II 

118TH CONGRESS 

2D SESSION S. 3988 

To amend the Internal Revenue Code of 1986 to modify rules for grantor 

trusts. 

IN THE SENATE OF THE UNITED STATES 

MARCH 20, 2024 

Mr. WYDEN (for himself and Mr. KING) introduced the following bill; which 

was read twice and referred to the Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to modify 

rules for grantor trusts. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Getting Rid of Abusive 

5 Trust Schemes Act’’ or the ‘‘GRATS Act’’. 

6 SEC. 2. REQUIRED MINIMUM 15-YEAR TERM, ETC., FOR 

7 GRANTOR RETAINED ANNUITY TRUSTS. 

8 (a) IN GENERAL.—Subsection (b) of section 2702 of 

9 the Internal Revenue Code of 1986 is amended— 


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1 (1) by redesignating paragraphs (1), (2), and 

2 (3) as subparagraphs (A), (B), and (C), respectively, 

3 and by moving such subparagraphs (as so redesig4 nated) 2 ems to the right, 

5 (2) by striking ‘‘For purposes of’’ and inserting 

6 the following: 

7 ‘‘(1) IN GENERAL.—For purposes of’’, 

8 (3) by striking ‘‘paragraph (1) or (2)’’ in para9 graph (1)(C) (as so redesignated) and inserting 

10 ‘‘subparagraph (A) or (B)’’, and 

11 (4) by adding at the end the following new 

12 paragraph: 

13 ‘‘(2) ADDITIONAL REQUIREMENTS WITH RE14 SPECT TO GRANTOR RETAINED ANNUITY TRUSTS.— 

15 For purposes of subsection (a), in the case of an in16 terest described in paragraph (1)(A) (determined 

17 without regard to this paragraph) which is retained 

18 by the transferor, such interest shall be treated as 

19 described in such paragraph only if— 

20 ‘‘(A) the right to receive the fixed amounts 

21 referred to in such paragraph is for a term of 

22 not less than 15 years and not more than the 

23 life expectancy of the annuitant plus 10 years, 


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1 ‘‘(B) such fixed amounts, when determined 

2 on an annual basis, do not decrease during the 

3 term described in subparagraph (A), and 

4 ‘‘(C) the remainder interest has a value, as 

5 determined as of the time of the transfer, which 

6 is— 

7 ‘‘(i) not less than an amount equal to 

8 the greater of— 

9 ‘‘(I) 25 percent of the fair mar10 ket value of the property transferred 

11 to the trust, or 

12 ‘‘(II) $500,000, and 

13 ‘‘(ii) not greater than the fair market 

14 value of the property transferred to the 

15 trust.’’. 

16 (b) EFFECTIVE DATES.—The amendments made by 

17 this section shall apply— 

18 (1) to trusts created on or after the date of en19 actment of this Act, and 

20 (2) to any portion of a trust established before 

21 the date of the enactment of this Act which is attrib22 utable to a contribution made on or after such date. 


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1 SEC. 3. CERTAIN TRANSFERS BETWEEN GRANTOR TRUST 

2 AND DEEMED OWNER. 

3 (a) IN GENERAL.—Part IV of subchapter O of chap4 ter 1 of the Internal Revenue Code of 1986 is amended 

5 by redesignating section 1062 as section 1063 and insert6 ing after section 1061 the following new section: 

7 ‘‘SEC. 1062. CERTAIN TRANSFERS BETWEEN GRANTOR 

8 TRUST AND DEEMED OWNER. 

9 ‘‘(a) IN GENERAL.—In the case of any transfer of 

10 property for consideration between a trust and a person 

11 who is a deemed owner of the trust, such transfer shall 

12 be treated as a sale or exchange for purposes of this chap13 ter regardless of the fact that such person is a deemed 

14 owner of such trust. 

15 ‘‘(b) EXCEPTION.—Subsection (a) shall not apply 

16 to— 

17 ‘‘(1) any grantor trust which is fully revocable 

18 by the deemed owner, 

19 ‘‘(2) any asset-backed securities trust, or 

20 ‘‘(3) any grantor trust which is identified by the 

21 Secretary (pursuant to regulations or other guid22 ance) as appropriate to exclude from the application 

23 of subsection (a). 

24 ‘‘(c) DEFINITIONS.—For purposes of this section— 

25 ‘‘(1) ASSET-BACKED SECURITIES TRUST.— 


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1 ‘‘(A) IN GENERAL.—The term ‘asset2 backed securities trust’ means any grantor 

3 trust— 

4 ‘‘(i) for which the assets of the trust 

5 are mortgage-backed securities or other 

6 asset-backed securities, and 

7 ‘‘(ii) which is engaged in 

8 securitization transactions. 

9 ‘‘(B) EXCEPTION.—The term ‘asset-backed 

10 securities trust’ shall not include any grantor 

11 trust identified by the Secretary (pursuant to 

12 regulations or other guidance) as appropriate to 

13 exclude from the application of subsection 

14 (b)(2). 

15 ‘‘(2) DEEMED OWNER.—The term ‘deemed 

16 owner’ means, with respect to any trust, any person 

17 who is treated as the owner of such trust (or a por18 tion thereof) under subpart E of part 1 of sub19 chapter J. 

20 ‘‘(d) RULE OF CONSTRUCTION.—For purposes of 

21 subsection (a), a transfer of property for consideration 

22 shall include— 

23 ‘‘(1) any satisfaction of an annuity, or 

24 ‘‘(2) any discharge of debt, 

25 by the trust in kind.’’. 


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1 (b) RELATED TAXPAYERS.—Section 267(b) of the 

2 Internal Revenue Code of 1986 is amended— 

3 (1) by striking ‘‘or’’ at the end of paragraph 

4 (12), 

5 (2) by striking the period at the end of para6 graph (13) and inserting ‘‘; or’’, and 

7 (3) by adding at the end the following new 

8 paragraph: 

9 ‘‘(14) A grantor trust and the person treated as 

10 the owner of the trust (or portion thereof) under 

11 subpart E of part 1 of subchapter J of this chap12 ter.’’. 

13 (c) CLERICAL AMENDMENTS.—The table of sections 

14 for part IV of subchapter O of chapter 1 of the Internal 

15 Revenue Code of 1986 is amended by striking the item 

16 relating to section 1062 and inserting the following new 

17 items: 

‘‘Sec. 1062. Certain sales to grantor trusts. 

‘‘Sec. 1063. Cross references.’’. 

18 (d) EFFECTIVE DATES.—The amendments made by 

19 this section shall apply to transfers made after the date 

20 of the enactment of this Act. 

21 SEC. 4. PAYMENT OF TAX ON INCOME OF GRANTOR TRUST. 

22 (a) IN GENERAL.—Section 2503 of the Internal Rev23 enue Code of 1986 is amended— 


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1 (1) in subsection (a), by striking ‘‘The term’’ 

2 and inserting ‘‘Subject to subsection (d), the term’’ 

3 and 

4 (2) by inserting after subsection (c) the fol5 lowing: 

6 ‘‘(d) PAYMENT OF TAX ON INCOME OF GRANTOR

7 TRUST.— 

8 ‘‘(1) IN GENERAL.—Notwithstanding sub9 sections (b) and (e), an amount equal to the taxes 

10 paid on the income of an applicable grantor trust for 

11 any calendar year by a person who is the deemed 

12 owner of such trust (or portion thereof) shall be 

13 treated for purposes of this subtitle as a taxable gift 

14 made during such calendar year. 

15 ‘‘(2) APPLICABLE GRANTOR TRUST.—For pur16 poses of this subsection, the term ‘applicable grantor 

17 trust’ means any trust— 

18 ‘‘(A) with respect to which the taxpayer is 

19 considered an owner under subpart E of part I 

20 of subchapter J of chapter 1, and 

21 ‘‘(B) which is not fully revocable by the 

22 taxpayer. 

23 ‘‘(3) REIMBURSEMENT BY TRUST.—Paragraph 

24 (1) shall not apply with respect to any amount paid 

25 by the deemed owner for any calendar year which is 


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1 reimbursed by the applicable grantor trust during 

2 such calendar year. 

3 ‘‘(4) DATE OF GIFT.—In the case of any 

4 amount treated for purposes of this subtitle as a 

5 taxable gift pursuant to paragraph (1), such gift 

6 shall be deemed to have occurred on the earlier of— 

7 ‘‘(A) December 31 of the calendar year for 

8 which the tax is paid by the person who is the 

9 deemed owner, 

10 ‘‘(B) the day before the date of the death 

11 of such person, or 

12 ‘‘(C) the date on which such person re13 nounces any right of reimbursement by the ap14 plicable grantor trust with respect to the cal15 endar year for which the tax is paid by such 

16 person. 

17 ‘‘(5) DEEMED OWNER.—For purposes of this 

18 subsection, the term ‘deemed owner’ has the same 

19 meaning given such term under section 1062(c).’’. 

20 (b) CONFORMING AMENDMENTS.— 

21 (1) Section 2522 of the Internal Revenue Code 

22 of 1986 is amended— 

23 (A) by redesignating subsection (f) as sub24 section (g), and 


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1 (B) by inserting after subsection (e) the 

2 following new subsection: 

3 ‘‘(f) DENIAL OF DEDUCTION FOR PAYMENT OF TAX

4 ON INCOME OF GRANTOR TRUST.—No deduction shall be 

5 allowed under this section for any amount which is treated 

6 as a gift by reason of section 2503(d).’’. 

7 (2) Section 2523 of such Code is amended by 

8 adding at the end the following new subsection: 

9 ‘‘(j) DENIAL OF DEDUCTION FOR PAYMENT OF TAX

10 ON INCOME OF GRANTOR TRUST.—No deduction shall be 

11 allowed under this section for any amount which is treated 

12 as a gift by reason of section 2503(d).’’. 

13 (c) EFFECTIVE DATES.—The amendments made by 

14 this section shall apply to trusts created on or after the 

15 date of enactment of this Act. 

Æ 


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