I 

111TH CONGRESS 

1ST SESSION H. R. 436 

To amend the Internal Revenue Code of 1986 to repeal the new carryover 

basis rules in order to prevent tax increases and the imposition of 

compliance burdens on many more estates than would benefit from repeal, to retain the estate tax with a $3,500,000 exemption, and for 

other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

JANUARY 9, 2009 

Mr. POMEROY introduced the following bill; which was referred to the 

Committee on Ways and Means 

A BILL 

To amend the Internal Revenue Code of 1986 to repeal 

the new carryover basis rules in order to prevent tax 

increases and the imposition of compliance burdens on 

many more estates than would benefit from repeal, to 

retain the estate tax with a $3,500,000 exemption, and 

for other purposes. 

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

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Certain Estate Tax 

5 Relief Act of 2009’’. 


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1 SEC. 2. RETENTION OF ESTATE TAX; REPEAL OF CARRY2 OVER BASIS. 

3 (a) IN GENERAL.—Subtitles A and E of title V of 

4 the Economic Growth and Tax Relief Reconciliation Act 

5 of 2001, and the amendments made by such subtitles, are 

6 hereby repealed; and the Internal Revenue Code of 1986 

7 shall be applied as if such subtitles, and amendments, had 

8 never been enacted. 

9 (b) SUNSET NOT TO APPLY.—Section 901 of the 

10 Economic Growth and Tax Relief Reconciliation Act of 

11 2001 shall not apply to title V of such Act. 

12 (c) CONFORMING AMENDMENTS.—Subsections (d) 

13 and (e) of section 511 of the Economic Growth and Tax 

14 Relief Reconciliation Act of 2001, and the amendments 

15 made by such subsections, are hereby repealed; and the 

16 Internal Revenue Code of 1986 shall be applied as if such 

17 subsections, and amendments, had never been enacted. 

18 SEC. 3. MODIFICATIONS TO ESTATE TAX. 

19 (a) $3,500,000 EXCLUSION EQUIVALENT OF UNI20 FIED CREDIT.—Subsection (c) of section 2010 of the In21 ternal Revenue Code of 1986 (relating to applicable credit 

22 amount) is amended by striking all that follows ‘‘the appli23 cable exclusion amount’’ and inserting ‘‘. For purposes of 

24 the preceding sentence, the applicable exclusion amount 

25 is $3,500,000.’’. 


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1 (b) FREEZE MAXIMUM ESTATE TAX RATE AT 45 

2 PERCENT; RESTORATION OF PHASEOUT OF GRADUATED

3 RATES AND UNIFIED CREDIT.— 

4 (1) Paragraph (1) of section 2001(c) of such 

5 Code is amended by striking the last 2 items in the 

6 table and inserting the following new item: 

‘‘Over $1,500,000 ................................ $555,800, plus 45 percent of the excess of such amount over 

$1,500,000.’’. 

7 (2) Paragraph (2) of section 2001(c) of such 

8 Code is amended to read as follows: 

9 ‘‘(2) PHASEOUT OF GRADUATED RATES AND

10 UNIFIED CREDIT.—The tentative tax determined 

11 under paragraph (1) shall be increased by an 

12 amount equal to 5 percent of so much of the amount 

13 (with respect to which the tentative tax is to be com14 puted) as exceeds $10,000,000. The amount of the 

15 increase under the preceding sentence shall not ex16 ceed the sum of the applicable credit amount under 

17 section 2010(c) and $119,200.’’. 

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

19 this section shall apply to estates of decedents dying, and 

20 gifts made, after December 31, 2009. 


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1 SEC. 4. VALUATION RULES FOR CERTAIN TRANSFERS OF 

2 NONBUSINESS ASSETS; LIMITATION ON MI3 NORITY DISCOUNTS. 

4 (a) IN GENERAL.—Section 2031 of the Internal Rev5 enue Code of 1986 (relating to definition of gross estate) 

6 is amended by redesignating subsection (d) as subsection 

7 (f) and by inserting after subsection (c) the following new 

8 subsections: 

9 ‘‘(d) VALUATION RULES FOR CERTAIN TRANSFERS

10 OF NONBUSINESS ASSETS.—For purposes of this chapter 

11 and chapter 12— 

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

13 of any interest in an entity other than an interest 

14 which is actively traded (within the meaning of sec15 tion 1092)— 

16 ‘‘(A) the value of any nonbusiness assets 

17 held by the entity shall be determined as if the 

18 transferor had transferred such assets directly 

19 to the transferee (and no valuation discount 

20 shall be allowed with respect to such nonbusi21 ness assets), and 

22 ‘‘(B) the nonbusiness assets shall not be 

23 taken into account in determining the value of 

24 the interest in the entity. 

25 ‘‘(2) NONBUSINESS ASSETS.—For purposes of 

26 this subsection— 


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1 ‘‘(A) IN GENERAL.—The term ‘nonbusi2 ness asset’ means any asset which is not used 

3 in the active conduct of 1 or more trades or 

4 businesses. 

5 ‘‘(B) EXCEPTION FOR CERTAIN PASSIVE

6 ASSETS.—Except as provided in subparagraph 

7 (C), a passive asset shall not be treated for pur8 poses of subparagraph (A) as used in the active 

9 conduct of a trade or business unless— 

10 ‘‘(i) the asset is property described in 

11 paragraph (1) or (4) of section 1221(a) or 

12 is a hedge with respect to such property, 

13 or 

14 ‘‘(ii) the asset is real property used in 

15 the active conduct of 1 or more real prop16 erty trades or businesses (within the mean17 ing of section 469(c)(7)(C)) in which the 

18 transferor materially participates and with 

19 respect to which the transferor meets the 

20 requirements of section 469(c)(7)(B)(ii). 

21 For purposes of clause (ii), material participa22 tion shall be determined under the rules of sec23 tion 469(h), except that section 469(h)(3) shall 

24 be applied without regard to the limitation to 

25 farming activity. 


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1 ‘‘(C) EXCEPTION FOR WORKING CAP2 ITAL.—Any asset (including a passive asset) 

3 which is held as a part of the reasonably re4 quired working capital needs of a trade or busi5 ness shall be treated as used in the active con6 duct of a trade or business. 

7 ‘‘(3) PASSIVE ASSET.—For purposes of this 

8 subsection, the term ‘passive asset’ means any— 

9 ‘‘(A) cash or cash equivalents, 

10 ‘‘(B) except to the extent provided by the 

11 Secretary, stock in a corporation or any other 

12 equity, profits, or capital interest in any entity, 

13 ‘‘(C) evidence of indebtedness, option, for14 ward or futures contract, notional principal con15 tract, or derivative, 

16 ‘‘(D) asset described in clause (iii), (iv), or 

17 (v) of section 351(e)(1)(B), 

18 ‘‘(E) annuity, 

19 ‘‘(F) real property used in 1 or more real 

20 property trades or businesses (as defined in sec21 tion 469(c)(7)(C)), 

22 ‘‘(G) asset (other than a patent, trade23 mark, or copyright) which produces royalty in24 come, 

25 ‘‘(H) commodity, 


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1 ‘‘(I) collectible (within the meaning of sec2 tion 401(m)), or 

3 ‘‘(J) any other asset specified in regula4 tions prescribed by the Secretary. 

5 ‘‘(4) LOOK-THRU RULES.— 

6 ‘‘(A) IN GENERAL.—If a nonbusiness asset 

7 of an entity consists of a 10-percent interest in 

8 any other entity, this subsection shall be ap9 plied by disregarding the 10-percent interest 

10 and by treating the entity as holding directly its 

11 ratable share of the assets of the other entity. 

12 This subparagraph shall be applied successively 

13 to any 10-percent interest of such other entity 

14 in any other entity. 

15 ‘‘(B) 10-PERCENT INTEREST.—The term 

16 ‘10-percent interest’ means— 

17 ‘‘(i) in the case of an interest in a cor18 poration, ownership of at least 10 percent 

19 (by vote or value) of the stock in such cor20 poration, 

21 ‘‘(ii) in the case of an interest in a 

22 partnership, ownership of at least 10 per23 cent of the capital or profits interest in the 

24 partnership, and 


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1 ‘‘(iii) in any other case, ownership of 

2 at least 10 percent of the beneficial inter3 ests in the entity. 

4 ‘‘(5) COORDINATION WITH SUBSECTION (b).— 

5 Subsection (b) shall apply after the application of 

6 this subsection. 

7 ‘‘(e) LIMITATION ON MINORITY DISCOUNTS.—For 

8 purposes of this chapter and chapter 12, in the case of 

9 the transfer of any interest in an entity other than an in10 terest which is actively traded (within the meaning of sec11 tion 1092), no discount shall be allowed by reason of the 

12 fact that the transferee does not have control of such enti13 ty if the transferee and members of the family (as defined 

14 in section 2032A(e)(2)) of the transferee have control of 

15 such entity.’’. 

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

17 this section shall apply to transfers after the date of the 

18 enactment of this Act. 

Æ 


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