,,ii #aaith ,,congress #b;d ,session ,s4 #ddij ,,in ,,the ,,senate ,,of ,,the ,,united ,,states ,may #ab1 #bjbf,mrs4 ,murray 7for herself1 ,mr4 ,wyden1 ,mr4 ,van ,hollen1 ,mr4 ,booker1 and ,ms4 ,alsobrooks7 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 provide a tax on the assets of trusts1 and for other purposes4 #a4 ,short title ,this ,act may be cited as the ,fair ,trusts for ,fiscal ,responsibility ,act4 #b4 ,imposition of tax on assets of 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 ,tax on trust assets ,,subchapter ,a--,tax imposed,s,u,b,c,h,a,p,t,e,r ,b--,trust withholding credit account,s,u,b,c,h,a,p,t,e,r ,c--,definitions and other rules ,a ,tax imposed ,sec4 #bija4 ,imposition of tax4,sec4 #bijb4 ,computation of tax4 #bija4 ,imposition of tax 7a7 ,in general ,there is hereby imposed a tax on the net value of all assets of an applicable trust held on the last day of any calendar year4 7b7 ,limitation ,the amount of tax imposed under this chapter on any applicable trust shall not exceed the excess 7if any7 of-- 7#a7 product of-- 7,a7 the sum of-- 7i7 the net value of all assets of the trust held as of the last day of the calendar year1 plus 7ii7 the balance of the trust withholding credit account 7as determined under section #biaa7 as of such day1 and 7,b7 the highest rate of tax under section #bjja7;c7 on the estates of decedents dying on such day1 over 7#b7 the amount determined under paragraph 7#a77;,a77ii74 #bijb4 ,computation of tax 7a7 ,in general ,the tax imposed by section #bija shall be equal to the sum of-- 7#a7 #j percent of so much of the net value of all assets of the trust as does not exceed the #a percent bracket threshold1 7#b7 #a percent of so much of the net value of all assets of the trust in excess of the #a percent bracket threshold but not in excess of the #a4e percent bracket threshold1 7#c7 #a4e percent of so much of the net value of all assets of the trust in excess of the #a4e percent bracket threshold but not in excess of the #b percent bracket threshold1 7#d7 #b percent of so much of the net value of all assets of the trust in excess of the #b percent bracket threshold but not in excess of the #c percent bracket threshold1 plus 7#e7 #c percent of so much of the net value of all assets of the trust in excess of the #c percent bracket threshold4 7b7 ,determination of bracket thresholds 7#a7 ,in general ,except as otherwise provided in this chapter-- 7,a7 #a percent bracket threshold ,the #a percent bracket threshold shall be equal to the lesser of-- 7i7 #ej1jjj1jjj1 or 7ii7 the sum of-- 7,i7 #j1 plus 7,,ii7 the lowest unused #a percent bracket amount allocated to the trust from among all beneficiaries of the trust4 7,b7 #a4e percent bracket threshold ,the #a4e percent bracket threshold shall be equal to the lesser of-- 7i7 #ajj1jjj1jjj1 or 7ii7 the sum of-- 7,i7 the #a percent bracket threshold1 plus 7,,ii7 the lowest unused #a4e percent bracket amount allocated to the trust from among all beneficiaries of the trust4 7,c7 #b percent bracket threshold ,the #b percent bracket threshold shall be equal to the lesser of-- 7i7 #bej1jjj1jjj1 or 7ii7 the sum of-- 7,i7 the #a4e percent bracket threshold1 plus 7,,ii7 the lowest unused #b percent bracket amount allocated to the trust from among all beneficiaries of the trust4 7,d7 #c percent bracket threshold ,the #c percent bracket threshold shall be equal to the lesser of-- 7i7 #a1jjj1jjj1jjj1 or 7ii7 the sum of-- 7,i7 the #b percent bracket threshold1 plus 7,,ii7 the lowest unused #c percent bracket amount allocated to the trust from among all beneficiaries of the trust4 7#b7 ,treatment of corporations1 partnerships1 and trusts ,in the case of any trust all of the beneficiaries of which are corporations1 partnerships1 or trusts 7after application of the rules of paragraphs 7#b7 and 7#c7 of section #bibb7;b77-- 7,a7 the #a percent bracket threshold shall be equal to the amount in effect under paragraph 7#a77;,a77i71 7,b7 the #a4e percent bracket threshold shall be equal to the amount in effect under paragraph 7#a77;,b77i71 7,c7 the #b percent bracket threshold shall be equal to the amount in effect under paragraph 7#a77;,c77i71 and 7,d7 the #c percent bracket threshold shall be equal to the amount in effect under paragraph 7#a77;,d77i74 7#c7 ,inflation adjustment 7,a7 ,in general ,in the case of any calendar year beginning after #bjbg1 each of the dollar amounts in subparagraphs 7,a77i71 7,b77i71 7,c77i71 and 7,d77i7 of paragraph 7#a7 shall be increased by an amount equal to-- 7i7 such dollar amount1 multiplied by 7ii7 the cost-of-living adjustment determined under section #a7;f77#c7 for such calendar year1 determined by substituting in subparagraph 7,a77ii7 thereof calendar year #bjbf for calendar year #bjaf4 7,b7 ,rounding ,if any amount as adjusted under subparagraph 7,a7 is not a multiple of #aj1jjj1 such dollar amount shall be rounded to the next lowest multiple of #aj1jjj4 7c7 ,allocation of unused bracket amounts 7#a7 ,in general ,except as otherwise provided in this subsection1 the amount of any category of unused bracket amount allocated to any trust from a beneficiary shall be equal to the product of-- 7,a7 the maximum amount with respect to such category as determined under paragraph 7#c77;,b71 and 7,b7 the ratio of-- 7i7 the present value of the beneficiary's beneficial interest in such trust 7determined as provided in section #fjci,m7c77#c771 to 7ii7 the present value of the beneficiary's beneficial interest 7as so determined7 in all applicable trusts4 7#b7 ,election to assign different amounts ,a beneficiary may elect to allocate the amount of any category of unused bracket amount in a different manner than provided in paragraph 7#a71 except that the aggregate amount of any category of unused bracket amounts allocated to all trusts for which such person is a beneficiary may not exceed the maximum amount with respect to such category as determined under paragraph 7#c77;,b74 ,an election made under this section shall be made at such time and in such manner as specified by the ,secretary in regulations4 7#c7 ,categories of unused bracket amounts2 maximum amount 7,a7 ,categories of unused bracket amounts ,for purposes of this subsection1 the categories of unused bracket amounts are-- 7i7 the unused #a percent bracket amount1 7ii7 the unused #a4e percent bracket amount1 7iii7 the unused #b percent bracket amount1 and 7iv7 the unused #c percent bracket amount4 7,b7 ,maximum amount ,with respect to any person for any calendar year-- 7i7 the maximum amount with respect to the unused #a percent bracket amount shall be equal to the amount in effect under subsection 7b77#a77;,a77i71 7ii7 the maximum amount with respect to the unused #a4e percent bracket amount shall be equal to the amount in effect under subsection 7b77#a77;,b77i71 7iii7 the maximum amount with respect to the unused #b percent bracket amount shall be equal to the amount in effect under subsection 7b77#a77;,c77i71 and 7iv7 the maximum amount with respect to the unused #c percent bracket amount shall be equal to the amount in effect under subsection 7b77#a77;,d77i74 7#d7 ,special rule for certain beneficiaries 7,a7 ,in general ,in the case of any beneficiary described in subparagraph 7,b71 no amount shall be allocated under this section and the determination of the lowest amount allocated to a trust under subparagraphs 7,a77ii77,,ii71 7,b77ii77,,ii71 7,c77ii77,,ii71 and 7,d77ii77,,ii7 of subsection 7b77#a7 shall be determined without regard to such beneficiary4 7,b7 ,beneficiaries described ,a beneficiary is described in this subparagraph if-- 7i7 such beneficiary is an exempt beneficiary1 or 7ii7 such beneficiary is person described in section #fjci,m7b77#b74 ,b ,trust withholding credit account ,sec4 #biaa4 ,trust withholding credit account4 #biaa4 ,trust withholding credit account 7a7 ,in general ,under rules established by the ,secretary-- 7#a7 each applicable trust which is subject to a tax imposed under this chapter1 and 7#b7 each beneficiary of an applicable trust who receives a qualified distribution1 shall establish a trust withholding credit account4 7b7 ,additions to account 7#a7 ,trusts ,the balance of the trust withholding credit account for any applicable trust shall be increased by the amount of tax imposed under this chapter which is paid by or on behalf of the trust4 7#b7 ,beneficiaries 7,a7 ,in general ,the balance of the trust withholding credit account for any beneficiary who receives a qualified distribution shall be increased by the ratable share with respect to such distribution4 7,b7 ,distributions to certain corporate shareholders and partners -- 7i7 ,in general ,for purposes of this section1 in the case of a qualified distribution to a corporation or partnership with respect to which a shareholder or partner is treated as a beneficiary by reason of section #bibb7;b77#c77;,b71 such shareholder or partner 7as the case may be7 shall be treated as having directly received a qualified distribution in an amount equal to the applicable percentage of the amount of the distribution made to such corporation or partnership4 7ii7 ,applicable percentage ,for purposes of this subparagraph1 the applicable percentage is the percentage of the ownership interest held by such individual in the corporation or partnership at the time of the distribution 7determined as provided under section #bibb7;b77#c77;,b774 7,c7 ,limitation ,in the case of a qualified distribution which is a direct skip from a trust 7within the meaning of chapter #ac71 the amount of the increase under subparagraph 7,a7 shall be reduced by the amount of credit allowed under section #bfjd7;c77#b7 7if any7 to the trust making the distribution4 7c7 ,subtractions 7#a7 ,trusts ,the balance of the trust withholding credit account for any applicable trust shall be reduced by-- 7,a7 the ratable share with respect to any qualified distribution made by the trust1 and 7,b7 in the case of a taxable termination 7as defined in section #bfab71 the sum of-- 7i7 the amount of any credit allowed under section #bfjd7;a71 plus 7ii7 the product of-- 7,i7 the amount determined under section #bfjd7;a77#a7 with respect to such taxable termination1 and 7,,ii7 the excess of #a over the inclusion ratio 7as defined in section #bfdb74 7#b7 ,beneficiaries ,the balance of the trust withholding credit account for any beneficiary shall be reduced by the amount of credits allowed to the beneficiary under sections #bjag1 #bfjd7;b71 and #bfjd7;c74 7d7 ,qualified distribution ,for purposes of this section-- 7#a7 ,in general ,the term qualified distribution means any distribution which-- 7,a7 is made from an applicable trust which is subject to a tax under this chapter1 and 7,b7 is made to any person other than an exempt beneficiary4 7#b7 ,special rule for certain trusts ,in the case of a property in an applicable trust which is includible in the gross estate of an individual1 such property shall be treated as distributed from the applicable trust to the individual in a qualified distribution 7and such individual shall be treated as the beneficiary of such trust for purposes of subsection 7b77#b77 on the earlier of-- 7,a7 the date such property is distributed from the trust1 or 7,b7 the date of the death of such individual4 7e7 ,ratable share ,for purposes of this section1 the term ratable share means1 with respect to any qualified distribution1 the amount which bears the same ratio to the balance of the trust withholding credit account 7determined immediately before the qualified distribution7 as-- 7#a7 the amount of the qualified distribution1 bears to 7#b7 the net value of assets of the trust 7determined immediately before the qualified distribution74 ,c ,definitions and other rules ,sec4 #biba4 ,determination of net value of assets4,sec4 #bibb4 ,other definitions and special rules4 #biba4 ,determination of net value of assets 7a7 ,in general ,for purposes of this chapter1 the term net value of all assets means1 as of any date1 the value of all property of the trust1 real or personal1 tangible or intangible1 wherever situated1 reduced by any qualified debts owed by the taxpayer4 7b7 ,value of property 7#a7 ,tradable assets 7,a7 ,in general ,in the case of any tradable asset1 the value of such asset shall be the fair market value of such asset4 7,b7 ,tradable asset ,for purposes of this paragraph1 the term tradable asset means any asset if-- 7i7 interests in such asset are traded on an established securities market1 7ii7 interests in such assets are readily tradable on a secondary market 7or the substantial equivalent thereof71 7iii7 interests in such assets are available on an online or electronic platform that regularly matches1 or facilitates the matching of1 buyers and sellers of such assets1 or 7iv7 such asset is an asset for which the ,secretary determines there is a reasonable basis to determine the asset's fair market value annually4 7#b7 ,other assets 7,a7 ,in general ,in the case of any asset which is not a tradable asset1 the value of such asset shall be-- 7i7 in any case in which there has been a qualified appraisal 7as defined in section #agj7;f77#aa77;,e77 conducted within the #b-year period ending on the date the value is determined for purposes of this chapter1 the value determined under such appraisal1 and 7ii7 in any other case1 the value of such property determined under such other method as prescribed by the ,secretary4 7,b7 ,determination where no alternative method ,if subparagraph 7,a77i7 does not apply and the ,secretary has not prescribed a method under subparagraph 7,a77ii71 the value of such asset shall be the greater of-- 7i7 the sum of-- 7,i7 the basis of such asset1 and 7,,ii7 the product of-- 7aa7 the amount determined under subclause 7,i71 and 7bb7 the sum of #a percent and the long-term rate determined under section #abgd7;d7 for the applicable month1 compounded semiannually1 or 7ii7 the value of such property determined by a qualified appraisal 7as defined in section #agj7;f77#aa77;,e77 conducted within the #e-year period ending on the date the value is determined for purposes of this chapter4 7,c7 ,applicable month ,for purposes of subparagraph 7,b77i77,,ii7-- 7i7 ,in general ,except as provided in clause 7ii71 the term applicable month means1 with respect to any asset1 the month in which such asset was acquired by the taxpayer4 7ii7 ,certain assets with carryover basis ,in the case of any asset the basis in the hands of the taxpayer was determined by reference to the basis in the hands of another person1 the term applicable month means the month in which such asset was acquired by such other person4 7#c7 ,limitation on discount by reason of family control 7,a7 ,in general ,for purposes of this chapter1 in the case of any interest in an entity other than an interest which is actively traded 7within the meaning of section #ajib71 if the person who transferred such interest1 the transferee1 and members of the family of the transferor and transferee have control of such entity immediately before such transfer1 no discount shall be allowed-- 7i7 by reason of the fact that the transferor or transferee does not have control of such entity1 7ii7 by reason of the lack of marketability of the interest1 or 7iii7 for any other reason4 7,b7 ,definitions ,in this paragraph1 the terms control and member of the family have the same meanings given such terms in section #bgjd7;c74 7,c7 ,attribution ,for purposes of this paragraph1 the rule of section #bgja7;e77#c7 shall apply for purposes of determining the interests held by any individual4 7#d7 ,valuation rules for certain nonbusiness assets held by nontradable entities 7,a7 ,in general ,for purposes of this chapter1 in the case of any interest in an entity other than an interest which is a tradable asset-- 7i7 the value of any nonbusiness assets held by the entity with respect to such interest shall be determined as if the owner of the entity directly held its ratable share of such nonbusiness assets 7and no valuation discount shall be allowed with respect to such nonbusiness assets71 and 7ii7 such nonbusiness assets shall not be taken into account in determining the value of the interest in the entity and the basis of such nonbusiness assets shall not be taken into account in determining the basis of such interest under paragraph 7#b77;,a77i74 7,b7 ,nonbusiness assets ,for purposes of this paragraph-- 7i7 ,in general ,the term nonbusiness asset means any asset other than an asset which is used in the active conduct of a trade or business4 7ii7 ,passive assets treated as nonbusiness assets ,for purposes of clause 7i71 a passive asset shall be treated as a nonbusiness asset unless-- 7,i7 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 7,,ii7 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 7iii7 ,material participation ,for purposes of clause 7ii77,,ii71 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 7iv7 ,working capital treated as used in trade or business ,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 paragraph1 the term passive asset means any-- 7i7 cash or cash equivalents1 7ii7 stock in a corporation or any other equity1 profits1 or capital interest in any entity1 7iii7 evidence of indebtedness1 option1 forward or futures contract1 notional principal contract1 or derivative1 7iv7 asset described in clause 7iii71 7iv71 or 7v7 of section #cea7;e77#a77;,b71 7v7 annuity1 7vi7 real property used in #a or more real property trades or businesses 7as defined in section #dfi7;c77#g77;,c771 7vii7 asset 7other than a patent1 trademark1 or copyright7 which produces royalty income1 7viii7 commodity1 7ix7 collectible 7within the meaning of section #djh7m771 or 7x7 any other asset specified in regulations prescribed by the ,secretary4 7,d7 ,look-thru rule 7i7 ,in general ,if a nonbusiness asset of an entity described in subparagraph 7,a7 consists of a #aj-percent interest in any other entity1 this paragraph 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 7ii7 #aj-percent interest ,the term #aj-percent interest means-- 7,i7 in the case of an interest in a corporation1 direct ownership of at least #aj percent 7by vote or value7 of the stock in such corporation1 7,,ii7 in the case of an interest in a partnership1 direct ownership of at least #aj percent of the capital or profits interest in the partnership1 and 7,,iii7 in any other case1 direct ownership of at least #aj percent of the beneficial interests in the entity4 7c7 ,qualified debt ,for purposes of this section-- 7#a7 ,in general ,the term qualified debt means any debt other than any debt to a person-- 7,a7 who made a contribution to the trust1 7,b7 who is a beneficiary of the trust1 or 7,c7 who is related 7within the meaning of section #bfg7;b77 to the trust or to a person described in subparagraph 7,a7 or 7,b74 7#b7 ,treatment of nonrecourse debt ,in the case of any debt which is nonrecourse debt1 the amount of qualified debt shall not exceed the value of the property securing such debt4 7d7 ,regulations ,not later than #ab months after the date of the enactment of this section1 the ,secretary shall establish rules and methods for determining the value of any asset for purposes of this chapter1 including rules for the valuation of assets that are not publicly traded or that do not have a readily ascertainable value4 #bibb4 ,other definitions and special rules 7a7 ,applicable trust ,for purposes of this chapter-- 7#a7 ,in general ,the term applicable trust means any trust or any portion of a trust to the extent that such trust or portion-- 7,a7 is a ,united ,states person described in section #ggja7;a77#cj77;,e71 7,b7 has one or more beneficiaries who are ,united ,states persons described in section #ggja7;a77#cj71 or 7,c7 has one or more living grantors who are ,united ,states persons described in section #ggja7;a77#cj77;,a74 ,for purposes of this paragraph1 a living person who is related 7determined under section #bfg7;b71 applied by substituting #e percent for #ej percent each place it appears7 to a grantor described in subparagraph 7,c7 shall be treated as a person described in such subparagraph4 7#b7 ,exceptions ,the term applicable trust does not include-- 7,a7 a trust-- 7i7 which is an organization described in paragraphs 7#a7 through 7#e7 of section #bjee7;a71 or 7ii7 from which only transfers described in section #bjee7;a7 may be made1 7,b7 a trust described in section #dja7;a7 and exempt from tax under section #eja7;a71 7,c7 a trust used to facilitate issuance of securities 7as determined by the ,secretary under regulations71 7,d7 a trust which-- 7i7 has a maximum duration of less than #a year1 and 7ii7 is organized and operated exclusively for a commercial purpose determined by the ,secretary to be applicable under this subsection1 and 7,e7 any trust or portion of a trust wherein the power to revest absolutely in the grantor title to the trust property to which such portion is attributable is exercisable solely by the grantor without the approval or consent of any other person4 7b7 ,determination of beneficiaries2 exempt beneficiary ,for purposes of this chapter-- 7#a7 ,contingent beneficiaries 7,a7 ,in general ,except as provided in subparagraph 7,b71 the term beneficiary shall not include any person whose interest in an applicable trust is contingent on the death of another person with an interest in such trust4 7,b7 ,exception ,the term beneficiary shall include a person whose interest in an applicable trust is contingent on the death of another person with an interest in such trust if-- 7i7 there exists one or more persons whose interest in such trust is not contingent on the death of another person1 and 7ii7 the amount of funds that may be distributed to any such person are limited by the trust instrument or by means other than the sole discretion of the trustee4 7#b7 ,treatment of beneficiary trusts ,if a trust is the beneficiary of another trust1 each trust or individual which holds a beneficial interest in such trust shall be treated as a beneficiary of such other trust4 7#c7 ,corporations and partnerships 7,a7 ,in general ,except for purposes of subparagraph 7,b71 the term beneficiary shall not include a corporation or a partnership4 7,b7 ,treatment of #e-percent owners 7i7 ,in general ,the term beneficiary shall include-- 7,i7 any shareholder of a corporation which is the beneficiary of an applicable trust if such shareholder holds #e percent or more of the stock 7by vote or value7 of such corporation1 and 7,,ii7 any partner of a partnership which is the beneficiary of an applicable trust if such partner owns more than #e percent of the capital or profits interest in the partnership4 7ii7 ,constructive ownership rules ,for purposes of clause 7i71 rules similar to the rules of paragraphs 7#b71 7#c71 7#d71 and 7#e7 of section #cah7;a7 shall apply4 7#d7 ,exempt beneficiary ,the term exempt beneficiary means any beneficiary which is an organization described in section #bjee7;a74 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 #fjci,l the following new section3 #fjci,m4 ,information with respect to trust asset tax 7a7 ,statement of net assets ,not later than ,april #a of each calendar year1 every applicable trust shall file with the ,secretary a statement setting forth-- 7#a7 the name and taxpayer identification number of such trust1 7#b7 the net value of assets of such trust as of the last day of the preceding calendar year1 7#c7 the name and taxpayer identification number of each beneficiary of such trust1 and 7#d7 the present value of the beneficial interests in the trust of each such beneficiary as of the last day of the preceding calendar year4 7b7 ,allocation of unused bracket amount 7#a7 ,in general ,not later than ,june #a of each calendar year1 each beneficiary of an applicable trust shall submit to the ,secretary a statement setting forth-- 7,a7 the name and taxpayer identification number of such beneficiary1 7,b7 the name and taxpayer identification number of each applicable trust of which such individual is a beneficiary1 and 7,c7 the amount of-- 7i7 the unused #a percent bracket amount allocated to each such trust under section #bijb7;c71 7ii7 the unused #a4e percent bracket amount allocated to each such trust under section #bijb7;c71 7iii7 the unused #b percent bracket amount allocated to each such trust under section #bijb7;c71 and 7iv7 the unused #c percent bracket amount allocated to each such trust under section #bijb7;c74 7#b7 ,exception ,paragraph 7#a7 shall not apply to any person if the aggregate present value of beneficial interests in all trusts with respect to which such person is a beneficiary is less than #bej1jjj4 7#c7 ,copies to trusts ,each beneficiary required to submit a statement under paragraph 7#a7 shall 7on or before the day on which the statement was required to be filed7 furnish to each applicable trust identified on the statement the information required under paragraph 7#a7 with respect to such applicable trust4 7c7 ,definitions and other rules ,for purposes of this section-- 7#a7 ,applicable trust ,the term applicable trust has the meaning given such term under chapter #af4 7#b7 ,beneficiary ,the term beneficiary has the meaning given such term under section #bibb7;b74 7#c7 ,present value of beneficial interests ,the present value of a person's beneficial interest in a trust shall be determined in proportion to the actuarial interest of such person in such trust4 4 7#b7 ,penalties 7,a7 ,initial statements ,section #fgbd7;d77#a7 of such ,code is amended by striking and at the end of subparagraph 7,b71 by striking and at the end of subparagraph 7,c71 by striking the period at the end of subparagraph 7,d7 and inserting 1 and1 and by inserting after subparagraph 7,d7 the following new subparagraph3 7,e7 any statement required to be filed under subsection 7a7 or 7b77#a7 of section #fjci,m4 4 7,b7 ,copies ,section #fgbd7;d77#b7 of such ,code is amended by striking or at the end of subparagraph 7,,nn71 by striking the period at the end of subparagraph 7,,oo7 and inserting 1 or1 and by inserting after subparagraph 7,,oo7 the following new subparagraph3 7,,pp7 section #fjci,m7b77#c74 4 7#c7 ,clerical amendment ,the table of sections for subpart ,a of part ,,iii of subchapter ,a of chapter #fa of such ,code is amended by inserting after the item relating to section #fjci,l the following new item3 ,sec4 #fjci,m4 ,information with respect to trust asset tax4 4 7c7 ,no deduction from income taxes ,section #bge of the ,internal ,revenue ,code of #aihf is amended by inserting after paragraph 7#f7 the following new paragraph3 7#g7 ,taxes imposed by chapter #af4 4 7d7 ,clerical amendment ,the table of chapters for the ,internal ,revenue ,code of #aihf is amended by inserting after the item relating to chapter #ae the following new item3 ,chapter #af--,tax on trust assets 4 7e7 ,effective date ,the amendments made by this section shall apply to calendar years beginning after ,december #ca1 #bjbf4 #c4 ,coordination with estate and generation-skipping and estate taxes 7a7 ,tax on generation-,skipping transfers 7#a7 ,gross-up of taxable amount ,subchapter ,c of chapter #ac of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new section3 #bfbe4 ,gross up of taxable amount to include additions to trust withholding credit account ,the taxable amount shall be increased-- 7#a7 in the case of a taxable termination1 by the amount which bears the same ratio to the balance of the trust withholding credit account of the trust involved 7determined under section #biaa immediately before the taxable termination7 as-- 7,a7 the taxable amount 7determined without regard to this section71 bears to 7,b7 the net value of assets of such trust 7determined under chapter #af immediately before such taxable distribution71 and 7#b7 in the case of a taxable distribution or a direct skip from a trust1 by the amount which bears the same ratio to the balance of the trust withholding credit account of the trust from which the taxable distribution or direct skip1 as the case may be1 was made 7determined under section #biaa immediately before the taxable distribution7 as-- 7,a7 the taxable amount 7determined without regard to this section71 bears to 7,b7 the net value of assets of such trust 7determined under chapter #af immediately before such taxable distribution74 4 7#b7 ,credit for trust withholding taxes ,subchapter ,a of chapter #ac of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new section3 #bfjd4 ,credit for previously paid trust asset taxes 7a7 ,taxable terminations ,in the case of a taxable termination1 there shall be allowed a credit against the tax imposed by section #bfja an amount equal to the product of-- 7#a7 the amount which bears the same ratio to the balance of the trust withholding credit account of the trust involved 7determined under section #biaa as of the time of the taxable termination7 as-- 7,a7 the taxable amount 7determined without regard to section #bfbe71 bears to 7,b7 the net value of assets of the trust 7determined under chapter #af as of the date of the taxable termination71 and 7#b7 the inclusion ratio4 7b7 ,taxable distributions ,in the case of a taxable distribution1 there shall be allowed a credit against the tax imposed by section #bfja an amount equal to the product of-- 7#a7 the amount which bears the same ratio to the balance of the trust withholding credit account of the transferee involved 7determined under section #biaa immediately after the time of the taxable distribution7 as-- 7,a7 the taxable amount 7determined without regard to section #bfbe71 bears to 7,b7 the net value of assets of the trust 7determined under chapter #af as of the time of the taxable distribution71 and 7#b7 the inclusion ratio4 7c7 ,direct skips 7#a7 ,in general ,in the case of a direct skip1 there shall be allowed a credit against the tax imposed by section #bfja an amount equal to the lesser of-- 7,a7 the product of-- 7i7 the balance of the trust withholding credit account of the person liable for such tax 7determined under section #biaa immediately before the time of the direct skip71 and 7ii7 the inclusion ratio1 or 7,b7 the amount of tax so imposed4 7#b7 ,direct skips from a trust ,in the case of a direct skip from a trust1 the amount of the credit determined under this subsection shall not exceed the product of-- 7,a7 the amount which bears the same ratio to the balance of the trust withholding credit account of the trust involved 7determined under section #biaa immediately before the time of the direct skip7 as-- 7i7 the taxable amount 7determined without regard to section #bfbe71 bears to 7ii7 the net value of assets of the trust 7determined under chapter #af as of the time of the direct skip71 and 7,b7 the inclusion ratio4 4 7#c7 ,clerical amendments 7,a7 ,the table of sections for subchapter ,a of chapter #ac of such ,code is amended by adding at the end the following new item3 ,sec4 #bfjd4 ,credit for previously paid trust asset taxes4 4 7,b7 ,the table of sections for subchapter ,a of chapter #ac of such ,code is amended by adding at the end the following new item3 ,sec4 #bfbe4 ,gross up of taxable amount to include additions to trust withholding credit account4 4 7b7 ,estate tax 7#a7 ,gross up of tax 7,a7 ,citizens and residents ,part ,,iii of subchapter ,a of chapter #aa of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new section3 #bjdg4 ,trust withholding credit account balance ,the gross estate shall include the balance of the trust withholding credit account 7determined under section #biaa7 of the decedent4 4 7,b7 ,nonresidents not citizens ,section #bajc of such ,code is amended by adding at the end the following new sentence3 ,for purposes of this section1 the balance of the trust withholding credit account shall be treated as situated in the ,united ,states44 7#b7 ,credit for previously paid trust withholding taxes 7,a7 ,estates of citizens and residents ,part ,,ii of subchapter ,a of chapter #aa of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new section3 #bjag4 ,credit for previously paid trust asset taxes ,there shall be allowed as a credit against the tax imposed by section #bjja an amount equal to the balance of the trust withholding credit account 7determined under section #biaa7 of the decedent4 4 7,b7 ,estates of nonresidents not citizens ,section #bajb7;a7 of the ,internal ,revenue ,code of #aihf is amended by striking #bjab and #bjac 7relating to gift tax and tax on prior transfers7 and inserting #bjab1 #bjac1 and #bjag4 7,c7 ,refunds of unused credits ,section #fdja7;b7 of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new paragraph3 7#c7 ,estate tax credit for previously paid trust asset taxes 7,a7 ,citizens and residents ,if the amount allowable as credit under section #bjag exceeds the tax imposed under section #bjja 7reduced by the amount of credits allowed under sections #bjaj through #bjaf71 the amount of such excess shall be considered an overpayment4 7,b7 ,nonresidents not citizens ,if the amount determined in accordance with section #bjag and allowable as a credit under section #bajb exceeds the tax imposed under section #bjaa 7reduced by the amount determined in accordance with sections #bjab and #bjac and allowed as a credit under section #bajb71 the amount of such excess shall be considered an overpayment4 4 7#c7 ,clerical amendments 7,a7 ,the table of sections for subchapter ,a of chapter #ac of such ,code is amended by adding at the end the following new item3 ,sec4 #bjag4 ,credit for previously paid trust asset taxes4 4 7,b7 ,the table of sections for subchapter ,a of chapter #ac of such ,code is amended by adding at the end the following new item3 ,sec4 #bjdg4 ,trust withholding credit account balance4 4 7c7 ,effective date ,the amendments made by this section shall apply to transfers made in calendar years beginning after1 and decedents dying after1 ,december #ca1 #bjbf4 #d4 ,payment of taxes of grantor trusts 7a7 ,in general ,section #bejc of the ,internal ,revenue ,code of #aihf is amended-- 7#a7 in subsection 7a71 by striking ,the term and inserting ,subject to subsection 7d71 the term1 and 7#b7 by inserting after subsection 7c7 the following3 7d7 ,payment of tax on income of grantor trust 7#a7 ,in general ,notwithstanding subsections 7b7 and 7e71 an amount equal to the applicable taxes paid with respect to an applicable grantor trust for any calendar year by a person who is the deemed owner of such trust 7or portion thereof7 shall be treated for purposes of this subtitle as a taxable gift made during such calendar year4 7#b7 ,applicable grantor trust ,for purposes of this subsection1 the term applicable grantor trust means any trustor portion of a trust-- 7,a7 with respect to which the taxpayer is considered an owner under subpart ,e of part ,i of subchapter ,j of chapter #a1 and 7,b7 which is not fully revocable by the taxpayer4 7#c7 ,applicable taxes ,for purposes of this subsection1 the term applicable taxes means1 with respect to any applicable grantor trust-- 7,a7 taxes paid on income1 and 7,b7 taxes paid on the value of assets of the trust4 7#d7 ,reimbursement by trust ,paragraph 7#a7 shall not apply with respect to any amount paid by the deemed owner for any calendar year which is reimbursed by the applicable grantor trust during such calendar year4 7#e7 ,date of gift ,in the case of any amount treated for purposes of this subtitle as a taxable gift pursuant to paragraph 7#a71 such gift shall be deemed to have occurred on the earlier of-- 7,a7 ,december #ca of the calendar year for which the tax is paid by the person who is the deemed owner1 7,b7 the day before the date of the death of such person1 or 7,c7 the date on which such person renounces any right of reimbursement by the applicable grantor trust with respect to the calendar year for which the tax is paid by such person4 7#f7 ,deemed owner ,for purposes of this subsection1 the term deemed owner has the same meaning given such term under section #ajfb7;c74 4 7b7 ,conforming amendments 7#a7 ,section #bebb of the ,internal ,revenue ,code of #aihf is amended-- 7,a7 by redesignating subsection 7f7 as subsection 7g71 and 7,b7 by inserting after subsection 7e7 the following new subsection3 7f7 ,denial of deduction for payment of tax on income of grantor trust ,no deduction shall be allowed under this section for any amount which is treated as a gift by reason of section #bejc7;d74 4 7#b7 ,section #bebc of such ,code is amended by adding at the end the following new subsection3 7j7 ,denial of deduction for payment of tax on income of grantor trust ,no deduction shall be allowed under this section for any amount which is treated as a gift by reason of section #bejc7;d74 4 7c7 ,effective dates ,the amendments made by this section shall apply to amounts paid or incurred after the date of the enactment of this ,act4