7b7 ,subsection 7b7 shall apply after the application of this subsection4 7e7 ,limitation on minority discounts ,for purposes of this chapter and chapter #ab1 in the case of the transfer of any interest in an entity other than an interest which is actively traded 7within the meaning of section #ajib71 no discount shall be allowed by reason of the fact that the transferee does not have control of such entity if the transferor1 the transferee1 and members of the family 7as defined in section #bjcb;,a7e77#b77 of the transferor and transferee-- 7#a7 have control of such entity1 or 7#b7 own the majority of the ownership interests 7by value7 in such entity4 4 7b7 ,effective date ,the amendments made by this section shall apply to transfers after the date of the enactment of this ,act4 #g4 ,required minimum #aj-year term1 etc41 for grantor retained annuity trusts 7a7 ,in general ,subsection 7b7 of section #bgjb of the ,internal ,revenue ,code of #aihf is amended-- 7#a7 by redesignating paragraphs 7#a71 7#b71 and 7#c7 as subparagraphs 7,a71 7,b71 and 7,c71 respectively1 and by moving such subparagraphs 7as so redesignated7 #b ems to the right2 7#b7 by striking ,for purposes of and inserting the following3 7#a7 ,in general ,for purposes of 2 7#c7 by striking paragraph 7#a7 or 7#b7 in paragraph 7#a77;,c7 7as so redesignated7 and inserting subparagraph 7,a7 or 7,b72 and 7#d7 by adding at the end the following new paragraph3 7#b7 ,additional requirements with respect to grantor retained annuities ,for purposes of subsection 7a71 in the case of an interest described in paragraph 7#a77;,a7 7determined without regard to this paragraph7 which is retained by the transferor1 such interest shall be treated as described in such paragraph only if-- 7,a7 the right to receive the fixed amounts referred to in such paragraph is for a term of not less than #aj years1 7,b7 such fixed amounts1 when determined on an annual basis1 do not decrease relative to any prior year during the first #aj years of the term referred to in subparagraph 7,a71 and 7,c7 the remainder interest has a value equal to or greater than #aj percent of the value of the assets transferred to the trust1 determined as of the time of the transfer4 4 7b7 ,effective date ,the amendments made by this section shall apply to transfers made after the date of the enactment of this ,act4 #h4 ,certain transfer tax rules applicable to grantor trusts 7a7 ,in general ,subtitle ,b of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new chapter3 #af ,special rules for grantor trusts ,sec4 #bija4 ,application of transfer taxes4 #bija4 ,application of transfer taxes 7a7 ,in general ,in the case of any portion of a trust to which this section applies-- 7#a7 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 owner1 7#b7 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 #ab1 and 7#c7 if at any time during the life of the deemed owner of such portion1 such owner ceases to be treated as the owner of such portion under subpart ,e of part #a of subchapter ,j of chapter #a1 all assets attributable to such portion at such time shall be treated for purposes of chapter #ab as a transfer by gift made by the deemed owner4 7b7 ,portion of trust to which section applies ,this section shall apply to-- 7#a7 the portion of a trust with respect to which the grantor is the deemed owner1 and 7#b7 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 #a of subchapter ,j of chapter #a1 and such deemed owner engages in a sale1 exchange1 or comparable transaction with the trust that is disregarded for purposes of subtitle ,a4 ,for purposes of paragraph 7#b71 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 transaction1 including all retained income therefrom1 appreciation thereon1 and reinvestments thereof1 net of the amount of consideration received by the deemed owner in such transaction4 7c7 ,exceptions ,this section shall not apply to-- 7#a7 any trust that is includible in the gross estate of the deemed owner 7without regard to subsection 7a77#a771 and 7#b7 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 taxes4 7d7 ,deemed owner defined ,for purposes of this section1 the term deemed owner means any person who is treated as the owner of a portion of a trust under subpart ,e of part #a of subchapter ,j of chapter #a4 7e7 ,reduction for taxable gifts to trust made by owner ,the amount to which subsection 7a7 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 #ab4 7f7 ,liability for payment of tax ,any tax imposed pursuant to subsection 7a7 shall be a liability of the trust4 4 7b7 ,clerical amendment ,the table of chapters for subtitle ,b of such ,code is amended by adding at the end the following new item3 ,chapter #af4 special rules for grantor trusts 4 7c7 ,effective date ,the amendments made by this section shall apply-- 7#a7 to trusts created on or after the date of the enactment of this ,act1 7#b7 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 date1 and 7#c7 to any portion of a trust established before the date of the enactment of this ,act to which section #bija7;a7 of the ,internal ,revenue ,code of #aihf 7as added by subsection 7a77 applies by reason of a transaction described in section #bija7;b77#b7 of such ,code on or after such date4