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[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[S. 3367 Introduced in Senate (IS)]

<DOC>

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.

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

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

    (a) Short Title.--This Act may be cited as the ``Billionaires 
Income Tax Act''.
    (b) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this Act an amendment or repeal is expressed in 
terms of an amendment to, or repeal of, a section or other provision, 
the reference shall be considered to be made to a section or other 
provision of the Internal Revenue Code of 1986.
    (c) Table of Contents.--The table of contents of 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

Sec. 231. Treatment of exclusion for certain small business stock.
Sec. 232. Modifications for investments in qualified opportunity funds.

SEC. 2. PURPOSE.

    The purpose of this Act is to require billionaires to pay taxes 
annually by eliminating the ability of high income and high net worth 
taxpayers to use tax planning strategies such as ``buy, borrow, die'' 
to defer paying taxes indefinitely, specifically by--
            (1) under the provisions of title I of this Act--
                    (A) requiring high income and high net worth 
                taxpayers to pay tax on the income they earn on an 
                annual basis, just like working people do on their 
                income from wages, through mark-to-market taxation, and
                    (B) shutting down the ability of the ultra wealthy 
                to buy and hold appreciating assets and borrow against 
                those assets to support their lavish lifestyles, all 
                completely tax-free, and
            (2) under the provisions of title II of this Act, closing 
        loopholes in the tax code that allow high income and high net 
        worth taxpayers to shield their income from taxation, including 
        the loophole that allows ultra wealthy taxpayers to transfer 
        untaxed appreciated assets to their heirs at death and such 
        heirs to sell such assets completely tax-free.

       TITLE I--ELIMINATION OF DEFERRAL FOR APPLICABLE TAXPAYERS

SEC. 101. ELIMINATION OF DEFERRAL OF TAX.

    (a) In General.--Subchapter E of chapter 1 is amended by adding at 
the end the following new part:

      ``PART IV--ELIMINATION OF DEFERRAL FOR APPLICABLE TAXPAYERS

``Subpart A. General provisions.
``Subpart B. Definitions and rules relating to applicable taxpayers.
``Subpart C. Other definitions and rules.

                    ``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 pass-through entities.
``Sec. 494. Treatment of gifts, bequests, and transfers in trust.

``SEC. 490. ELIMINATION OF DEFERRAL OF TAX FOR APPLICABLE TAXPAYERS.

    ``In the case of an applicable taxpayer for any taxable year--
            ``(1) if there is a taxable event with respect to any 
        tradable covered asset of the taxpayer during the taxable year, 
        gain or loss shall be recognized as provided in section 491,
            ``(2) if there is an applicable transfer by the taxpayer 
        during the taxable year of any nontradable covered asset--
                    ``(A) if such applicable transfer is a disregarded 
                nonrecognition event, gain or loss shall be recognized 
                as provided in section 492(a)(1), and
                    ``(B) the tax imposed by this chapter for the 
                taxable year shall be increased as provided in section 
                492 with respect to any gain from any such transfer,
            ``(3) gain or loss with respect to any applicable entity 
        held by the taxpayer shall be taken into account as provided in 
        section 493, and
            ``(4) in the case of any gift, bequest, or transfer in 
        trust by an applicable taxpayer or applicable entity held by an 
        applicable taxpayer, section 494 shall apply.

``SEC. 491. TREATMENT OF TRADABLE COVERED ASSETS.

    ``(a) In General.--For purposes of this title, in the case of a 
taxable event with respect to any tradable covered asset of an 
applicable taxpayer--
            ``(1) notwithstanding any other provision of this title--
                    ``(A) gain or loss shall be recognized and taken 
                into account in the taxable year in which the taxable 
                event occurs as if the taxpayer had sold the tradable 
                covered asset for its fair market value--
                            ``(i) in the case of a taxable event 
                        described in subsection (b)(1), on the date of 
                        the taxable event, and
                            ``(ii) in the case of a taxable event 
                        described in subsection (b)(2), immediately 
                        before the taxable event, and
                    ``(B) except as provided in subsection (c)(1), gain 
                or loss taken into account by reason of a taxable event 
                described in subsection (b)(1) with respect to a 
                tradable covered asset which is a capital asset shall 
                be treated as long-term capital gain or long-term 
                capital loss, respectively, and
            ``(2) proper adjustments shall be made in the amount of 
        gain or loss subsequently realized for gain or loss taken into 
        account under paragraph (1).
    ``(b) Taxable Event.--For purposes of this part, the term `taxable 
event' means, with respect to any tradable covered asset--
            ``(1) the holding of such asset as of the close of any 
        taxable year with respect to which a taxpayer is an applicable 
        taxpayer, and
            ``(2) any disregarded nonrecognition event.
    ``(c) Special Rules.--
            ``(1) Characterization as ordinary income or loss.--Except 
        as provided by the Secretary, subsection (a)(1)(B) shall not 
        apply to any gain or loss from a tradable covered asset if, 
        under any other provision of this title, such gain or loss--
                    ``(A) is treated as gain or loss from the sale or 
                exchange of an asset which is not a capital asset, or
                    ``(B) is treated as ordinary income or loss on a 
                basis other than the taxpayer's holding period in such 
                asset.
            ``(2) Holding period.--For purposes of this title, any 
        taxable event described in subsection (b)(1) with respect to 
        any tradable covered asset shall not be taken into account in 
        determining the holding period of the taxpayer with respect to 
        such tradable covered asset.
            ``(3) Proper adjustments for subsequent gain or loss.--For 
        purposes of subsection (a)(2), section 492(a)(1)(B), section 
        493(c)(1)(A)(ii), and section 493(c)(3)(C), the proper 
        adjustments required under such provisions shall include such 
        adjustments in basis of property, or such other adjustments in 
        respect of property, as the Secretary determines necessary or 
        appropriate.

``SEC. 492. DEFERRAL RECAPTURE AMOUNT ON APPLICABLE TRANSFERS OF 
              NONTRADABLE COVERED ASSETS.

    ``(a) In General.--If there is an applicable transfer during a 
taxable year of a nontradable covered asset of an applicable taxpayer--
            ``(1) in the case of an applicable transfer which is a 
        disregarded nonrecognition event--
                    ``(A) notwithstanding any other provision of this 
                title, gain or loss shall be recognized and taken into 
                account by the taxpayer (including for purposes of 
                paragraph (2) and subsection (c)) in the taxable year 
                in which the transfer occurs as if the taxpayer had 
                sold the nontradable covered asset for its fair market 
                value immediately before such transfer, and
                    ``(B) proper adjustments shall be made in the 
                amount of gain or loss subsequently realized for gain 
                or loss taken into account under subparagraph (A), and
            ``(2) if there is gain from the applicable transfer, the 
        tax imposed by this chapter for the taxable year (determined 
        without regard to this section) shall be increased by the sum 
        of the deferral recapture amounts determined under subsection 
        (b) for each such transfer.
    ``(b) Deferral Recapture Amount.--
            ``(1) In general.--For purposes of this part--
                    ``(A) In general.--The term `deferral recapture 
                amount' means, with respect to any applicable transfer 
                of any nontradable covered asset, the aggregate amount 
                of interest (determined in the manner provided under 
                paragraph (3)) on the deemed tax amount determined 
                under paragraph (2) for each taxable year to which gain 
                is allocated under paragraph (2)(A) and which precedes 
                the taxable year of the applicable transfer.
                    ``(B) Limitation on amount.--The amount determined 
                under subparagraph (A) with respect to any applicable 
                transfer shall not exceed the applicable percentage of 
                the gain from such transfer. For purposes of this 
                subparagraph, the applicable percentage is the excess 
                of--
                            ``(i) 49 percent, over
                            ``(ii) in the case of the transfer of a 
                        nontradable covered asset which--
                                    ``(I) is a capital asset, the rate 
                                of tax in effect under section 
                                1(h)(1)(D) for the taxable year of the 
                                transfer, or
                                    ``(II) is not a capital asset, the 
                                highest rate of tax in effect under 
                                section 1 for such taxable year.
            ``(2) Deemed tax amount.--For purposes of paragraph (1)--
                    ``(A) In general.--The deemed tax amount for any 
                taxable year preceding the taxable year of any 
                applicable transfer of a nontradable covered asset 
                shall be the amount determined--
                            ``(i) first, except as provided in 
                        subparagraph (B), by allocating the amount of 
                        gain from such transfer ratably to each day in 
                        the taxpayer's holding period of such asset, 
                        and
                            ``(ii) then by multiplying the amount 
                        allocated under clause (i) to days in such 
                        preceding taxable year by--
                                    ``(I) if such asset is a capital 
                                asset, the rate of tax in effect under 
                                section 1(h)(1)(D) for the taxable year 
                                of such transfer, or
                                    ``(II) if such asset is not a 
                                capital asset, the highest rate of tax 
                                in effect under section 1 for such 
                                taxable year.
                    ``(B) Special rule for periods before becoming 
                applicable taxpayer.--Notwithstanding subparagraph 
                (A)(i), any gain allocated under such subparagraph to 
                any taxable year preceding the first taxable year for 
                which the taxpayer is treated as an applicable taxpayer 
                shall be allocated to such first taxable year.
                    ``(C) Increase in deemed tax amount by tax on net 
                investment income.--If gain from a transfer to which 
                this section applies for any taxable year is of a type 
                taken into account in computing net investment income 
                (as defined in section 1411), the deemed tax amount 
                under this paragraph for any preceding taxable year to 
                which such gain is allocated under subparagraph (A)(i) 
                shall be increased by an amount equal to the amount of 
                such allocated gain multiplied by the rate of tax in 
                effect under section 1411(a)(1) for the taxable year of 
                such transfer.
            ``(3) Computation of interest.--
                    ``(A) In general.--The amount of interest referred 
                to in paragraph (1) on any deemed tax amount determined 
                under paragraph (2) for any preceding taxable year 
                shall be determined for the period--
                            ``(i) beginning on the due date for such 
                        preceding taxable year, and
                            ``(ii) ending on the date on which the 
                        applicable transfer occurs,
                by using the rates determined under section 6621(b) 
                (plus 1 percentage point), and the method applicable 
                under section 6621, for underpayments of tax for such 
                period.
                    ``(B) Due date.--For purposes of this paragraph, 
                the term `due date' means, with respect to any 
                preceding taxable year, the date prescribed by law 
                (determined without regard to extensions) for filing 
                the return of the tax imposed by this chapter for such 
                taxable year.
    ``(c) Special Rule for Taxpayers With Net Capital Losses.--
            ``(1) In general.--If a taxpayer has a net capital loss for 
        any taxable year for which there is an increase in tax under 
        subsection (a)(2), such increase in tax shall be reduced (but 
        not below zero) by the credit equivalent of such net capital 
        loss.
            ``(2) Credit equivalent.--For purposes of this subsection, 
        the term `credit equivalent' means, with respect to any net 
        capital loss for any taxable year, an amount equal to such loss 
        multiplied by the rate of tax in effect under section 
        1(h)(1)(D) for such taxable year.
            ``(3) Coordination with carryovers of loss.--For purposes 
        of subsection (b) of section 1212, the net capital loss for a 
        taxable year to which paragraph (1) applies (determined without 
        regard to this subsection) shall be reduced (but not below 
        zero) by an amount equal to the amount of the reduction under 
        paragraph (1) for such taxable year divided by the rate of tax 
        in effect under section 1(h)(1)(D) for such taxable year.
    ``(d) Special Rules for Certain Dividend Distributions.--
            ``(1) Excess dividend distributions.--
                    ``(A) In general.--For purposes of applying this 
                section, any excess dividend shall be treated as gain 
                from an applicable transfer of a nontradable covered 
                asset occurring on the date such dividend is received.
                    ``(B) Excess dividend.--For purposes of this part, 
                the term `excess dividend' means, with respect to any 
                nontradable covered asset which consists of stock in a 
                C corporation, any dividend in respect of such stock 
                received during any taxable year to the extent such 
                dividend does not exceed its ratable portion of the 
                total excess dividends (if any) for such taxable year.
                    ``(C) Total excess dividends.--For purposes of this 
                paragraph--
                            ``(i) In general.--The term `total excess 
                        dividends' means, with respect to stock in a C 
                        corporation described in subparagraph (B), the 
                        excess (if any) of--
                                    ``(I) the amount of the dividends 
                                in respect of such stock received by 
                                the taxpayer during the taxable year, 
                                over
                                    ``(II) 125 percent of the average 
                                amount of dividends received in respect 
                                of such stock by the taxpayer during 
                                the 3 preceding taxable years (or, if 
                                shorter, the portion of the taxpayer's 
                                holding period before the taxable 
                                year).
                            ``(ii) No excess for 1st year.--Except as 
                        provided by the Secretary, the total excess 
                        dividends with respect to any stock shall be 
                        zero for the taxable year in which the 
                        taxpayer's holding period in such stock begins.
                    ``(D) Adjustments.--Under regulations prescribed by 
                the Secretary--
                            ``(i) determinations under this paragraph 
                        shall be made on a share-by-share basis, except 
                        that shares with the same holding period may be 
                        aggregated and other shares may be aggregated 
                        to the extent provided by the Secretary,
                            ``(ii) proper adjustments shall be made for 
                        stock splits and stock dividends,
                            ``(iii) if the taxpayer does not hold the 
                        stock during the entire taxable year, dividends 
                        received during such year shall be annualized, 
                        and
                            ``(iv) if the taxpayer's holding period 
                        includes periods during which the stock was 
                        held by 1 or more other persons, dividends with 
                        respect to such stock received by such other 
                        person shall be taken into account as if 
                        received by the taxpayer.
            ``(2) Capital gain dividends of certain reits.--
                    ``(A) In general.--For purposes of applying this 
                section, if an applicable taxpayer holds directly (or 
                indirectly through 1 or more nontradable interests) 
                stock in a real estate investment trust which is a 
                nontradable covered asset, any capital gain dividend 
                received by such taxpayer from such entity shall be 
                treated as gain from an applicable transfer of a 
                nontradable covered asset occurring on the date such 
                dividend is received.
                    ``(B) Reporting.--A real estate investment trust 
                shall include in the written notice for a capital gain 
                dividend under section 857(b)(3)(B) its holding period 
                in the asset giving rise to the capital gain dividend. 
                The Secretary shall provide rules for the determination 
                of holding periods in cases where the dividend is 
                properly allocable to gain from more than 1 asset.
            ``(3) Holding period.--Except as prescribed by the 
        Secretary, if an applicable taxpayer is treated under this 
        subsection as receiving gain from an applicable transfer of a 
        nontradable covered asset, the taxpayer's holding period for 
        purposes of computing the deferral recapture amount under this 
        section shall be the taxpayer's holding period with respect to 
        the stock or ownership interest in the entity to which 
        paragraph (1) or (2) applies (or, if shorter, the holding 
        period included in the notice described in paragraph (2)(B) in 
        the case of a capital gain dividend).
    ``(e) Holding Period.--For purposes of this section--
            ``(1) In general.--The taxpayer's holding period shall be 
        determined under section 1223, except that if a tradable 
        covered asset of an applicable taxpayer is converted to, or 
        exchanged for, a nontradable covered asset, such period shall 
        only include the period after the most recent taxable event 
        under this part with respect to such tradable covered asset.
            ``(2) Secretarial authority.--The Secretary shall prescribe 
        such regulations, rules, or guidance providing for other 
        modifications to holding periods as may be necessary to carry 
        out the purposes of this section.

``SEC. 493. SPECIAL RULES FOR APPLICATION OF NONDEFERRAL RULES TO 
              CERTAIN PASS-THROUGH ENTITIES.

    ``(a) Treatment of Ownership Interests in Applicable Entities.--For 
purposes of applying this part, except as provided in this section, any 
ownership interest in an applicable entity held directly (or indirectly 
through 1 or more nontradable interests) by an applicable taxpayer 
which is a tradable or nontradable covered asset shall be treated in 
the same manner as any other such asset.
    ``(b) Additional Requirements for Applicable Taxpayers Who Are 
Significant Owners.--For purposes of this part--
            ``(1) In general.--In the case of any applicable taxpayer 
        which is a significant owner of an applicable entity--
                    ``(A) such taxpayer shall meet the reporting 
                requirements under paragraph (2) with respect to such 
                entity, and
                    ``(B) such taxpayer shall take into account amounts 
                with respect to such entity as required under paragraph 
                (3).
            ``(2) Reporting requirements for significant owners.--
                    ``(A) Notice to entity of status.--
                            ``(i) In general.--In the case of the first 
                        taxable year for which a taxpayer--
                                    ``(I) is an applicable taxpayer,
                                    ``(II) is a significant owner of an 
                                applicable entity, and
                                    ``(III) holds directly a 
                                nontradable interest in such applicable 
                                entity,
                        such taxpayer shall, at such time and in such 
                        manner as the Secretary shall prescribe, notify 
                        such applicable entity that such taxpayer is a 
                        taxpayer meeting the requirements of subclauses 
                        (I), (II), and (III) and that the applicable 
                        entity is subject to the notice requirements 
                        under subsection (c) with respect to such 
                        taxpayer. Such taxpayer shall include with such 
                        notice such information as the Secretary may 
                        prescribe.
                            ``(ii) Period of notice.--Any notice 
                        provided by a taxpayer under clause (i) shall 
                        remain in effect, and such entity shall 
                        continue to be subject to the reporting 
                        requirements under subsection (c) with respect 
                        to such taxpayer, for the period specified by 
                        the Secretary. The Secretary may require 
                        additional reporting by the taxpayer for 
                        purposes of carrying out this clause.
                    ``(B) Reporting of elections to treat nontradable 
                interests as tradable assets.--If--
                            ``(i) section 496(a)(1) applies to an 
                        applicable taxpayer for any taxable year for 
                        which a notice with respect to such taxpayer is 
                        in effect under subparagraph (A), and
                            ``(ii) the applicable taxpayer made the 
                        election under section 496(a)(3) to treat any 
                        nontradable interest in an applicable entity as 
                        a tradable covered asset for purposes of 
                        section 496(a)(1),
                the applicable taxpayer shall, at such times and in 
                such manner as the Secretary shall prescribe, report to 
                such applicable entity notice of such election, the 
                amount of gain described in section 496(c)(1) with 
                respect to such treatment, and the requirement for the 
                entity to make the basis adjustments described in 
                section 496(c)(2).
            ``(3) Certain gain or loss of applicable entity taken into 
        account by significant owners.--
                    ``(A) In general.--Each applicable taxpayer for 
                which a notice with respect to such taxpayer is in 
                effect under paragraph (2)(A) or subsection (c)(2) with 
                respect to an applicable entity for any taxable year of 
                the taxpayer shall, in computing the taxpayer's tax 
                liability under this chapter for such taxable year, 
                take into account such taxpayer's share of any gain or 
                loss reported under subsection (c)(1)(A)(i) or 
                (c)(1)(B)(i) to the taxpayer for any taxable year of 
                such entity ending with or within such taxable year of 
                the taxpayer.
                    ``(B) Basis adjustments.--Under rules prescribed by 
                the Secretary, if gain or loss is taken into account by 
                an applicable taxpayer under subparagraph (A) with 
                respect to any tradable covered asset by reason of the 
                taxpayer holding a nontradable interest in an 
                applicable entity--
                            ``(i) the applicable entity's adjusted 
                        basis of such asset (solely for purposes of 
                        computing the taxpayer's share of such adjusted 
                        basis), and
                            ``(ii) the taxpayer's adjusted basis of 
                        such nontradable interest,
                shall each be appropriately adjusted to reflect gain or 
                loss so taken into account. Such rules shall also 
                provide proper adjustments to adjusted bases where such 
                ownership is held through tiered entities.
                    ``(C) Special rules for deferral recapture 
                amount.--
                            ``(i) Holding period.--Except as prescribed 
                        by the Secretary, if an applicable taxpayer 
                        takes into account gain under subparagraph (A) 
                        for any taxable year from an applicable 
                        transfer by such applicable entity of a 
                        nontradable covered asset, the taxpayer's 
                        holding period with respect to such asset for 
                        purposes of computing the deferral recapture 
                        amount under section 492 shall be the shorter 
                        of--
                                    ``(I) the entity's holding period 
                                in such asset, or
                                    ``(II) the taxpayer's holding 
                                period in such entity.
                            ``(ii) Other rules.--The Secretary shall 
                        prescribe rules for purposes of this section--
                                    ``(I) for the treatment of 
                                fragmented holding periods,
                                    ``(II) for the determination of 
                                holding periods in the case of tiered 
                                structures, and
                                    ``(III) to prevent the shifting of 
                                any deferral recapture amount between 
                                taxpayers holding ownership interests 
                                in an applicable entity.
                    ``(D) Taxpayers failing to file notice.--Under 
                rules required by the Secretary, if a taxpayer fails to 
                file a notice with any applicable entity as required 
                under paragraph (2)(A), such taxpayer shall take into 
                account, in computing the taxpayer's tax liability 
                under this chapter for any taxable year for which such 
                notice (or a related notice under subsection (c)(2)) 
                would otherwise have been in effect, gain or loss 
                described in subparagraph (A) which would have been 
                reported if such notice had been filed.
            ``(4) Significant owner.--For purposes of this subsection--
                    ``(A) In general.--The term `significant owner' 
                means, with respect to any applicable entity, an 
                applicable taxpayer who, at any time during the 
                applicable taxpayer's taxable year--
                            ``(i) is a 5-percent owner with respect to 
                        such entity, or
                            ``(ii) holds nontradable interests in such 
                        entity with an aggregate applicable value of 
                        greater than $50,000,000.
                    ``(B) 5-percent owner.--
                            ``(i) In general.--The term `5-percent 
                        owner' mean, with respect to any applicable 
                        entity, an applicable taxpayer who owns (or is 
                        considered as owning within the meaning of 
                        section 318) at least 5 percent of--
                                    ``(I) in the case of a corporation, 
                                the stock (by vote or value) in such 
                                corporation, or
                                    ``(II) in the case of an applicable 
                                entity other than a corporation, the 
                                capital or profits interests in such 
                                entity.
                            ``(ii) Constructive ownership rules.--For 
                        purposes of this subparagraph--
                                    ``(I) subparagraph (C) of section 
                                318(a)(2) shall be applied by 
                                substituting `5 percent' for `50 
                                percent', and
                                    ``(II) in the case of an applicable 
                                entity which is not a corporation, 
                                ownership in such entity shall be 
                                determined in accordance with 
                                regulations prescribed by the Secretary 
                                which shall be based on principles 
                                similar to the principles of section 
                                318 (as modified by subclause (I)).
    ``(c) Additional Entity Reporting Requirements.--
            ``(1) In general.--Except as provided in paragraph (4), an 
        applicable entity for any taxable year shall, at such times and 
        in such manner as the Secretary shall prescribe, report to each 
        applicable taxpayer with respect to which a notice is in effect 
        under subsection (b)(2)(A) or paragraph (2)--
                    ``(A) in the case of tradable covered assets held 
                by such entity, such taxpayer's share of--
                            ``(i) gain or loss determined by the entity 
                        under rules similar to the rules under section 
                        491, and
                            ``(ii) proper adjustments shall be made in 
                        the amount of gain or loss subsequently 
                        realized for gain or loss taken into account 
                        under clause (i),
                    ``(B) in the case of nontradable covered assets 
                held by such entity--
                            ``(i) such person's share of any gain or 
                        loss on any applicable transfer during such 
                        taxable year of any such asset, and
                            ``(ii) the holding period in each such 
                        asset, and
                    ``(C) such other information as the Secretary 
                determines necessary to carry out this part.
            ``(2) Notice of taxpayers holding indirect interests in 
        other applicable entities.--
                    ``(A) In general.--Under rules prescribed by the 
                Secretary, except as provided in subparagraph (B), if 
                an applicable entity in a tier of entities--
                            ``(i) receives a notice under subsection 
                        (b)(2)(A) with respect to an applicable 
                        taxpayer, such entity shall notify each other 
                        applicable entity in which such applicable 
                        taxpayer holds, by reason of holding a 
                        nontradable interest in such entity, a 
                        nontradable interest in such other entity that 
                        the person holding such interest in such other 
                        entity is an applicable taxpayer with respect 
                        to which the notice requirements of paragraph 
                        (1) apply to such other entity, or
                            ``(ii) receives a notice under clause (i) 
                        or this clause, such entity shall notify each 
                        other applicable entity in which the applicable 
                        taxpayer holds, by reason of holding an 
                        interest in the entity receiving such notice, a 
                        nontradable interest in such other entity that 
                        the person holding such interest in such other 
                        entity is an applicable taxpayer with respect 
                        to which the notice requirements of paragraph 
                        (1) apply to such other entity.
                Any such notice shall remain in effect, and any entity 
                receiving such notice shall treat such taxpayer as an 
                applicable taxpayer, for the period specified by the 
                Secretary. The Secretary may require additional 
                reporting by such entities for purposes of carrying out 
                this clause.
                    ``(B) Requirement only applies if applicable 
                taxpayer is significant owner.--An applicable entity 
                shall be required to report under subparagraph (A) to 
                another applicable entity only if the applicable 
                taxpayer is a significant owner (within the meaning of 
                subsection (b)(4)) of such other entity, determined 
                only by taking into account interests in such other 
                entity which such applicable taxpayer holds by reason 
                of its ownership interests in the entity otherwise 
                required to report and such other ownership interests 
                in such other entity as the Secretary may require to be 
                taken into account to prevent the avoidance of the 
                purposes of this part.
            ``(3) Special rules for disregarded nonrecognition 
        events.--In the case of an applicable transfer of a nontradable 
        covered asset of an applicable entity which is a disregarded 
        nonrecognition event--
                    ``(A) notwithstanding any other provision of this 
                title, gain or loss shall be recognized and taken into 
                account in the taxable year in which the transfer 
                occurs as if the entity had sold the nontradable 
                covered asset for its fair market value immediately 
                before such transfer (or such other value as is 
                determined as of such time under rules prescribed by 
                the Secretary),
                    ``(B) such entity shall report the amount of gain 
                or loss required to be taken into account under 
                subparagraph (A) to--
                            ``(i) each applicable taxpayer with respect 
                        to which a notice is in effect which such 
                        entity has received under subsection (b)(1), 
                        and
                            ``(ii) each other applicable entity from 
                        which it has received a notice under paragraph 
                        (2) with respect to such an applicable 
                        taxpayer, and
                    ``(C) proper adjustments shall be made in the 
                amount of gain or loss subsequently realized for gain 
                or loss taken into account under subparagraph (A).
            ``(4) Delay in reporting requirement.--If--
                    ``(A) a notice is received by an applicable entity 
                under subsection (b)(2)(A) or paragraph (2) for any 
                taxable year of the entity with respect to any person 
                holding directly (or indirectly through 1 or more 
                nontradable interests) a nontradable interest in such 
                entity, and
                    ``(B) no notice is in effect with respect to such 
                person or any other person for the preceding taxable 
                year,
        then, except as provided by the Secretary, such notice shall be 
        treated as first taking effect for purposes of this subsection, 
        section 351(h), and section 1031(i) for the taxable year 
        immediately following the taxable year in which the notice is 
        received. This paragraph shall not apply to a notice described 
        in subparagraph (A) received by an applicable entity from a 
        person who was a significant owner (within the meaning of 
        subsection (b)(4)) of such entity (or any predecessor entity) 
        on the date of the enactment of this part.
            ``(5) Secretarial authority.--In prescribing rules for the 
        application of this subsection, the Secretary may provide--
                    ``(A) simplified methods for applicable entities to 
                meet the requirements of this subsection, including the 
                aggregation of gains and losses where appropriate,
                    ``(B) rules for determining a holder's share of 
                amounts required to be reported by an applicable entity 
                under paragraph (1), and
                    ``(C) any rules necessary to prevent the avoidance 
                of the purposes of this section, including through the 
                delay in the reporting requirement under paragraph (4).
    ``(d) Definitions and Rules Relating to Application of Section.--
For purposes of this part--
            ``(1) Applicable entity.--The term `applicable entity' 
        means any--
                    ``(A) partnership,
                    ``(B) S corporation, or
                    ``(C) other pass-through entity specified in 
                regulations or guidance prescribed by the Secretary.
            ``(2) Election to treat entity as applicable taxpayer for 
        taxable events involving tradable assets.--If an applicable 
        entity elects the application of this paragraph for any taxable 
        year--
                    ``(A) this section shall not apply with respect to 
                any gain or loss in connection with a taxable event 
                involving any tradable covered asset held directly (or 
                indirectly through 1 or more nontradable interests) by 
                such entity, and
                    ``(B) such entity shall be treated as an applicable 
                taxpayer for purposes of applying sections 490(1) and 
                491 to such taxable event.
        Such an election shall be made at such time and in such manner 
        as the Secretary may prescribe and, once made, shall be 
        irrevocable without the consent of the Secretary.
    ``(e) Nontradable Interest.--For purposes of this part, the term 
`nontradable interest' means any ownership interest in an applicable 
entity which is a nontradable covered asset.
    ``(f) Regulations and Guidance.--The Secretary shall prescribe such 
regulations and guidance as are necessary to carry out the provisions 
of this section, including regulations or guidance necessary--
            ``(1) to prevent the use of pass-through entities to avoid 
        the purposes of this part, and
            ``(2) to simplify the application of this part.

``SEC. 494. TREATMENT OF GIFTS, BEQUESTS, AND TRANSFERS IN TRUST.

    ``(a) In General.--
            ``(1) Deemed sale.--If any person described in paragraph 
        (3) transfers any covered asset by gift, upon death, or in 
        trust, such covered asset shall be treated as sold by such 
        person for its fair market value to the transferee on the date 
        of such gift, death, or transfer.
            ``(2) No recognition for losses on transfers by gift or in 
        trust.--
                    ``(A) In general.--No loss shall be recognized with 
                respect to any covered asset which is treated as sold 
                under subsection (a) by reason of a transfer by gift or 
                in trust.
                    ``(B) Amount of gain for transferee.--If a loss is 
                not recognized by the transferor by reason of 
                subparagraph (A) and the transferee sells or otherwise 
                disposes of the covered asset (or of other property the 
                basis of which in the taxpayer's hands is determined 
                directly or indirectly by reference to such property) 
                at a gain, then such gain shall be recognized only to 
                the extent that it exceeds so much of such loss as is 
                properly allocable to the covered asset sold or 
                otherwise disposed of by the transferee.
            ``(3) Person described.--A person is described in this 
        section if such person is--
                    ``(A) an individual who is an applicable taxpayer 
                for the taxable year in which the transfer is made, or
                    ``(B) an applicable entity with respect to which a 
                notice received by the entity under subsection 
                (b)(2)(A) or (c)(2) of section 493 is in effect at the 
                time of such transfer.
    ``(b) Special Rules for Certain Grantor Trusts.--
            ``(1) Transfers of nontradable covered assets into certain 
        grantor trusts.--For purposes of applying this section to any 
        transfer in trust, except as otherwise provided in this 
        paragraph, any transfer of a nontradable covered asset from the 
        person treated as the owner of an applicable grantor trust 
        (other than a grantor trust which is a wholly revocable trust) 
        to such trust shall be treated as a transfer to which 
        subsection (a) applies.
            ``(2) Deemed distributions.--In the case of any applicable 
        grantor trust, any property held by such trust shall be treated 
        as transferred by the owner in a transfer to which subsection 
        (a) applies--
                    ``(A) on any date that--
                            ``(i) the owner ceases to be treated as the 
                        owner under this chapter,
                            ``(ii) such property is distributed to any 
                        person other than the owner, or
                            ``(iii) the property would no longer be 
                        included in the owner's gross estate under 
                        chapter 11, or
                    ``(B) on the date of the death of the owner.
            ``(3) Applicable grantor trust.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `applicable grantor 
                trust' means the portion of any trust with respect to 
                which an applicable taxpayer is considered the owner 
                under subpart E of part I of subchapter J.
                    ``(B) Exceptions.--The Secretary shall provide for 
                appropriate exceptions to the treatment of categories 
                of trusts as applicable grantor trusts under 
                subparagraph (A), including arrangements which are 
                ordinarily used in the course of a trade or business, 
                employee benefit arrangements, and arrangements for 
                securitization transactions.
    ``(c) Exceptions.--
            ``(1) Spousal exception.--
                    ``(A) In general.--Subsection (a) shall not apply 
                to any transfer if such transfer--
                            ``(i) is--
                                    ``(I) made to the spouse or the 
                                surviving spouse of the transferor, or
                                    ``(II) made to a former spouse of 
                                the transferor if the transfer is 
                                incident to divorce, or
                            ``(ii) is a transfer of qualified 
                        terminable interest property or of property to 
                        which section 2056(b)(5) or 2523(e) applies.
                    ``(B) Certain remainder interests treated as 
                transferred by spouse.--Property described in 
                subparagraph (A)(ii) shall be treated as sold by the 
                spouse or surviving spouse on the earlier of the date 
                of the disposition of such property by such spouse or 
                surviving spouse or the date of the death of such 
                spouse or surviving spouse.
                    ``(C) Qualified terminable interest property.--For 
                purposes of this paragraph, the term `qualified 
                terminable interest property' means any property 
                described in section 2056(b)(7) or 2523(f)(2).
                    ``(D) Disallowance of spousal exception where 
                spouse or surviving spouse not united states citizen or 
                long-term resident.--
                            ``(i) In general.--Subparagraph (A) shall 
                        not apply if the spouse or surviving spouse of 
                        the decedent is not a citizen or long-term 
                        resident of the United States.
                            ``(ii) Long-term resident.--For purposes of 
                        clause (i), the term `long-term resident' means 
                        any individual (other than a citizen of the 
                        United States) who is a lawful permanent 
                        resident of the United States--
                                    ``(I) for the taxable year in which 
                                the transfer described in subsection 
                                (a) occurs, and
                                    ``(II) in at least 8 taxable years 
                                during the period of 15 taxable years 
                                ending with the taxable year during 
                                which the transfer described in 
                                subsection (a) or (b)(1) occurs.
                        For purposes of the preceding sentence, an 
                        individual shall not be treated as a lawful 
                        permanent resident for any taxable year if such 
                        individual is treated as a resident of a 
                        foreign country for the taxable year under the 
                        provisions of a tax treaty between the United 
                        States and the foreign country and does not 
                        waive the benefits of such treaty applicable to 
                        residents of the foreign country.
            ``(2) Gifts and bequests to charity.--
                    ``(A) In general.--Subsection (a) shall not apply 
                to any transfer if such transfer is made to or for the 
                use of an organization described in section 170(c).
                    ``(B) Special rule for split-interest trusts.--In 
                the case of any transfer--
                            ``(i) to a charitable remainder annuity 
                        trust (as defined in section 664) or a 
                        charitable remainder unitrust (as defined in 
                        section 664), or
                            ``(ii) of an interest described in section 
                        170(f)(2)(B),
                subsection (a) shall not apply to the portion of such 
                transfer which is to or for the use of an organization 
                described in section 170(c).
                    ``(C) Special rule for pooled income funds.--In the 
                case of any transfer to a pooled income fund (as 
                defined in section 642(c)(5)), subsection (a) shall not 
                apply to the portion of such transfer which is to or 
                for the use of an organization described in section 
                170(b)(1)(A) (other than in clauses (vii) or (viii)).
            ``(3) Qualified disability trusts and cemetery perpetual 
        care funds.--Subsection (a) shall not apply to transfers to any 
        qualified disability trust (as defined in section 
        642(b)(2)(C)(ii)) or to transfers to any cemetery perpetual 
        care fund described in section 642(i).
    ``(d) Basis of Transferee.--
            ``(1) In general.--Notwithstanding sections 1014 and 1015, 
        to the extent that subsection (a) applies to any transfer of 
        property--
                    ``(A) except as provided in subparagraph (B), the 
                basis of the property in the hands of the transferee 
                shall be the fair market value of the property 
                (consistent with the amount taken into account by the 
                transferor under subsection (a)), and
                    ``(B) in the case such transfer is a transfer upon 
                death to any individual described in subsection 
                (c)(1)(A)(i), the basis of the property in the hands of 
                the transferee shall be the same as it would be in the 
                hands of the transferor, except that if such basis 
                (adjusted for the period before the date of the 
                transfer as provided in section 1016) is greater than 
                the fair market value of the property at the time of 
                death, then for the purpose of determining loss the 
                basis shall be such fair market value.
            ``(2) Consistent basis rules for transfers by death.--In 
        the case of any transfer upon death, rules similar to section 
        1014(f) shall apply for purposes of this section.
    ``(e) Application of Depreciation Recapture Rules.--Paragraphs (1) 
and (2) of section 1245(b) and paragraphs (1) and (2) of section 
1250(d) shall not apply to any property treated as sold by reason of 
subsection (a).

  ``Subpart B--Definitions and Rules Relating to Applicable Taxpayers

``Sec. 495. Applicable taxpayer defined.
``Sec. 496. Special rules for taxpayers entering or changing status as 
                            applicable taxpayers.

``SEC. 495. APPLICABLE TAXPAYER DEFINED.

    ``(a) In General.--For purposes of this part--
            ``(1) In general.--The term `applicable taxpayer' means, 
        with respect to any taxable year, any taxpayer--
                    ``(A) which is an individual who met either the 
                income test of paragraph (2) or the asset test of 
                paragraph (3) for each of the 3 immediately preceding 
                taxable years (including taxable years beginning before 
                the date of the enactment of this part which are 
                included in any such 3-taxable year period), or
                    ``(B) which is--
                            ``(i) an applicable trust, or
                            ``(ii) the estate of an individual who was 
                        an applicable taxpayer for any taxable year 
                        during the 4-taxable year period ending with 
                        the taxable year in which the individual died.
            ``(2) Income test.--The requirements of this paragraph are 
        met for any taxable year if the applicable adjusted gross 
        income of the taxpayer for the taxable year exceeds 
        $100,000,000 ($50,000,000 in the case of a married individual 
        filing separately).
            ``(3) Asset test.--The requirements of this paragraph are 
        met for any taxable year if the aggregate applicable value of 
        all tradable and nontradable covered assets held by the 
        taxpayer as of the close of the taxable year exceeds 
        $1,000,000,000 ($500,000,000 in the case of a married 
        individual filing separately).
            ``(4) Special rules relating to applicable taxpayer 
        status.--
                    ``(A) Termination of status of individual 
                taxpayers.--A taxpayer who is treated as an applicable 
                taxpayer under paragraph (1)(A) for any taxable year 
                shall continue to be so treated until the first taxable 
                year with respect to which--
                            ``(i) the taxpayer does not, for each of 
                        the 3 taxable years immediately preceding such 
                        taxable year, meet either--
                                    ``(I) the income test of paragraph 
                                (2) in effect for such preceding 
                                taxable year, or
                                    ``(II) the asset test of paragraph 
                                (3) in effect for such preceding 
                                taxable year,
                        except that each such paragraph shall be 
                        applied for purposes of this clause by 
                        substituting an amount equal to one-half of the 
                        dollar amount otherwise in effect for such 
                        taxpayer under such paragraph for each such 
                        preceding taxable year for such dollar amount, 
                        and
                            ``(ii) the taxpayer elects, in such manner 
                        and form and at such time as the Secretary may 
                        prescribe, not to be so treated for such first 
                        taxable year.
                    ``(B) Earlier termination election of applicable 
                taxpayer status for divorced individuals.--If--
                            ``(i) an applicable taxpayer ceases to be a 
                        married individual by reason of a decree of 
                        divorce or separate maintenance issued during 
                        any taxable year, and
                            ``(ii) such taxpayer, for the first taxable 
                        year following the taxable year described in 
                        clause (i), does not meet either--
                                    ``(I) the income test of paragraph 
                                (2), except that such paragraph shall 
                                be applied for purposes of this 
                                subclause by substituting `$1,000,000' 
                                for the dollar amount otherwise in 
                                effect for such taxpayer under such 
                                paragraph, or
                                    ``(II) the asset test of paragraph 
                                (3), except that such paragraph shall 
                                be applied for purposes of this 
                                subclause by substituting `$10,000,000' 
                                for the dollar amount otherwise in 
                                effect for such taxpayer under such 
                                paragraph,
                then such taxpayer may elect, in such manner and form 
                and at such time as the Secretary may prescribe, not to 
                be treated as an applicable taxpayer beginning with 
                such first taxable year.
                    ``(C) Election.--An election under subparagraph (A) 
                or (B)--
                            ``(i) shall be made with the taxpayer's 
                        return of tax for the taxable year to which 
                        such election first applies (or such other time 
                        as the Secretary shall prescribe) and shall be 
                        in such form and manner as the Secretary may 
                        prescribe, and
                            ``(ii) shall apply to such first taxable 
                        year and all subsequent taxable years until the 
                        first taxable year for which the taxpayer is 
                        again treated as an applicable taxpayer by 
                        reason of meeting the requirements of paragraph 
                        (1)(A).
            ``(5) Special rules for married individuals.--
                    ``(A) Applicable taxpayers becoming married 
                individuals.--If an individual was an applicable 
                taxpayer for the taxable year before the individual 
                became a married individual (within the meaning of 
                section 7703), such individual and the individual's 
                spouse shall be treated as applicable taxpayers for 
                such taxable year of marriage and subsequent taxable 
                years until such status is otherwise terminated under 
                this section.
                    ``(B) Married individuals filing separately.--If a 
                married individual filing separately is treated as an 
                applicable taxpayer for any taxable year, such 
                individual's spouse shall be treated as an applicable 
                taxpayer for such taxable year.
                    ``(C) First-year elections.--Under rules prescribed 
                by the Secretary, if an individual is first treated as 
                an applicable taxpayer for a taxable year by reason of 
                the application of subparagraph (A) or (B), section 496 
                shall apply to such taxpayer for such first taxable 
                year only with respect to assets held separately by 
                such individual unless such taxable year is also the 
                first taxable year for which the individual's spouse is 
                an applicable taxpayer.
            ``(6) Regulatory authority.--The Secretary shall prescribe 
        such regulations and guidance as may be necessary to carry out 
        the provisions of this subsection, including--
                    ``(A) rules waiving the application of paragraph 
                (5)(B) in cases where the Secretary determines 
                equitable relief is appropriate,
                    ``(B) rules providing for the application of this 
                subsection in cases where the filing status of a 
                taxpayer changes between any taxable year and any of 
                the 3 immediately preceding taxable years, including 
                the first taxable year in which a taxpayer files a 
                joint return after becoming married, and
                    ``(C) rules requiring such information reporting as 
                the Secretary determines necessary to determine whether 
                a taxpayer is an applicable taxpayer.
    ``(b) Applicable Adjusted Gross Income.--For purposes of this 
section, the term `applicable adjusted gross income' means modified 
adjusted gross income as defined in section 36B(d)(2)(B), except that--
            ``(1) clause (i) thereof shall be applied by substituting 
        `sections 911, 931, and 933' for `section 911', and
            ``(2) in the case of a trust, no deduction under section 
        651 or 661 shall be allowed.
    ``(c) Applicable Trust.--For purposes of this section--
            ``(1) In general.--The term `applicable trust' means a 
        trust (other than a grantor trust) which, for each of the 3 
        taxable years immediately preceding such taxable year 
        (including taxable years beginning before the date of the 
        enactment of this part which are included in any such 3-taxable 
        year period), meets either--
                    ``(A) the income test of subsection (a)(2), except 
                that such subsection shall be applied for purposes of 
                this subparagraph by substituting `$10,000,000' for the 
                dollar amount otherwise in effect for such taxable year 
                under such paragraph, or
                    ``(B) the asset test of subsection (a)(3), except 
                that such subsection shall be applied for purposes of 
                this subparagraph by substituting `$100,000,000' for 
                the dollar amount otherwise in effect for such taxable 
                year under such paragraph.
            ``(2) Exceptions.--Such term shall not include--
                    ``(A) a qualified disability trust (as defined in 
                section 642(b)(2)(C)(ii)),
                    ``(B) any portion of a trust which consists of 
                property permanently set aside for the exclusive use of 
                an organization described in section 170(c),
                    ``(C) a pooled income fund (as defined in section 
                642(c)(5)) or a cemetery perpetual care fund (as 
                described in section 642(i)),
                    ``(D) a settlement trust (as defined in section 
                646),
                    ``(E) any charitable remainder annuity trust (as 
                defined in section 664),
                    ``(F) any charitable remainder unitrust (as defined 
                in section 664), or
                    ``(G) any other category of trust identified in 
                regulations or guidance provided by the Secretary.
            ``(3) Grantor trusts.--
                    ``(A) Grantor trust defined.--For purposes of this 
                section, the term `grantor trust' means any portion of 
                a trust with respect to which the grantor or any other 
                person is considered the owner under subpart E of part 
                I of subchapter J.
                    ``(B) Assets of grantor trust taken into account.--
                For purposes of subsection (a)(1)(A), the assets of a 
                grantor trust shall be included in the assets of--
                            ``(i) the grantor of such trust if the 
                        grantor is considered the owner of such assets, 
                        and
                            ``(ii) if a person other than the grantor 
                        is considered the owner of such assets, both 
                        the grantor and such person.
    ``(d) Special Rules for Foreign Persons and Expatriates.--For 
purposes of this part--
            ``(1) Nonresident alien individuals.--The following rules 
        shall apply in determining whether a nonresident alien 
        individual is an applicable taxpayer:
                    ``(A) Income test.--For purposes of the income test 
                under subsection (a)(2)--
                            ``(i) such subsection shall be applied for 
                        purposes of this subparagraph by substituting 
                        `$50,000,000' for the dollar amount otherwise 
                        in effect for such taxable year under such 
                        paragraph, and
                            ``(ii) the applicable adjusted gross income 
                        of such individual shall be equal to the 
                        taxable income of such individual, determined 
                        by only taking into account items of income, 
                        gain, deduction, and loss which are effectively 
                        connected with the conduct of trades or 
                        businesses within the United States.
                    ``(B) Asset test.--For purposes of the asset test 
                under subsection (a)(3)--
                            ``(i) such subsection shall be applied for 
                        purposes of this subparagraph by substituting 
                        `$500,000,000' for the dollar amount otherwise 
                        in effect for such taxable year under such 
                        paragraph, and
                            ``(ii) only assets which produce income 
                        described in subparagraph (A) shall be taken 
                        into account.
            ``(2) Expatriates.--
                    ``(A) In general.--If, for the taxable year which 
                includes a covered expatriate's expatriation date, such 
                expatriate--
                            ``(i) was an applicable taxpayer (without 
                        regard to this paragraph), or
                            ``(ii) is an applicable taxpayer under the 
                        rules of subparagraph (B),
                such expatriate shall be treated as an applicable 
                taxpayer during each of the taxable years during the 
                10-taxable-year period beginning with such taxable year 
                (and such status shall not be terminated during such 
                period by reason of any other provision of this part).
                    ``(B) Special rules for determining status.--For 
                purposes of subparagraph (A)(ii), a covered expatriate 
                not otherwise treated as an applicable taxpayer shall 
                be treated as an applicable taxpayer if, during any of 
                the 5 taxable years immediately preceding the taxable 
                year which includes the covered expatriate's 
                expatriation date (including taxable years beginning 
                before the date of the enactment of this part which are 
                included in any such 5-taxable year period), the 
                expatriate meets either--
                            ``(i) the income test of subsection (a)(2), 
                        except that such subsection shall be applied 
                        for purposes of this subparagraph by 
                        substituting `$50,000,000' for the dollar 
                        amount otherwise in effect for such taxable 
                        year under such paragraph, or
                            ``(ii) the asset test of subsection (a)(3), 
                        except that such subsection shall be applied 
                        for purposes of this subparagraph by 
                        substituting `$500,000,000' for the dollar 
                        amount otherwise in effect for such taxable 
                        year under such paragraph.
                    ``(C) Definitions.--Any term used in this paragraph 
                which is also used in section 877A shall have the same 
                meaning as when used in such section.

``SEC. 496. SPECIAL RULES FOR TAXPAYERS ENTERING OR CHANGING STATUS AS 
              APPLICABLE TAXPAYERS.

    ``(a) Initial Treatment as Applicable Taxpayer.--
            ``(1) In general.--In the case of the first taxable year 
        for which a taxpayer is an applicable taxpayer--
                    ``(A) the taxpayer may make the election under 
                paragraph (3) with respect to nontradable covered 
                assets, and
                    ``(B) if the taxpayer elects the application of 
                this subparagraph, the net first-year tax liability of 
                the taxpayer for such taxable year shall be payable in 
                5 equal annual installments over the 5-taxable year 
                period beginning with such taxable year.
            ``(2) Net first-year tax liability.--For purposes of this 
        section--
                    ``(A) In general.--The term `net first-year tax 
                liability' means, with respect to the first taxable 
                year described in paragraph (1), the excess (if any) 
                of--
                            ``(i) such taxpayer's net income tax for 
                        such taxable year, over
                            ``(ii) such taxpayer's net income tax for 
                        such taxable year determined without regard to 
                        gain or loss of the taxpayer taken into account 
                        for such taxable year by reason of a taxable 
                        event described in section 491(b)(1).
                    ``(B) Net income tax.--The term `net income tax' 
                means the regular tax liability reduced by the credits 
                allowed under subparts A, B, and D of part IV of 
                subchapter A.
            ``(3) Election to pay and defer tax on nontradable 
        assets.--
                    ``(A) In general.--Except as provided in 
                subparagraph (C), a taxpayer may elect to treat any 
                nontradable covered asset held by the taxpayer as of 
                the end of the first taxable year described in 
                paragraph (1) as a tradable covered asset for purposes 
                of applying section 491(b)(1) and this subsection.
                    ``(B) Determination of gain.--
                            ``(i) In general.--For purposes of applying 
                        section 491(a)(1)(A), the fair market value of 
                        any asset with respect to which an election is 
                        in effect under subparagraph (A) shall be the 
                        amount specified by the taxpayer in such 
                        election, except that such value may not, 
                        unless otherwise provided by the Secretary, be 
                        less than the taxpayer's adjusted basis in such 
                        asset as of the end of the first taxable year 
                        described in paragraph (1).
                            ``(ii) No deductions or credits for basis 
                        increases.--If there is any increase under this 
                        part in the taxpayer's adjusted basis of any 
                        asset by reason of an election under this 
                        paragraph, no deduction or credit shall be 
                        allowed under this title with respect to the 
                        portion of such adjusted basis attributable to 
                        such increase.
                    ``(C) Only significant owner of applicable entity 
                may elect.--In the case of a nontradable covered asset 
                which is a nontradable interest in an applicable 
                entity, an applicable taxpayer may make an election 
                under subparagraph (A) with respect to such asset only 
                if such taxpayer is a significant owner (as defined in 
                section 493(b)(4)(A)) of such entity with respect to 
                whom a notice is in effect under section 493(b)(2)(A) 
                for the taxable year for which the election is being 
                made.
            ``(4) Special rule where delay in reporting by applicable 
        entity.--
                    ``(A) In general.--If--
                            ``(i) there is a delay in reporting to an 
                        applicable taxpayer by 1 or more applicable 
                        entities by reason of section 493(c)(4), and
                            ``(ii) any gain or loss is reported by such 
                        entities to such taxpayer under section 
                        493(c)(1)(A)(i) and is taken into account in 
                        such taxpayer's taxable year immediately 
                        succeeding the first taxable year described in 
                        paragraph (1),
                then, subject to such rules as the Secretary may 
                prescribe, the taxpayer may elect under paragraph 
                (1)(B) to treat the net tax liability described in 
                subparagraph (B) as net first-year tax liability 
                payable in 5 equal annual installments beginning with 
                such succeeding taxable year. The rules of paragraph 
                (5) shall apply to such installments in the same manner 
                as such rules apply to installments for such first 
                taxable year.
                    ``(B) Net tax liability.--For purposes of 
                subparagraph (A), the net tax liability described in 
                this subparagraph is, with respect to the taxable year 
                described in such subparagraph, the excess (if any) 
                of--
                            ``(i) such taxpayer's net income tax for 
                        such taxable year, over
                            ``(ii) such taxpayer's net income tax for 
                        such taxable year determined without regard to 
                        gain or loss of the taxpayer described in 
                        subparagraph (A)(ii).
            ``(5) Rules relating to installment payments.--
                    ``(A) Date for payment of installments.--If an 
                election is made under paragraph (1), the first 
                installment shall be paid on the due date (determined 
                without regard to any extension of time for filing the 
                return) for the return of tax for the first taxable 
                year described in paragraph (1) and each succeeding 
                installment shall be paid on the due date (as so 
                determined) for the return of tax for the taxable year 
                following the taxable year with respect to which the 
                preceding installment was made.
                    ``(B) Acceleration of payment.--
                            ``(i) Disposition of assets.--
                                    ``(I) In general.--If, before the 
                                close of the 5-year period described in 
                                paragraph (1), a taxpayer sells or 
                                exchanges, transfers, or otherwise 
                                disposes of an asset with respect to 
                                which an election is in effect under 
                                paragraph (1)(B), then the applicable 
                                percentage of the unpaid portion of all 
                                remaining installments described in 
                                paragraph (1)(B) shall be due on the 
                                date of such disposition (or such later 
                                date as the Secretary may prescribe).
                                    ``(II) Applicable percentage.--For 
                                purposes of this subparagraph, the 
                                applicable percentage is the percentage 
                                determined by dividing the gain not 
                                taken into account in determining net 
                                income tax under paragraph (2)(A)(ii) 
                                with respect to the asset described in 
                                subclause (I) by the aggregate amount 
                                of all gain not so taken into account.
                            ``(ii) Failure to pay, etc.--In the case of 
                        an addition to tax for failure to timely pay 
                        any installment required under this subsection, 
                        the death of the taxpayer, or the filing of a 
                        petition by the taxpayer in a title 11 or 
                        similar case, then the unpaid portion of all 
                        remaining installments shall be due on the date 
                        of such event (or in the case of a title 11 or 
                        similar case, the day before the petition is 
                        filed).
                    ``(C) Proration of deficiency to installments.--If 
                an election is made under paragraph (1) to pay the net 
                first-year tax liability under this section in 
                installments and a deficiency has been assessed with 
                respect to such net tax liability, the deficiency shall 
                be prorated to the installments payable under paragraph 
                (1). The part of the deficiency so prorated to any 
                installment the date for payment of which has not 
                arrived shall be collected at the same time as, and as 
                a part of, such installment. The part of the deficiency 
                so prorated to any installment the date for payment of 
                which has arrived shall be paid upon notice and demand 
                from the Secretary. This subsection shall not apply if 
                the deficiency is due to negligence, to intentional 
                disregard of rules and regulations, or to fraud.
                    ``(D) Installments not to prevent credit or refund 
                of overpayments or increase estimated taxes.--If an 
                election is made under paragraph (1) to pay the net 
                first-year tax liability under this subsection in 
                installments--
                            ``(i) no installment of such liability 
                        shall--
                                    ``(I) in the case of a request for 
                                credit or refund, be taken into account 
                                as a liability for purposes of 
                                determining whether an overpayment 
                                exists for purposes of section 6402 
                                before the date on which such 
                                installment is due, or
                                    ``(II) be treated as a tax imposed 
                                by section 1 for purposes of section 
                                6654, and
                            ``(ii) the first sentence of section 6403 
                        shall not apply with respect to any such 
                        installment.
            ``(6) Elections.--
                    ``(A) In general.--Any election under paragraph 
                (1), (3)(A), or (4)(A) shall be made not later than the 
                due date for the return of tax for the first taxable 
                year described in paragraph (1) and shall be made in 
                such manner as the Secretary shall provide.
                    ``(B) Extensions.--The Secretary shall by 
                regulation prescribe such circumstances and procedures 
                under which extensions of time will be granted to make 
                any election under paragraph (1), (3)(A), or (4)(A). In 
                determining whether to grant relief under this 
                subparagraph, the Secretary shall take into account all 
                relevant circumstances and the time for making the 
                election shall be treated as not expressly provided by 
                statute.
    ``(b) Treatment of Taxpayers Leaving and Reentering Applicable 
Status.--If a taxpayer's status as an applicable taxpayer is terminated 
under section 495(a)(4) and the taxpayer is again treated as an 
applicable taxpayer for a subsequent taxable year by reason of meeting 
the requirements of section 495(a)(1)(A), the following rules shall 
apply:
            ``(1) Subsequent year not treated as first year of 
        applicable taxpayer status.--Subsection (a) shall not apply to 
        any taxable year in which the taxpayer is again treated as an 
        applicable taxpayer and such subsequent taxable year shall not 
        be treated as the first taxable year for which the taxpayer is 
        an applicable taxpayer for any other purpose of this part.
            ``(2) Nontradable assets.--If there is an applicable 
        transfer by a taxpayer of a nontradable covered asset after the 
        taxpayer is again treated as an applicable taxpayer, the 
        taxpayer's holding period of such asset for purposes of section 
        492 shall include all periods during which the taxpayer's 
        status as an applicable taxpayer was previously terminated and 
        the taxpayer held such asset.
    ``(c) Special Rules Relating to Ownership of Nontradable Interests 
in Applicable Entities.--
            ``(1) In general.--For purposes of subsection (a), if an 
        applicable taxpayer elects under subsection (a)(3) to treat a 
        nontradable interest in an applicable entity held directly as a 
        tradable covered asset for the first taxable year described in 
        subsection (a)(1), the amount of the gain taken into account 
        under subsection (a) with respect to such interest shall be 
        equal to the excess (if any) of--
                    ``(A) the value of such interest specified by the 
                taxpayer under subsection (a)(3)(B), over
                    ``(B) the taxpayer's adjusted basis in such 
                interest as of the close of such taxable year.
            ``(2) Adjustments to bases of entity's nontradable 
        assets.--
                    ``(A) Partnerships.--
                            ``(i) In general.--If the applicable entity 
                        is a partnership, the partnership shall 
                        increase the adjusted bases of the 
                        partnership's assets by the amount described in 
                        paragraph (1). Such increase shall constitute 
                        an adjustment to the bases of partnership 
                        assets solely for determining the applicable 
                        taxpayer's share of such bases.
                            ``(ii) Allocation.--The Secretary shall 
                        prescribe rules for the allocation of the 
                        increase in adjusted bases among partnership 
                        assets in a manner which has the effect of 
                        reducing the difference between the value and 
                        such adjusted bases. Such rules shall also 
                        provide proper adjustments to adjusted bases 
                        where ownership is held through tiered 
                        entities.
                    ``(B) Other applicable entities.--Rules similar to 
                the rules of clause (i) shall apply to applicable 
                entities other than partnerships.
                    ``(C) No deductions or credits for basis 
                increases.--If there is any increase in the applicable 
                entity's adjusted basis of any asset by reason of 
                subparagraph (A), no deduction or credit shall be 
                allowed under this title with respect to the portion of 
                such adjusted basis attributable to such increase.
            ``(3) Definitions.--Any term used in this subsection which 
        is also used in section 493 shall have the same meaning as when 
        used in such section.
    ``(d) Special Election for Certain Tradable Assets of Applicable 
Taxpayers.--
            ``(1) In general.--If a qualified taxpayer makes an 
        election under this subsection, then any stock held by such 
        qualified taxpayer which would (but for such election) be a 
        tradable covered asset and which is specified in such election 
        shall be treated as a nontradable capital asset of the taxpayer 
        for purposes of this part.
            ``(2) Limitations.--
                    ``(A) Only stock of a single entity taken into 
                account.--An election made under this subsection may 
                not specify stock in more than one C corporation or 
                specify more than one class of stock in such 
                corporation.
                    ``(B) Value.--
                            ``(i) In general.--The aggregate value of 
                        stock specified in an election made under this 
                        subsection shall not exceed $1,000,000,000.
                            ``(ii) Determination.--For purposes of 
                        clause (i), the value of any stock specified in 
                        an election made under this section shall be 
                        determined as of the last day of the first 
                        taxable year for which the taxpayer is an 
                        applicable taxpayer.
            ``(3) Qualified taxpayer.--For purposes of this subsection, 
        the term `qualified taxpayer' means any taxpayer--
                    ``(A) which is not an estate or trust, and
                    ``(B) for which the first taxable year for which 
                such taxpayer is an applicable taxpayer is a taxable 
                year that begins before January 1, 2025.
            ``(4) Election.--
                    ``(A) In general.--Any election under this 
                subsection shall be made not later than the due date 
                for the return of tax for the first taxable year for 
                which the taxpayer is an applicable taxpayer and shall 
                be made in such manner as the Secretary shall provide.
                    ``(B) Extensions.--The Secretary shall by 
                regulation prescribe such circumstances and procedures 
                under which extensions of time will be granted to make 
                any election under this subsection. In determining 
                whether to grant relief under this subparagraph, the 
                Secretary shall take into account all relevant 
                circumstances and the time for making the election 
                shall be treated as not expressly provided by statute.

                ``Subpart C--Other Definitions and Rules

``Sec. 497. Terms and rules relating to covered assets.
``Sec. 498. Other definitions; coordination with title.

``SEC. 497. TERMS AND RULES RELATING TO COVERED ASSETS.

    ``(a) Covered Asset.--For purposes of this part, except as 
otherwise provided in this part, the term `covered asset' means any 
asset other than--
            ``(1) any interest of the taxpayer in an applicable savings 
        plan or in a defined benefit plan,
            ``(2) any cash or cash equivalent, or
            ``(3) any private placement life insurance or annuity 
        contract described in section 72(e)(12)(D).
    ``(b) Tradable Covered Asset.--For purposes of this part, except as 
provided in section 496(d), the term `tradable covered asset' means--
            ``(1) any covered asset if--
                    ``(A) interests in such asset are traded on an 
                established securities market,
                    ``(B) interests in such assets are readily tradable 
                on a secondary market (or the substantial equivalent 
                thereof),
                    ``(C) interests in such assets are available on an 
                online or electronic platform that regularly matches, 
                or facilitates the matching of, buyers and sellers of 
                such assets, or
                    ``(D) such asset is an asset for which the 
                Secretary determines there is a reasonable basis to 
                determine the asset's fair market value annually, and
            ``(2) any derivative with respect to an underlying 
        investment which--
                    ``(A) is an asset described in paragraph (1), or
                    ``(B) is a nontradable covered asset which is 
                identified in regulations or other guidance provided by 
                the Secretary.
    ``(c) Nontradable Covered Asset.--For purposes of this part--
            ``(1) In general.--The term `nontradable covered asset' 
        means any covered asset which is not a tradable covered asset.
            ``(2) Certain assets only counted for determining aggregate 
        value of assets.--
                    ``(A) In general.--Any asset excluded from 
                treatment as a covered asset under paragraph (1), (2), 
                or (3) of subsection (a) shall be taken into account as 
                a nontradable covered asset in computing the aggregate 
                applicable value of all tradable and nontradable 
                covered assets held by the taxpayer as of the close of 
                any taxable year for purposes of section 495(a)(3).
                    ``(B) Private placement life insurance and annuity 
                contracts.--For purposes of subparagraph (A)--
                            ``(i) In general.--The applicable value of 
                        a private placement life insurance or annuity 
                        contract (as defined in section 72(e)(12)(D)) 
                        as of any date shall be its cash surrender 
                        value (as determined under section 
                        7702(f)(2)(A)) on such date.
                            ``(ii) Adjustments.--The Secretary shall by 
                        regulation provide for adjustments to the cash 
                        surrender value determined under clause (i) 
                        with respect to any contract to the extent 
                        necessary to prevent the avoidance of the 
                        purposes of this part, including regulations 
                        which ensure that such value as of any time 
                        properly reflects the value of any underlying 
                        investments with respect to such contract as of 
                        such time.
            ``(3) Investments in qualified opportunity funds.--
        Notwithstanding subsection (b), any investment in a qualified 
        opportunity fund (as defined in section 1400Z-2(d)) shall be 
        treated as a nontradable covered asset.
    ``(d) Applicable Value.--For purposes of this part--
            ``(1) Tradable covered assets.--The applicable value of any 
        tradable covered asset as of any date shall be its fair market 
        value on such date.
            ``(2) Nontradable covered assets.--The applicable value of 
        any nontradable covered asset as of any date shall be the 
        greatest of--
                    ``(A) the original cost basis of such asset,
                    ``(B) the adjusted basis of such asset,
                    ``(C) the value determined as of the date of the 
                last event with respect to the asset which establishes 
                such value,
                    ``(D) in the case of an asset the value of which is 
                included in an applicable financial statement, the 
                value in the latest available statement,
                    ``(E) the value of such asset determined for 
                purposes of using such asset to secure any 
                indebtedness, and
                    ``(F) the value of such asset determined under such 
                other valuation method as the Secretary may prescribe.
        If a covered asset would, but for subsection (c)(3) or any 
        other provision of this part, be treated as a tradable covered 
        asset, the asset's applicable value shall be determined under 
        paragraph (1).
            ``(3) Adjustment for debt and other liabilities of the 
        taxpayer.--Except as provided by the Secretary, the aggregate 
        applicable value of all covered assets of the taxpayer as of 
        any date (determined without regard to this paragraph) shall be 
        reduced by the aggregate outstanding amount of--
                    ``(A) indebtedness of the taxpayer as of such date, 
                and
                    ``(B) any other liabilities (other than 
                indebtedness) of the taxpayer as of such date which the 
                Secretary determines are appropriate to be taken into 
                account for such purpose.
            ``(4) Reliance on valuation.--In determining the applicable 
        value of any tradable covered asset for purposes of this 
        section, the taxpayer may rely on a valuation which is--
                    ``(A) provided to the taxpayer by a broker under 
                section 6045(b),
                    ``(B) provided to the taxpayer by a dealer in 
                securities or a dealer in commodities, within the 
                meaning of section 475,
                    ``(C) determined under an applicable financial 
                statement, or
                    ``(D) provided to the taxpayer by such other 
                persons as may be designated by the Secretary.
            ``(5) Applicable financial statement.--For purposes of this 
        subsection, the term `applicable financial statement' has the 
        meaning given such term by section 451(b)(3).
            ``(6) Special rules for applicable entities.--In the case 
        of an applicable entity--
                    ``(A) adjustments to basis of any covered asset 
                under section 493(b)(2) shall be taken into account in 
                determining the adjusted basis of such asset for 
                purposes of paragraph (2)(B),
                    ``(B) the value of a partner's ownership interest 
                in such partnership under paragraph (2)(C) shall not be 
                less than the value of the partner's capital account 
                under section 704, and
                    ``(C) the Secretary shall provide rules for 
                determining the share of a holder of an ownership 
                interest in such an entity of amounts included in an 
                applicable financial statement of such entity for 
                purposes of applying paragraph (2)(D).
            ``(7) Secretarial authority.--The Secretary shall prescribe 
        such regulations, rules, and guidance as may be necessary to 
        carry out the purposes of this subsection, including 
        regulations, rules, and guidance which--
                    ``(A) prevent the avoidance of such purposes,
                    ``(B) provide rules for the application of 
                paragraph (2)(C), including in cases of transactions in 
                which gain or loss is not recognized in connection with 
                contributions, distributions, and sales of 
                substantially similar property from which value may be 
                derived, and
                    ``(C) provide rules for determining the applicable 
                value of assets in taxable years beginning before the 
                date of the enactment of this part.

``SEC. 498. OTHER DEFINITIONS; COORDINATION WITH TITLE.

    ``(a) Applicable Transfer.--For purposes of this part--
            ``(1) In general.--The term `applicable transfer' means--
                    ``(A) any sale, exchange, disposition, or other 
                transfer if--
                            ``(i) gain or loss (if any) is, without 
                        regard to this part, recognized under this 
                        chapter on such sale, exchange, disposition, or 
                        other transfer, and
                            ``(ii) such sale, exchange, disposition, or 
                        other transfer is not in the ordinary course of 
                        a trade or business, and
                    ``(B) any disregarded nonrecognition event.
            ``(2) Disregarded nonrecognition event.--The term 
        `disregarded nonrecognition event' means--
                    ``(A) any exchange to which section 351 applies,
                    ``(B) any exchange to which section 1031 applies,
                    ``(C) any transfer of an asset which--
                            ``(i) is identified by the Secretary,
                            ``(ii) involves a C corporation, and
                            ``(iii) is in connection with an asset with 
                        respect to which no gain or loss has been 
                        recognized by such corporation, or
                    ``(D) any other transaction in which gain or loss 
                is not otherwise recognized and which the Secretary 
                determines is necessary to be treated as a disregarded 
                nonrecognition event in order to prevent the avoidance 
                of the purposes of this part.
            ``(3) Conversion of assets.--
                    ``(A) Nontradable to tradable.--If a taxpayer holds 
                a nontradable covered asset (other than an investment 
                in a qualified opportunity fund (as defined in section 
                1400Z-2(d))) which, as part of a transaction or series 
                of transactions, is converted to, or exchanged for, a 
                tradable covered asset, such conversion or exchange 
                shall be treated as a disregarded nonrecognition event 
                if gain or loss (if any) on such conversion or exchange 
                is, without regard to this part, not recognized under 
                this chapter.
                    ``(B) Tradable to nontradable.--If a taxpayer holds 
                a tradable covered asset which, as part of a 
                transaction or series of transactions, is converted to, 
                or exchanged for, a nontradable covered asset, such 
                conversion or exchange shall be treated as a taxable 
                event with respect to the asset being converted or 
                exchanged if gain or loss (if any) on such conversion 
                or exchange is, without regard to this part, not 
                recognized under this chapter.
    ``(b) Applicable Savings Plan.--The term `applicable savings plan' 
means--
            ``(1) a defined contribution plan to which section 401(a) 
        or 403(a) applies,
            ``(2) an annuity contract under section 403(b),
            ``(3) an eligible deferred compensation plan described in 
        section 457(b) which is maintained by an eligible employer 
        described in section 457(e)(1)(A),
            ``(4) an individual retirement plan,
            ``(5) an Archer MSA (within the meaning of section 220(d)),
            ``(6) a qualified tuition program (as defined in section 
        529(b)),
            ``(7) an ABLE account (as defined in section 529A(e)(6)),
            ``(8) a Coverdell education savings account (as defined in 
        section 530), or
            ``(9) a health savings account (within the meaning of 
        section 223(d)).
    ``(c) Derivative; Underlying Investment.--
            ``(1) Derivative.--The term `derivative' has the meaning 
        given such term under section 59A(h)(4).
            ``(2) Underlying investment.--The term `underlying 
        investment' means, with respect to any derivative, any item--
                    ``(A) which is described in clauses (i) through (v) 
                of section 59A(h)(4)(A) (or any item substantially the 
                same as any such item), and
                    ``(B) by reference to which the value of the 
                derivative, or any payment or other transfer with 
                respect to the derivative, is determined either 
                directly or indirectly.
    ``(d) Regulatory Authority To Prevent Avoidance and To Coordinate 
With Other Provisions of This Title.--The Secretary shall issue such 
regulations or other guidance as are necessary to--
            ``(1) prevent taxpayers from avoiding the application of 
        this part, and
            ``(2) coordinate the provisions of this part with other 
        provisions of this title which require taxpayers to take income 
        into account in the absence of a payment or other 
        distribution.''.
    (b) Clerical Amendment.--The table of parts for subchapter E of 
chapter 1 is amended by adding at the end the following new item:

``Part IV. Elimination of deferral for applicable taxpayers.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable events and applicable transfers occurring in taxable 
years beginning after December 31, 2023.

SEC. 102. CARRYBACK OF CAPITAL LOSSES ATTRIBUTABLE TO MARK-TO-MARKET 
              RULES.

    (a) In General.--Section 1212 is amended by adding at the end the 
following new subsection:
    ``(d) Carryback of Losses of Applicable Taxpayers From Assets 
Marked to Market.--
            ``(1) In general.--If an applicable taxpayer elects to have 
        this subsection apply to any taxable year in which the taxpayer 
        has a net marked-to-market loss (in this subsection referred to 
        as the `loss year)', the amount of such net marked-to-market 
        loss--
                    ``(A) shall be a carryback to each of the 3 taxable 
                years preceding the loss year, and
                    ``(B) to the extent that, after the application of 
                paragraphs (2) and (3), such loss is allowed as a 
                carryback to any such preceding taxable year, the 
                amount so allowed shall be treated as a long-term 
                capital loss.
            ``(2) Amount carried to each taxable year.--The entire 
        amount of the net marked-to-market loss for any loss year shall 
        be carried to the earliest of the taxable years to which such 
        loss may be carried back under paragraph (1). The portion of 
        such loss which shall be carried to each of the 2 other taxable 
        years to which such loss may be carried back shall be the 
        excess (if any) of such loss over the portion of such loss 
        which, after the application of paragraph (3), was allowed as a 
        carryback for any prior taxable year.
            ``(3) Amount which may be used in any prior taxable year.--
        An amount shall be allowed as a carryback under paragraph (1) 
        from a loss year to any prior taxable year only to the extent--
                    ``(A) such amount does not exceed the net marked-
                to-market gain for such prior year, and
                    ``(B) the allowance of such carryback does not 
                increase or produce a net operating loss (as defined in 
                section 172(c)) for such year.
            ``(4) Net marked-to-market loss.--For purposes of this 
        subsection, the term `net marked-to-market loss' means, with 
        respect to any taxable year, an amount equal to--
                    ``(A) the net capital loss for the taxable year 
                determined by taking into account only marked-to-market 
                gains and losses, reduced (but not below zero) by
                    ``(B) the aggregate amount of gains from the sale 
                or exchange of capital assets which are not marked-to-
                market gains.
            ``(5) Net marked-to-market gain.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `net marked-to-market 
                gain' means, with respect to any taxable year, an 
                amount equal to--
                            ``(i) the capital gain net income for the 
                        taxable year determined by taking into account 
                        only marked-to-market gains and losses, reduced 
                        (but not below zero) by
                            ``(ii) the aggregate amount of losses from 
                        the sale or exchange of capital assets which 
                        are not marked-to-market losses.
                    ``(B) Special rule.--The net marked-to-market gain 
                for any taxable year before the loss year shall be 
                computed without regard to the net marked-to-market 
                loss for the loss year or for any taxable year 
                thereafter.
            ``(6) Coordination with carryforward provisions of 
        subsection (b)(1).--
                    ``(A) Carryforward amount reduced by amount used as 
                carryback.--For purposes of applying subsection 
                (b)(1)(B), if any portion of the net marked-to-market 
                loss for any taxable year is allowed as a carryback 
                under paragraph (1) to any preceding taxable year, the 
                amount allowed as a carryback shall be treated as a 
                long-term capital gain for the loss year.
                    ``(B) Carryover loss retains character as 
                attributable to marked-to-market.--Any amount carried 
                forward as a long-term capital loss to any taxable year 
                under subsection (b)(1)(B) (after the application of 
                subparagraph (A)) shall, to the extent attributable to 
                marked-to-market losses, be treated as marked-to-market 
                loss.
                    ``(C) Coordination with reduction in net capital 
                loss for credit.--For purposes of this paragraph and 
                paragraph (4), any reduction in net capital loss under 
                section 492(c)(3) (relating to reduction for credit 
                against tax attributable to deferral recapture amount) 
                shall, except as provided by the Secretary, be applied 
                before the application of such paragraphs.
            ``(7) Other definitions and rules.--For purposes of this 
        subsection--
                    ``(A) Marked-to-market gains and losses.--
                            ``(i) In general.--The terms `marked-to-
                        market gains' and `marked-to-market losses' 
                        means, with respect to any applicable taxpayer 
                        for any taxable year, gains or losses which are 
                        recognized and taken into account by such 
                        taxpayer for such taxable year under section 
                        491 by reason of taxable events described in 
                        section 491(b)(1) with respect to tradable 
                        covered assets which are capital assets. Such 
                        terms shall not include gains and losses from 
                        nontradable covered assets which are treated as 
                        tradable covered assets (and to which section 
                        491 applies) by reason of an election under 
                        section 496(a)(3).
                            ``(ii) Applicable entities.--In the case of 
                        marked-to-market gains or losses of an 
                        applicable entity, this subsection shall be 
                        applied at the partner or other ownership 
                        level.
                    ``(B) Other terms.--Any term used in this 
                subsection which is also used in part IV of subchapter 
                E shall have the same meaning as when used in such 
                part.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to loss years beginning after December 31, 2023.

 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.

    (a) In General.--Section 1411(a) is amended by adding at the end 
the following new paragraph:
            ``(3) No adjusted gross income limit for applicable 
        taxpayers.--In the case of an applicable taxpayer (as defined 
        in section 495) for any taxable year, notwithstanding paragraph 
        (1) or (2), the tax under this subsection for such taxable year 
        shall be equal to the product of--
                    ``(A) in the case of an individual, the rate of tax 
                in effect under paragraph (1) multiplied by the amount 
                determined under paragraph (1)(A), and
                    ``(B) in the case of an estate or trust, the rate 
                of tax in effect under paragraph (2) multiplied by the 
                amount determined under paragraph (2)(A).''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2023.

SEC. 202. TREATMENT OF COVERED EXPATRIATES.

    (a) Application of Expatriate Rules to Applicable Taxpayers.--
Section 877A is amended by redesignating subsection (i) as subsection 
(j) and by inserting after subsection (h) the following new subsection:
    ``(i) Special Rules for Applicable Taxpayers.--
            ``(1) In general.--In the case of a covered expatriate who 
        is an applicable taxpayer (as defined in section 495) for the 
        taxable year which includes the expatriation date--
                    ``(A) no election may be made under subsection (b) 
                with respect to any property treated as sold by reason 
                of subsection (a) (after application of subparagraph 
                (B)), and
                    ``(B) the covered expatriate shall, for purposes of 
                subsection (a)(1), also be treated as having sold on 
                the last day of the 10-taxable year period described in 
                section 495(d)(2)(A) all property held by the covered 
                expatriate as of the close of such day which is not 
                otherwise treated as sold under part IV of subchapter E 
                as of such time.
            ``(2) Application of section 877.--Notwithstanding section 
        877(h)--
                    ``(A) a covered expatriate described in paragraph 
                (1) shall be treated as an individual to whom section 
                877 applies, and
                    ``(B) such individual shall be taxable as provided 
                in such section for each of the taxable years in the 
                10-taxable year period described in section 
                495(d)(2)(A).''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2023.

          Subtitle B--Rules for Applicable Entities and Trusts

SEC. 211. TREATMENT OF LIKE-KIND EXCHANGES BY APPLICABLE ENTITIES.

    (a) In General.--Section 1031 is amended by adding at the end the 
following new subsection:
    ``(i) Special Rules for Applicable Entities.--Subsection (a) shall 
not apply to an exchange by an applicable entity if a notice received 
by the entity under subsection (b)(2)(A) or (c)(2) of section 493 is in 
effect at the time of such exchange.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to exchanges completed after December 31, 2023.

SEC. 212. TREATMENT OF TRANSFERS BY APPLICABLE ENTITIES IN EXCHANGE FOR 
              STOCK.

    (a) In General.--Section 351 is amended by redesignating subsection 
(h) as subsection (i) and by inserting after subsection (g) the 
following new subsection:
    ``(h) Special Rules for Applicable Entities.--
            ``(1) In general.--Subsection (a) shall not apply to an 
        exchange by an applicable entity if an applicable notice 
        received by the entity is in effect at the time of such 
        exchange.
            ``(2) Applicable notice.--For purposes of paragraph (1)--
                    ``(A) In general.--The term `applicable notice' 
                means, with respect to any applicable entity, a 
                notice--
                            ``(i) which is received by the entity under 
                        subsection (b)(2)(A) or (c)(2) of section 493, 
                        and
                            ``(ii) which relates to an applicable 
                        taxpayer who is a 20-percent owner with respect 
                        to such entity.
                    ``(B) 20-percent owner.--For purposes of 
                subparagraph (A), a 20-percent owner shall be 
                determined in the same manner as a 5-percent owner 
                under section 493(b)(4)(B), except that `20 percent' 
                shall be substituted for `5 percent' in applying 
                clauses (i) and (ii)(I) thereof.
            ``(3) Applicable entity.--For purposes of this subsection, 
        the term `applicable entity' has the meaning given such term by 
        section 493.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to exchanges completed after December 31, 2023.

SEC. 213. SPECIAL RULES FOR APPLICABLE TRUSTS.

    (a) In-Kind Distributions.--Section 643(e)(3) is amended--
            (1) in subparagraph (A), by striking ``to which an election 
        under this paragraph applies'' and inserting ``to which this 
        paragraph applies'', and
            (2) by striking subparagraph (B) and inserting the 
        following:
                    ``(B) Distributions to which this paragraph 
                applies.--This paragraph shall apply to--
                            ``(i) any distribution of property by an 
                        estate which is described in section 
                        495(a)(1)(B)(ii) or by an applicable trust (as 
                        defined in section 495(c)), and
                            ``(ii) any distribution during the taxable 
                        year of any other estate or trust which makes 
                        an election under this paragraph.
                Any election made under clause (ii) shall be made on 
                the return of such estate or trust for such taxable 
                year, and, once made, may be revoked only with the 
                consent of the Secretary.''.
    (b) Treatment of Loans.--Section 643(i) is amended--
            (1) by inserting ``or an applicable trust (as defined in 
        section 495(c))'' after ``foreign trust'' in paragraph (1),
            (2) by striking ``who is a United States person'' in 
        paragraph (1)(A) and inserting ``who is not exempt from tax 
        under this chapter'',
            (3) by striking ``United States person'' in paragraph 
        (1)(B) and inserting ``person (other than a person who is 
        exempt from tax under this chapter)'',
            (4) by striking paragraph (2)(C), and
            (5) by striking ``Foreign'' in the heading thereof and 
        inserting ``Certain''.
    (c) Treatment of Multiple Trusts.--Section 643(f)(2) is amended by 
inserting ``or the rules of part IV of subchapter E'' after ``this 
chapter''.
    (d) Foreign Trusts.--
            (1) In general.--Subpart F of part I of subchapter J is 
        amended by adding at the end the following new section:

``SEC. 686. SPECIAL RULES FOR APPLICABLE FOREIGN TRUSTS.

    ``(a) In General.--For purposes of this part, in the case of any 
beneficiary of an applicable foreign trust who is required to include 
in income any amount attributable to gain on an applicable transfer of 
any covered asset, the amount of tax imposed under this chapter shall 
be increased by the amount which bears the same ratio to the amount of 
the deferral recapture amount which would be determined on such 
applicable transfer under section 492(a) (determined as if such trust 
were an applicable taxpayer and section 492 applied to any covered 
asset of the trust) as--
            ``(1) the amount required to be included in income 
        attributable to the gain on such applicable transfer, bears to
            ``(2) the total amount of the gain on such applicable 
        transfer.
    ``(b) Exception.--Subsection (a) shall not apply to any amount to 
the extent that the applicable foreign trust pays (at such time and in 
such manner as provided by the Secretary) the tax which would be 
imposed under section 492(a) (determined as if such trust were an 
applicable taxpayer and section 492 applied to any covered asset of the 
trust) with respect to the applicable transfer described in subsection 
(a).
    ``(c) Applicable Foreign Trust.--For purposes of this section, the 
term `applicable foreign trust' means any foreign trust which would be 
an applicable trust if such trust were a domestic trust.
    ``(d) Other Terms.--Any term used in this section which is also 
used in part IV of subchapter E shall have the same meaning as when 
used in such part.''.
            (2) Reporting.--Section 6048(c)(1) is amended by striking 
        ``and'', at the end of subparagraph (B), by redesignating 
        subparagraph (C) as subparagraph (D), and by inserting after 
        subparagraph (B) the following new subparagraph:
                    ``(C) such information as the Secretary shall 
                require for purposes of determining the increase (if 
                any) in tax under section 686, and''.
            (3) Clerical amendment.--The table of sections for subpart 
        F of part I of subchapter J is amended by adding at the end the 
        following new item:

``Sec. 686. Special rules for applicable foreign trusts.''.
    (e) Coordination With Throwback Rules.--The Secretary of the 
Treasury (or the Secretary's delegate) shall provide such regulations 
or other guidance as necessary to coordinate the amendments made by 
this section with the rules of subpart D of part I of subchapter J.
    (f) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to taxable years 
        beginning after December 31, 2023.
            (2) Foreign trusts.--The amendments made by subsection (e) 
        shall apply to applicable transfers occurring in taxable years 
        beginning after December 31, 2023.

    Subtitle C--Treatment of Deferred Compensation and Certain Life 
                    Insurance and Annuity Contracts

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

    (a) In General.--Subpart A of part I of subchapter D of chapter 1 
is amended by adding at the end the following new section:

``SEC. 409B. SPECIAL RULES FOR CERTAIN DEFERRED COMPENSATION.

    ``(a) In General.--In the case of an individual who is an 
applicable taxpayer for any taxable year, the taxpayer's tax under this 
chapter for the taxable year (determined without regard to this 
section) shall be increased by an amount equal to the sum of--
            ``(1) the deferral recapture amount determined under 
        subsection (b)(1) for any applicable deferred compensation 
        which is includible in the gross income of the individual for 
        the taxable year, and
            ``(2) 10 percent of the amount of any severance pay which 
        is includible in the gross income of the individual during the 
        taxable year.
    ``(b) Deferral Recapture Amount.--For purposes of this section--
            ``(1) In general.--The term `deferral recapture amount' 
        means, with respect to any applicable deferred compensation 
        includible in gross income for the taxable year, the aggregate 
        amount of interest (determined in the manner provided under 
        paragraph (3)) on the deemed tax amount determined under 
        paragraph (2) for each preceding taxable year to which 
        compensation is allocated under paragraph (2)(A).
            ``(2) Deemed tax amount.--
                    ``(A) In general.--The deemed tax amount for any 
                taxable year preceding the taxable year in which 
                applicable deferred compensation is includible in gross 
                income shall be the amount determined--
                            ``(i) first, except as provided in 
                        subparagraph (B), by allocating the amount of 
                        such compensation ratably to each day in the 
                        deferral period with respect to the applicable 
                        deferred compensation, and
                            ``(ii) then by multiplying the amount, if 
                        any, allocated under clause (i) to such 
                        preceding taxable year by the highest rate of 
                        tax in effect under section 1 for the taxable 
                        year in which the compensation is includible in 
                        gross income of the individual.
                    ``(B) Special rule for periods before becoming 
                applicable taxpayer.--Notwithstanding subparagraph 
                (A)(i), any compensation which would be otherwise 
                allocated under such subparagraph to any taxable year 
                preceding the first taxable year for which the taxpayer 
                is treated as an applicable taxpayer shall be allocated 
                to such first taxable year.
            ``(3) Computation of interest.--
                    ``(A) In general.--The amount of interest referred 
                to in paragraph (1) on any deemed tax amount determined 
                under paragraph (2) for any preceding taxable year with 
                respect to applicable deferred compensation shall be 
                determined for the period beginning on the due date for 
                such preceding taxable year and ending on the last day 
                of the deferral period with respect to the applicable 
                deferred compensation, by using the rates determined 
                under section 6621(b) (plus 1 percentage point), and 
                the method applicable under section 6621, for 
                underpayments of tax for such period.
                    ``(B) Due date.--For purposes of this paragraph, 
                the term `due date' means, with respect to any 
                preceding taxable year, the date prescribed by law 
                (determined without regard to extensions) for filing 
                the return of the tax imposed by this chapter for such 
                taxable year.
            ``(4) Limitation.--In no case shall the deferral recapture 
        amount determined with respect to any applicable deferred 
        compensation which is includible in gross income for a taxable 
        year exceed an amount equal to 10 percent of the amount of such 
        compensation.
    ``(c) Definitions.--For purposes of this section--
            ``(1) Applicable taxpayer.--The term `applicable taxpayer' 
        has the meaning given such term by section 495.
            ``(2) Applicable deferred compensation.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the term `applicable deferred 
                compensation' means--
                            ``(i) any compensation provided under a 
                        nonqualified deferred compensation plan, as 
                        defined in section 409A(d)(1), except that--
                                    ``(I) such term shall include stock 
                                appreciation rights, and
                                    ``(II) compensation shall not fail 
                                to be treated as deferred solely 
                                because such compensation is not 
                                treated as deferred for purposes of 
                                section 409A by reason of such 
                                compensation being includible in gross 
                                income for the first taxable year after 
                                a taxable year in which such 
                                compensation is no longer subject to a 
                                substantial risk of forfeiture, and
                            ``(ii) any other property transferred in 
                        connection with the performance of services 
                        which is subject to section 83.
                    ``(B) Exceptions.--Such term does not include--
                            ``(i) severance pay, or
                            ``(ii) any transfer of a profits interest 
                        in a partnership.
                    ``(C) Earnings and interest.--Any earnings, 
                interest, or similar adjustment included in an amount 
                of applicable deferred compensation shall not be 
                treated as separately deferred from such amount.
            ``(3) Severance pay.--The term `severance pay' means any 
        compensation the payment or vesting of which is contingent, in 
        whole or in part, upon the termination of employment or other 
        services, including cash, property, reimbursement or direct 
        provision of living, travel, and business expenses, and life, 
        health, or other insurance, to the extent otherwise includible 
        in gross income.
            ``(4) Deferral period.--
                    ``(A) In general.--Except as provided in 
                subparagraphs (B) and (C), the term `deferral period', 
                with respect to any applicable deferred compensation, 
                means the period--
                            ``(i) beginning on the date the 
                        compensation was first deferred, without regard 
                        to vesting, transferability, or risk of 
                        forfeiture, and
                            ``(ii) ending on the date such compensation 
                        is includible in gross income or, if 
                        applicable, the date described in section 
                        83(a)(1) with respect to such compensation.
                For purposes of the preceding sentence, compensation 
                shall be treated as first deferred as of the date the 
                applicable taxpayer first has a legally binding right 
                to the compensation or, in the case of property subject 
                to section 83, the date of transfer of the property.
                    ``(B) Computation of interest.--Solely for purposes 
                of subsection (b)(3), the deferral period shall end on 
                the last day of the taxable year which includes the 
                date described in subparagraph (A)(ii).
                    ``(C) Property transferred pursuant to the exercise 
                of an option.--In the case of property acquired 
                pursuant to an option described in section 83(e)(3), 
                the deferral period shall begin on the date of grant of 
                the option pursuant to which the property was acquired.
    ``(d) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary or appropriate to carry out the purposes of this 
section.''.
    (b) Information Reporting With Respect to Applicable Deferred 
Compensation.--Subpart B of part III of subchapter A of chapter 61, as 
in effect after the amendments made by section 334(d) of the SECURE 2.0 
Act of 2022, is amended by adding at the end the following new section:

``SEC. 6050AA. INFORMATION WITH RESPECT TO APPLICABLE DEFERRED 
              COMPENSATION.

    ``(a) In General.--Every person making a payment to an individual 
in excess of $5,000,000 of--
            ``(1) any applicable deferred compensation described in 
        section 409B(c)(2)(A), or
            ``(2) any severance pay (as defined in section 409B(d)(3)),
shall make a return, not later than January 31 of the first calendar 
year beginning after the close of the taxable year during which such 
payment is includible in gross income of the individual.
    ``(b) Information Required.--The return required by subsection (a) 
shall include--
            ``(1) the name, taxpayer identification number, and address 
        of the individual to whom the payment of applicable deferred 
        compensation or severance pay is made,
            ``(2) the date any applicable deferred compensation was 
        first deferred (the date of the transfer, in the case of 
        property subject to section 83, or the date of grant of the 
        option, in the case of property acquired pursuant to an option 
        described in section 83(e)(3)), without regard to vesting, 
        transferability, or risk of forfeiture,
            ``(3) the amount of such compensation includible in gross 
        income of the individual for the taxable year,
            ``(4) the amount of such severance pay includible in gross 
        income of the individual for the taxable year, and
            ``(5) such other information as the Secretary may require.
    ``(c) Special Rules.--
            ``(1) Section 83 compensation.--With respect to transfers 
        of property to which section 83 applies, the information 
        required under paragraphs (2) and (3) of subsection (b) shall 
        be reported separately for each item of property transferred, 
        except that property for which the information required by such 
        paragraphs is identical may be aggregated.
            ``(2) Other compensation.--With respect to any applicable 
        deferred compensation not described in paragraph (1), if such 
        compensation is paid pursuant to more than 1 plan or 
        arrangement or involves amounts which were first deferred on 
        more than 1 date, the information required under paragraphs (2) 
        and (3) of subsection (b) shall be reported separately with 
        respect to each such plan or arrangement and each such date.
    ``(d) Statements To Be Furnished to Individuals With Respect to 
Whom Information Is Reported.--Every person required to make a return 
under subsection (a) shall furnish to each individual with respect to 
whom such a return is required a written statement showing--
            ``(1) the name, address, and phone number of the 
        information contact of the person making such return, and
            ``(2) the information required by paragraphs (2) through 
        (5) of subsection (b).
The written statement required under the preceding sentence shall be 
furnished to the individual on or before January 31 of the first 
calendar year beginning after the close of the taxable year for which 
the return under subsection (a) was made.
    ``(e) Adjustments for Inflation.--
            ``(1) In general.--In the case of any taxable year 
        beginning after 2024, the $5,000,000 amount under subsection 
        (a) shall be increased by an amount equal to the product of--
                    ``(A) such dollar amount, and
                    ``(B) the cost-of-living adjustment under section 
                1(f)(3) for the calendar year in which such taxable 
                year begins, determined by substituting `calendar year 
                2023' for `calendar year 1992' in subparagraph (B) 
                thereof.
            ``(2) Rounding.--If any amount as adjusted under paragraph 
        (1) is not a multiple of $250,000, such amount shall be rounded 
        to the next lowest multiple of $250,000.
    ``(f) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary or appropriate to carry out the purposes of this 
section, including regulations specifying what constitutes a payment to 
an individual of applicable deferred compensation for purposes of 
subsection (a).''.
    (c) Penalties.--
            (1) Returns.--Section 6724(d)(1)(B), as in effect after the 
        amendments made by section 334(d) of the SECURE 2.0 Act of 
        2022, is amended by striking ``or'' at the end of clause 
        (xxvii), by striking ``and'' at the end of clause (xxviii) and 
        inserting ``or'', and by inserting after clause (xxviii) the 
        following new clause:
                            ``(xxix) section 6050AA (a) (relating to 
                        returns of information with respect to 
                        applicable deferred compensation), and''.
            (2) Statements.--Section 6724(d)(2), as so in effect, is 
        amended--
                    (A) by striking ``or'' at the end of subparagraph 
                (KK),
                    (B) by striking the period at the end of 
                subparagraph (LL) and inserting ``, or'', and
                    (C) by inserting after subparagraph (LL) the 
                following new subparagraph:

                                                    ``(MM) section 
                                                6050AA(d) (relating to 
                                                statements of 
                                                information with 
                                                respect to applicable 
                                                deferred 
                                                compensation).''.

    (d) Clerical Amendments.--
            (1) In general.--The table of sections for subpart A of 
        part I of subchapter D of chapter 1 is amended by inserting 
        after the item relating to section 409A the following new item:

``Sec. 409B. Special rules for certain deferred compensation.''.
            (2) Information reporting.--The table of sections for 
        subpart B of part III of subchapter A of chapter 61, as in 
        effect after the amendments made by section 334(d) of the 
        SECURE 2.0 Act of 2022, is amended by inserting after the item 
        relating to section 6050Z the following new item:

``Sec. 6050AA. Information with respect to applicable deferred 
                            compensation.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2023.

SEC. 222. RULES RELATING TO CERTAIN LIFE INSURANCE AND ANNUITY 
              CONTRACTS OF APPLICABLE TAXPAYERS.

    (a) Treatment of Amounts Received.--
            (1) In general.--Section 72(e) is amended by redesignating 
        paragraph (12) as paragraph (13) and by inserting after 
        paragraph (11) the following:
            ``(12) Treatment of certain amounts received under certain 
        life insurance and annuity contracts of applicable taxpayers.--
                    ``(A) In general.--In the case of any applicable 
                amount which is received during any taxable year, 
                notwithstanding paragraph (5)(A) or (5)(E)--
                            ``(i) if such amount is received on or 
                        after the annuity starting date, paragraph 
                        (2)(A) shall apply, and
                            ``(ii) if such amount is received before 
                        the annuity starting date or is received with 
                        respect to a life insurance contract to which 
                        this section applies, the rules of clauses (i) 
                        and (ii) of paragraph (2)(B) shall apply.
                    ``(B) Applicable amount.--
                            ``(i) In general.--For purposes of this 
                        paragraph, the term `applicable amount' means--
                                    ``(I) any amount to which this 
                                subsection applies which is received 
                                under an applicable private placement 
                                life insurance or annuity contract, and
                                    ``(II) in the case of an applicable 
                                taxpayer, notwithstanding paragraph 
                                (5)(A), (5)(E), or (10)(A), any amount 
                                or portion described in paragraph 
                                (4)(A) with respect to a life insurance 
                                or annuity contract, except that `any 
                                applicable taxpayer or any related 
                                person (as defined in section 
                                144(a)(3)) to an applicable taxpayer' 
                                shall be substituted for `an 
                                individual' in applying such paragraph.
                            ``(ii) Treatment of refunds, surrenders, 
                        redemptions and maturities.--Notwithstanding 
                        paragraph (5)(A) or (5)(E), amounts described 
                        in clause (i)(I) shall include amounts 
                        described in clause (i) or (ii) of paragraph 
                        (5)(E) received under an applicable private 
                        placement life insurance or annuity contract.
                            ``(iii) Amounts under pre-1982 and 
                        qualified plan contracts, etc., excluded.--Such 
                        term shall not include amounts received--
                                    ``(I) under a contract which is 
                                described in paragraph (5)(B) or 
                                (5)(D), or
                                    ``(II) under a qualified tuition 
                                program (as defined in section 529(b)) 
                                or under a Coverdell education savings 
                                account (as defined in section 530(b)).
                    ``(C) Applicable private placement life insurance 
                or annuity contract.--For purposes of this paragraph--
                            ``(i) In general.--The term `applicable 
                        private placement life insurance or annuity 
                        contract' means a private placement life 
                        insurance or annuity contract the holder of 
                        which (whether directly or indirectly) is an 
                        applicable taxpayer.
                            ``(ii) Secretarial authority.--The 
                        Secretary shall prescribe regulations or other 
                        guidance which treat a private placement life 
                        insurance or annuity contract as an applicable 
                        private placement life insurance or annuity 
                        contract in cases where an applicable taxpayer 
                        (or a related person) has an interest in such 
                        contract not described in clause (i) if such 
                        treatment is necessary to prevent the avoidance 
                        of the purposes of this paragraph.
                    ``(D) Private placement life insurance or annuity 
                contract.--For purposes of this paragraph, the term 
                `private placement life insurance or annuity contract' 
                means any contract--
                            ``(i) which is an annuity contract or a 
                        life insurance contract, and
                            ``(ii) with respect to which the holder of 
                        the contract is required, for purposes of 
                        obtaining a registration exemption under 
                        securities laws as in effect on the date of 
                        enactment of this section (including the 
                        Securities Exchange Act of 1934 and the 
                        Investment Advisors Act of 1940), to make a 
                        representation that such owner--
                                    ``(I) has a specified minimum 
                                amount of income or assets,
                                    ``(II) has completed a specified 
                                minimum level of education, or
                                    ``(III) holds a specific license or 
                                credential.
                    ``(E) Applicable taxpayer.--For purposes of this 
                paragraph, the term `applicable taxpayer' has the 
                meaning given such term under section 495.''.
            (2) Conforming amendment.--Section 72(e)(5)(C) is amended 
        by inserting ``or (12)'' after ``(10)''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to amounts received in taxable years beginning 
        after December 31, 2023.
    (b) 10-Percent Additional Tax for Distributions From Applicable 
Private Placement Life Insurance or Annuity Contracts.--
            (1) In general.--Section 72(v) is amended--
                    (A) by inserting ``or an applicable private 
                placement life insurance or annuity contract (as 
                defined in subsection (e)(12))'' after ``a modified 
                endowment contract (as defined in section 7702A)'' in 
                paragraph(1), and
                    (B) by inserting ``and Applicable Private Placement 
                Life Insurance or Annuity Contracts'' after ``Modified 
                Endowment Contracts'' in the heading thereof.
            (2) Effective date.--The amendments made by this subsection 
        shall apply to amounts received in taxable years beginning 
        after December 31, 2023.
    (c) Repeal of Exclusion for Death Benefits.--
            (1) In general.--Section 101 is amended by adding at the 
        end the following new subsection:
    ``(k) Exclusion Not To Apply.--
            ``(1) In general.--Subsection (a)(1) shall not apply to 
        amounts received by reason of the death of the insured under an 
        applicable private placement life or annuity contract (within 
        the meaning of section 72(e)(12)).
            ``(2) Amounts previously included.--The Secretary shall 
        prescribe rules to ensure that paragraph (1) shall not apply to 
        any portion of any amount received which was previously 
        included in gross income.''.
            (2) Conforming amendment.--Section 101(a)(1) is amended by 
        striking ``and subsection (j),'' and inserting ``subsection 
        (j), and subsection (k),''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to amounts received in taxable years beginning 
        after December 31, 2023.
    (d) Reporting Requirements.--
            (1) In general.--Subpart B of part III of subchapter A of 
        chapter 61, as amended by this Act, is amended by adding at the 
        end the following new section:

``SEC. 6050BB. RETURNS RELATING TO AMOUNTS RECEIVED UNDER CERTAIN LIFE 
              INSURANCE AND ANNUITY CONTRACTS.

    ``(a) In General.--Every person who issues a life insurance or 
annuity contract or who reinsures such a contract shall make an annual 
return (at such time and in such manner as the Secretary shall 
prescribe) setting forth--
            ``(1) the name, address, and TIN of such person,
            ``(2) the name, address, and TIN of each person who 
        receives an applicable amount (as defined in section 72(e)(12)) 
        during the year with respect to any life insurance or annuity 
        contract issued or reinsured by such person,
            ``(3) the aggregate applicable amounts received by each 
        person identified in paragraph (2), and
            ``(4) such other information as the Secretary may require.
    ``(b) Statement To Be Furnished to Taxpayers With Respect to Whom 
Information Is Required.--
            ``(1) In general.--Every person that is required to make a 
        return under subsection (a) shall furnish to each person whose 
        identity is required to be set forth under subsection (a)(2) a 
        written statement showing--
                    ``(A) the name, address, and phone number of the 
                information contact of the person required to make such 
                return, and
                    ``(B) the information required to be shown on such 
                return with respect to the person described in 
                subsection (a)(2) and with respect to applicable 
                amounts received by such person.
            ``(2) Furnishing of information.--The written statement 
        required under paragraph (1) shall be furnished to the person 
        on or before January 31 of the year following the calendar year 
        for which the return under subsection (a) is required to be 
        made.
    ``(c) Regulatory Authority.--The Secretary may prescribe such 
regulations and other guidance as necessary for purposes of carrying 
out this section, including regulations or other guidance to require 
reporting under this section by such other persons as necessary to 
carry out the purposes of section 72(e)(12).''.
            (2) Penalties.--
                    (A) Returns.--Section 6724(d)(1)(B), as amended by 
                this Act, is amended by striking ``or'' at the end of 
                clause (xxviii), by striking ``and'' at the end of 
                clause (xxix) and inserting ``or'', and by inserting 
                after clause (xxix) the following new clause:
                            ``(xxx) section 6050BB(a) (relating to 
                        returns of information with respect to private 
                        placement life insurance and annuity 
                        contracts),''.
                    (B) Statements.--Section 6724(d)(2), as so amended, 
                is amended--
                            (i) by striking ``or'' at the end of 
                        subparagraph (LL),
                            (ii) by striking the period at the end of 
                        subparagraph (MM) and inserting ``, or'', and
                            (iii) by inserting after subparagraph (MM) 
                        the following new subparagraph:

                                                    ``(NN) section 
                                                6050BB(b) (relating to 
                                                statements of 
                                                information with 
                                                respect to private 
                                                placement life 
                                                insurance and annuity 
                                                contracts).''.

            (3) Clerical amendment.--The table of sections for subpart 
        B of part III of subchapter A of chapter 61, as amended by this 
        Act, is amended by inserting after the item relating to section 
        6050AA the following new item:

``Sec. 6050BB. Returns relating to amounts received under certain life 
                            insurance and annuity contracts.''.
            (4) Effective date.--The amendments made by this subsection 
        shall apply to taxable years beginning after December 31, 2023.

    Subtitle D--Repeal of Special Treatment for Certain Investments

SEC. 231. TREATMENT OF EXCLUSION FOR CERTAIN SMALL BUSINESS STOCK.

    (a) In General.--Section 1202(a) is amended by adding at the end 
the following new paragraph:
            ``(5) Special rules for applicable taxpayers.--
                    ``(A) In general.--This subsection shall not apply 
                to any gain from the sale or exchange of qualified 
                small business stock by an applicable taxpayer (as 
                defined in section 495).
                    ``(B) Exception.--Subparagraph (A) shall not apply 
                to any qualified small business stock acquired before 
                November 30, 2023.''.
    (b) Effective Date.--The amendment made by this subsection shall 
apply to sales or exchanges on or after November 30, 2023.

SEC. 232. MODIFICATIONS FOR INVESTMENTS IN QUALIFIED OPPORTUNITY FUNDS.

    (a) Termination of Election.--
            (1) In general.--Section 1400Z-2(a)(2)(B) is amended to 
        read as follows:
                    ``(B) except as provided in paragraph (3), with 
                respect to any sale or exchange after the earlier of--
                            ``(i) December 31, 2026, or
                            ``(ii) in the case of an applicable 
                        taxpayer, the last day of the taxable year 
                        preceding the first taxable year for which the 
                        taxpayer is an applicable taxpayer.''.
            (2) Special rules.--Section 1400Z-2(a) is amended by adding 
        at the end the following new paragraph:
            ``(3) Special rules for applicable taxpayers and 
        entities.--For purposes of paragraph (2)(B)--
                    ``(A) Applicable entities.--No election may be made 
                under paragraph (1) by an applicable entity with 
                respect to any sale or exchange if a notice received by 
                the entity under subsection (b)(2)(A) or (c)(2) of 
                section 493 is in effect at the time of such sale or 
                exchange.
                    ``(B) Special rule for 2023.--In the case of a 
                taxpayer which would be an applicable taxpayer for its 
                first taxable year beginning in 2023 (determined as if 
                part IV of subchapter E applied to taxable years 
                beginning in 2023), clause (ii) of paragraph (2)(B) 
                shall be applied by substituting `November 30, 2023' 
                for the date otherwise specified in such clause.
                    ``(C) Definitions.--For purposes of this paragraph 
                and subsection (c), any term used in this paragraph 
                which is also used in part IV of subchapter E shall 
                have the same meaning as when used in such part.''.
    (b) Modification of Special Rule for Investments Held 10 Years.--
Section 1400Z-2(c) is amended by striking ``shall be equal to'' and all 
that follows and inserting ``shall be equal to--
            ``(1) in the case of any taxpayer who is an applicable 
        taxpayer for any taxable year during which such investment was 
        held by the taxpayer or any taxpayer which is an applicable 
        entity, the lesser of--
                    ``(A) the fair market value of such investment as 
                of the last day of the taxable year which includes the 
                later of--
                            ``(i) the date that such investment has 
                        been held for 10 years, or
                            ``(ii) in the case of--
                                    ``(I) an applicable taxpayer, the 
                                date that such taxpayer first became an 
                                applicable taxpayer, or
                                    ``(II) an applicable entity, the 
                                first date a notice was received by the 
                                entity under subsection (b)(2)(A) or 
                                (c)(2) of section 493, or
                    ``(B) the fair market value of such investment on 
                the date that investment is sold or exchanged, and
            ``(2) in the case of any other taxpayer, the fair market 
        value of such investment on the date the investment is sold or 
        exchanged.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to sales or exchanges after November 30, 2023, in taxable years 
ending after such date.
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