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[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[H.R. 436 Introduced in House (IH)]

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.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Certain Estate Tax Relief Act of 
2009''.

SEC. 2. RETENTION OF ESTATE TAX; REPEAL OF CARRYOVER BASIS.

    (a) In General.--Subtitles A and E of title V of the Economic 
Growth and Tax Relief Reconciliation Act of 2001, and the amendments 
made by such subtitles, are hereby repealed; and the Internal Revenue 
Code of 1986 shall be applied as if such subtitles, and amendments, had 
never been enacted.
    (b) Sunset Not To Apply.--Section 901 of the Economic Growth and 
Tax Relief Reconciliation Act of 2001 shall not apply to title V of 
such Act.
    (c) Conforming Amendments.--Subsections (d) and (e) of section 511 
of the Economic Growth and Tax Relief Reconciliation Act of 2001, and 
the amendments made by such subsections, are hereby repealed; and the 
Internal Revenue Code of 1986 shall be applied as if such subsections, 
and amendments, had never been enacted.

SEC. 3. MODIFICATIONS TO ESTATE TAX.

    (a) $3,500,000 Exclusion Equivalent of Unified Credit.--Subsection 
(c) of section 2010 of the Internal Revenue Code of 1986 (relating to 
applicable credit amount) is amended by striking all that follows ``the 
applicable exclusion amount'' and inserting ``. For purposes of the 
preceding sentence, the applicable exclusion amount is $3,500,000.''.
    (b) Freeze Maximum Estate Tax Rate at 45 Percent; Restoration of 
Phaseout of Graduated Rates and Unified Credit.--
            (1) Paragraph (1) of section 2001(c) of such Code is 
        amended by striking the last 2 items in the 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.''.
 

            (2) Paragraph (2) of section 2001(c) of such Code is 
        amended to read as follows:
            ``(2) Phaseout of graduated rates and unified credit.--The 
        tentative tax determined under paragraph (1) shall be increased 
        by an amount equal to 5 percent of so much of the amount (with 
        respect to which the tentative tax is to be computed) as 
        exceeds $10,000,000. The amount of the increase under the 
        preceding sentence shall not exceed the sum of the applicable 
        credit amount under section 2010(c) and $119,200.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to estates of decedents dying, and gifts made, after December 31, 
2009.

SEC. 4. VALUATION RULES FOR CERTAIN TRANSFERS OF NONBUSINESS ASSETS; 
              LIMITATION ON MINORITY DISCOUNTS.

    (a) In General.--Section 2031 of the Internal Revenue Code of 1986 
(relating to definition of gross estate) is amended by redesignating 
subsection (d) as subsection (f) and by inserting after subsection (c) 
the following new subsections:
    ``(d) Valuation Rules for Certain Transfers of Nonbusiness 
Assets.--For purposes of this chapter and chapter 12--
            ``(1) In general.--In the case of the transfer of any 
        interest in an entity other than an interest which is actively 
        traded (within the meaning of section 1092)--
                    ``(A) the value of any nonbusiness assets held by 
                the entity shall be determined as if the transferor had 
                transferred such assets directly to the transferee (and 
                no valuation discount shall be allowed with respect to 
                such nonbusiness assets), and
                    ``(B) the nonbusiness assets shall not be taken 
                into account in determining the value of the interest 
                in the entity.
            ``(2) Nonbusiness assets.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `nonbusiness asset' 
                means any asset which is not used in the active conduct 
                of 1 or more trades or businesses.
                    ``(B) Exception for certain passive assets.--Except 
                as provided in subparagraph (C), a passive asset shall 
                not be treated for purposes of subparagraph (A) as used 
                in the active conduct of a trade or business unless--
                            ``(i) the asset is property described in 
                        paragraph (1) or (4) of section 1221(a) or is a 
                        hedge with respect to such property, or
                            ``(ii) the asset is real property used in 
                        the active conduct of 1 or more real property 
                        trades or businesses (within the meaning of 
                        section 469(c)(7)(C)) in which the transferor 
                        materially participates and with respect to 
                        which the transferor meets the requirements of 
                        section 469(c)(7)(B)(ii).
                For purposes of clause (ii), material participation 
                shall be determined under the rules of section 469(h), 
                except that section 469(h)(3) shall be applied without 
                regard to the limitation to farming activity.
                    ``(C) Exception for working capital.--Any asset 
                (including a passive asset) which is held as a part of 
                the reasonably required working capital needs of a 
                trade or business shall be treated as used in the 
                active conduct of a trade or business.
            ``(3) Passive asset.--For purposes of this subsection, the 
        term `passive asset' means any--
                    ``(A) cash or cash equivalents,
                    ``(B) except to the extent provided by the 
                Secretary, stock in a corporation or any other equity, 
                profits, or capital interest in any entity,
                    ``(C) evidence of indebtedness, option, forward or 
                futures contract, notional principal contract, or 
                derivative,
                    ``(D) asset described in clause (iii), (iv), or (v) 
                of section 351(e)(1)(B),
                    ``(E) annuity,
                    ``(F) real property used in 1 or more real property 
                trades or businesses (as defined in section 
                469(c)(7)(C)),
                    ``(G) asset (other than a patent, trademark, or 
                copyright) which produces royalty income,
                    ``(H) commodity,
                    ``(I) collectible (within the meaning of section 
                401(m)), or
                    ``(J) any other asset specified in regulations 
                prescribed by the Secretary.
            ``(4) Look-thru rules.--
                    ``(A) In general.--If a nonbusiness asset of an 
                entity consists of a 10-percent interest in any other 
                entity, this subsection shall be applied by 
                disregarding the 10-percent interest and by treating 
                the entity as holding directly its ratable share of the 
                assets of the other entity. This subparagraph shall be 
                applied successively to any 10-percent interest of such 
                other entity in any other entity.
                    ``(B) 10-percent interest.--The term `10-percent 
                interest' means--
                            ``(i) in the case of an interest in a 
                        corporation, ownership of at least 10 percent 
                        (by vote or value) of the stock in such 
                        corporation,
                            ``(ii) in the case of an interest in a 
                        partnership, ownership of at least 10 percent 
                        of the capital or profits interest in the 
                        partnership, and
                            ``(iii) in any other case, ownership of at 
                        least 10 percent of the beneficial interests in 
                        the entity.
            ``(5) Coordination with subsection (b).--Subsection (b) 
        shall apply after the application of this subsection.
    ``(e) Limitation on Minority Discounts.--For purposes of this 
chapter and chapter 12, in the case of the transfer of any interest in 
an entity other than an interest which is actively traded (within the 
meaning of section 1092), no discount shall be allowed by reason of the 
fact that the transferee does not have control of such entity if the 
transferee and members of the family (as defined in section 
2032A(e)(2)) of the transferee have control of such entity.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to transfers after the date of the enactment of this Act.
                                 <all>
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