,,ii #aafth ,,congress #ast ,session ,s4 #bbca ,,in ,,the ,,senate ,,of ,,the ,,united ,,states ,july #bc1 #bjai,mr4 ,booker introduced the following bill2 which was read twice and referred to the ,committee on ,finance ,a ,,bill ,to establish ,american opportunity accounts1 to modify estate and gift tax rules1 to reform the taxation of capital income1 and for other purposes4 #a4 ,short title2 table of contents 7a7 ,short title ,this ,act may be cited as the ,american ,opportunity ,accounts ,act4 7b7 ,table of contents ,the table of contents for this ,act is as follows3 ,sec4 #a4 ,short title2 table of contents4,,title ,i--,american opportunity accounts,sec4 #aja4 ,definitions4,sec4 #ajb4 ,american ,opportunity ,fund4,sec4 #ajc4 ,,ao accounts4,sec4 #ajd4 ,assignment1 alienation1 and treatment of deceased individuals4,sec4 #aje4 ,rules governing ,,ao accounts relating to investment1 accounting1 and reporting4,sec4 #ajf4 ,american ,opportunity ,fund ,board4,sec4 #ajg4 ,fiduciary responsibilities4,sec4 #ajh4 ,accounts disregarded in determining eligibility for ,federal benefits4,sec4 #aji4 ,reports4,sec4 #aaj4 ,programs for promoting financial capability4,sec4 #aaa4 ,tax treatment4,,title ,,ii--,revenue provisions,subtitle ,a--,estate and gift tax provisions,sec4 #bja4 ,modification of estate tax rate and basic exclusion amount4,sec4 #bjb4 ,required minimum #aj-year term1 etc41 for grantor retained annuity trusts4,sec4 #bjc4 ,certain transfer tax rules applicable to grantor trusts4,sec4 #bjd4 ,simplifying gift tax exclusion for annual gifts4,sec4 #bje4 ,modification of rules for value of certain farm real property4,subtitle ,b--,reform of taxation of capital income,sec4 #baa4 ,increase in capital gains rate4,sec4 #bab4 ,deemed realization of capital gains at time of gift or death4,sec4 #bac4 ,exclusion of certain amounts of realized capital gain4,sec4 #bad4 ,extension of time for payment of tax4,sec4 #bae4 ,waiver of penalty for underpayment of estimated tax4,sec4 #baf4 ,effective date4 ,i ,american opportunity accounts #aja4 ,definitions ,for purposes of this title-- 7#a7 ,american ,opportunity ,fund ,the term ,american ,opportunity ,fund means the fund established under section #ajb4 7#b7 ,,ao account ,the term ,,ao account means an ,american opportunity account established under section #ajc4 7#c7 ,secretary ,the term ,secretary means the ,secretary of the ,treasury or the ,secretary's delegate4 7#d7 ,american ,opportunity ,fund ,board ,the term ,american ,opportunity ,fund ,board means the board established pursuant to section #ajf4 7#e7 ,executive ,director ,the term ,executive ,director means the executive director appointed pursuant to section #ajf4 #ajb4 ,american ,opportunity ,fund 7a7 ,establishment ,there is established in the ,treasury of the ,united ,states a fund to be known as the ,american ,opportunity ,fund4 7b7 ,amounts held by ,fund ,the ,american ,opportunity ,fund consists of the sum of all amounts paid into the ,fund under this title1 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 ,fund1 and reduced by the total amount of payments made from the ,fund 7including payments for administrative expenses74 7c7 ,use of ,fund 7#a7 ,in general ,the sums in the ,american ,opportunity ,fund are appropriated and shall remain available without fiscal year limitation-- 7,a7 to make contributions to ,,ao accounts2 7,b7 to invest under section #aje2 7,c7 to make distributions in accordance with this title2 7,d7 to pay the administrative expenses of carrying out this title2 and 7,e7 to purchase insurance as provided in section #ajg7;c77#b74 7#b7 ,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 purpose4 7d7 ,transfers to ,american ,opportunity ,fund ,the ,secretary shall make transfers from the general fund of the ,treasury to the ,american ,opportunity ,fund as follows3 7#a7 ,initial contribution for eligible individuals born after ,december #ca1 #bjai ,upon receipt of a certification under section #ajc7;b77#b7 with respect to an individual born after ,december #ca1 #bjai1 the ,secretary shall transfer #a1jjj to the ,,ao account of the individual4 7#b7 ,annual contributions 7,a7 ,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 #ah1 the ,secretary shall transfer the annual contribution amount to the ,,ao account of the individual4 7,b7 ,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 decrease1 on a sliding scale in a linear manner1 from the initial amount to the final amount specified in such table for such income tier3 ,in the case of household income 7expressed as a percent of the poverty line7 within the following income tier3,the initial amount is--,the final amount is--,up to #ajj percent#b1jjjb1jjjajj percent up to #abe percent#b1jjja1ejjabe percent up to #age percent#a1ejja1jjjage percent up to #bbe percent#a1jjjejjbbe percent up to #cbe percent#ejjbejcbe percent up to #ejj percent#bejjejj percent or more#jj 7,c7 ,applicable household income2 poverty line ,for purposes of this paragraph-- 7i7 ,applicable household income ,the term applicable household income means household income 7as defined in section #cf;,b7d7 of the ,internal ,revenue ,code of #aihf71 except that-- 7,i7 with respect to any calendar year1 the ,secretary shall use the income of the most recent taxable year for which information is available2 and 7,,ii7 in determining household income the ,secretary shall aggregate the income of married individuals filing separate tax returns4 7ii7 ,poverty line ,the term poverty line has the meaning given such term under section #cf;,b7d7 of the ,internal ,revenue ,code of #aihf4 7,d7 ,authority to provide tax information 7i7 ,in general ,section #fajc7l7 of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new paragraph3 7#bc7 ,disclosure of return information to carry out eligibility requirements for certain programs 7,a7 ,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 #ajb of the ,american ,opportunity ,accounts ,act4 ,such return information shall be limited to-- 7i7 taxpayer identity information with respect to such taxpayer1 7ii7 the filing status of such taxpayer1 7iii7 the number of individuals for whom a deduction is allowed under section #aea with respect to the taxpayer 7including the taxpayer and the taxpayer's spouse71 7iv7 the modified adjusted gross income 7as defined in section #cf;,b7 of such taxpayer1 of any spouse of such taxpayer who filed a separate return1 and of each of the other individuals included under clause 7iii7 who are required to file a return of tax imposed by chapter #a for the taxable year1 7v7 such other information as is prescribed by the ,secretary by regulation as might indicate whether the taxpayer is eligible for such an annual contribution 7and the amount thereof71 and 7vi7 the taxable year with respect to which the preceding information relates or1 if applicable1 the fact that such information is not available4 7,b7 ,restriction on use of disclosed information ,return information disclosed under subparagraph 7,a7 may be used by officers and employees of the ,department of ,treasury or the ,american ,opportunity ,fund ,board for the purposes of1 and to the extent necessary in establishing eligibility for1 and verifying the appropriate amount of1 any annual contribution described in subparagraph 7,a74 4 7ii7 ,procedures and recordkeeping related to disclosures ,paragraph 7#d7 of section #fajc7p7 of such ,code is amended by striking or 7#bb7 each place it appears and inserting 7#bb71 or 7#bc74 7,e7 ,study on incorporation of other wealth factors ,not later than #b years after the date of the enactment of this ,act1 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 wealth1 total assets1 and overall net worth4 ,such measure may-- 7i7 include financial assets1 the value of family home1 retirement accounts1 business and entrepreneurial ventures1 potential future inheritances1 and any other assets or debts2 and 7ii7 continue to factor in current or past income to the extent such information is useful in estimating overall household wealth4 7#c7 ,adjustment for inflation 7,a7 ,in general ,for each calendar year beginning after #bjbj1 each of the dollar amounts under paragraphs 7#a7 and 7#b77;,b77i7 shall be increased by such dollar amount multiplied by the cost-of-living adjustment determined under section #a7;f77#c7 of the ,internal ,revenue ,code of #aihf determined by substituting calendar year #bjai for calendar year #bjaf in subparagraph 7,a77ii7 thereof4 7,b7 ,rounding ,if any amount adjusted under paragraph 7#a7 is not a multiple of #ej1 such amount shall be rounded to the next lowest multiple of #ej4 7e7 ,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 system4 ,no amount from any tax on employment may be contributed to the ,american ,opportunity ,fund or ,,ao accounts4 #ajc4 ,,ao accounts 7a7 ,in general 7#a7 ,establishment ,the ,executive ,director shall establish in the ,american ,opportunity ,fund an account 7to be known as an ,american ,opportunity account or an ,,ao account7 for each eligible individual certified under subsection 7b74 ,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 ,fund4 7#b7 ,account balance ,the balance in an account holder's ,,ao account at any time is the excess of-- 7,a7 the sum of-- 7i7 all deposits made into the ,american ,opportunity ,fund and credited to the account under paragraph 7#c72 and 7ii7 the total amount of allocations made to and reductions made in the account pursuant to paragraph 7#d72 over 7,b7 the amounts paid out of the account with respect to such individual under subsection 7c74 7#c7 ,crediting of contributions ,pursuant to regulations which shall be prescribed by the ,executive ,director1 the ,executive ,director shall credit to each ,,ao account the amounts paid into the ,american ,opportunity ,fund under section #ajb7;d7 which are attributable to the account holder of such account4 7#d7 ,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 attributable1 on a pro rata basis1 to sums credited to such account1 reduced by an appropriate share of the administrative expenses paid out of the net earnings1 as determined by the ,executive ,director4 7b7 ,eligible individual ,for purposes of this title-- 7#a7 ,in general ,the term eligible individual means any individual who-- 7,a7 was born after ,december #ca1 #bjjc2 7,b7 has not yet attained the age of #ah years2 and 7,c7 has a valid1 unique1 ,federal ,government issued identification number recognized by the ,internal ,revenue ,service4 7#b7 ,certification of account holders 7,a7 ,automatic certification for certain individuals born after ,december #ca1 #bjai ,on any date after ,december #ca1 #bjai1 on which an eligible individual is issued a social security account number under section #bjc7;c77#b7 of the ,social ,security ,act1 the ,commissioner of ,social ,security shall certify to the ,executive ,director and the ,secretary of the ,treasury the name of1 and social security number issued to1 such eligible individual4 7,b7 ,other individuals ,in the case of an eligible individual who is not certified under subparagraph 7,a71 such individual may request the establishment an ,,ao account under this subparagraph by application to the ,executive ,director1 and the ,executive ,director shall certify such individual under this subparagraph4 7c7 ,restrictions on distributions 7#a7 ,age-related restrictions 7,a7 ,in general ,except as otherwise provided in this paragraph1 no amount may be distributed from an ,,ao account before the date on which the account holder attains the age of #ah4 7,b7 ,higher education expenses ,subparagraph 7,a7 shall not apply to amounts paid for qualified tuition and related expenses 7as defined in section #be;,a7f77#a7 of the ,internal ,revenue ,code of #aihf7 of the account holder if the account holder is an eligible student 7as defined in section #be;,a7b77#c7 of such ,code7 with respect to such expenses4 7,c7 ,authority to provide higher age limit for certain distributions ,the ,secretary1 in consultation with the ,american ,opportunity ,fund ,advisory ,board1 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 appropriate4 7#b7 ,use-related restrictions 7,a7 ,in general ,no amount may be distributed from an ,,ao account unless the account holder establishes1 under rules established by the ,executive ,director in consultation with the ,american ,opportunity ,fund ,advisory ,board1 that such amount shall be used for a qualified expense4 7,b7 ,qualified expense ,for purposes of this subsection-- 7i7 ,in general ,the term qualified expense means expenses for any of the following3 7,i7 ,education of the account holder4 7,,ii7 ,ownership of a home by the account holder4 7,,iii7 ,any expenses paid or incurred on or after the date on which the account holder attains age #ei4 7,,iv7 ,any other investment in financial assets or personal capital that provides long-term gains to wages and wealth1 as established under regulations promulgated by the ,secretary1 in consultation with the ,executive ,director and the ,american ,opportunity ,fund ,advisory ,board4 7ii7 ,exception ,such term shall not include any expense described in clause 7i7 which is paid to a person who does not meet such standards as are prescribed by the ,secretary1 in consultation with the ,executive ,director and the ,american ,opportunity ,fund ,advisory ,board4 7#c7 ,american ,opportunity ,account ,advisory ,board ,for purposes of this subsection1 the term ,american ,opportunity ,fund ,advisory ,board means an advisory board established by the ,secretary consisting of individuals with expertise in savings and asset-building1 home financing1 education financing1 consumer financial protection1 and such other areas as the ,secretary may determine appropriate4 #ajd4 ,assignment1 alienation1 and treatment of deceased individuals 7a7 ,assignment and alienation ,under regulations which shall be prescribed by the ,executive ,director1 rules relating to assignment and alienation applicable under chapter #hd of title #e1 ,united ,states ,code1 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 ,fund4 7b7 ,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 zero1 upon receipt of notification of such individual's death1 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 or1 if there is no such account of a surviving spouse1 to the duly appointed legal representative of the estate of the deceased account holder1 or if there is no such representative1 to the person or persons determined to be entitled thereto under the laws of the domicile of the deceased account holder4 #aje4 ,rules governing ,,ao accounts relating to investment1 accounting1 and reporting 7a7 ,investment program ,the ,secretary shall establish1 and the ,american ,opportunity ,fund ,board shall invest in debt obligations of the ,united ,states ,government with a term of #cj years4 7b7 ,independent public accountant 7#a7 ,in general ,under regulations which shall be prescribed by the ,executive ,director1 and subject to the provisions of this title1 section #hdci7;b7 of title #e1 ,united ,states ,code 7relating to engagement of independent qualified public accountant71 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 ,fund4 7#b7 ,application rules ,for purposes of paragraph 7#a71 references in such section #hdci7;b7 to an employee1 ,member1 former employee1 or former ,member shall be deemed references to an account holder of an ,,ao account in the ,american ,opportunity ,fund4 7c7 ,confidentiality and disclosure 7#a7 ,in general ,except as otherwise authorized by ,federal law1 the ,american ,opportunity ,fund ,board1 the ,executive ,director1 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 ,fund4 7#b7 ,disclosure to designee of beneficiary ,the ,executive ,director may1 subject to such requirements and conditions as he may prescribe by regulations1 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 disclosure1 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 person4 #ajf4 ,american ,opportunity ,fund ,board 7a7 ,in general ,there is established in the executive branch of the ,government an ,american ,opportunity ,fund ,board4 7b7 ,composition1 duties1 and responsibilities ,subject to the provisions of this title1 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 ,board3 7#a7 ,section #hdgb of title #e1 ,united ,states ,code 7relating to composition of ,federal ,retirement ,thrift ,investment ,board74 7#b7 ,section #hdgd of such title 7relating to ,executive ,director74 7#c7 ,section #hdgf of such title 7relating to administrative provisions74 #ajg4 ,fiduciary responsibilities 7a7 ,in general ,under regulations of the ,secretary of ,labor1 the provisions of sections #hdgg and #hdgh of title #e1 ,united ,states ,code1 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 ,fund4 7b7 ,investigative authority ,any authority available to the ,secretary of ,labor under section #ejd of the ,employee ,retirement ,income ,security ,act of #aigd 7#bi ,u4,s4,c4 #aacd7 is hereby made available to the ,secretary of ,labor1 and any officer designated by the ,secretary of ,labor1 to determine whether any person has violated1 or is about to violate1 any provision applicable under subsection 7a74 7c7 ,exculpatory provisions2 insurance 7#a7 ,in general ,any provision in an agreement or instrument which purports to relieve a fiduciary from responsibility or liability for any responsibility1 obligation1 or duty under this title shall be void4 7#b7 ,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 therein1 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 obligation4 #ajh4 ,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 for1 or amount of1 any benefit or service1 paid for in whole or in part with ,federal funds1 including student financial aid4 #aji4 ,reports 7a7 ,reports to ,congress ,the ,executive ,director1 in consultation with the ,secretary1 shall annually transmit a written report to the ,congress4 ,such report shall include-- 7#a7 a detailed description of the status and operation of the ,american ,opportunity ,fund and the management of the ,,ao accounts2 and 7#b7 a detailed accounting of the administrative expenses in carrying out this title1 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 accounts4 7b7 ,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 account1 which shall include-- 7#a7 a statement of the balance of individual's ,,ao account2 7#b7 a projection of the account's growth by the time the individual attains the age of #ah2 and 7#c7 such other information as the ,secretary deems relevant4 #aaj4 ,programs for promoting financial capability ,the ,secretary of the ,treasury1 in coordination with the ,financial ,literacy and ,education ,commission1 shall develop programs to promote the financial capability of account holders of ,,ao accounts4 #aaa4 ,tax treatment 7a7 ,contributions and distributions ,part ,,iii of subchapter ,b of chapter #a of the ,internal ,revenue ,code of #aihf is amended by inserting after section #aci;,g the following new section3 #aci;,h4 ,contributions to and distributions from ,,ao accounts ,gross income shall not include-- 7#a7 any contribution credited to the ,,ao account of the taxpayer under section #ajc7;a77#c7 of the ,american ,opportunity ,accounts ,act1 and 7#b7 any distribution from such an ,,ao account4 4 7b7 ,tax treatment of earnings and distributions ,subchapter ,f of chapter #a of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new part3 ,,ix ,american ,opportunity ,fund and ,,ao accounts ,sec4 #ecj;,a4 ,american ,opportunity ,fund and ,,ao accounts4 #ecj;,a4 ,american ,opportunity ,fund and ,,ao accounts 7a7 ,general rule ,the ,american ,opportunity ,fund and ,,ao accounts shall be exempt from taxation under this subtitle4 ,notwithstanding the preceding sentence1 a ,,ao account shall be subject to the taxes imposed by section #eaa 7relating to imposition of tax on unrelated business income of charitable organizations74 7b7 ,definitions ,for purposes of this section1 the terms ,american ,opportunity ,fund and ,,ao account have the meanings given such terms under title ,i of the ,american ,opportunity ,accounts ,act4 4 7c7 ,conforming amendments 7#a7 ,the table of sections for part ,,iii of subchapter ,b of chapter #a of the ,internal ,revenue ,code of #aihf is amended by inserting after the item related to section #aci;,g the following new item3 ,sec4 #aci;,h4 ,contributions to and distributions from ,,ao accounts4 4 7#b7 ,the table of parts for subchapter ,f of chapter #a of such ,code is amended by adding at the end the following new item3 ,part ,,ix--,american ,opportunity ,fund and ,,ao accounts 4 7d7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjai4 ,,ii ,revenue provisions ,a ,estate and gift tax provisions #bja4 ,modification of estate tax rate and basic exclusion amount 7a7 ,permanent extension of maximum estate tax rate and basic exclusion amount as in effect in #bjji 7#a7 ,maximum estate tax rate ,the last row of the table contained in subsection 7c7 of section #bjja of the ,internal ,revenue ,code of #aihf is amended by striking #dj percent and inserting #de percent4 7#b7 ,basic exclusion amount ,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 subsection1 the basic exclusion amount is #c1ejj1jjj4 4 7b7 ,additional taxes for estates over #aj1jjj1jjj ,the table contained in section #bjja7;c71 as amended by subsection 7a71 is amended-- 7#a7 by inserting but not over #aj1jjj1jjj after ,over #a1jjj1jjj in the last row2 and 7#b7 by adding at the end the following3 ,over #aj1jjj1jjj but not over #ej1jjj1jjjd1cie1hjj1 plus #ee percent of the excess of such amount over #aj1jjj1jjj4,over #ej1jjj1jjjbf1cie1hjj1 plus #fe percent of the excess of such amount over #ej1jjj1jjj4 4 7c7 ,effective date ,the amendments made by this section shall apply to estates of decedents dying and gifts made after ,december #ca1 #bjai4 #bjb4 ,required minimum #aj-year term1 etc41 for grantor retained annuity trusts 7a7 ,in general ,subsection 7b7 of section #bgjb 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 years and not more than the life expectancy of the annuitant plus #aj years1 7,b7 such fixed amounts1 when determined on an annual basis1 do not decrease during the term described in subparagraph 7,a71 and 7,c7 the remainder interest has a value1 as determined as of the time of the transfer1 which is-- 7i7 not less than an amount equal to the greater of-- 7,i7 #be percent of the fair market value of the property in the trust1 or 7,,ii7 #ejj1jjj1 and 7ii7 not greater than the fair market value of the property in the trust4 4 7b7 ,effective date ,the amendments made by this section shall apply to transfers made after the date of the enactment of this ,act4 #bjc4 ,certain transfer tax rules applicable to grantor trusts 7a7 ,in general ,subtitle ,b 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 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 ,act2 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 date2 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 #bjd4 ,simplifying gift tax exclusion for annual gifts 7a7 ,in general ,section #bejc of the ,internal ,revenue ,code of #aihf is amended-- 7#a7 by striking paragraph 7#a7 of subsection 7b7 and inserting the following3 7#a7 ,in general 7,a7 ,limit per donee ,in the case of gifts made to any person by the donor during the calendar year1 the first #aj1jjj of such gifts to such person shall not1 for purposes of subsection 7a71 be included in the total amount of gifts made during such year4 7,b7 ,cumulative limit per donor 7i7 ,in general ,the aggregate amount excluded under subparagraph 7,a7 with respect to all transfers described in clause 7ii7 made by the donor during the calendar year shall not exceed #ej1jjj4 7ii7 ,transfers subject to limitation ,the transfers described in this clause are-- 7,i7 a transfer in trust 7with the exception of any transfer to a trust described in section #bfdb7;c77#b771 7,,ii7 a transfer of an interest in a passthrough entity1 7,,iii7 a transfer of an interest subject to a prohibition on sale1 and 7,,iv7 any other transfer of property that1 without regard to withdrawal1 put1 or other such rights in the donee1 cannot immediately be liquidated by the donee4 1 and 7#b7 by striking subsection 7c74 7b7 ,conforming amendments 7#a7 ,subparagraph 7,b7 of section #ebi7;c77#b7 of the ,internal ,revenue ,code of #aihf is amended by striking section #bejc7;b7 and inserting 8section #bejc7;b77#a77;,a74 7#b7 ,clause 7i7 of section #ebi;,a7b77#b77;,b7 of such ,code is amended by striking section #bejc7;b7 and inserting section #bejc7;b77#a77;,a74 7#c7 ,paragraph 7#b7 of section #bebc7;i7 of such ,code is amended by striking section #bejc7;b7 and inserting section #bejc7;b77#a77;,a74 7#d7 ,subsection 7c7 of such ,code of section #bhja is amended by striking #bejc7;b7 and inserting #bejc7;b77#a77;,a74 7c7 ,regulations ,the ,secretary of the ,treasury1 or the ,secretary of the ,treasury's delegate1 may prescribe such regulations or other guidance as may be necessary or appropriate to carry out the amendments made by this section4 7d7 ,effective date ,the amendments made by this section shall apply to any calendar year beginning after the date of the enactment of this ,act4 #bje4 ,modification of rules for value of certain farm real property 7a7 ,increase in limitation 7#a7 ,in general ,paragraph 7#b7 of section #bjcb;,a7a7 of the ,internal ,revenue ,code of #aihf is amended by striking #gej1jjj and inserting #c1jjj1jjj4 7#b7 ,inflation adjustment ,paragraph 7#c7 of section #bjcb;,a7a7 of such ,code is amended-- 7,a7 by striking #aiih and inserting #bjbj2 7,b7 by striking #gej1jjj and inserting #c1jjj1jjj in subparagraph 7,a72 and 7,c7 by striking calendar year #aiig and inserting calendar year #bjai in subparagraph 7,b74 7b7 ,qualified use limited to farming purposes 7#a7 ,in general ,section #bjcb;,a7b77#b7 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 purposes44 7#b7 ,conforming amendments 7,a7 ,subsections 7c77#f77;,a71 7h77#c71 and 7i77#c7 of section #bjcb;,a of the such ,code are each amended by striking subparagraph 7,a7 or 7,b7 of4 7,b7 ,the heading of section #bjcb;,a of such ,code 7and the item relating to section #bjcb;,a in the table of sections for part ,,iii of subchapter ,a of chapter #aa of such ,code7 is amended by striking 1 etc414 7c7 ,effective date ,the amendments made by this section shall apply to estates of decedents dying1 and gifts made1 after ,december #ca1 #bjai4 ,b ,reform of taxation of capital income #baa4 ,increase in capital gains rate 7a7 ,in general ,section #a7;h77#a77;,d7 of the ,internal ,revenue ,code of #aihf is amended by striking #bj percent and inserting #bd4b percent4 7b7 ,minimum tax ,section #ee7;b77#c77;,d7 of the ,internal ,revenue ,code of #aihf is amended by striking #bj percent and inserting #bd4b percent4 7c7 ,conforming amendments ,the following provisions are each amended by striking #bj percent and inserting #bj4d percent3 7#a7 ,section #eca of the ,internal ,revenue ,code of #aihf4 7#b7 ,section #eda of the ,internal ,revenue ,code of #aihf4 7#c7 ,section #adde7;e77#a7 of the ,internal ,revenue ,code of #aihf4 7#d7 ,section #adde7;e77#f7 of the ,internal ,revenue ,code of #aihf4 7#e7 ,the second sentence of section #geah7;g77#f77;,a7 of the ,internal ,revenue ,code of #aihf4 7#f7 ,section #eceaa7;f77#b7 of title #df1 ,united ,states ,code4 7d7 ,effective dates 7#a7 ,in general ,except as otherwise provided1 the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjai4 7#b7 ,withholding ,the amendments made by paragraphs 7#c7 and 7#d7 of subsection 7c7 shall apply to amounts paid on or after ,january #a1 #bjai4 #bab4 ,deemed realization of capital gains at time of gift or death 7a7 ,treatment as sale 7#a7 ,in general ,part ,,iv of subchapter ,p of chapter #a of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new section3 #abfa4 ,gains from certain property transferred by gift or upon death 7a7 ,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 gift1 death1 or transfer4 7b7 ,exceptions 7#a7 ,tangible property ,this section shall not apply to any tangible personal property other than a collectible 7as defined in section #djh7m7 without regard to paragraph 7#c7 thereof74 7#b7 ,spousal exception ,this section shall not apply to any transfer if such transfer is made to the spouse or surviving spouse of the transferor4 7#c7 ,gifts to charity ,this section shall not apply to any transfer if such transfer is made to an organization described in section #agj7;c74 4 7#b7 ,clerical amendment ,the table of sections for part ,,iv of subchapter ,p of chapter #a of such ,code is amended by adding at the end the following new item3 ,sec4 #abfa4 ,gains from certain property transferred by gift or upon death4 4 7b7 ,treatment of basis for gifts and bequests to which tax applies 7#a7 ,elimination of carryover basis for gifts ,subsection 7a7 section #ajae of the ,internal ,revenue ,code of #aihf is amended-- 7,a7 by striking ,if the property and inserting the following3 7#a7 ,gifts before ,january #a1 #bjbj ,if the property 2 7,b7 by inserting and before ,january #a1 #bjbj after after ,december #ca1 #aibj2 and 7,c7 by adding at the end the following new paragraph3 7#b7 ,gifts after ,december #ca1 #bjai 7,a7 ,in general ,if the property was acquired by gift after ,december #ca1 #bjai1 the basis shall be the fair market value of such property at the time of the gift4 7,b7 ,special rules for charitable organizations ,in the case of any property acquired by an organization described in section #agj7;c7 by gift1 subparagraph 7,a7 shall not apply and paragraph 7#a7 shall be applied without regard to the phrase and before ,january #a1 #bjbj4 4 7#b7 ,property acquired from decedent spouses ,section #ajad of such ,code is amended by adding at the end the following new subsection3 7g7 ,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 #ajda7;a77#a71 the basis of such property in the hands of the transferee shall be determined under section #ajda7;b7 and not this section4 4 7#c7 ,rule for transfers between spouses 7,a7 ,in general ,section #ajda7;b7 of the ,internal ,revenue ,code of #aihf is amended to read as follows3 7b7 ,transferee has transferor's basis ,in the case of any transfer of property described in subsection 7a71 the basis of the transferee in the property shall be the adjusted basis of the transferor4 4 7,b7 ,conforming amendment ,section #ajae7;e7 of such ,code is amended by striking #ajda7;b77#b7 and inserting #ajda7;b74 #bac4 ,exclusion of certain amounts of realized capital gain 7a7 ,in general ,part ,,iii of subchapter ,b of chapter #a of the ,internal ,revenue ,code of #aihf1 as amended by section #aaa1 is amended by inserting after section #aci;,h the following new section3 #aci;,i4 ,exclusion gain from transfers of appreciated assets by gift or at death 7a7 ,in general ,gross income shall not include so much of the aggregate gain from transfers at death described in #abfa7;a7 of any capital asset as does not exceed #ajj1jjj4 7b7 ,special rules for real property used for farming 7#a7 ,in general 7,a7 ,application of section ,in the case of qualified real property-- 7i7 subsection 7a7 shall be applied separately to such qualified real property and other property1 and 7ii7 in applying subsection 7a7 to such qualified real property1 the applicable amount shall be substituted for #ajj1jjj4 7,b7 ,applicable amount ,for purposes of subparagraph 7,a71 the applicable amount is an amount equal to the sum of-- 7i7 #a1jjj1jjj1 plus 7ii7 the excess 7not less than zero7 of the amount in effect under subsection 7a7 over the aggregate amount of gain from transfers at death described in section #abfa7;a7 of capital assets other than qualified real property4 7#b7 ,imposition of additional tax 7,a7 ,in general ,the ,secretary shall1 by regulations1 provide for recapturing the benefit under any exclusion allowable under paragraph 7#a7 with respect to any qualified real property if1 within #aj years after the decedent's death and before the death of the qualified heir-- 7i7 the qualified heir disposes of any interest in qualified real property 7other than by a disposition to a member of his family71 or 7ii7 the qualified heir ceases to use for the qualified use the qualified real property which was acquired 7or passed7 from the decedent4 7,b7 ,liability ,the benefit recaptured under subparagraph 7,a7 shall be recaptured from the qualified heir4 7#c7 ,definitions ,any term used in this subsection which is also used in section #bjcb;,a shall have the meaning given such term under section #bjcb;,a4 7c7 ,inflation adjustment 7#a7 ,in general ,in the case of any taxable year beginning after #bjbj1 the #ajj1jjj amount in subsection 7a7 and the #a1jjj1jjj in subsection 7b77#a77;,b77i7 shall each be increased by an amount equal to-- 7,a7 such dollar amount1 multiplied by 7,b7 the cost-of-living adjustment determined under section #a7;f77#c7 for the calendar year in which the taxable year begins1 determined by substituting in subparagraph 7,a77ii7 thereof calendar year #bjai for calendar year #bjaf4 7#b7 ,rounding 7,a7 ,in general ,if the dollar amount in subsection 7a71 after being increased under paragraph 7#a71 is not a multiple of #aj1jjj1 such dollar amount shall be rounded to the next lowest multiple of #aj1jjj4 7,b7 ,qualified real property ,if the dollar amount in subsection 7b77#a77;,b77i71 after being increased under paragraph 7#a71 is not a multiple of #ajj1jjj1 such amount shall be rounded to the next lowest multiple of #ajj1jjj4 4 7b7 ,clerical amendment ,the table of sections for part ,,iii of subchapter ,b of chapter #a of such ,code is amended by inserting after section #aci;,h the following new item3 ,sec4 #aci;,i4 ,exclusion gain from transfers of appreciated assets by gift or at death4 4 7c7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after ,december #ca1 #bjai4 #bad4 ,extension of time for payment of tax 7a7 ,extension of time 7#a7 ,in general ,subpart ,b of chapter #fb of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new section3 #fafh4 ,extension of time for payment of capital gains on certain assets realized by reason of death 7a7 #ae-,year installment payment 7#a7 ,in general ,in the case of any gain with respect to an eligible capital asset that is recognized under section #abfa by reason of the death of the taxpayer1 the taxpayer may elect to pay part or all of tax imposed on such gain in #b or more 7but not exceeding #ae7 equal installments4 7#b7 ,date for payment of installments ,if an election is made under paragraph 7#a71 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 7#a7 occurs is due1 and each succeeding installment shall be paid on or before the date which is #a year after the date prescribed by this paragraph for payment of the preceding installment4 7b7 ,eligible capital asset ,for purposes of this section1 the term eligible capital asset means any capital asset other than personal property of a type which is actively traded 7within the meaning of section #ajib7;d77#a774 7c7 ,portion of tax eligible ,the amount of tax to which this section applies shall not exceed the excess of-- 7#a7 the tax computed under chapter #a 7determined after application of section #abfa71 over 7#b7 the tax computed under chapter #a 7determined without regard to section #abfa74 7d7 ,election ,any election under subsection 7a7 shall be made not later than the time prescribed by section #fjgb for filing the return of tax imposed under chapter #a 7including extensions thereof71 and shall be made in such manner as the ,secretary shall by regulations prescribe4 ,if an election under subsection 7a7 is made1 the provisions of this subtitle shall apply as though the ,secretary were extending the time for payment of the tax4 7e7 ,proration of deficiency to installments ,if an election is made under subsection 7a7 to pay any part of the tax imposed under chapter #a in installments and a deficiency has been assessed1 the deficiency shall 7subject to the limitation provided by subsection 7a77#b77 be prorated to the installments payable under subsection 7a74 ,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 as1 and as a part of1 such installment4 ,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 ,secretary4 ,this subsection shall not apply if the deficiency is due to negligence1 to intentional disregard of rules and regulations1 or to fraud with intent to evade tax4 7f7 ,time for payment of interest ,if the time for payment of any amount of tax has been extended under this section1 interest payable under section #ffja on any unpaid portion shall be paid annually at the same time as1 and as part of1 each installment payment of the tax4 7g7 ,regulations ,the ,secretary shall prescribe such regulations as may be necessary to the application of this section4 7h7 ,cross ,references 7#a7 ,security ,for authority of the ,secretary to require security in the case of an extension under this section1 see section #fafe4 7#b7 ,interest ,for provisions relating to interest on tax payable in installments under this section1 see subsection 7k7 of section #ffja4 4 7#b7 ,clerical amendment ,the table of sections for subpart ,b of chapter #fb is amended by adding at the end the following new item3 ,sec4 #fafh4 ,extension of time for payment of capital gains on certain assets realized by reason of death4 4 7b7 ,interest ,section #ffja of the ,internal ,revenue ,code of #aihf is amended by redesignating subsection 7k7 as subsection 7l7 and by inserting after subsection 7j7 the following new subsection3 7k7 ,special rate for tax extended under section #fafh ,if the time for payment of an amount of tax imposed by chapter #aa is extended as provided in section #fafh1 in lieu of the annual rate provided by subsection 7a71 interest shall be paid at a rate equal to #de percent of the annual rate provided by subsection 7a74 ,for purposes of this subsection1 the amount of any deficiency which is prorated to installments payable under section #fafh shall be treated as an amount of tax payable in installments under such section4 4 #bae4 ,waiver of penalty for underpayment of estimated tax ,section #ffed7;e77#c7 of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new subparagraph3 7,c7 ,capital gains payable upon death ,no addition to tax shall be imposed under subsection 7a7 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 #abfa4 4 #baf4 ,effective date ,except as otherwise provided1 the amendments made by this subtitle shall apply to transfers after ,december #ca1 #bjai1 in taxable years beginning after such date4