II 

118TH CONGRESS 

1ST SESSION S. 3367 

To amend the Internal Revenue Code of 1986 to eliminate tax loopholes 

that allow billionaires to defer tax indefinitely through planning strategies 

such as ‘‘buy, borrow, die’’, to modify over 30 tax provisions so that 

billionaires are required to pay taxes annually, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

NOVEMBER 30, 2023 

Mr. WYDEN (for himself, Ms. STABENOW, Mr. BROWN, Mr. CASEY, Mr. 

WHITEHOUSE, Ms. WARREN, Mr. SCHATZ, Ms. HIRONO, Ms. BALDWIN, 

Mr. SANDERS, Mr. MERKLEY, Mr. FETTERMAN, Mr. REED, Mr. WELCH, 

Ms. SMITH, and Mr. MARKEY) 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 eliminate 

tax loopholes that allow billionaires to defer tax indefinitely through planning strategies such as ‘‘buy, borrow, 

die’’, to modify over 30 tax provisions so that billionaires 

are required to pay taxes annually, and for other purposes. 

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


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1 SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE; 

2 TABLE OF CONTENTS. 

3 (a) SHORT TITLE.—This Act may be cited as the 

4 ‘‘Billionaires Income Tax Act’’. 

5 (b) AMENDMENT OF 1986 CODE.—Except as other6 wise expressly provided, whenever in this Act an amend7 ment or repeal is expressed in terms of an amendment 

8 to, or repeal of, a section or other provision, the reference 

9 shall be considered to be made to a section or other provi10 sion of the Internal Revenue Code of 1986. 

11 (c) TABLE OF CONTENTS.—The table of contents of 

12 this Act is as follows: 

Sec. 1. Short title; amendment of 1986 Code; table of contents. 

Sec. 2. Purpose. 

TITLE I—ELIMINATION OF DEFERRAL FOR APPLICABLE 

TAXPAYERS 

Sec. 101. Elimination of deferral of tax. 

Sec. 102. Carryback of capital losses attributable to mark-to-market rules. 

TITLE II—APPLICATION OF OTHER PROVISIONS TO APPLICABLE 

TAXPAYERS AND ENTITIES 

Subtitle A—Individuals 

Sec. 201. Applicable taxpayers not eligible for adjusted gross income limitation 

on net investment tax. 

Sec. 202. Treatment of covered expatriates. 

Subtitle B—Rules for Applicable Entities and Trusts 

Sec. 211. Treatment of like-kind exchanges by applicable entities. 

Sec. 212. Treatment of transfers by applicable entities in exchange for stock. 

Sec. 213. Special rules for applicable trusts. 

Subtitle C—Treatment of Deferred Compensation and Certain Life Insurance 

and Annuity Contracts 

Sec. 221. Elimination of deferral of tax on certain compensation. 

Sec. 222. Rules relating to certain life insurance and annuity contracts of applicable taxpayers. 

Subtitle D—Repeal of Special Treatment for Certain Investments 


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Sec. 231. Treatment of exclusion for certain small business stock. 

Sec. 232. Modifications for investments in qualified opportunity funds. 

1 SEC. 2. PURPOSE. 

2 The purpose of this Act is to require billionaires to 

3 pay taxes annually by eliminating the ability of high in4 come and high net worth taxpayers to use tax planning 

5 strategies such as ‘‘buy, borrow, die’’ to defer paying taxes 

6 indefinitely, specifically by— 

7 (1) under the provisions of title I of this Act— 

8 (A) requiring high income and high net 

9 worth taxpayers to pay tax on the income they 

10 earn on an annual basis, just like working peo11 ple do on their income from wages, through 

12 mark-to-market taxation, and 

13 (B) shutting down the ability of the ultra 

14 wealthy to buy and hold appreciating assets and 

15 borrow against those assets to support their 

16 lavish lifestyles, all completely tax-free, and 

17 (2) under the provisions of title II of this Act, 

18 closing loopholes in the tax code that allow high in19 come and high net worth taxpayers to shield their 

20 income from taxation, including the loophole that al21 lows ultra wealthy taxpayers to transfer untaxed ap22 preciated assets to their heirs at death and such 

23 heirs to sell such assets completely tax-free. 


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1 TITLE I—ELIMINATION OF DE2 FERRAL FOR APPLICABLE 

3 TAXPAYERS 

4 SEC. 101. ELIMINATION OF DEFERRAL OF TAX. 

5 (a) IN GENERAL.—Subchapter E of chapter 1 is 

6 amended by adding at the end the following new part: 

7 ‘‘PART IV—ELIMINATION OF DEFERRAL FOR 

8 APPLICABLE TAXPAYERS 

‘‘Subpart A. General provisions. 

‘‘Subpart B. Definitions and rules relating to applicable taxpayers. 

‘‘Subpart C. Other definitions and rules. 

9 ‘‘Subpart A—General Provisions 

‘‘Sec. 490. Elimination of deferral of tax for applicable taxpayers. 

‘‘Sec. 491. Treatment of tradable covered assets. 

‘‘Sec. 492. Deferral recapture amount on applicable transfers of nontradable 

covered assets. 

‘‘Sec. 493. Special rules for application of nondeferral rules to certain passthrough entities. 

‘‘Sec. 494. Treatment of gifts, bequests, and transfers in trust. 

10 ‘‘SEC. 490. ELIMINATION OF DEFERRAL OF TAX FOR APPLI11 CABLE TAXPAYERS. 

12 ‘‘In the case of an applicable taxpayer for any taxable 

13 year— 

14 ‘‘(1) if there is a taxable event with respect to 

15 any tradable covered asset of the taxpayer during 

16 the taxable year, gain or loss shall be recognized as 

17 provided in section 491, 

18 ‘‘(2) if there is an applicable transfer by the 

19 taxpayer during the taxable year of any nontradable 

20 covered asset— 


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1 ‘‘(A) if such applicable transfer is a dis2 regarded nonrecognition event, gain or loss 

3 shall be recognized as provided in section 

4 492(a)(1), and 

5 ‘‘(B) the tax imposed by this chapter for 

6 the taxable year shall be increased as provided 

7 in section 492 with respect to any gain from 

8 any such transfer, 

9 ‘‘(3) gain or loss with respect to any applicable 

10 entity held by the taxpayer shall be taken into ac11 count as provided in section 493, and 

12 ‘‘(4) in the case of any gift, bequest, or transfer 

13 in trust by an applicable taxpayer or applicable enti14 ty held by an applicable taxpayer, section 494 shall 

15 apply. 

16 ‘‘SEC. 491. TREATMENT OF TRADABLE COVERED ASSETS. 

17 ‘‘(a) IN GENERAL.—For purposes of this title, in the 

18 case of a taxable event with respect to any tradable cov19 ered asset of an applicable taxpayer— 

20 ‘‘(1) notwithstanding any other provision of this 

21 title— 

22 ‘‘(A) gain or loss shall be recognized and 

23 taken into account in the taxable year in which 

24 the taxable event occurs as if the taxpayer had 


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1 sold the tradable covered asset for its fair mar2 ket value— 

3 ‘‘(i) in the case of a taxable event de4 scribed in subsection (b)(1), on the date of 

5 the taxable event, and 

6 ‘‘(ii) in the case of a taxable event de7 scribed in subsection (b)(2), immediately 

8 before the taxable event, and 

9 ‘‘(B) except as provided in subsection 

10 (c)(1), gain or loss taken into account by reason 

11 of a taxable event described in subsection (b)(1) 

12 with respect to a tradable covered asset which 

13 is a capital asset shall be treated as long-term 

14 capital gain or long-term capital loss, respec15 tively, and 

16 ‘‘(2) proper adjustments shall be made in the 

17 amount of gain or loss subsequently realized for gain 

18 or loss taken into account under paragraph (1). 

19 ‘‘(b) TAXABLE EVENT.—For purposes of this part, 

20 the term ‘taxable event’ means, with respect to any 

21 tradable covered asset— 

22 ‘‘(1) the holding of such asset as of the close 

23 of any taxable year with respect to which a taxpayer 

24 is an applicable taxpayer, and 

25 ‘‘(2) any disregarded nonrecognition event. 


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1 ‘‘(c) SPECIAL RULES.— 

2 ‘‘(1) CHARACTERIZATION AS ORDINARY INCOME

3 OR LOSS.—Except as provided by the Secretary, sub4 section (a)(1)(B) shall not apply to any gain or loss 

5 from a tradable covered asset if, under any other 

6 provision of this title, such gain or loss— 

7 ‘‘(A) is treated as gain or loss from the 

8 sale or exchange of an asset which is not a cap9 ital asset, or 

10 ‘‘(B) is treated as ordinary income or loss 

11 on a basis other than the taxpayer’s holding pe12 riod in such asset. 

13 ‘‘(2) HOLDING PERIOD.—For purposes of this 

14 title, any taxable event described in subsection (b)(1) 

15 with respect to any tradable covered asset shall not 

16 be taken into account in determining the holding pe17 riod of the taxpayer with respect to such tradable 

18 covered asset. 

19 ‘‘(3) PROPER ADJUSTMENTS FOR SUBSEQUENT

20 GAIN OR LOSS.—For purposes of subsection (a)(2), 

21 section 492(a)(1)(B), section 493(c)(1)(A)(ii), and 

22 section 493(c)(3)(C), the proper adjustments re23 quired under such provisions shall include such ad24 justments in basis of property, or such other adjustVerDate Sep 11 2014 02:30 Dec 07, 2023 Jkt 049200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S3367.IS S3367

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1 ments in respect of property, as the Secretary deter2 mines necessary or appropriate. 

3 ‘‘SEC. 492. DEFERRAL RECAPTURE AMOUNT ON APPLICA4 BLE TRANSFERS OF NONTRADABLE COV5 ERED ASSETS. 

6 ‘‘(a) IN GENERAL.—If there is an applicable transfer 

7 during a taxable year of a nontradable covered asset of 

8 an applicable taxpayer— 

9 ‘‘(1) in the case of an applicable transfer which 

10 is a disregarded nonrecognition event— 

11 ‘‘(A) notwithstanding any other provision 

12 of this title, gain or loss shall be recognized and 

13 taken into account by the taxpayer (including 

14 for purposes of paragraph (2) and subsection 

15 (c)) in the taxable year in which the transfer 

16 occurs as if the taxpayer had sold the 

17 nontradable covered asset for its fair market 

18 value immediately before such transfer, and 

19 ‘‘(B) proper adjustments shall be made in 

20 the amount of gain or loss subsequently realized 

21 for gain or loss taken into account under sub22 paragraph (A), and 

23 ‘‘(2) if there is gain from the applicable trans24 fer, the tax imposed by this chapter for the taxable 

25 year (determined without regard to this section) 


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1 shall be increased by the sum of the deferral recap2 ture amounts determined under subsection (b) for 

3 each such transfer. 

4 ‘‘(b) DEFERRAL RECAPTURE AMOUNT.— 

5 ‘‘(1) IN GENERAL.—For purposes of this part— 

6 ‘‘(A) IN GENERAL.—The term ‘deferral re7 capture amount’ means, with respect to any ap8 plicable transfer of any nontradable covered 

9 asset, the aggregate amount of interest (deter10 mined in the manner provided under paragraph 

11 (3)) on the deemed tax amount determined 

12 under paragraph (2) for each taxable year to 

13 which gain is allocated under paragraph (2)(A) 

14 and which precedes the taxable year of the ap15 plicable transfer. 

16 ‘‘(B) LIMITATION ON AMOUNT.—The 

17 amount determined under subparagraph (A) 

18 with respect to any applicable transfer shall not 

19 exceed the applicable percentage of the gain 

20 from such transfer. For purposes of this sub21 paragraph, the applicable percentage is the ex22 cess of— 

23 ‘‘(i) 49 percent, over 

24 ‘‘(ii) in the case of the transfer of a 

25 nontradable covered asset which— 


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1 ‘‘(I) is a capital asset, the rate of 

2 tax in effect under section 1(h)(1)(D) 

3 for the taxable year of the transfer, or 

4 ‘‘(II) is not a capital asset, the 

5 highest rate of tax in effect under sec6 tion 1 for such taxable year. 

7 ‘‘(2) DEEMED TAX AMOUNT.—For purposes of 

8 paragraph (1)— 

9 ‘‘(A) IN GENERAL.—The deemed tax 

10 amount for any taxable year preceding the tax11 able year of any applicable transfer of a 

12 nontradable covered asset shall be the amount 

13 determined— 

14 ‘‘(i) first, except as provided in sub15 paragraph (B), by allocating the amount of 

16 gain from such transfer ratably to each 

17 day in the taxpayer’s holding period of 

18 such asset, and 

19 ‘‘(ii) then by multiplying the amount 

20 allocated under clause (i) to days in such 

21 preceding taxable year by— 

22 ‘‘(I) if such asset is a capital 

23 asset, the rate of tax in effect under 

24 section 1(h)(1)(D) for the taxable 

25 year of such transfer, or 


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1 ‘‘(II) if such asset is not a capital 

2 asset, the highest rate of tax in effect 

3 under section 1 for such taxable year. 

4 ‘‘(B) SPECIAL RULE FOR PERIODS BEFORE

5 BECOMING APPLICABLE TAXPAYER.—Notwith6 standing subparagraph (A)(i), any gain allo7 cated under such subparagraph to any taxable 

8 year preceding the first taxable year for which 

9 the taxpayer is treated as an applicable tax10 payer shall be allocated to such first taxable 

11 year. 

12 ‘‘(C) INCREASE IN DEEMED TAX AMOUNT

13 BY TAX ON NET INVESTMENT INCOME.—If gain 

14 from a transfer to which this section applies for 

15 any taxable year is of a type taken into account 

16 in computing net investment income (as defined 

17 in section 1411), the deemed tax amount under 

18 this paragraph for any preceding taxable year 

19 to which such gain is allocated under subpara20 graph (A)(i) shall be increased by an amount 

21 equal to the amount of such allocated gain mul22 tiplied by the rate of tax in effect under section 

23 1411(a)(1) for the taxable year of such trans24 fer. 

25 ‘‘(3) COMPUTATION OF INTEREST.— 


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1 ‘‘(A) IN GENERAL.—The amount of inter2 est referred to in paragraph (1) on any deemed 

3 tax amount determined under paragraph (2) for 

4 any preceding taxable year shall be determined 

5 for the period— 

6 ‘‘(i) beginning on the due date for 

7 such preceding taxable year, and 

8 ‘‘(ii) ending on the date on which the 

9 applicable transfer occurs, 

10 by using the rates determined under section 

11 6621(b) (plus 1 percentage point), and the 

12 method applicable under section 6621, for un13 derpayments of tax for such period. 

14 ‘‘(B) DUE DATE.—For purposes of this 

15 paragraph, the term ‘due date’ means, with re16 spect to any preceding taxable year, the date 

17 prescribed by law (determined without regard to 

18 extensions) for filing the return of the tax im19 posed by this chapter for such taxable year. 

20 ‘‘(c) SPECIAL RULE FOR TAXPAYERS WITH NET

21 CAPITAL LOSSES.— 

22 ‘‘(1) IN GENERAL.—If a taxpayer has a net 

23 capital loss for any taxable year for which there is 

24 an increase in tax under subsection (a)(2), such inVerDate Sep 11 2014 02:30 Dec 07, 2023 Jkt 049200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\S3367.IS S3367

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1 crease in tax shall be reduced (but not below zero) 

2 by the credit equivalent of such net capital loss. 

3 ‘‘(2) CREDIT EQUIVALENT.—For purposes of 

4 this subsection, the term ‘credit equivalent’ means, 

5 with respect to any net capital loss for any taxable 

6 year, an amount equal to such loss multiplied by the 

7 rate of tax in effect under section 1(h)(1)(D) for 

8 such taxable year. 

9 ‘‘(3) COORDINATION WITH CARRYOVERS OF

10 LOSS.—For purposes of subsection (b) of section 

11 1212, the net capital loss for a taxable year to which 

12 paragraph (1) applies (determined without regard to 

13 this subsection) shall be reduced (but not below 

14 zero) by an amount equal to the amount of the re15 duction under paragraph (1) for such taxable year 

16 divided by the rate of tax in effect under section 

17 1(h)(1)(D) for such taxable year. 

18 ‘‘(d) SPECIAL RULES FOR CERTAIN DIVIDEND DIS19 TRIBUTIONS.— 

20 ‘‘(1) EXCESS DIVIDEND DISTRIBUTIONS.— 

21 ‘‘(A) IN GENERAL.—For purposes of ap22 plying this section, any excess dividend shall be 

23 treated as gain from an applicable transfer of 

24 a nontradable covered asset occurring on the 

25 date such dividend is received. 


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1 ‘‘(B) EXCESS DIVIDEND.—For purposes of 

2 this part, the term ‘excess dividend’ means, 

3 with respect to any nontradable covered asset 

4 which consists of stock in a C corporation, any 

5 dividend in respect of such stock received dur6 ing any taxable year to the extent such dividend 

7 does not exceed its ratable portion of the total 

8 excess dividends (if any) for such taxable year. 

9 ‘‘(C) TOTAL EXCESS DIVIDENDS.—For 

10 purposes of this paragraph— 

11 ‘‘(i) IN GENERAL.—The term ‘total 

12 excess dividends’ means, with respect to 

13 stock in a C corporation described in sub14 paragraph (B), the excess (if any) of— 

15 ‘‘(I) the amount of the dividends 

16 in respect of such stock received by 

17 the taxpayer during the taxable year, 

18 over 

19 ‘‘(II) 125 percent of the average 

20 amount of dividends received in re21 spect of such stock by the taxpayer 

22 during the 3 preceding taxable years 

23 (or, if shorter, the portion of the tax24 payer’s holding period before the tax25 able year). 


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1 ‘‘(ii) NO EXCESS FOR 1ST YEAR.—Ex2 cept as provided by the Secretary, the total 

3 excess dividends with respect to any stock 

4 shall be zero for the taxable year in which 

5 the taxpayer’s holding period in such stock 

6 begins. 

7 ‘‘(D) ADJUSTMENTS.—Under regulations 

8 prescribed by the Secretary— 

9 ‘‘(i) determinations under this para10 graph shall be made on a share-by-share 

11 basis, except that shares with the same 

12 holding period may be aggregated and 

13 other shares may be aggregated to the ex14 tent provided by the Secretary, 

15 ‘‘(ii) proper adjustments shall be 

16 made for stock splits and stock dividends, 

17 ‘‘(iii) if the taxpayer does not hold the 

18 stock during the entire taxable year, divi19 dends received during such year shall be 

20 annualized, and 

21 ‘‘(iv) if the taxpayer’s holding period 

22 includes periods during which the stock 

23 was held by 1 or more other persons, divi24 dends with respect to such stock received 


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1 by such other person shall be taken into 

2 account as if received by the taxpayer. 

3 ‘‘(2) CAPITAL GAIN DIVIDENDS OF CERTAIN

4 REITS.— 

5 ‘‘(A) IN GENERAL.—For purposes of ap6 plying this section, if an applicable taxpayer 

7 holds directly (or indirectly through 1 or more 

8 nontradable interests) stock in a real estate in9 vestment trust which is a nontradable covered 

10 asset, any capital gain dividend received by 

11 such taxpayer from such entity shall be treated 

12 as gain from an applicable transfer of a 

13 nontradable covered asset occurring on the date 

14 such dividend is received. 

15 ‘‘(B) REPORTING.—A real estate invest16 ment trust shall include in the written notice 

17 for a capital gain dividend under section 

18 857(b)(3)(B) its holding period in the asset giv19 ing rise to the capital gain dividend. The Sec20 retary shall provide rules for the determination 

21 of holding periods in cases where the dividend 

22 is properly allocable to gain from more than 1 

23 asset. 

24 ‘‘(3) HOLDING PERIOD.—Except as prescribed 

25 by the Secretary, if an applicable taxpayer is treated 


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1 under this subsection as receiving gain from an ap2 plicable transfer of a nontradable covered asset, the 

3 taxpayer’s holding period for purposes of computing 

4 the deferral recapture amount under this section 

5 shall be the taxpayer’s holding period with respect to 

6 the stock or ownership interest in the entity to which 

7 paragraph (1) or (2) applies (or, if shorter, the hold8 ing period included in the notice described in para9 graph (2)(B) in the case of a capital gain dividend). 

10 ‘‘(e) HOLDING PERIOD.—For purposes of this sec11 tion— 

12 ‘‘(1) IN GENERAL.—The taxpayer’s holding pe13 riod shall be determined under section 1223, except 

14 that if a tradable covered asset of an applicable tax15 payer is converted to, or exchanged for, a 

16 nontradable covered asset, such period shall only in17 clude the period after the most recent taxable event 

18 under this part with respect to such tradable covered 

19 asset. 

20 ‘‘(2) SECRETARIAL AUTHORITY.—The Secretary 

21 shall prescribe such regulations, rules, or guidance 

22 providing for other modifications to holding periods 

23 as may be necessary to carry out the purposes of 

24 this section. 


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1 ‘‘SEC. 493. SPECIAL RULES FOR APPLICATION OF NON2 DEFERRAL RULES TO CERTAIN PASS3 THROUGH ENTITIES. 

4 ‘‘(a) TREATMENT OF OWNERSHIP INTERESTS IN AP5 PLICABLE ENTITIES.—For purposes of applying this part, 

6 except as provided in this section, any ownership interest 

7 in an applicable entity held directly (or indirectly through 

8 1 or more nontradable interests) by an applicable taxpayer 

9 which is a tradable or nontradable covered asset shall be 

10 treated in the same manner as any other such asset. 

11 ‘‘(b) ADDITIONAL REQUIREMENTS FOR APPLICABLE

12 TAXPAYERS WHO ARE SIGNIFICANT OWNERS.—For pur13 poses of this part— 

14 ‘‘(1) IN GENERAL.—In the case of any applica15 ble taxpayer which is a significant owner of an appli16 cable entity— 

17 ‘‘(A) such taxpayer shall meet the report18 ing requirements under paragraph (2) with re19 spect to such entity, and 

20 ‘‘(B) such taxpayer shall take into account 

21 amounts with respect to such entity as required 

22 under paragraph (3). 

23 ‘‘(2) REPORTING REQUIREMENTS FOR SIGNIFI24 CANT OWNERS.— 

25 ‘‘(A) NOTICE TO ENTITY OF STATUS.— 


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1 ‘‘(i) IN GENERAL.—In the case of the 

2 first taxable year for which a taxpayer— 

3 ‘‘(I) is an applicable taxpayer, 

4 ‘‘(II) is a significant owner of an 

5 applicable entity, and 

6 ‘‘(III) holds directly a 

7 nontradable interest in such applicable 

8 entity, 

9 such taxpayer shall, at such time and in 

10 such manner as the Secretary shall pre11 scribe, notify such applicable entity that 

12 such taxpayer is a taxpayer meeting the 

13 requirements of subclauses (I), (II), and 

14 (III) and that the applicable entity is sub15 ject to the notice requirements under sub16 section (c) with respect to such taxpayer. 

17 Such taxpayer shall include with such no18 tice such information as the Secretary may 

19 prescribe. 

20 ‘‘(ii) PERIOD OF NOTICE.—Any notice 

21 provided by a taxpayer under clause (i) 

22 shall remain in effect, and such entity shall 

23 continue to be subject to the reporting re24 quirements under subsection (c) with re25 spect to such taxpayer, for the period specVerDate Sep 11 2014 02:30 Dec 07, 2023 Jkt 049200 PO 00000 Frm 00019 Fmt 6652 Sfmt 6201 E:\BILLS\S3367.IS S3367

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1 ified by the Secretary. The Secretary may 

2 require additional reporting by the tax3 payer for purposes of carrying out this 

4 clause. 

5 ‘‘(B) REPORTING OF ELECTIONS TO TREAT

6 NONTRADABLE INTERESTS AS TRADABLE AS7 SETS.—If— 

8 ‘‘(i) section 496(a)(1) applies to an 

9 applicable taxpayer for any taxable year 

10 for which a notice with respect to such tax11 payer is in effect under subparagraph (A), 

12 and 

13 ‘‘(ii) the applicable taxpayer made the 

14 election under section 496(a)(3) to treat 

15 any nontradable interest in an applicable 

16 entity as a tradable covered asset for pur17 poses of section 496(a)(1), 

18 the applicable taxpayer shall, at such times and 

19 in such manner as the Secretary shall prescribe, 

20 report to such applicable entity notice of such 

21 election, the amount of gain described in section 

22 496(c)(1) with respect to such treatment, and 

23 the requirement for the entity to make the basis 

24 adjustments described in section 496(c)(2). 


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1 ‘‘(3) CERTAIN GAIN OR LOSS OF APPLICABLE

2 ENTITY TAKEN INTO ACCOUNT BY SIGNIFICANT

3 OWNERS.— 

4 ‘‘(A) IN GENERAL.—Each applicable tax5 payer for which a notice with respect to such 

6 taxpayer is in effect under paragraph (2)(A) or 

7 subsection (c)(2) with respect to an applicable 

8 entity for any taxable year of the taxpayer 

9 shall, in computing the taxpayer’s tax liability 

10 under this chapter for such taxable year, take 

11 into account such taxpayer’s share of any gain 

12 or loss reported under subsection (c)(1)(A)(i) or 

13 (c)(1)(B)(i) to the taxpayer for any taxable year 

14 of such entity ending with or within such tax15 able year of the taxpayer. 

16 ‘‘(B) BASIS ADJUSTMENTS.—Under rules 

17 prescribed by the Secretary, if gain or loss is 

18 taken into account by an applicable taxpayer 

19 under subparagraph (A) with respect to any 

20 tradable covered asset by reason of the taxpayer 

21 holding a nontradable interest in an applicable 

22 entity— 

23 ‘‘(i) the applicable entity’s adjusted 

24 basis of such asset (solely for purposes of 


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1 computing the taxpayer’s share of such ad2 justed basis), and 

3 ‘‘(ii) the taxpayer’s adjusted basis of 

4 such nontradable interest, 

5 shall each be appropriately adjusted to reflect 

6 gain or loss so taken into account. Such rules 

7 shall also provide proper adjustments to ad8 justed bases where such ownership is held 

9 through tiered entities. 

10 ‘‘(C) SPECIAL RULES FOR DEFERRAL RE11 CAPTURE AMOUNT.— 

12 ‘‘(i) HOLDING PERIOD.—Except as 

13 prescribed by the Secretary, if an applica14 ble taxpayer takes into account gain under 

15 subparagraph (A) for any taxable year 

16 from an applicable transfer by such appli17 cable entity of a nontradable covered asset, 

18 the taxpayer’s holding period with respect 

19 to such asset for purposes of computing 

20 the deferral recapture amount under sec21 tion 492 shall be the shorter of— 

22 ‘‘(I) the entity’s holding period in 

23 such asset, or 

24 ‘‘(II) the taxpayer’s holding pe25 riod in such entity. 


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1 ‘‘(ii) OTHER RULES.—The Secretary 

2 shall prescribe rules for purposes of this 

3 section— 

4 ‘‘(I) for the treatment of frag5 mented holding periods, 

6 ‘‘(II) for the determination of 

7 holding periods in the case of tiered 

8 structures, and 

9 ‘‘(III) to prevent the shifting of 

10 any deferral recapture amount be11 tween taxpayers holding ownership in12 terests in an applicable entity. 

13 ‘‘(D) TAXPAYERS FAILING TO FILE NO14 TICE.—Under rules required by the Secretary, 

15 if a taxpayer fails to file a notice with any ap16 plicable entity as required under paragraph 

17 (2)(A), such taxpayer shall take into account, in 

18 computing the taxpayer’s tax liability under this 

19 chapter for any taxable year for which such no20 tice (or a related notice under subsection (c)(2)) 

21 would otherwise have been in effect, gain or loss 

22 described in subparagraph (A) which would 

23 have been reported if such notice had been 

24 filed. 


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1 ‘‘(4) SIGNIFICANT OWNER.—For purposes of 

2 this subsection— 

3 ‘‘(A) IN GENERAL.—The term ‘significant 

4 owner’ means, with respect to any applicable 

5 entity, an applicable taxpayer who, at any time 

6 during the applicable taxpayer’s taxable year— 

7 ‘‘(i) is a 5-percent owner with respect 

8 to such entity, or 

9 ‘‘(ii) holds nontradable interests in 

10 such entity with an aggregate applicable 

11 value of greater than $50,000,000. 

12 ‘‘(B) 5-PERCENT OWNER.— 

13 ‘‘(i) IN GENERAL.—The term ‘5-per14 cent owner’ mean, with respect to any ap15 plicable entity, an applicable taxpayer who 

16 owns (or is considered as owning within 

17 the meaning of section 318) at least 5 per18 cent of— 

19 ‘‘(I) in the case of a corporation, 

20 the stock (by vote or value) in such 

21 corporation, or 

22 ‘‘(II) in the case of an applicable 

23 entity other than a corporation, the 

24 capital or profits interests in such en25 tity. 


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1 ‘‘(ii) CONSTRUCTIVE OWNERSHIP

2 RULES.—For purposes of this subpara3 graph— 

4 ‘‘(I) subparagraph (C) of section 

5 318(a)(2) shall be applied by sub6 stituting ‘5 percent’ for ‘50 percent’, 

7 and 

8 ‘‘(II) in the case of an applicable 

9 entity which is not a corporation, 

10 ownership in such entity shall be de11 termined in accordance with regula12 tions prescribed by the Secretary 

13 which shall be based on principles 

14 similar to the principles of section 318 

15 (as modified by subclause (I)). 

16 ‘‘(c) ADDITIONAL ENTITY REPORTING REQUIRE17 MENTS.— 

18 ‘‘(1) IN GENERAL.—Except as provided in para19 graph (4), an applicable entity for any taxable year 

20 shall, at such times and in such manner as the Sec21 retary shall prescribe, report to each applicable tax22 payer with respect to which a notice is in effect 

23 under subsection (b)(2)(A) or paragraph (2)— 

24 ‘‘(A) in the case of tradable covered assets 

25 held by such entity, such taxpayer’s share of— 


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1 ‘‘(i) gain or loss determined by the en2 tity under rules similar to the rules under 

3 section 491, and 

4 ‘‘(ii) proper adjustments shall be 

5 made in the amount of gain or loss subse6 quently realized for gain or loss taken into 

7 account under clause (i), 

8 ‘‘(B) in the case of nontradable covered as9 sets held by such entity— 

10 ‘‘(i) such person’s share of any gain 

11 or loss on any applicable transfer during 

12 such taxable year of any such asset, and 

13 ‘‘(ii) the holding period in each such 

14 asset, and 

15 ‘‘(C) such other information as the Sec16 retary determines necessary to carry out this 

17 part. 

18 ‘‘(2) NOTICE OF TAXPAYERS HOLDING INDI19 RECT INTERESTS IN OTHER APPLICABLE ENTI20 TIES.— 

21 ‘‘(A) IN GENERAL.—Under rules pre22 scribed by the Secretary, except as provided in 

23 subparagraph (B), if an applicable entity in a 

24 tier of entities— 


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1 ‘‘(i) receives a notice under subsection 

2 (b)(2)(A) with respect to an applicable tax3 payer, such entity shall notify each other 

4 applicable entity in which such applicable 

5 taxpayer holds, by reason of holding a 

6 nontradable interest in such entity, a 

7 nontradable interest in such other entity 

8 that the person holding such interest in 

9 such other entity is an applicable taxpayer 

10 with respect to which the notice require11 ments of paragraph (1) apply to such other 

12 entity, or 

13 ‘‘(ii) receives a notice under clause (i) 

14 or this clause, such entity shall notify each 

15 other applicable entity in which the appli16 cable taxpayer holds, by reason of holding 

17 an interest in the entity receiving such no18 tice, a nontradable interest in such other 

19 entity that the person holding such interest 

20 in such other entity is an applicable tax21 payer with respect to which the notice re22 quirements of paragraph (1) apply to such 

23 other entity. 

24 Any such notice shall remain in effect, and any 

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1 payer as an applicable taxpayer, for the period 

2 specified by the Secretary. The Secretary may 

3 require additional reporting by such entities for 

4 purposes of carrying out this clause. 

5 ‘‘(B) REQUIREMENT ONLY APPLIES IF AP6 PLICABLE TAXPAYER IS SIGNIFICANT OWNER.— 

7 An applicable entity shall be required to report 

8 under subparagraph (A) to another applicable 

9 entity only if the applicable taxpayer is a sig10 nificant owner (within the meaning of sub11 section (b)(4)) of such other entity, determined 

12 only by taking into account interests in such 

13 other entity which such applicable taxpayer 

14 holds by reason of its ownership interests in the 

15 entity otherwise required to report and such 

16 other ownership interests in such other entity 

17 as the Secretary may require to be taken into 

18 account to prevent the avoidance of the pur19 poses of this part. 

20 ‘‘(3) SPECIAL RULES FOR DISREGARDED NON21 RECOGNITION EVENTS.—In the case of an applicable 

22 transfer of a nontradable covered asset of an appli23 cable entity which is a disregarded nonrecognition 

24 event— 


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1 ‘‘(A) notwithstanding any other provision 

2 of this title, gain or loss shall be recognized and 

3 taken into account in the taxable year in which 

4 the transfer occurs as if the entity had sold the 

5 nontradable covered asset for its fair market 

6 value immediately before such transfer (or such 

7 other value as is determined as of such time 

8 under rules prescribed by the Secretary), 

9 ‘‘(B) such entity shall report the amount 

10 of gain or loss required to be taken into account 

11 under subparagraph (A) to— 

12 ‘‘(i) each applicable taxpayer with re13 spect to which a notice is in effect which 

14 such entity has received under subsection 

15 (b)(1), and 

16 ‘‘(ii) each other applicable entity from 

17 which it has received a notice under para18 graph (2) with respect to such an applica19 ble taxpayer, and 

20 ‘‘(C) proper adjustments shall be made in 

21 the amount of gain or loss subsequently realized 

22 for gain or loss taken into account under sub23 paragraph (A). 

24 ‘‘(4) DELAY IN REPORTING REQUIREMENT.— 

25 If— 


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1 ‘‘(A) a notice is received by an applicable 

2 entity under subsection (b)(2)(A) or paragraph 

3 (2) for any taxable year of the entity with re4 spect to any person holding directly (or indi5 rectly through 1 or more nontradable interests) 

6 a nontradable interest in such entity, and 

7 ‘‘(B) no notice is in effect with respect to 

8 such person or any other person for the pre9 ceding taxable year, 

10 then, except as provided by the Secretary, such no11 tice shall be treated as first taking effect for pur12 poses of this subsection, section 351(h), and section 

13 1031(i) for the taxable year immediately following 

14 the taxable year in which the notice is received. This 

15 paragraph shall not apply to a notice described in 

16 subparagraph (A) received by an applicable entity 

17 from a person who was a significant owner (within 

18 the meaning of subsection (b)(4)) of such entity (or 

19 any predecessor entity) on the date of the enactment 

20 of this part. 

21 ‘‘(5) SECRETARIAL AUTHORITY.—In prescribing 

22 rules for the application of this subsection, the Sec23 retary may provide— 

24 ‘‘(A) simplified methods for applicable en25 tities to meet the requirements of this subVerDate Sep 11 2014 02:30 Dec 07, 2023 Jkt 049200 PO 00000 Frm 00030 Fmt 6652 Sfmt 6201 E:\BILLS\S3367.IS S3367

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1 section, including the aggregation of gains and 

2 losses where appropriate, 

3 ‘‘(B) rules for determining a holder’s share 

4 of amounts required to be reported by an appli5 cable entity under paragraph (1), and 

6 ‘‘(C) any rules necessary to prevent the 

7 avoidance of the purposes of this section, in8 cluding through the delay in the reporting re9 quirement under paragraph (4). 

10 ‘‘(d) DEFINITIONS AND RULES RELATING TO APPLI11 CATION OF SECTION.—For purposes of this part— 

12 ‘‘(1) APPLICABLE ENTITY.—The term ‘applica13 ble entity’ means any— 

14 ‘‘(A) partnership, 

15 ‘‘(B) S corporation, or 

16 ‘‘(C) other pass-through entity specified in 

17 regulations or guidance prescribed by the Sec18 retary. 

19 ‘‘(2) ELECTION TO TREAT ENTITY AS APPLICA20 BLE TAXPAYER FOR TAXABLE EVENTS INVOLVING

21 TRADABLE ASSETS.—If an applicable entity elects 

22 the application of this paragraph for any taxable 

23 year— 

24 ‘‘(A) this section shall not apply with re25 spect to any gain or loss in connection with a 


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•S 3367 IS

1 taxable event involving any tradable covered 

2 asset held directly (or indirectly through 1 or 

3 more nontradable interests) by such entity, and 

4 ‘‘(B) such entity shall be treated as an ap5 plicable taxpayer for purposes of applying sec6 tions 490(1) and 491 to such taxable event. 

7 Such an election shall be made at such time and in 

8 such manner as the Secretary may prescribe and, 

9 once made, shall be irrevocable without the consent 

10 of the Secretary. 

11 ‘‘(e) NONTRADABLE INTEREST.—For purposes of 

12 this part, the term ‘nontradable interest’ means any own13 ership interest in an applicable entity which is a 

14 nontradable covered asset. 

15 ‘‘(f) REGULATIONS AND GUIDANCE.—The Secretary 

16 shall prescribe such regulations and guidance as are nec17 essary to carry out the provisions of this section, including 

18 regulations or guidance necessary— 

19 ‘‘(1) to prevent the use of pass-through entities 

20 to avoid the purposes of this part, and 

21 ‘‘(2) to simplify the application of this part. 

22 ‘‘SEC. 494. TREATMENT OF GIFTS, BEQUESTS, AND TRANS23 FERS IN TRUST. 

24 ‘‘(a) IN GENERAL.— 


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•S 3367 IS

1 ‘‘(1) DEEMED SALE.—If any person described 

2 in paragraph (3) transfers any covered asset by gift, 

3 upon death, or in trust, such covered asset shall be 

4 treated as sold by such person for its fair market 

5 value to the transferee on the date of such gift, 

6 death, or transfer. 

7 ‘‘(2) NO RECOGNITION FOR LOSSES ON TRANS8 FERS BY GIFT OR IN TRUST.— 

9 ‘‘(A) IN GENERAL.—No loss shall be recog10 nized with respect to any covered asset which is 

11 treated as sold under subsection (a) by reason 

12 of a transfer by gift or in trust. 

13 ‘‘(B) AMOUNT OF GAIN FOR TRANS14 FEREE.—If a loss is not recognized by the 

15 transferor by reason of subparagraph (A) and 

16 the transferee sells or otherwise disposes of the 

17 covered asset (or of other property the basis of 

18 which in the taxpayer’s hands is determined di19 rectly or indirectly by reference to such prop20 erty) at a gain, then such gain shall be recog21 nized only to the extent that it exceeds so much 

22 of such loss as is properly allocable to the cov23 ered asset sold or otherwise disposed of by the 

24 transferee. 


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•S 3367 IS

1 ‘‘(3) PERSON DESCRIBED.—A person is de2 scribed in this section if such person is— 

3 ‘‘(A) an individual who is an applicable 

4 taxpayer for the taxable year in which the 

5 transfer is made, or 

6 ‘‘(B) an applicable entity with respect to 

7 which a notice received by the entity under sub8 section (b)(2)(A) or (c)(2) of section 493 is in 

9 effect at the time of such transfer. 

10 ‘‘(b) SPECIAL RULES FOR CERTAIN GRANTOR

11 TRUSTS.— 

12 ‘‘(1) TRANSFERS OF NONTRADABLE COVERED

13 ASSETS INTO CERTAIN GRANTOR TRUSTS.—For pur14 poses of applying this section to any transfer in 

15 trust, except as otherwise provided in this para16 graph, any transfer of a nontradable covered asset 

17 from the person treated as the owner of an applica18 ble grantor trust (other than a grantor trust which 

19 is a wholly revocable trust) to such trust shall be 

20 treated as a transfer to which subsection (a) applies. 

21 ‘‘(2) DEEMED DISTRIBUTIONS.—In the case of 

22 any applicable grantor trust, any property held by 

23 such trust shall be treated as transferred by the 

24 owner in a transfer to which subsection (a) ap25 plies— 


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•S 3367 IS

1 ‘‘(A) on any date that— 

2 ‘‘(i) the owner ceases to be treated as 

3 the owner under this chapter, 

4 ‘‘(ii) such property is distributed to 

5 any person other than the owner, or 

6 ‘‘(iii) the property would no longer be 

7 included in the owner’s gross estate under 

8 chapter 11, or 

9 ‘‘(B) on the date of the death of the owner. 

10 ‘‘(3) APPLICABLE GRANTOR TRUST.—For pur11 poses of this subsection— 

12 ‘‘(A) IN GENERAL.—The term ‘applicable 

13 grantor trust’ means the portion of any trust 

14 with respect to which an applicable taxpayer is 

15 considered the owner under subpart E of part 

16 I of subchapter J. 

17 ‘‘(B) EXCEPTIONS.—The Secretary shall 

18 provide for appropriate exceptions to the treat19 ment of categories of trusts as applicable grant20 or trusts under subparagraph (A), including ar21 rangements which are ordinarily used in the 

22 course of a trade or business, employee benefit 

23 arrangements, and arrangements for 

24 securitization transactions. 

25 ‘‘(c) EXCEPTIONS.— 


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1 ‘‘(1) SPOUSAL EXCEPTION.— 

2 ‘‘(A) IN GENERAL.—Subsection (a) shall 

3 not apply to any transfer if such transfer— 

4 ‘‘(i) is— 

5 ‘‘(I) made to the spouse or the 

6 surviving spouse of the transferor, or 

7 ‘‘(II) made to a former spouse of 

8 the transferor if the transfer is inci9 dent to divorce, or 

10 ‘‘(ii) is a transfer of qualified ter11 minable interest property or of property to 

12 which section 2056(b)(5) or 2523(e) ap13 plies. 

14 ‘‘(B) CERTAIN REMAINDER INTERESTS

15 TREATED AS TRANSFERRED BY SPOUSE.—Prop16 erty described in subparagraph (A)(ii) shall be 

17 treated as sold by the spouse or surviving 

18 spouse on the earlier of the date of the disposi19 tion of such property by such spouse or sur20 viving spouse or the date of the death of such 

21 spouse or surviving spouse. 

22 ‘‘(C) QUALIFIED TERMINABLE INTEREST

23 PROPERTY.—For purposes of this paragraph, 

24 the term ‘qualified terminable interest property’ 


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•S 3367 IS

1 means any property described in section 

2 2056(b)(7) or 2523(f)(2). 

3 ‘‘(D) DISALLOWANCE OF SPOUSAL EXCEP4 TION WHERE SPOUSE OR SURVIVING SPOUSE

5 NOT UNITED STATES CITIZEN OR LONG-TERM

6 RESIDENT.— 

7 ‘‘(i) IN GENERAL.—Subparagraph (A) 

8 shall not apply if the spouse or surviving 

9 spouse of the decedent is not a citizen or 

10 long-term resident of the United States. 

11 ‘‘(ii) LONG-TERM RESIDENT.—For 

12 purposes of clause (i), the term ‘long-term 

13 resident’ means any individual (other than 

14 a citizen of the United States) who is a 

15 lawful permanent resident of the United 

16 States— 

17 ‘‘(I) for the taxable year in which 

18 the transfer described in subsection 

19 (a) occurs, and 

20 ‘‘(II) in at least 8 taxable years 

21 during the period of 15 taxable years 

22 ending with the taxable year during 

23 which the transfer described in sub24 section (a) or (b)(1) occurs. 


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•S 3367 IS

1 For purposes of the preceding sentence, an 

2 individual shall not be treated as a lawful 

3 permanent resident for any taxable year if 

4 such individual is treated as a resident of 

5 a foreign country for the taxable year 

6 under the provisions of a tax treaty be7 tween the United States and the foreign 

8 country and does not waive the benefits of 

9 such treaty applicable to residents of the 

10 foreign country. 

11 ‘‘(2) GIFTS AND BEQUESTS TO CHARITY.— 

12 ‘‘(A) IN GENERAL.—Subsection (a) shall 

13 not apply to any transfer if such transfer is 

14 made to or for the use of an organization de15 scribed in section 170(c). 

16 ‘‘(B) SPECIAL RULE FOR SPLIT-INTEREST

17 TRUSTS.—In the case of any transfer— 

18 ‘‘(i) to a charitable remainder annuity 

19 trust (as defined in section 664) or a char20 itable remainder unitrust (as defined in 

21 section 664), or 

22 ‘‘(ii) of an interest described in sec23 tion 170(f)(2)(B), 


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•S 3367 IS

1 subsection (a) shall not apply to the portion of 

2 such transfer which is to or for the use of an 

3 organization described in section 170(c). 

4 ‘‘(C) SPECIAL RULE FOR POOLED INCOME

5 FUNDS.—In the case of any transfer to a pooled 

6 income fund (as defined in section 642(c)(5)), 

7 subsection (a) shall not apply to the portion of 

8 such transfer which is to or for the use of an 

9 organization described in section 170(b)(1)(A) 

10 (other than in clauses (vii) or (viii)). 

11 ‘‘(3) QUALIFIED DISABILITY TRUSTS AND CEM12 ETERY PERPETUAL CARE FUNDS.—Subsection (a) 

13 shall not apply to transfers to any qualified dis14 ability trust (as defined in section 642(b)(2)(C)(ii)) 

15 or to transfers to any cemetery perpetual care fund 

16 described in section 642(i). 

17 ‘‘(d) BASIS OF TRANSFEREE.— 

18 ‘‘(1) IN GENERAL.—Notwithstanding sections 

19 1014 and 1015, to the extent that subsection (a) ap20 plies to any transfer of property— 

21 ‘‘(A) except as provided in subparagraph 

22 (B), the basis of the property in the hands of 

23 the transferee shall be the fair market value of 

24 the property (consistent with the amount taken 


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•S 3367 IS

1 into account by the transferor under subsection 

2 (a)), and 

3 ‘‘(B) in the case such transfer is a transfer 

4 upon death to any individual described in sub5 section (c)(1)(A)(i), the basis of the property in 

6 the hands of the transferee shall be the same as 

7 it would be in the hands of the transferor, ex8 cept that if such basis (adjusted for the period 

9 before the date of the transfer as provided in 

10 section 1016) is greater than the fair market 

11 value of the property at the time of death, then 

12 for the purpose of determining loss the basis 

13 shall be such fair market value. 

14 ‘‘(2) CONSISTENT BASIS RULES FOR TRANS15 FERS BY DEATH.—In the case of any transfer upon 

16 death, rules similar to section 1014(f) shall apply for 

17 purposes of this section. 

18 ‘‘(e) APPLICATION OF DEPRECIATION RECAPTURE

19 RULES.—Paragraphs (1) and (2) of section 1245(b) and 

20 paragraphs (1) and (2) of section 1250(d) shall not apply 

21 to any property treated as sold by reason of subsection 

22 (a). 

23 ‘‘Subpart B—Definitions and Rules Relating to 

24 Applicable Taxpayers 

‘‘Sec. 495. Applicable taxpayer defined. 

‘‘Sec. 496. Special rules for taxpayers entering or changing status as applicable 

taxpayers. 


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•S 3367 IS

1 ‘‘SEC. 495. APPLICABLE TAXPAYER DEFINED. 

2 ‘‘(a) IN GENERAL.—For purposes of this part— 

3 ‘‘(1) IN GENERAL.—The term ‘applicable tax4 payer’ means, with respect to any taxable year, any 

5 taxpayer— 

6 ‘‘(A) which is an individual who met either 

7 the income test of paragraph (2) or the asset 

8 test of paragraph (3) for each of the 3 imme9 diately preceding taxable years (including tax10 able years beginning before the date of the en11 actment of this part which are included in any 

12 such 3-taxable year period), or 

13 ‘‘(B) which is— 

14 ‘‘(i) an applicable trust, or 

15 ‘‘(ii) the estate of an individual who 

16 was an applicable taxpayer for any taxable 

17 year during the 4-taxable year period end18 ing with the taxable year in which the indi19 vidual died. 

20 ‘‘(2) INCOME TEST.—The requirements of this 

21 paragraph are met for any taxable year if the appli22 cable adjusted gross income of the taxpayer for the 

23 taxable year exceeds $100,000,000 ($50,000,000 in 

24 the case of a married individual filing separately). 

25 ‘‘(3) ASSET TEST.—The requirements of this 

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1 gate applicable value of all tradable and nontradable 

2 covered assets held by the taxpayer as of the close 

3 of the taxable year exceeds $1,000,000,000 

4 ($500,000,000 in the case of a married individual 

5 filing separately). 

6 ‘‘(4) SPECIAL RULES RELATING TO APPLICABLE

7 TAXPAYER STATUS.— 

8 ‘‘(A) TERMINATION OF STATUS OF INDI9 VIDUAL TAXPAYERS.—A taxpayer who is treat10 ed as an applicable taxpayer under paragraph 

11 (1)(A) for any taxable year shall continue to be 

12 so treated until the first taxable year with re13 spect to which— 

14 ‘‘(i) the taxpayer does not, for each of 

15 the 3 taxable years immediately preceding 

16 such taxable year, meet either— 

17 ‘‘(I) the income test of paragraph 

18 (2) in effect for such preceding tax19 able year, or 

20 ‘‘(II) the asset test of paragraph 

21 (3) in effect for such preceding tax22 able year, 

23 except that each such paragraph shall be 

24 applied for purposes of this clause by sub25 stituting an amount equal to one-half of 


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1 the dollar amount otherwise in effect for 

2 such taxpayer under such paragraph for 

3 each such preceding taxable year for such 

4 dollar amount, and 

5 ‘‘(ii) the taxpayer elects, in such man6 ner and form and at such time as the Sec7 retary may prescribe, not to be so treated 

8 for such first taxable year. 

9 ‘‘(B) EARLIER TERMINATION ELECTION OF

10 APPLICABLE TAXPAYER STATUS FOR DIVORCED

11 INDIVIDUALS.—If— 

12 ‘‘(i) an applicable taxpayer ceases to 

13 be a married individual by reason of a de14 cree of divorce or separate maintenance 

15 issued during any taxable year, and 

16 ‘‘(ii) such taxpayer, for the first tax17 able year following the taxable year de18 scribed in clause (i), does not meet ei19 ther— 

20 ‘‘(I) the income test of paragraph 

21 (2), except that such paragraph shall 

22 be applied for purposes of this sub23 clause by substituting ‘$1,000,000’ 

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1 fect for such taxpayer under such 

2 paragraph, or 

3 ‘‘(II) the asset test of paragraph 

4 (3), except that such paragraph shall 

5 be applied for purposes of this sub6 clause by substituting ‘$10,000,000’ 

7 for the dollar amount otherwise in ef8 fect for such taxpayer under such 

9 paragraph, 

10 then such taxpayer may elect, in such manner 

11 and form and at such time as the Secretary 

12 may prescribe, not to be treated as an applica13 ble taxpayer beginning with such first taxable 

14 year. 

15 ‘‘(C) ELECTION.—An election under sub16 paragraph (A) or (B)— 

17 ‘‘(i) shall be made with the taxpayer’s 

18 return of tax for the taxable year to which 

19 such election first applies (or such other 

20 time as the Secretary shall prescribe) and 

21 shall be in such form and manner as the 

22 Secretary may prescribe, and 

23 ‘‘(ii) shall apply to such first taxable 

24 year and all subsequent taxable years until 

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1 payer is again treated as an applicable tax2 payer by reason of meeting the require3 ments of paragraph (1)(A). 

4 ‘‘(5) SPECIAL RULES FOR MARRIED INDIVID5 UALS.— 

6 ‘‘(A) APPLICABLE TAXPAYERS BECOMING

7 MARRIED INDIVIDUALS.—If an individual was 

8 an applicable taxpayer for the taxable year be9 fore the individual became a married individual 

10 (within the meaning of section 7703), such indi11 vidual and the individual’s spouse shall be 

12 treated as applicable taxpayers for such taxable 

13 year of marriage and subsequent taxable years 

14 until such status is otherwise terminated under 

15 this section. 

16 ‘‘(B) MARRIED INDIVIDUALS FILING SEPA17 RATELY.—If a married individual filing sepa18 rately is treated as an applicable taxpayer for 

19 any taxable year, such individual’s spouse shall 

20 be treated as an applicable taxpayer for such 

21 taxable year. 

22 ‘‘(C) FIRST-YEAR ELECTIONS.—Under 

23 rules prescribed by the Secretary, if an indi24 vidual is first treated as an applicable taxpayer 

25 for a taxable year by reason of the application 


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•S 3367 IS

1 of subparagraph (A) or (B), section 496 shall 

2 apply to such taxpayer for such first taxable 

3 year only with respect to assets held separately 

4 by such individual unless such taxable year is 

5 also the first taxable year for which the individ6 ual’s spouse is an applicable taxpayer. 

7 ‘‘(6) REGULATORY AUTHORITY.—The Secretary 

8 shall prescribe such regulations and guidance as may 

9 be necessary to carry out the provisions of this sub10 section, including— 

11 ‘‘(A) rules waiving the application of para12 graph (5)(B) in cases where the Secretary de13 termines equitable relief is appropriate, 

14 ‘‘(B) rules providing for the application of 

15 this subsection in cases where the filing status 

16 of a taxpayer changes between any taxable year 

17 and any of the 3 immediately preceding taxable 

18 years, including the first taxable year in which 

19 a taxpayer files a joint return after becoming 

20 married, and 

21 ‘‘(C) rules requiring such information re22 porting as the Secretary determines necessary 

23 to determine whether a taxpayer is an applica24 ble taxpayer. 


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1 ‘‘(b) APPLICABLE ADJUSTED GROSS INCOME.—For 

2 purposes of this section, the term ‘applicable adjusted 

3 gross income’ means modified adjusted gross income as 

4 defined in section 36B(d)(2)(B), except that— 

5 ‘‘(1) clause (i) thereof shall be applied by sub6 stituting ‘sections 911, 931, and 933’ for ‘section 

7 911’, and 

8 ‘‘(2) in the case of a trust, no deduction under 

9 section 651 or 661 shall be allowed. 

10 ‘‘(c) APPLICABLE TRUST.—For purposes of this sec11 tion— 

12 ‘‘(1) IN GENERAL.—The term ‘applicable trust’ 

13 means a trust (other than a grantor trust) which, 

14 for each of the 3 taxable years immediately pre15 ceding such taxable year (including taxable years be16 ginning before the date of the enactment of this part 

17 which are included in any such 3-taxable year pe18 riod), meets either— 

19 ‘‘(A) the income test of subsection (a)(2), 

20 except that such subsection shall be applied for 

21 purposes of this subparagraph by substituting 

22 ‘$10,000,000’ for the dollar amount otherwise 

23 in effect for such taxable year under such para24 graph, or 


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1 ‘‘(B) the asset test of subsection (a)(3), ex2 cept that such subsection shall be applied for 

3 purposes of this subparagraph by substituting 

4 ‘$100,000,000’ for the dollar amount otherwise 

5 in effect for such taxable year under such para6 graph. 

7 ‘‘(2) EXCEPTIONS.—Such term shall not in8 clude— 

9 ‘‘(A) a qualified disability trust (as defined 

10 in section 642(b)(2)(C)(ii)), 

11 ‘‘(B) any portion of a trust which consists 

12 of property permanently set aside for the exclu13 sive use of an organization described in section 

14 170(c), 

15 ‘‘(C) a pooled income fund (as defined in 

16 section 642(c)(5)) or a cemetery perpetual care 

17 fund (as described in section 642(i)), 

18 ‘‘(D) a settlement trust (as defined in sec19 tion 646), 

20 ‘‘(E) any charitable remainder annuity 

21 trust (as defined in section 664), 

22 ‘‘(F) any charitable remainder unitrust (as 

23 defined in section 664), or 


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1 ‘‘(G) any other category of trust identified 

2 in regulations or guidance provided by the Sec3 retary. 

4 ‘‘(3) GRANTOR TRUSTS.— 

5 ‘‘(A) GRANTOR TRUST DEFINED.—For 

6 purposes of this section, the term ‘grantor 

7 trust’ means any portion of a trust with respect 

8 to which the grantor or any other person is con9 sidered the owner under subpart E of part I of 

10 subchapter J. 

11 ‘‘(B) ASSETS OF GRANTOR TRUST TAKEN

12 INTO ACCOUNT.—For purposes of subsection 

13 (a)(1)(A), the assets of a grantor trust shall be 

14 included in the assets of— 

15 ‘‘(i) the grantor of such trust if the 

16 grantor is considered the owner of such as17 sets, and 

18 ‘‘(ii) if a person other than the grant19 or is considered the owner of such assets, 

20 both the grantor and such person. 

21 ‘‘(d) SPECIAL RULES FOR FOREIGN PERSONS AND

22 EXPATRIATES.—For purposes of this part— 

23 ‘‘(1) NONRESIDENT ALIEN INDIVIDUALS.—The 

24 following rules shall apply in determining whether a 


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1 nonresident alien individual is an applicable tax2 payer: 

3 ‘‘(A) INCOME TEST.—For purposes of the 

4 income test under subsection (a)(2)— 

5 ‘‘(i) such subsection shall be applied 

6 for purposes of this subparagraph by sub7 stituting ‘$50,000,000’ for the dollar 

8 amount otherwise in effect for such taxable 

9 year under such paragraph, and 

10 ‘‘(ii) the applicable adjusted gross in11 come of such individual shall be equal to 

12 the taxable income of such individual, de13 termined by only taking into account items 

14 of income, gain, deduction, and loss which 

15 are effectively connected with the conduct 

16 of trades or businesses within the United 

17 States. 

18 ‘‘(B) ASSET TEST.—For purposes of the 

19 asset test under subsection (a)(3)— 

20 ‘‘(i) such subsection shall be applied 

21 for purposes of this subparagraph by sub22 stituting ‘$500,000,000’ for the dollar 

23 amount otherwise in effect for such taxable 

24 year under such paragraph, and 


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1 ‘‘(ii) only assets which produce income 

2 described in subparagraph (A) shall be 

3 taken into account. 

4 ‘‘(2) EXPATRIATES.— 

5 ‘‘(A) IN GENERAL.—If, for the taxable 

6 year which includes a covered expatriate’s expa7 triation date, such expatriate— 

8 ‘‘(i) was an applicable taxpayer (with9 out regard to this paragraph), or 

10 ‘‘(ii) is an applicable taxpayer under 

11 the rules of subparagraph (B), 

12 such expatriate shall be treated as an applicable 

13 taxpayer during each of the taxable years dur14 ing the 10-taxable-year period beginning with 

15 such taxable year (and such status shall not be 

16 terminated during such period by reason of any 

17 other provision of this part). 

18 ‘‘(B) SPECIAL RULES FOR DETERMINING

19 STATUS.—For purposes of subparagraph 

20 (A)(ii), a covered expatriate not otherwise treat21 ed as an applicable taxpayer shall be treated as 

22 an applicable taxpayer if, during any of the 5 

23 taxable years immediately preceding the taxable 

24 year which includes the covered expatriate’s ex25 patriation date (including taxable years beginVerDate Sep 11 2014 02:30 Dec 07, 2023 Jkt 049200 PO 00000 Frm 00051 Fmt 6652 Sfmt 6201 E:\BILLS\S3367.IS S3367

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1 ning before the date of the enactment of this 

2 part which are included in any such 5-taxable 

3 year period), the expatriate meets either— 

4 ‘‘(i) the income test of subsection 

5 (a)(2), except that such subsection shall be 

6 applied for purposes of this subparagraph 

7 by substituting ‘$50,000,000’ for the dollar 

8 amount otherwise in effect for such taxable 

9 year under such paragraph, or 

10 ‘‘(ii) the asset test of subsection 

11 (a)(3), except that such subsection shall be 

12 applied for purposes of this subparagraph 

13 by substituting ‘$500,000,000’ for the dol14 lar amount otherwise in effect for such 

15 taxable year under such paragraph. 

16 ‘‘(C) DEFINITIONS.—Any term used in 

17 this paragraph which is also used in section 

18 877A shall have the same meaning as when 

19 used in such section. 

20 ‘‘SEC. 496. SPECIAL RULES FOR TAXPAYERS ENTERING OR 

21 CHANGING STATUS AS APPLICABLE TAX22 PAYERS. 

23 ‘‘(a) INITIAL TREATMENT AS APPLICABLE TAX24 PAYER.— 


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1 ‘‘(1) IN GENERAL.—In the case of the first tax2 able year for which a taxpayer is an applicable tax3 payer— 

4 ‘‘(A) the taxpayer may make the election 

5 under paragraph (3) with respect to 

6 nontradable covered assets, and 

7 ‘‘(B) if the taxpayer elects the application 

8 of this subparagraph, the net first-year tax li9 ability of the taxpayer for such taxable year 

10 shall be payable in 5 equal annual installments 

11 over the 5-taxable year period beginning with 

12 such taxable year. 

13 ‘‘(2) NET FIRST-YEAR TAX LIABILITY.—For 

14 purposes of this section— 

15 ‘‘(A) IN GENERAL.—The term ‘net first16 year tax liability’ means, with respect to the 

17 first taxable year described in paragraph (1), 

18 the excess (if any) of— 

19 ‘‘(i) such taxpayer’s net income tax 

20 for such taxable year, over 

21 ‘‘(ii) such taxpayer’s net income tax 

22 for such taxable year determined without 

23 regard to gain or loss of the taxpayer 

24 taken into account for such taxable year by 


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1 reason of a taxable event described in sec2 tion 491(b)(1). 

3 ‘‘(B) NET INCOME TAX.—The term ‘net 

4 income tax’ means the regular tax liability re5 duced by the credits allowed under subparts A, 

6 B, and D of part IV of subchapter A. 

7 ‘‘(3) ELECTION TO PAY AND DEFER TAX ON

8 NONTRADABLE ASSETS.— 

9 ‘‘(A) IN GENERAL.—Except as provided in 

10 subparagraph (C), a taxpayer may elect to treat 

11 any nontradable covered asset held by the tax12 payer as of the end of the first taxable year de13 scribed in paragraph (1) as a tradable covered 

14 asset for purposes of applying section 491(b)(1) 

15 and this subsection. 

16 ‘‘(B) DETERMINATION OF GAIN.— 

17 ‘‘(i) IN GENERAL.—For purposes of 

18 applying section 491(a)(1)(A), the fair 

19 market value of any asset with respect to 

20 which an election is in effect under sub21 paragraph (A) shall be the amount speci22 fied by the taxpayer in such election, ex23 cept that such value may not, unless other24 wise provided by the Secretary, be less 

25 than the taxpayer’s adjusted basis in such 


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1 asset as of the end of the first taxable year 

2 described in paragraph (1). 

3 ‘‘(ii) NO DEDUCTIONS OR CREDITS

4 FOR BASIS INCREASES.—If there is any in5 crease under this part in the taxpayer’s ad6 justed basis of any asset by reason of an 

7 election under this paragraph, no deduc8 tion or credit shall be allowed under this 

9 title with respect to the portion of such ad10 justed basis attributable to such increase. 

11 ‘‘(C) ONLY SIGNIFICANT OWNER OF APPLI12 CABLE ENTITY MAY ELECT.—In the case of a 

13 nontradable covered asset which is a 

14 nontradable interest in an applicable entity, an 

15 applicable taxpayer may make an election under 

16 subparagraph (A) with respect to such asset 

17 only if such taxpayer is a significant owner (as 

18 defined in section 493(b)(4)(A)) of such entity 

19 with respect to whom a notice is in effect under 

20 section 493(b)(2)(A) for the taxable year for 

21 which the election is being made. 

22 ‘‘(4) SPECIAL RULE WHERE DELAY IN REPORT23 ING BY APPLICABLE ENTITY.— 

24 ‘‘(A) IN GENERAL.—If— 


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1 ‘‘(i) there is a delay in reporting to an 

2 applicable taxpayer by 1 or more applicable 

3 entities by reason of section 493(c)(4), and 

4 ‘‘(ii) any gain or loss is reported by 

5 such entities to such taxpayer under sec6 tion 493(c)(1)(A)(i) and is taken into ac7 count in such taxpayer’s taxable year im8 mediately succeeding the first taxable year 

9 described in paragraph (1), 

10 then, subject to such rules as the Secretary may 

11 prescribe, the taxpayer may elect under para12 graph (1)(B) to treat the net tax liability de13 scribed in subparagraph (B) as net first-year 

14 tax liability payable in 5 equal annual install15 ments beginning with such succeeding taxable 

16 year. The rules of paragraph (5) shall apply to 

17 such installments in the same manner as such 

18 rules apply to installments for such first taxable 

19 year. 

20 ‘‘(B) NET TAX LIABILITY.—For purposes 

21 of subparagraph (A), the net tax liability de22 scribed in this subparagraph is, with respect to 

23 the taxable year described in such subpara24 graph, the excess (if any) of— 


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1 ‘‘(i) such taxpayer’s net income tax 

2 for such taxable year, over 

3 ‘‘(ii) such taxpayer’s net income tax 

4 for such taxable year determined without 

5 regard to gain or loss of the taxpayer de6 scribed in subparagraph (A)(ii). 

7 ‘‘(5) RULES RELATING TO INSTALLMENT PAY8 MENTS.— 

9 ‘‘(A) DATE FOR PAYMENT OF INSTALL10 MENTS.—If an election is made under para11 graph (1), the first installment shall be paid on 

12 the due date (determined without regard to any 

13 extension of time for filing the return) for the 

14 return of tax for the first taxable year described 

15 in paragraph (1) and each succeeding install16 ment shall be paid on the due date (as so deter17 mined) for the return of tax for the taxable 

18 year following the taxable year with respect to 

19 which the preceding installment was made. 

20 ‘‘(B) ACCELERATION OF PAYMENT.— 

21 ‘‘(i) DISPOSITION OF ASSETS.— 

22 ‘‘(I) IN GENERAL.—If, before the 

23 close of the 5-year period described in 

24 paragraph (1), a taxpayer sells or ex25 changes, transfers, or otherwise disVerDate Sep 11 2014 02:30 Dec 07, 2023 Jkt 049200 PO 00000 Frm 00057 Fmt 6652 Sfmt 6201 E:\BILLS\S3367.IS S3367

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1 poses of an asset with respect to 

2 which an election is in effect under 

3 paragraph (1)(B), then the applicable 

4 percentage of the unpaid portion of all 

5 remaining installments described in 

6 paragraph (1)(B) shall be due on the 

7 date of such disposition (or such later 

8 date as the Secretary may prescribe). 

9 ‘‘(II) APPLICABLE PERCENT10 AGE.—For purposes of this subpara11 graph, the applicable percentage is the 

12 percentage determined by dividing the 

13 gain not taken into account in deter14 mining net income tax under para15 graph (2)(A)(ii) with respect to the 

16 asset described in subclause (I) by the 

17 aggregate amount of all gain not so 

18 taken into account. 

19 ‘‘(ii) FAILURE TO PAY, ETC.—In the 

20 case of an addition to tax for failure to 

21 timely pay any installment required under 

22 this subsection, the death of the taxpayer, 

23 or the filing of a petition by the taxpayer 

24 in a title 11 or similar case, then the un25 paid portion of all remaining installments 


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1 shall be due on the date of such event (or 

2 in the case of a title 11 or similar case, the 

3 day before the petition is filed). 

4 ‘‘(C) PRORATION OF DEFICIENCY TO IN5 STALLMENTS.—If an election is made under 

6 paragraph (1) to pay the net first-year tax li7 ability under this section in installments and a 

8 deficiency has been assessed with respect to 

9 such net tax liability, the deficiency shall be 

10 prorated to the installments payable under 

11 paragraph (1). The part of the deficiency so 

12 prorated to any installment the date for pay13 ment of which has not arrived shall be collected 

14 at the same time as, and as a part of, such in15 stallment. The part of the deficiency so pro16 rated to any installment the date for payment 

17 of which has arrived shall be paid upon notice 

18 and demand from the Secretary. This sub19 section shall not apply if the deficiency is due 

20 to negligence, to intentional disregard of rules 

21 and regulations, or to fraud. 

22 ‘‘(D) INSTALLMENTS NOT TO PREVENT

23 CREDIT OR REFUND OF OVERPAYMENTS OR IN24 CREASE ESTIMATED TAXES.—If an election is 

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1 year tax liability under this subsection in in2 stallments— 

3 ‘‘(i) no installment of such liability 

4 shall— 

5 ‘‘(I) in the case of a request for 

6 credit or refund, be taken into ac7 count as a liability for purposes of de8 termining whether an overpayment ex9 ists for purposes of section 6402 be10 fore the date on which such install11 ment is due, or 

12 ‘‘(II) be treated as a tax imposed 

13 by section 1 for purposes of section 

14 6654, and 

15 ‘‘(ii) the first sentence of section 6403 

16 shall not apply with respect to any such in17 stallment. 

18 ‘‘(6) ELECTIONS.— 

19 ‘‘(A) IN GENERAL.—Any election under 

20 paragraph (1), (3)(A), or (4)(A) shall be made 

21 not later than the due date for the return of tax 

22 for the first taxable year described in paragraph 

23 (1) and shall be made in such manner as the 

24 Secretary shall provide. 


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1 ‘‘(B) EXTENSIONS.—The Secretary shall 

2 by regulation prescribe such circumstances and 

3 procedures under which extensions of time will 

4 be granted to make any election under para5 graph (1), (3)(A), or (4)(A). In determining 

6 whether to grant relief under this subpara7 graph, the Secretary shall take into account all 

8 relevant circumstances and the time for making 

9 the election shall be treated as not expressly 

10 provided by statute. 

11 ‘‘(b) TREATMENT OF TAXPAYERS LEAVING AND RE12 ENTERING APPLICABLE STATUS.—If a taxpayer’s status 

13 as an applicable taxpayer is terminated under section 

14 495(a)(4) and the taxpayer is again treated as an applica15 ble taxpayer for a subsequent taxable year by reason of 

16 meeting the requirements of section 495(a)(1)(A), the fol17 lowing rules shall apply: 

18 ‘‘(1) SUBSEQUENT YEAR NOT TREATED AS

19 FIRST YEAR OF APPLICABLE TAXPAYER STATUS.— 

20 Subsection (a) shall not apply to any taxable year in 

21 which the taxpayer is again treated as an applicable 

22 taxpayer and such subsequent taxable year shall not 

23 be treated as the first taxable year for which the 

24 taxpayer is an applicable taxpayer for any other pur25 pose of this part. 


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1 ‘‘(2) NONTRADABLE ASSETS.—If there is an 

2 applicable transfer by a taxpayer of a nontradable 

3 covered asset after the taxpayer is again treated as 

4 an applicable taxpayer, the taxpayer’s holding period 

5 of such asset for purposes of section 492 shall in6 clude all periods during which the taxpayer’s status 

7 as an applicable taxpayer was previously terminated 

8 and the taxpayer held such asset. 

9 ‘‘(c) SPECIAL RULES RELATING TO OWNERSHIP OF

10 NONTRADABLE INTERESTS IN APPLICABLE ENTITIES.— 

11 ‘‘(1) IN GENERAL.—For purposes of subsection 

12 (a), if an applicable taxpayer elects under subsection 

13 (a)(3) to treat a nontradable interest in an applica14 ble entity held directly as a tradable covered asset 

15 for the first taxable year described in subsection 

16 (a)(1), the amount of the gain taken into account 

17 under subsection (a) with respect to such interest 

18 shall be equal to the excess (if any) of— 

19 ‘‘(A) the value of such interest specified by 

20 the taxpayer under subsection (a)(3)(B), over 

21 ‘‘(B) the taxpayer’s adjusted basis in such 

22 interest as of the close of such taxable year. 

23 ‘‘(2) ADJUSTMENTS TO BASES OF ENTITY’S

24 NONTRADABLE ASSETS.— 

25 ‘‘(A) PARTNERSHIPS.— 


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1 ‘‘(i) IN GENERAL.—If the applicable 

2 entity is a partnership, the partnership 

3 shall increase the adjusted bases of the 

4 partnership’s assets by the amount de5 scribed in paragraph (1). Such increase 

6 shall constitute an adjustment to the bases 

7 of partnership assets solely for determining 

8 the applicable taxpayer’s share of such 

9 bases. 

10 ‘‘(ii) ALLOCATION.—The Secretary 

11 shall prescribe rules for the allocation of 

12 the increase in adjusted bases among part13 nership assets in a manner which has the 

14 effect of reducing the difference between 

15 the value and such adjusted bases. Such 

16 rules shall also provide proper adjustments 

17 to adjusted bases where ownership is held 

18 through tiered entities. 

19 ‘‘(B) OTHER APPLICABLE ENTITIES.— 

20 Rules similar to the rules of clause (i) shall 

21 apply to applicable entities other than partner22 ships. 

23 ‘‘(C) NO DEDUCTIONS OR CREDITS FOR

24 BASIS INCREASES.—If there is any increase in 

25 the applicable entity’s adjusted basis of any 


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1 asset by reason of subparagraph (A), no deduc2 tion or credit shall be allowed under this title 

3 with respect to the portion of such adjusted 

4 basis attributable to such increase. 

5 ‘‘(3) DEFINITIONS.—Any term used in this sub6 section which is also used in section 493 shall have 

7 the same meaning as when used in such section. 

8 ‘‘(d) SPECIAL ELECTION FOR CERTAIN TRADABLE

9 ASSETS OF APPLICABLE TAXPAYERS.— 

10 ‘‘(1) IN GENERAL.—If a qualified taxpayer 

11 makes an election under this subsection, then any 

12 stock held by such qualified taxpayer which would 

13 (but for such election) be a tradable covered asset 

14 and which is specified in such election shall be treat15 ed as a nontradable capital asset of the taxpayer for 

16 purposes of this part. 

17 ‘‘(2) LIMITATIONS.— 

18 ‘‘(A) ONLY STOCK OF A SINGLE ENTITY

19 TAKEN INTO ACCOUNT.—An election made 

20 under this subsection may not specify stock in 

21 more than one C corporation or specify more 

22 than one class of stock in such corporation. 

23 ‘‘(B) VALUE.— 

24 ‘‘(i) IN GENERAL.—The aggregate 

25 value of stock specified in an election made 


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1 under this subsection shall not exceed 

2 $1,000,000,000. 

3 ‘‘(ii) DETERMINATION.—For purposes 

4 of clause (i), the value of any stock speci5 fied in an election made under this section 

6 shall be determined as of the last day of 

7 the first taxable year for which the tax8 payer is an applicable taxpayer. 

9 ‘‘(3) QUALIFIED TAXPAYER.—For purposes of 

10 this subsection, the term ‘qualified taxpayer’ means 

11 any taxpayer— 

12 ‘‘(A) which is not an estate or trust, and 

13 ‘‘(B) for which the first taxable year for 

14 which such taxpayer is an applicable taxpayer is 

15 a taxable year that begins before January 1, 

16 2025. 

17 ‘‘(4) ELECTION.— 

18 ‘‘(A) IN GENERAL.—Any election under 

19 this subsection shall be made not later than the 

20 due date for the return of tax for the first tax21 able year for which the taxpayer is an applica22 ble taxpayer and shall be made in such manner 

23 as the Secretary shall provide. 

24 ‘‘(B) EXTENSIONS.—The Secretary shall 

25 by regulation prescribe such circumstances and 


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1 procedures under which extensions of time will 

2 be granted to make any election under this sub3 section. In determining whether to grant relief 

4 under this subparagraph, the Secretary shall 

5 take into account all relevant circumstances and 

6 the time for making the election shall be treat7 ed as not expressly provided by statute. 

8 ‘‘Subpart C—Other Definitions and Rules 

‘‘Sec. 497. Terms and rules relating to covered assets. 

‘‘Sec. 498. Other definitions; coordination with title. 

9 ‘‘SEC. 497. TERMS AND RULES RELATING TO COVERED AS10 SETS. 

11 ‘‘(a) COVERED ASSET.—For purposes of this part, 

12 except as otherwise provided in this part, the term ‘cov13 ered asset’ means any asset other than— 

14 ‘‘(1) any interest of the taxpayer in an applica15 ble savings plan or in a defined benefit plan, 

16 ‘‘(2) any cash or cash equivalent, or 

17 ‘‘(3) any private placement life insurance or an18 nuity contract described in section 72(e)(12)(D). 

19 ‘‘(b) TRADABLE COVERED ASSET.—For purposes of 

20 this part, except as provided in section 496(d), the term 

21 ‘tradable covered asset’ means— 

22 ‘‘(1) any covered asset if— 

23 ‘‘(A) interests in such asset are traded on 

24 an established securities market, 


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1 ‘‘(B) interests in such assets are readily 

2 tradable on a secondary market (or the sub3 stantial equivalent thereof), 

4 ‘‘(C) interests in such assets are available 

5 on an online or electronic platform that regu6 larly matches, or facilitates the matching of, 

7 buyers and sellers of such assets, or 

8 ‘‘(D) such asset is an asset for which the 

9 Secretary determines there is a reasonable basis 

10 to determine the asset’s fair market value annu11 ally, and 

12 ‘‘(2) any derivative with respect to an under13 lying investment which— 

14 ‘‘(A) is an asset described in paragraph 

15 (1), or 

16 ‘‘(B) is a nontradable covered asset which 

17 is identified in regulations or other guidance 

18 provided by the Secretary. 

19 ‘‘(c) NONTRADABLE COVERED ASSET.—For pur20 poses of this part— 

21 ‘‘(1) IN GENERAL.—The term ‘nontradable cov22 ered asset’ means any covered asset which is not a 

23 tradable covered asset. 

24 ‘‘(2) CERTAIN ASSETS ONLY COUNTED FOR DE25 TERMINING AGGREGATE VALUE OF ASSETS.— 


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1 ‘‘(A) IN GENERAL.—Any asset excluded 

2 from treatment as a covered asset under para3 graph (1), (2), or (3) of subsection (a) shall be 

4 taken into account as a nontradable covered 

5 asset in computing the aggregate applicable 

6 value of all tradable and nontradable covered 

7 assets held by the taxpayer as of the close of 

8 any taxable year for purposes of section 

9 495(a)(3). 

10 ‘‘(B) PRIVATE PLACEMENT LIFE INSUR11 ANCE AND ANNUITY CONTRACTS.—For pur12 poses of subparagraph (A)— 

13 ‘‘(i) IN GENERAL.—The applicable 

14 value of a private placement life insurance 

15 or annuity contract (as defined in section 

16 72(e)(12)(D)) as of any date shall be its 

17 cash surrender value (as determined under 

18 section 7702(f)(2)(A)) on such date. 

19 ‘‘(ii) ADJUSTMENTS.—The Secretary 

20 shall by regulation provide for adjustments 

21 to the cash surrender value determined 

22 under clause (i) with respect to any con23 tract to the extent necessary to prevent the 

24 avoidance of the purposes of this part, in25 cluding regulations which ensure that such 


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1 value as of any time properly reflects the 

2 value of any underlying investments with 

3 respect to such contract as of such time. 

4 ‘‘(3) INVESTMENTS IN QUALIFIED OPPOR5 TUNITY FUNDS.—Notwithstanding subsection (b), 

6 any investment in a qualified opportunity fund (as 

7 defined in section 1400Z–2(d)) shall be treated as a 

8 nontradable covered asset. 

9 ‘‘(d) APPLICABLE VALUE.—For purposes of this 

10 part— 

11 ‘‘(1) TRADABLE COVERED ASSETS.—The appli12 cable value of any tradable covered asset as of any 

13 date shall be its fair market value on such date. 

14 ‘‘(2) NONTRADABLE COVERED ASSETS.—The 

15 applicable value of any nontradable covered asset as 

16 of any date shall be the greatest of— 

17 ‘‘(A) the original cost basis of such asset, 

18 ‘‘(B) the adjusted basis of such asset, 

19 ‘‘(C) the value determined as of the date of 

20 the last event with respect to the asset which 

21 establishes such value, 

22 ‘‘(D) in the case of an asset the value of 

23 which is included in an applicable financial 

24 statement, the value in the latest available 

25 statement, 


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1 ‘‘(E) the value of such asset determined 

2 for purposes of using such asset to secure any 

3 indebtedness, and 

4 ‘‘(F) the value of such asset determined 

5 under such other valuation method as the Sec6 retary may prescribe. 

7 If a covered asset would, but for subsection (c)(3) or 

8 any other provision of this part, be treated as a 

9 tradable covered asset, the asset’s applicable value 

10 shall be determined under paragraph (1). 

11 ‘‘(3) ADJUSTMENT FOR DEBT AND OTHER LI12 ABILITIES OF THE TAXPAYER.—Except as provided 

13 by the Secretary, the aggregate applicable value of 

14 all covered assets of the taxpayer as of any date (de15 termined without regard to this paragraph) shall be 

16 reduced by the aggregate outstanding amount of— 

17 ‘‘(A) indebtedness of the taxpayer as of 

18 such date, and 

19 ‘‘(B) any other liabilities (other than in20 debtedness) of the taxpayer as of such date 

21 which the Secretary determines are appropriate 

22 to be taken into account for such purpose. 

23 ‘‘(4) RELIANCE ON VALUATION.—In deter24 mining the applicable value of any tradable covered 


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1 asset for purposes of this section, the taxpayer may 

2 rely on a valuation which is— 

3 ‘‘(A) provided to the taxpayer by a broker 

4 under section 6045(b), 

5 ‘‘(B) provided to the taxpayer by a dealer 

6 in securities or a dealer in commodities, within 

7 the meaning of section 475, 

8 ‘‘(C) determined under an applicable finan9 cial statement, or 

10 ‘‘(D) provided to the taxpayer by such 

11 other persons as may be designated by the Sec12 retary. 

13 ‘‘(5) APPLICABLE FINANCIAL STATEMENT.— 

14 For purposes of this subsection, the term ‘applicable 

15 financial statement’ has the meaning given such 

16 term by section 451(b)(3). 

17 ‘‘(6) SPECIAL RULES FOR APPLICABLE ENTI18 TIES.—In the case of an applicable entity— 

19 ‘‘(A) adjustments to basis of any covered 

20 asset under section 493(b)(2) shall be taken 

21 into account in determining the adjusted basis 

22 of such asset for purposes of paragraph (2)(B), 

23 ‘‘(B) the value of a partner’s ownership in24 terest in such partnership under paragraph 

25 (2)(C) shall not be less than the value of the 


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1 partner’s capital account under section 704, 

2 and 

3 ‘‘(C) the Secretary shall provide rules for 

4 determining the share of a holder of an owner5 ship interest in such an entity of amounts in6 cluded in an applicable financial statement of 

7 such entity for purposes of applying paragraph 

8 (2)(D). 

9 ‘‘(7) SECRETARIAL AUTHORITY.—The Secretary 

10 shall prescribe such regulations, rules, and guidance 

11 as may be necessary to carry out the purposes of 

12 this subsection, including regulations, rules, and 

13 guidance which— 

14 ‘‘(A) prevent the avoidance of such pur15 poses, 

16 ‘‘(B) provide rules for the application of 

17 paragraph (2)(C), including in cases of trans18 actions in which gain or loss is not recognized 

19 in connection with contributions, distributions, 

20 and sales of substantially similar property from 

21 which value may be derived, and 

22 ‘‘(C) provide rules for determining the ap23 plicable value of assets in taxable years begin24 ning before the date of the enactment of this 

25 part. 


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1 ‘‘SEC. 498. OTHER DEFINITIONS; COORDINATION WITH 

2 TITLE. 

3 ‘‘(a) APPLICABLE TRANSFER.—For purposes of this 

4 part— 

5 ‘‘(1) IN GENERAL.—The term ‘applicable trans6 fer’ means— 

7 ‘‘(A) any sale, exchange, disposition, or 

8 other transfer if— 

9 ‘‘(i) gain or loss (if any) is, without 

10 regard to this part, recognized under this 

11 chapter on such sale, exchange, disposition, 

12 or other transfer, and 

13 ‘‘(ii) such sale, exchange, disposition, 

14 or other transfer is not in the ordinary 

15 course of a trade or business, and 

16 ‘‘(B) any disregarded nonrecognition event. 

17 ‘‘(2) DISREGARDED NONRECOGNITION

18 EVENT.—The term ‘disregarded nonrecognition 

19 event’ means— 

20 ‘‘(A) any exchange to which section 351 

21 applies, 

22 ‘‘(B) any exchange to which section 1031 

23 applies, 

24 ‘‘(C) any transfer of an asset which— 

25 ‘‘(i) is identified by the Secretary, 

26 ‘‘(ii) involves a C corporation, and 


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1 ‘‘(iii) is in connection with an asset 

2 with respect to which no gain or loss has 

3 been recognized by such corporation, or 

4 ‘‘(D) any other transaction in which gain 

5 or loss is not otherwise recognized and which 

6 the Secretary determines is necessary to be 

7 treated as a disregarded nonrecognition event in 

8 order to prevent the avoidance of the purposes 

9 of this part. 

10 ‘‘(3) CONVERSION OF ASSETS.— 

11 ‘‘(A) NONTRADABLE TO TRADABLE.—If a 

12 taxpayer holds a nontradable covered asset 

13 (other than an investment in a qualified oppor14 tunity fund (as defined in section 1400Z–2(d))) 

15 which, as part of a transaction or series of 

16 transactions, is converted to, or exchanged for, 

17 a tradable covered asset, such conversion or ex18 change shall be treated as a disregarded non19 recognition event if gain or loss (if any) on such 

20 conversion or exchange is, without regard to 

21 this part, not recognized under this chapter. 

22 ‘‘(B) TRADABLE TO NONTRADABLE.—If a 

23 taxpayer holds a tradable covered asset which, 

24 as part of a transaction or series of trans25 actions, is converted to, or exchanged for, a 


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1 nontradable covered asset, such conversion or 

2 exchange shall be treated as a taxable event 

3 with respect to the asset being converted or ex4 changed if gain or loss (if any) on such conver5 sion or exchange is, without regard to this part, 

6 not recognized under this chapter. 

7 ‘‘(b) APPLICABLE SAVINGS PLAN.—The term ‘appli8 cable savings plan’ means— 

9 ‘‘(1) a defined contribution plan to which sec10 tion 401(a) or 403(a) applies, 

11 ‘‘(2) an annuity contract under section 403(b), 

12 ‘‘(3) an eligible deferred compensation plan de13 scribed in section 457(b) which is maintained by an 

14 eligible employer described in section 457(e)(1)(A), 

15 ‘‘(4) an individual retirement plan, 

16 ‘‘(5) an Archer MSA (within the meaning of 

17 section 220(d)), 

18 ‘‘(6) a qualified tuition program (as defined in 

19 section 529(b)), 

20 ‘‘(7) an ABLE account (as defined in section 

21 529A(e)(6)), 

22 ‘‘(8) a Coverdell education savings account (as 

23 defined in section 530), or 

24 ‘‘(9) a health savings account (within the mean25 ing of section 223(d)). 


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1 ‘‘(c) DERIVATIVE; UNDERLYING INVESTMENT.— 

2 ‘‘(1) DERIVATIVE.—The term ‘derivative’ has 

3 the meaning given such term under section 

4 59A(h)(4). 

5 ‘‘(2) UNDERLYING INVESTMENT.—The term 

6 ‘underlying investment’ means, with respect to any 

7 derivative, any item— 

8 ‘‘(A) which is described in clauses (i) 

9 through (v) of section 59A(h)(4)(A) (or any 

10 item substantially the same as any such item), 

11 and 

12 ‘‘(B) by reference to which the value of the 

13 derivative, or any payment or other transfer 

14 with respect to the derivative, is determined ei15 ther directly or indirectly. 

16 ‘‘(d) REGULATORY AUTHORITY TO PREVENT AVOID17 ANCE AND TO COORDINATE WITH OTHER PROVISIONS OF

18 THIS TITLE.—The Secretary shall issue such regulations 

19 or other guidance as are necessary to— 

20 ‘‘(1) prevent taxpayers from avoiding the appli21 cation of this part, and 

22 ‘‘(2) coordinate the provisions of this part with 

23 other provisions of this title which require taxpayers 

24 to take income into account in the absence of a pay25 ment or other distribution.’’. 


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1 (b) CLERICAL AMENDMENT.—The table of parts for 

2 subchapter E of chapter 1 is amended by adding at the 

3 end the following new item: 

‘‘Part IV. Elimination of deferral for applicable taxpayers.’’. 

4 (c) EFFECTIVE DATE.—The amendments made by 

5 this section shall apply to taxable events and applicable 

6 transfers occurring in taxable years beginning after De7 cember 31, 2023. 

8 SEC. 102. CARRYBACK OF CAPITAL LOSSES ATTRIBUTABLE 

9 TO MARK-TO-MARKET RULES. 

10 (a) IN GENERAL.—Section 1212 is amended by add11 ing at the end the following new subsection: 

12 ‘‘(d) CARRYBACK OF LOSSES OF APPLICABLE TAX13 PAYERS FROM ASSETS MARKED TO MARKET.— 

14 ‘‘(1) IN GENERAL.—If an applicable taxpayer 

15 elects to have this subsection apply to any taxable 

16 year in which the taxpayer has a net marked-to-mar17 ket loss (in this subsection referred to as the ‘loss 

18 year)’, the amount of such net marked-to-market 

19 loss— 

20 ‘‘(A) shall be a carryback to each of the 3 

21 taxable years preceding the loss year, and 

22 ‘‘(B) to the extent that, after the applica23 tion of paragraphs (2) and (3), such loss is al24 lowed as a carryback to any such preceding taxVerDate Sep 11 2014 02:30 Dec 07, 2023 Jkt 049200 PO 00000 Frm 00077 Fmt 6652 Sfmt 6201 E:\BILLS\S3367.IS S3367

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1 able year, the amount so allowed shall be treat2 ed as a long-term capital loss. 

3 ‘‘(2) AMOUNT CARRIED TO EACH TAXABLE

4 YEAR.—The entire amount of the net marked-to5 market loss for any loss year shall be carried to the 

6 earliest of the taxable years to which such loss may 

7 be carried back under paragraph (1). The portion of 

8 such loss which shall be carried to each of the 2 

9 other taxable years to which such loss may be car10 ried back shall be the excess (if any) of such loss 

11 over the portion of such loss which, after the appli12 cation of paragraph (3), was allowed as a carryback 

13 for any prior taxable year. 

14 ‘‘(3) AMOUNT WHICH MAY BE USED IN ANY

15 PRIOR TAXABLE YEAR.—An amount shall be allowed 

16 as a carryback under paragraph (1) from a loss year 

17 to any prior taxable year only to the extent— 

18 ‘‘(A) such amount does not exceed the net 

19 marked-to-market gain for such prior year, and 

20 ‘‘(B) the allowance of such carryback does 

21 not increase or produce a net operating loss (as 

22 defined in section 172(c)) for such year. 

23 ‘‘(4) NET MARKED-TO-MARKET LOSS.—For 

24 purposes of this subsection, the term ‘net marked-toVerDate Sep 11 2014 02:30 Dec 07, 2023 Jkt 049200 PO 00000 Frm 00078 Fmt 6652 Sfmt 6201 E:\BILLS\S3367.IS S3367

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1 market loss’ means, with respect to any taxable 

2 year, an amount equal to— 

3 ‘‘(A) the net capital loss for the taxable 

4 year determined by taking into account only 

5 marked-to-market gains and losses, reduced 

6 (but not below zero) by 

7 ‘‘(B) the aggregate amount of gains from 

8 the sale or exchange of capital assets which are 

9 not marked-to-market gains. 

10 ‘‘(5) NET MARKED-TO-MARKET GAIN.—For 

11 purposes of this subsection— 

12 ‘‘(A) IN GENERAL.—The term ‘net 

13 marked-to-market gain’ means, with respect to 

14 any taxable year, an amount equal to— 

15 ‘‘(i) the capital gain net income for 

16 the taxable year determined by taking into 

17 account only marked-to-market gains and 

18 losses, reduced (but not below zero) by 

19 ‘‘(ii) the aggregate amount of losses 

20 from the sale or exchange of capital assets 

21 which are not marked-to-market losses. 

22 ‘‘(B) SPECIAL RULE.—The net marked-to23 market gain for any taxable year before the loss 

24 year shall be computed without regard to the 


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1 net marked-to-market loss for the loss year or 

2 for any taxable year thereafter. 

3 ‘‘(6) COORDINATION WITH CARRYFORWARD

4 PROVISIONS OF SUBSECTION (B)(1).— 

5 ‘‘(A) CARRYFORWARD AMOUNT REDUCED

6 BY AMOUNT USED AS CARRYBACK.—For pur7 poses of applying subsection (b)(1)(B), if any 

8 portion of the net marked-to-market loss for 

9 any taxable year is allowed as a carryback 

10 under paragraph (1) to any preceding taxable 

11 year, the amount allowed as a carryback shall 

12 be treated as a long-term capital gain for the 

13 loss year. 

14 ‘‘(B) CARRYOVER LOSS RETAINS CHAR15 ACTER AS ATTRIBUTABLE TO MARKED-TO-MAR16 KET.—Any amount carried forward as a long17 term capital loss to any taxable year under sub18 section (b)(1)(B) (after the application of sub19 paragraph (A)) shall, to the extent attributable 

20 to marked-to-market losses, be treated as 

21 marked-to-market loss. 

22 ‘‘(C) COORDINATION WITH REDUCTION IN

23 NET CAPITAL LOSS FOR CREDIT.—For purposes 

24 of this paragraph and paragraph (4), any re25 duction in net capital loss under section 


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1 492(c)(3) (relating to reduction for credit 

2 against tax attributable to deferral recapture 

3 amount) shall, except as provided by the Sec4 retary, be applied before the application of such 

5 paragraphs. 

6 ‘‘(7) OTHER DEFINITIONS AND RULES.—For 

7 purposes of this subsection— 

8 ‘‘(A) MARKED-TO-MARKET GAINS AND

9 LOSSES.— 

10 ‘‘(i) IN GENERAL.—The terms 

11 ‘marked-to-market gains’ and ‘marked-to12 market losses’ means, with respect to any 

13 applicable taxpayer for any taxable year, 

14 gains or losses which are recognized and 

15 taken into account by such taxpayer for 

16 such taxable year under section 491 by 

17 reason of taxable events described in sec18 tion 491(b)(1) with respect to tradable cov19 ered assets which are capital assets. Such 

20 terms shall not include gains and losses 

21 from nontradable covered assets which are 

22 treated as tradable covered assets (and to 

23 which section 491 applies) by reason of an 

24 election under section 496(a)(3). 


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1 ‘‘(ii) APPLICABLE ENTITIES.—In the 

2 case of marked-to-market gains or losses of 

3 an applicable entity, this subsection shall 

4 be applied at the partner or other owner5 ship level. 

6 ‘‘(B) OTHER TERMS.—Any term used in 

7 this subsection which is also used in part IV of 

8 subchapter E shall have the same meaning as 

9 when used in such part.’’. 

10 (b) EFFECTIVE DATE.—The amendment made by 

11 this section shall apply to loss years beginning after De12 cember 31, 2023. 

13 TITLE II—APPLICATION OF 

14 OTHER PROVISIONS TO AP15 PLICABLE TAXPAYERS AND 

16 ENTITIES 

17 Subtitle A—Individuals 

18 SEC. 201. APPLICABLE TAXPAYERS NOT ELIGIBLE FOR AD19 JUSTED GROSS INCOME LIMITATION ON NET 

20 INVESTMENT TAX. 

21 (a) IN GENERAL.—Section 1411(a) is amended by 

22 adding at the end the following new paragraph: 

23 ‘‘(3) NO ADJUSTED GROSS INCOME LIMIT FOR

24 APPLICABLE TAXPAYERS.—In the case of an applica25 ble taxpayer (as defined in section 495) for any taxVerDate Sep 11 2014 02:30 Dec 07, 2023 Jkt 049200 PO 00000 Frm 00082 Fmt 6652 Sfmt 6201 E:\BILLS\S3367.IS S3367

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1 able year, notwithstanding paragraph (1) or (2), the 

2 tax under this subsection for such taxable year shall 

3 be equal to the product of— 

4 ‘‘(A) in the case of an individual, the rate 

5 of tax in effect under paragraph (1) multiplied 

6 by the amount determined under paragraph 

7 (1)(A), and 

8 ‘‘(B) in the case of an estate or trust, the 

9 rate of tax in effect under paragraph (2) multi10 plied by the amount determined under para11 graph (2)(A).’’. 

12 (b) EFFECTIVE DATE.—The amendment made by 

13 this section shall apply to taxable years beginning after 

14 December 31, 2023. 

15 SEC. 202. TREATMENT OF COVERED EXPATRIATES. 

16 (a) APPLICATION OF EXPATRIATE RULES TO APPLI17 CABLE TAXPAYERS.—Section 877A is amended by redes18 ignating subsection (i) as subsection (j) and by inserting 

19 after subsection (h) the following new subsection: 

20 ‘‘(i) SPECIAL RULES FOR APPLICABLE TAX21 PAYERS.— 

22 ‘‘(1) IN GENERAL.—In the case of a covered ex23 patriate who is an applicable taxpayer (as defined in 

24 section 495) for the taxable year which includes the 

25 expatriation date— 


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1 ‘‘(A) no election may be made under sub2 section (b) with respect to any property treated 

3 as sold by reason of subsection (a) (after appli4 cation of subparagraph (B)), and 

5 ‘‘(B) the covered expatriate shall, for pur6 poses of subsection (a)(1), also be treated as 

7 having sold on the last day of the 10-taxable 

8 year period described in section 495(d)(2)(A) 

9 all property held by the covered expatriate as of 

10 the close of such day which is not otherwise 

11 treated as sold under part IV of subchapter E 

12 as of such time. 

13 ‘‘(2) APPLICATION OF SECTION 877.—Notwith14 standing section 877(h)— 

15 ‘‘(A) a covered expatriate described in 

16 paragraph (1) shall be treated as an individual 

17 to whom section 877 applies, and 

18 ‘‘(B) such individual shall be taxable as 

19 provided in such section for each of the taxable 

20 years in the 10-taxable year period described in 

21 section 495(d)(2)(A).’’. 

22 (b) EFFECTIVE DATE.—The amendments made by 

23 this section shall apply to taxable years beginning after 

24 December 31, 2023. 


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1 Subtitle B—Rules for Applicable 

2 Entities and Trusts 

3 SEC. 211. TREATMENT OF LIKE-KIND EXCHANGES BY AP4 PLICABLE ENTITIES. 

5 (a) IN GENERAL.—Section 1031 is amended by add6 ing at the end the following new subsection: 

7 ‘‘(i) SPECIAL RULES FOR APPLICABLE ENTITIES.— 

8 Subsection (a) shall not apply to an exchange by an appli9 cable entity if a notice received by the entity under sub10 section (b)(2)(A) or (c)(2) of section 493 is in effect at 

11 the time of such exchange.’’. 

12 (b) EFFECTIVE DATE.—The amendment made by 

13 this section shall apply to exchanges completed after De14 cember 31, 2023. 

15 SEC. 212. TREATMENT OF TRANSFERS BY APPLICABLE EN16 TITIES IN EXCHANGE FOR STOCK. 

17 (a) IN GENERAL.—Section 351 is amended by redes18 ignating subsection (h) as subsection (i) and by inserting 

19 after subsection (g) the following new subsection: 

20 ‘‘(h) SPECIAL RULES FOR APPLICABLE ENTITIES.— 

21 ‘‘(1) IN GENERAL.—Subsection (a) shall not 

22 apply to an exchange by an applicable entity if an 

23 applicable notice received by the entity is in effect at 

24 the time of such exchange. 


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1 ‘‘(2) APPLICABLE NOTICE.—For purposes of 

2 paragraph (1)— 

3 ‘‘(A) IN GENERAL.—The term ‘applicable 

4 notice’ means, with respect to any applicable 

5 entity, a notice— 

6 ‘‘(i) which is received by the entity 

7 under subsection (b)(2)(A) or (c)(2) of sec8 tion 493, and 

9 ‘‘(ii) which relates to an applicable 

10 taxpayer who is a 20-percent owner with 

11 respect to such entity. 

12 ‘‘(B) 20-PERCENT OWNER.—For purposes 

13 of subparagraph (A), a 20-percent owner shall 

14 be determined in the same manner as a 5-per15 cent owner under section 493(b)(4)(B), except 

16 that ‘20 percent’ shall be substituted for ‘5 per17 cent’ in applying clauses (i) and (ii)(I) thereof. 

18 ‘‘(3) APPLICABLE ENTITY.—For purposes of 

19 this subsection, the term ‘applicable entity’ has the 

20 meaning given such term by section 493.’’. 

21 (b) EFFECTIVE DATE.—The amendments made by 

22 this section shall apply to exchanges completed after De23 cember 31, 2023. 


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1 SEC. 213. SPECIAL RULES FOR APPLICABLE TRUSTS. 

2 (a) IN-KIND DISTRIBUTIONS.—Section 643(e)(3) is 

3 amended— 

4 (1) in subparagraph (A), by striking ‘‘to which 

5 an election under this paragraph applies’’ and in6 serting ‘‘to which this paragraph applies’’, and 

7 (2) by striking subparagraph (B) and inserting 

8 the following: 

9 ‘‘(B) DISTRIBUTIONS TO WHICH THIS

10 PARAGRAPH APPLIES.—This paragraph shall 

11 apply to— 

12 ‘‘(i) any distribution of property by an 

13 estate which is described in section 

14 495(a)(1)(B)(ii) or by an applicable trust 

15 (as defined in section 495(c)), and 

16 ‘‘(ii) any distribution during the tax17 able year of any other estate or trust which 

18 makes an election under this paragraph. 

19 Any election made under clause (ii) shall be 

20 made on the return of such estate or trust for 

21 such taxable year, and, once made, may be re22 voked only with the consent of the Secretary.’’. 

23 (b) TREATMENT OF LOANS.—Section 643(i) is 

24 amended— 


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1 (1) by inserting ‘‘or an applicable trust (as de2 fined in section 495(c))’’ after ‘‘foreign trust’’ in 

3 paragraph (1), 

4 (2) by striking ‘‘who is a United States person’’ 

5 in paragraph (1)(A) and inserting ‘‘who is not ex6 empt from tax under this chapter’’, 

7 (3) by striking ‘‘United States person’’ in para8 graph (1)(B) and inserting ‘‘person (other than a 

9 person who is exempt from tax under this chapter)’’, 

10 (4) by striking paragraph (2)(C), and 

11 (5) by striking ‘‘FOREIGN’’ in the heading 

12 thereof and inserting ‘‘CERTAIN’’. 

13 (c) TREATMENT OF MULTIPLE TRUSTS.—Section 

14 643(f)(2) is amended by inserting ‘‘or the rules of part 

15 IV of subchapter E’’ after ‘‘this chapter’’. 

16 (d) FOREIGN TRUSTS.— 

17 (1) IN GENERAL.—Subpart F of part I of sub18 chapter J is amended by adding at the end the fol19 lowing new section: 

20 ‘‘SEC. 686. SPECIAL RULES FOR APPLICABLE FOREIGN 

21 TRUSTS. 

22 ‘‘(a) IN GENERAL.—For purposes of this part, in the 

23 case of any beneficiary of an applicable foreign trust who 

24 is required to include in income any amount attributable 

25 to gain on an applicable transfer of any covered asset, the 


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1 amount of tax imposed under this chapter shall be in2 creased by the amount which bears the same ratio to the 

3 amount of the deferral recapture amount which would be 

4 determined on such applicable transfer under section 

5 492(a) (determined as if such trust were an applicable tax6 payer and section 492 applied to any covered asset of the 

7 trust) as— 

8 ‘‘(1) the amount required to be included in in9 come attributable to the gain on such applicable 

10 transfer, bears to 

11 ‘‘(2) the total amount of the gain on such appli12 cable transfer. 

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

14 any amount to the extent that the applicable foreign trust 

15 pays (at such time and in such manner as provided by 

16 the Secretary) the tax which would be imposed under sec17 tion 492(a) (determined as if such trust were an applicable 

18 taxpayer and section 492 applied to any covered asset of 

19 the trust) with respect to the applicable transfer described 

20 in subsection (a). 

21 ‘‘(c) APPLICABLE FOREIGN TRUST.—For purposes of 

22 this section, the term ‘applicable foreign trust’ means any 

23 foreign trust which would be an applicable trust if such 

24 trust were a domestic trust. 


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1 ‘‘(d) OTHER TERMS.—Any term used in this section 

2 which is also used in part IV of subchapter E shall have 

3 the same meaning as when used in such part.’’. 

4 (2) REPORTING.—Section 6048(c)(1) is amend5 ed by striking ‘‘and’’, at the end of subparagraph 

6 (B), by redesignating subparagraph (C) as subpara7 graph (D), and by inserting after subparagraph (B) 

8 the following new subparagraph: 

9 ‘‘(C) such information as the Secretary 

10 shall require for purposes of determining the in11 crease (if any) in tax under section 686, and’’. 

12 (3) CLERICAL AMENDMENT.—The table of sec13 tions for subpart F of part I of subchapter J is 

14 amended by adding at the end the following new 

15 item: 

‘‘Sec. 686. Special rules for applicable foreign trusts.’’. 

16 (e) COORDINATION WITH THROWBACK RULES.—The 

17 Secretary of the Treasury (or the Secretary’s delegate) 

18 shall provide such regulations or other guidance as nec19 essary to coordinate the amendments made by this section 

20 with the rules of subpart D of part I of subchapter J. 

21 (f) EFFECTIVE DATES.— 

22 (1) IN GENERAL.—Except as provided in para23 graph (2), the amendments made by this section 

24 shall apply to taxable years beginning after Decem25 ber 31, 2023. 


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1 (2) FOREIGN TRUSTS.—The amendments made 

2 by subsection (e) shall apply to applicable transfers 

3 occurring in taxable years beginning after December 

4 31, 2023. 

5 Subtitle C—Treatment of Deferred 

6 Compensation and Certain Life 

7 Insurance and Annuity Con8 tracts 

9 SEC. 221. ELIMINATION OF DEFERRAL OF TAX ON CERTAIN 

10 COMPENSATION. 

11 (a) IN GENERAL.—Subpart A of part I of subchapter 

12 D of chapter 1 is amended by adding at the end the fol13 lowing new section: 

14 ‘‘SEC. 409B. SPECIAL RULES FOR CERTAIN DEFERRED COM15 PENSATION. 

16 ‘‘(a) IN GENERAL.—In the case of an individual who 

17 is an applicable taxpayer for any taxable year, the tax18 payer’s tax under this chapter for the taxable year (deter19 mined without regard to this section) shall be increased 

20 by an amount equal to the sum of— 

21 ‘‘(1) the deferral recapture amount determined 

22 under subsection (b)(1) for any applicable deferred 

23 compensation which is includible in the gross income 

24 of the individual for the taxable year, and 


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1 ‘‘(2) 10 percent of the amount of any severance 

2 pay which is includible in the gross income of the in3 dividual during the taxable year. 

4 ‘‘(b) DEFERRAL RECAPTURE AMOUNT.—For pur5 poses of this section— 

6 ‘‘(1) IN GENERAL.—The term ‘deferral recap7 ture amount’ means, with respect to any applicable 

8 deferred compensation includible in gross income for 

9 the taxable year, the aggregate amount of interest 

10 (determined in the manner provided under para11 graph (3)) on the deemed tax amount determined 

12 under paragraph (2) for each preceding taxable year 

13 to which compensation is allocated under paragraph 

14 (2)(A). 

15 ‘‘(2) DEEMED TAX AMOUNT.— 

16 ‘‘(A) IN GENERAL.—The deemed tax 

17 amount for any taxable year preceding the tax18 able year in which applicable deferred com19 pensation is includible in gross income shall be 

20 the amount determined— 

21 ‘‘(i) first, except as provided in sub22 paragraph (B), by allocating the amount of 

23 such compensation ratably to each day in 

24 the deferral period with respect to the ap25 plicable deferred compensation, and 


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1 ‘‘(ii) then by multiplying the amount, 

2 if any, allocated under clause (i) to such 

3 preceding taxable year by the highest rate 

4 of tax in effect under section 1 for the tax5 able year in which the compensation is in6 cludible in gross income of the individual. 

7 ‘‘(B) SPECIAL RULE FOR PERIODS BEFORE

8 BECOMING APPLICABLE TAXPAYER.—Notwith9 standing subparagraph (A)(i), any compensa10 tion which would be otherwise allocated under 

11 such subparagraph to any taxable year pre12 ceding the first taxable year for which the tax13 payer is treated as an applicable taxpayer shall 

14 be allocated to such first taxable year. 

15 ‘‘(3) COMPUTATION OF INTEREST.— 

16 ‘‘(A) IN GENERAL.—The amount of inter17 est referred to in paragraph (1) on any deemed 

18 tax amount determined under paragraph (2) for 

19 any preceding taxable year with respect to ap20 plicable deferred compensation shall be deter21 mined for the period beginning on the due date 

22 for such preceding taxable year and ending on 

23 the last day of the deferral period with respect 

24 to the applicable deferred compensation, by 

25 using the rates determined under section 


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1 6621(b) (plus 1 percentage point), and the 

2 method applicable under section 6621, for un3 derpayments of tax for such period. 

4 ‘‘(B) DUE DATE.—For purposes of this 

5 paragraph, the term ‘due date’ means, with re6 spect to any preceding taxable year, the date 

7 prescribed by law (determined without regard to 

8 extensions) for filing the return of the tax im9 posed by this chapter for such taxable year. 

10 ‘‘(4) LIMITATION.—In no case shall the deferral 

11 recapture amount determined with respect to any 

12 applicable deferred compensation which is includible 

13 in gross income for a taxable year exceed an amount 

14 equal to 10 percent of the amount of such com15 pensation. 

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

17 ‘‘(1) APPLICABLE TAXPAYER.—The term ‘appli18 cable taxpayer’ has the meaning given such term by 

19 section 495. 

20 ‘‘(2) APPLICABLE DEFERRED COMPENSA21 TION.— 

22 ‘‘(A) IN GENERAL.—Except as provided in 

23 subparagraph (B), the term ‘applicable deferred 

24 compensation’ means— 


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1 ‘‘(i) any compensation provided under 

2 a nonqualified deferred compensation plan, 

3 as defined in section 409A(d)(1), except 

4 that— 

5 ‘‘(I) such term shall include stock 

6 appreciation rights, and 

7 ‘‘(II) compensation shall not fail 

8 to be treated as deferred solely be9 cause such compensation is not treat10 ed as deferred for purposes of section 

11 409A by reason of such compensation 

12 being includible in gross income for 

13 the first taxable year after a taxable 

14 year in which such compensation is no 

15 longer subject to a substantial risk of 

16 forfeiture, and 

17 ‘‘(ii) any other property transferred in 

18 connection with the performance of serv19 ices which is subject to section 83. 

20 ‘‘(B) EXCEPTIONS.—Such term does not 

21 include— 

22 ‘‘(i) severance pay, or 

23 ‘‘(ii) any transfer of a profits interest 

24 in a partnership. 


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1 ‘‘(C) EARNINGS AND INTEREST.—Any 

2 earnings, interest, or similar adjustment in3 cluded in an amount of applicable deferred com4 pensation shall not be treated as separately de5 ferred from such amount. 

6 ‘‘(3) SEVERANCE PAY.—The term ‘severance 

7 pay’ means any compensation the payment or vest8 ing of which is contingent, in whole or in part, upon 

9 the termination of employment or other services, in10 cluding cash, property, reimbursement or direct pro11 vision of living, travel, and business expenses, and 

12 life, health, or other insurance, to the extent other13 wise includible in gross income. 

14 ‘‘(4) DEFERRAL PERIOD.— 

15 ‘‘(A) IN GENERAL.—Except as provided in 

16 subparagraphs (B) and (C), the term ‘deferral 

17 period’, with respect to any applicable deferred 

18 compensation, means the period— 

19 ‘‘(i) beginning on the date the com20 pensation was first deferred, without re21 gard to vesting, transferability, or risk of 

22 forfeiture, and 

23 ‘‘(ii) ending on the date such com24 pensation is includible in gross income or, 

25 if applicable, the date described in section 


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1 83(a)(1) with respect to such compensa2 tion. 

3 For purposes of the preceding sentence, com4 pensation shall be treated as first deferred as of 

5 the date the applicable taxpayer first has a le6 gally binding right to the compensation or, in 

7 the case of property subject to section 83, the 

8 date of transfer of the property. 

9 ‘‘(B) COMPUTATION OF INTEREST.—Solely 

10 for purposes of subsection (b)(3), the deferral 

11 period shall end on the last day of the taxable 

12 year which includes the date described in sub13 paragraph (A)(ii). 

14 ‘‘(C) PROPERTY TRANSFERRED PURSUANT

15 TO THE EXERCISE OF AN OPTION.—In the case 

16 of property acquired pursuant to an option de17 scribed in section 83(e)(3), the deferral period 

18 shall begin on the date of grant of the option 

19 pursuant to which the property was acquired. 

20 ‘‘(d) REGULATIONS.—The Secretary shall prescribe 

21 such regulations as may be necessary or appropriate to 

22 carry out the purposes of this section.’’. 

23 (b) INFORMATION REPORTING WITH RESPECT TO

24 APPLICABLE DEFERRED COMPENSATION.—Subpart B of 

25 part III of subchapter A of chapter 61, as in effect after 


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1 the amendments made by section 334(d) of the SECURE 

2 2.0 Act of 2022, is amended by adding at the end the 

3 following new section: 

4 ‘‘SEC. 6050AA. INFORMATION WITH RESPECT TO APPLICA5 BLE DEFERRED COMPENSATION. 

6 ‘‘(a) IN GENERAL.—Every person making a payment 

7 to an individual in excess of $5,000,000 of— 

8 ‘‘(1) any applicable deferred compensation de9 scribed in section 409B(c)(2)(A), or 

10 ‘‘(2) any severance pay (as defined in section 

11 409B(d)(3)), 

12 shall make a return, not later than January 31 of the first 

13 calendar year beginning after the close of the taxable year 

14 during which such payment is includible in gross income 

15 of the individual. 

16 ‘‘(b) INFORMATION REQUIRED.—The return required 

17 by subsection (a) shall include— 

18 ‘‘(1) the name, taxpayer identification number, 

19 and address of the individual to whom the payment 

20 of applicable deferred compensation or severance pay 

21 is made, 

22 ‘‘(2) the date any applicable deferred compensa23 tion was first deferred (the date of the transfer, in 

24 the case of property subject to section 83, or the 

25 date of grant of the option, in the case of property 


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1 acquired pursuant to an option described in section 

2 83(e)(3)), without regard to vesting, transferability, 

3 or risk of forfeiture, 

4 ‘‘(3) the amount of such compensation includ5 ible in gross income of the individual for the taxable 

6 year, 

7 ‘‘(4) the amount of such severance pay includ8 ible in gross income of the individual for the taxable 

9 year, and 

10 ‘‘(5) such other information as the Secretary 

11 may require. 

12 ‘‘(c) SPECIAL RULES.— 

13 ‘‘(1) SECTION 83 COMPENSATION.—With re14 spect to transfers of property to which section 83 

15 applies, the information required under paragraphs 

16 (2) and (3) of subsection (b) shall be reported sepa17 rately for each item of property transferred, except 

18 that property for which the information required by 

19 such paragraphs is identical may be aggregated. 

20 ‘‘(2) OTHER COMPENSATION.—With respect to 

21 any applicable deferred compensation not described 

22 in paragraph (1), if such compensation is paid pur23 suant to more than 1 plan or arrangement or in24 volves amounts which were first deferred on more 

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1 graphs (2) and (3) of subsection (b) shall be re2 ported separately with respect to each such plan or 

3 arrangement and each such date. 

4 ‘‘(d) STATEMENTS TO BE FURNISHED TO INDIVID5 UALS WITH RESPECT TO WHOM INFORMATION IS RE6 PORTED.—Every person required to make a return under 

7 subsection (a) shall furnish to each individual with respect 

8 to whom such a return is required a written statement 

9 showing— 

10 ‘‘(1) the name, address, and phone number of 

11 the information contact of the person making such 

12 return, and 

13 ‘‘(2) the information required by paragraphs 

14 (2) through (5) of subsection (b). 

15 The written statement required under the preceding sen16 tence shall be furnished to the individual on or before Jan17 uary 31 of the first calendar year beginning after the close 

18 of the taxable year for which the return under subsection 

19 (a) was made. 

20 ‘‘(e) ADJUSTMENTS FOR INFLATION.— 

21 ‘‘(1) IN GENERAL.—In the case of any taxable 

22 year beginning after 2024, the $5,000,000 amount 

23 under subsection (a) shall be increased by an 

24 amount equal to the product of— 

25 ‘‘(A) such dollar amount, and 


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1 ‘‘(B) the cost-of-living adjustment under 

2 section 1(f)(3) for the calendar year in which 

3 such taxable year begins, determined by sub4 stituting ‘calendar year 2023’ for ‘calendar year 

5 1992’ in subparagraph (B) thereof. 

6 ‘‘(2) ROUNDING.—If any amount as adjusted 

7 under paragraph (1) is not a multiple of $250,000, 

8 such amount shall be rounded to the next lowest 

9 multiple of $250,000. 

10 ‘‘(f) REGULATIONS.—The Secretary shall prescribe 

11 such regulations as may be necessary or appropriate to 

12 carry out the purposes of this section, including regula13 tions specifying what constitutes a payment to an indi14 vidual of applicable deferred compensation for purposes of 

15 subsection (a).’’. 

16 (c) PENALTIES.— 

17 (1) RETURNS.—Section 6724(d)(1)(B), as in 

18 effect after the amendments made by section 334(d) 

19 of the SECURE 2.0 Act of 2022, is amended by 

20 striking ‘‘or’’ at the end of clause (xxvii), by striking 

21 ‘‘and’’ at the end of clause (xxviii) and inserting 

22 ‘‘or’’, and by inserting after clause (xxviii) the fol23 lowing new clause: 


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1 ‘‘(xxix) section 6050AA (a) (relating 

2 to returns of information with respect to 

3 applicable deferred compensation), and’’. 

4 (2) STATEMENTS.—Section 6724(d)(2), as so in 

5 effect, is amended— 

6 (A) by striking ‘‘or’’ at the end of subpara7 graph (KK), 

8 (B) by striking the period at the end of 

9 subparagraph (LL) and inserting ‘‘, or’’, and 

10 (C) by inserting after subparagraph (LL) 

11 the following new subparagraph: 

12 ‘‘(MM) section 

13 6050AA(d) (relating to 

14 statements of information 

15 with respect to applicable 

16 deferred compensation).’’. 

17 (d) CLERICAL AMENDMENTS.— 

18 (1) IN GENERAL.—The table of sections for 

19 subpart A of part I of subchapter D of chapter 1 is 

20 amended by inserting after the item relating to sec21 tion 409A the following new item: 

‘‘Sec. 409B. Special rules for certain deferred compensation.’’. 

22 (2) INFORMATION REPORTING.—The table of 

23 sections for subpart B of part III of subchapter A 

24 of chapter 61, as in effect after the amendments 

25 made by section 334(d) of the SECURE 2.0 Act of 


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1 2022, is amended by inserting after the item relat2 ing to section 6050Z the following new item: 

‘‘Sec. 6050AA. Information with respect to applicable deferred compensation.’’. 

3 (e) EFFECTIVE DATE.—The amendments made by 

4 this section shall apply to taxable years beginning after 

5 December 31, 2023. 

6 SEC. 222. RULES RELATING TO CERTAIN LIFE INSURANCE 

7 AND ANNUITY CONTRACTS OF APPLICABLE 

8 TAXPAYERS. 

9 (a) TREATMENT OF AMOUNTS RECEIVED.— 

10 (1) IN GENERAL.—Section 72(e) is amended by 

11 redesignating paragraph (12) as paragraph (13) and 

12 by inserting after paragraph (11) the following: 

13 ‘‘(12) TREATMENT OF CERTAIN AMOUNTS RE14 CEIVED UNDER CERTAIN LIFE INSURANCE AND AN15 NUITY CONTRACTS OF APPLICABLE TAXPAYERS.— 

16 ‘‘(A) IN GENERAL.—In the case of any ap17 plicable amount which is received during any 

18 taxable year, notwithstanding paragraph (5)(A) 

19 or (5)(E)— 

20 ‘‘(i) if such amount is received on or 

21 after the annuity starting date, paragraph 

22 (2)(A) shall apply, and 

23 ‘‘(ii) if such amount is received before 

24 the annuity starting date or is received 

25 with respect to a life insurance contract to 


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1 which this section applies, the rules of 

2 clauses (i) and (ii) of paragraph (2)(B) 

3 shall apply. 

4 ‘‘(B) APPLICABLE AMOUNT.— 

5 ‘‘(i) IN GENERAL.—For purposes of 

6 this paragraph, the term ‘applicable 

7 amount’ means— 

8 ‘‘(I) any amount to which this 

9 subsection applies which is received 

10 under an applicable private placement 

11 life insurance or annuity contract, and 

12 ‘‘(II) in the case of an applicable 

13 taxpayer, notwithstanding paragraph 

14 (5)(A), (5)(E), or (10)(A), any 

15 amount or portion described in para16 graph (4)(A) with respect to a life in17 surance or annuity contract, except 

18 that ‘any applicable taxpayer or any 

19 related person (as defined in section 

20 144(a)(3)) to an applicable taxpayer’ 

21 shall be substituted for ‘an individual’ 

22 in applying such paragraph. 

23 ‘‘(ii) TREATMENT OF REFUNDS, SUR24 RENDERS, REDEMPTIONS AND MATU25 RITIES.—Notwithstanding paragraph 


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1 (5)(A) or (5)(E), amounts described in 

2 clause (i)(I) shall include amounts de3 scribed in clause (i) or (ii) of paragraph 

4 (5)(E) received under an applicable private 

5 placement life insurance or annuity con6 tract. 

7 ‘‘(iii) AMOUNTS UNDER PRE-1982 AND

8 QUALIFIED PLAN CONTRACTS, ETC., EX9 CLUDED.—Such term shall not include 

10 amounts received— 

11 ‘‘(I) under a contract which is 

12 described in paragraph (5)(B) or 

13 (5)(D), or 

14 ‘‘(II) under a qualified tuition 

15 program (as defined in section 

16 529(b)) or under a Coverdell edu17 cation savings account (as defined in 

18 section 530(b)). 

19 ‘‘(C) APPLICABLE PRIVATE PLACEMENT

20 LIFE INSURANCE OR ANNUITY CONTRACT.—For 

21 purposes of this paragraph— 

22 ‘‘(i) IN GENERAL.—The term ‘applica23 ble private placement life insurance or an24 nuity contract’ means a private placement 

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1 er of which (whether directly or indirectly) 

2 is an applicable taxpayer. 

3 ‘‘(ii) SECRETARIAL AUTHORITY.—The 

4 Secretary shall prescribe regulations or 

5 other guidance which treat a private place6 ment life insurance or annuity contract as 

7 an applicable private placement life insur8 ance or annuity contract in cases where an 

9 applicable taxpayer (or a related person) 

10 has an interest in such contract not de11 scribed in clause (i) if such treatment is 

12 necessary to prevent the avoidance of the 

13 purposes of this paragraph. 

14 ‘‘(D) PRIVATE PLACEMENT LIFE INSUR15 ANCE OR ANNUITY CONTRACT.—For purposes 

16 of this paragraph, the term ‘private placement 

17 life insurance or annuity contract’ means any 

18 contract— 

19 ‘‘(i) which is an annuity contract or a 

20 life insurance contract, and 

21 ‘‘(ii) with respect to which the holder 

22 of the contract is required, for purposes of 

23 obtaining a registration exemption under 

24 securities laws as in effect on the date of 

25 enactment of this section (including the 


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1 Securities Exchange Act of 1934 and the 

2 Investment Advisors Act of 1940), to make 

3 a representation that such owner— 

4 ‘‘(I) has a specified minimum 

5 amount of income or assets, 

6 ‘‘(II) has completed a specified 

7 minimum level of education, or 

8 ‘‘(III) holds a specific license or 

9 credential. 

10 ‘‘(E) APPLICABLE TAXPAYER.—For pur11 poses of this paragraph, the term ‘applicable 

12 taxpayer’ has the meaning given such term 

13 under section 495.’’. 

14 (2) CONFORMING AMENDMENT.—Section 

15 72(e)(5)(C) is amended by inserting ‘‘or (12)’’ after 

16 ‘‘(10)’’. 

17 (3) EFFECTIVE DATE.—The amendments made 

18 by this subsection shall apply to amounts received in 

19 taxable years beginning after December 31, 2023. 

20 (b) 10-PERCENT ADDITIONAL TAX FOR DISTRIBU21 TIONS FROM APPLICABLE PRIVATE PLACEMENT LIFE IN22 SURANCE OR ANNUITY CONTRACTS.— 

23 (1) IN GENERAL.—Section 72(v) is amended— 

24 (A) by inserting ‘‘or an applicable private 

25 placement life insurance or annuity contract (as 


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1 defined in subsection (e)(12))’’ after ‘‘a modi2 fied endowment contract (as defined in section 

3 7702A)’’ in paragraph(1), and 

4 (B) by inserting ‘‘AND APPLICABLE PRI5 VATE PLACEMENT LIFE INSURANCE OR ANNU6 ITY CONTRACTS’’ after ‘‘MODIFIED ENDOW7 MENT CONTRACTS’’ in the heading thereof. 

8 (2) EFFECTIVE DATE.—The amendments made 

9 by this subsection shall apply to amounts received in 

10 taxable years beginning after December 31, 2023. 

11 (c) REPEAL OF EXCLUSION FOR DEATH BENE12 FITS.— 

13 (1) IN GENERAL.—Section 101 is amended by 

14 adding at the end the following new subsection: 

15 ‘‘(k) EXCLUSION NOT TO APPLY.— 

16 ‘‘(1) IN GENERAL.—Subsection (a)(1) shall not 

17 apply to amounts received by reason of the death of 

18 the insured under an applicable private placement 

19 life or annuity contract (within the meaning of sec20 tion 72(e)(12)). 

21 ‘‘(2) AMOUNTS PREVIOUSLY INCLUDED.—The 

22 Secretary shall prescribe rules to ensure that para23 graph (1) shall not apply to any portion of any 

24 amount received which was previously included in 

25 gross income.’’. 


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1 (2) CONFORMING AMENDMENT.—Section 

2 101(a)(1) is amended by striking ‘‘and subsection 

3 (j),’’ and inserting ‘‘subsection (j), and subsection 

4 (k),’’. 

5 (3) EFFECTIVE DATE.—The amendments made 

6 by this subsection shall apply to amounts received in 

7 taxable years beginning after December 31, 2023. 

8 (d) REPORTING REQUIREMENTS.— 

9 (1) IN GENERAL.—Subpart B of part III of 

10 subchapter A of chapter 61, as amended by this Act, 

11 is amended by adding at the end the following new 

12 section: 

13 ‘‘SEC. 6050BB. RETURNS RELATING TO AMOUNTS RECEIVED 

14 UNDER CERTAIN LIFE INSURANCE AND AN15 NUITY CONTRACTS. 

16 ‘‘(a) IN GENERAL.—Every person who issues a life 

17 insurance or annuity contract or who reinsures such a con18 tract shall make an annual return (at such time and in 

19 such manner as the Secretary shall prescribe) setting 

20 forth— 

21 ‘‘(1) the name, address, and TIN of such per22 son, 

23 ‘‘(2) the name, address, and TIN of each per24 son who receives an applicable amount (as defined in 

25 section 72(e)(12)) during the year with respect to 


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1 any life insurance or annuity contract issued or rein2 sured by such person, 

3 ‘‘(3) the aggregate applicable amounts received 

4 by each person identified in paragraph (2), and 

5 ‘‘(4) such other information as the Secretary 

6 may require. 

7 ‘‘(b) STATEMENT TO BE FURNISHED TO TAXPAYERS

8 WITH RESPECT TO WHOM INFORMATION IS REQUIRED.— 

9 ‘‘(1) IN GENERAL.—Every person that is re10 quired to make a return under subsection (a) shall 

11 furnish to each person whose identity is required to 

12 be set forth under subsection (a)(2) a written state13 ment showing— 

14 ‘‘(A) the name, address, and phone num15 ber of the information contact of the person re16 quired to make such return, and 

17 ‘‘(B) the information required to be shown 

18 on such return with respect to the person de19 scribed in subsection (a)(2) and with respect to 

20 applicable amounts received by such person. 

21 ‘‘(2) FURNISHING OF INFORMATION.—The 

22 written statement required under paragraph (1) 

23 shall be furnished to the person on or before Janu24 ary 31 of the year following the calendar year for 


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1 which the return under subsection (a) is required to 

2 be made. 

3 ‘‘(c) REGULATORY AUTHORITY.—The Secretary may 

4 prescribe such regulations and other guidance as nec5 essary for purposes of carrying out this section, including 

6 regulations or other guidance to require reporting under 

7 this section by such other persons as necessary to carry 

8 out the purposes of section 72(e)(12).’’. 

9 (2) PENALTIES.— 

10 (A) RETURNS.—Section 6724(d)(1)(B), as 

11 amended by this Act, is amended by striking 

12 ‘‘or’’ at the end of clause (xxviii), by striking 

13 ‘‘and’’ at the end of clause (xxix) and inserting 

14 ‘‘or’’, and by inserting after clause (xxix) the 

15 following new clause: 

16 ‘‘(xxx) section 6050BB(a) (relating to 

17 returns of information with respect to pri18 vate placement life insurance and annuity 

19 contracts),’’. 

20 (B) STATEMENTS.—Section 6724(d)(2), as 

21 so amended, is amended— 

22 (i) by striking ‘‘or’’ at the end of sub23 paragraph (LL), 


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1 (ii) by striking the period at the end 

2 of subparagraph (MM) and inserting ‘‘, 

3 or’’, and 

4 (iii) by inserting after subparagraph 

5 (MM) the following new subparagraph: 

6 ‘‘(NN) section 

7 6050BB(b) (relating to 

8 statements of information 

9 with respect to private place10 ment life insurance and an11 nuity contracts).’’. 

12 (3) CLERICAL AMENDMENT.—The table of sec13 tions for subpart B of part III of subchapter A of 

14 chapter 61, as amended by this Act, is amended by 

15 inserting after the item relating to section 6050AA 

16 the following new item: 

‘‘Sec. 6050BB. Returns relating to amounts received under certain life insurance and annuity contracts.’’. 

17 (4) EFFECTIVE DATE.—The amendments made 

18 by this subsection shall apply to taxable years begin19 ning after December 31, 2023. 


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1 Subtitle D—Repeal of Special 

2 Treatment for Certain Investments 

3 SEC. 231. TREATMENT OF EXCLUSION FOR CERTAIN SMALL 

4 BUSINESS STOCK. 

5 (a) IN GENERAL.—Section 1202(a) is amended by 

6 adding at the end the following new paragraph: 

7 ‘‘(5) SPECIAL RULES FOR APPLICABLE TAX8 PAYERS.— 

9 ‘‘(A) IN GENERAL.—This subsection shall 

10 not apply to any gain from the sale or exchange 

11 of qualified small business stock by an applica12 ble taxpayer (as defined in section 495). 

13 ‘‘(B) EXCEPTION.—Subparagraph (A) 

14 shall not apply to any qualified small business 

15 stock acquired before November 30, 2023.’’. 

16 (b) EFFECTIVE DATE.—The amendment made by 

17 this subsection shall apply to sales or exchanges on or 

18 after November 30, 2023. 

19 SEC. 232. MODIFICATIONS FOR INVESTMENTS IN QUALI20 FIED OPPORTUNITY FUNDS. 

21 (a) TERMINATION OF ELECTION.— 

22 (1) IN GENERAL.—Section 1400Z–2(a)(2)(B) is 

23 amended to read as follows: 


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1 ‘‘(B) except as provided in paragraph (3), 

2 with respect to any sale or exchange after the 

3 earlier of— 

4 ‘‘(i) December 31, 2026, or 

5 ‘‘(ii) in the case of an applicable tax6 payer, the last day of the taxable year pre7 ceding the first taxable year for which the 

8 taxpayer is an applicable taxpayer.’’. 

9 (2) SPECIAL RULES.—Section 1400Z–2(a) is 

10 amended by adding at the end the following new 

11 paragraph: 

12 ‘‘(3) SPECIAL RULES FOR APPLICABLE TAX13 PAYERS AND ENTITIES.—For purposes of paragraph 

14 (2)(B)— 

15 ‘‘(A) APPLICABLE ENTITIES.—No election 

16 may be made under paragraph (1) by an appli17 cable entity with respect to any sale or ex18 change if a notice received by the entity under 

19 subsection (b)(2)(A) or (c)(2) of section 493 is 

20 in effect at the time of such sale or exchange. 

21 ‘‘(B) SPECIAL RULE FOR 2023.—In the 

22 case of a taxpayer which would be an applicable 

23 taxpayer for its first taxable year beginning in 

24 2023 (determined as if part IV of subchapter E 

25 applied to taxable years beginning in 2023), 


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1 clause (ii) of paragraph (2)(B) shall be applied 

2 by substituting ‘November 30, 2023’ for the 

3 date otherwise specified in such clause. 

4 ‘‘(C) DEFINITIONS.—For purposes of this 

5 paragraph and subsection (c), any term used in 

6 this paragraph which is also used in part IV of 

7 subchapter E shall have the same meaning as 

8 when used in such part.’’. 

9 (b) MODIFICATION OF SPECIAL RULE FOR INVEST10 MENTS HELD 10 YEARS.—Section 1400Z–2(c) is amend11 ed by striking ‘‘shall be equal to’’ and all that follows and 

12 inserting ‘‘shall be equal to— 

13 ‘‘(1) in the case of any taxpayer who is an ap14 plicable taxpayer for any taxable year during which 

15 such investment was held by the taxpayer or any 

16 taxpayer which is an applicable entity, the lesser 

17 of— 

18 ‘‘(A) the fair market value of such invest19 ment as of the last day of the taxable year 

20 which includes the later of— 

21 ‘‘(i) the date that such investment has 

22 been held for 10 years, or 

23 ‘‘(ii) in the case of— 


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1 ‘‘(I) an applicable taxpayer, the 

2 date that such taxpayer first became 

3 an applicable taxpayer, or 

4 ‘‘(II) an applicable entity, the 

5 first date a notice was received by the 

6 entity under subsection (b)(2)(A) or 

7 (c)(2) of section 493, or 

8 ‘‘(B) the fair market value of such invest9 ment on the date that investment is sold or ex10 changed, and 

11 ‘‘(2) in the case of any other taxpayer, the fair 

12 market value of such investment on the date the in13 vestment is sold or exchanged.’’. 

14 (c) EFFECTIVE DATE.—The amendments made by 

15 this section shall apply to sales or exchanges after Novem16 ber 30, 2023, in taxable years ending after such date. 

Æ 


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