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For the 99.5 Percent Act
12/15/2023, 4:07 PM
Summary of Bill S 1178
One of the key provisions of the For the 99.5 Percent Act is the reform of the estate tax. Currently, the estate tax only applies to estates worth over $11.7 million for individuals and $23.4 million for couples. This bill seeks to lower these thresholds to $3.5 million for individuals and $7 million for couples. Additionally, the bill proposes to increase the tax rate on estates valued over these thresholds to 45%.
Another important aspect of the For the 99.5 Percent Act is the reform of the gift tax. Currently, individuals can gift up to $15,000 per year tax-free. This bill would lower this threshold to $10,000 and increase the tax rate on gifts over this amount to 45%. Furthermore, the bill includes provisions to close loopholes that allow wealthy individuals to avoid paying taxes on their assets. This includes measures to prevent the undervaluation of assets and the use of trusts to avoid taxes. Overall, the For the 99.5 Percent Act aims to make the tax system more equitable by ensuring that the wealthiest Americans pay their fair share. It is currently being debated in Congress and has garnered both support and opposition from lawmakers.
Congressional Summary of S 1178
For the 99.5 Percent Act
This bill imposes increased tax rates on decedent estates, gifts, and generation-skipping transfers.
Estates with a value of over $1 billion are taxed at a 65% tax rate. The basic exclusion amount is reduced to $3.5 million.
The bill increases (1) to $3 million the reduction in valuations of farmland for estate tax purposes and adjusts such increased amount for inflation, and (2) to $2 million the maximum estate tax exclusion for contributions of conservation easements. It also increases to 60% the applicable percentage for such exclusion.
The bill requires (1) consistent basis reporting for property acquired by gift and transfers in trust, and (2) executors of estates and donors of gifts required to file a gift tax return to disclose to the Department of the Treasury, and to recipients of any interest in an estate or a gift, information identifying the value of each interest received.
The bill sets forth estate valuation rules for certain transfers of nonbusiness assets and limits estate tax discounts for certain individuals with minority interests in a business acquired from a decedent.
The bill expands rules for valuing assets in grantor retained annuity trusts to require that (1) the right to receive fixed amounts from an annuity last for a term of not less than 10 years and not more than the life expectancy of the annuitant plus 10 years, and that such fixed amounts not decrease during the first 10 years of the annuity term, and (2) the remainder interest have a value when transferred that is not less than the the greater of 25% of the fair market value of the trust property or $500,000. The bill also sets forth rules for the application of transfer taxes to a grantor trust (a trust in which the grantor retains control over the trust assets and has the right to receive income from the trust).
The bill modifies the tax exclusion for annual gifts to eliminate the present interest requirement for such exclusion and to impose a new, aggregate per donor limit equal to twice the annual exclusion amount in effect for the taxable year. It also provides for a gross up of taxable gifts in specified calendar years.
The bill defines executor for purposes of the Internal Revenue Code.
