American Solution for Simplifying the Estate Tax Act of 2014

To amend the Internal Revenue Code of 1986 to allow an annual elective surcharge in lieu of estate tax, and for other purposes. 1. Short title; table of contents (a) Short title This Act may be cited as the American Solution for Simplifying the Estate Tax Act of 2014 (b) Table of contents The table of contents for this Act is as follows: Sec. 1. Short title; table of contents. Sec. 2. Congressional findings. Sec. 3. Elective simplified estate tax. Sec. 4. Carry-over basis. Sec. 5. Returns. Sec. 6. Special rule for revocation of trusts in connection with election. 2. Congressional findings Congress finds the following: (1) The current method of collecting Federal estate tax often cripples American family owned businesses, farms, and ranches by forcing the sale of ongoing concerns in order to pay tax liability arising from the death of an owner, creating inefficiencies, dislocation, and often job losses. (2) From farmers and ranchers to urban business owners, the Federal estate tax looms heavily and has a counterproductive effect on our Nation’s family owned businesses that costs numerous jobs. (3) The job losses, economic dislocation, and excessive compliance costs are not justified given the fact that the estate tax has averaged one percent of total IRS collections since 1960, with $14 billion collected in Fiscal Year 2013 (less than ½ percent of total IRS collections). (4) The Joint Economic Committee in its May 2006 study concluded that in order to avoid wealth transfer taxes, individuals’ costs of complying with the estate tax roughly equals the revenue yield of the estate tax for the U.S. Treasury. (5) The current method of collection of the estate tax leads many wealthy Americans to lock up capital in trusts to minimize or eliminate tax liability, meaning that billions of dollars are left idle instead of facilitating the creation of new business ventures that could stimulate the economy. (6) As recently as 2009, of the 34,000 estate tax returns filed that year, only half owed any estate tax, indicating that many wealthy Americans have found means to avoid paying this tax. In 2012, 9,400 Americans still had to file estate tax returns, even with the higher $5 million threshold. (7) It is in the national interest to modify the mechanism for collection of revenues from those Americans who have the largest estates, provided that it is done in a revenue neutral manner that ensures the ongoing collection of an appropriate percentage of the historical average of 1 percent of total IRS tax receipts that reflects the lower amount of estate tax revenues generated under the 2010 and 2012 amendments due to a higher exemption amount. 3. Elective simplified estate tax (a) In general Chapter 11 D Simplified Estate Tax Sec. 2301. Simplified estate tax. Sec. 2302. Imposition and rate. Sec. 2303. Election. Sec. 2304. Seven taxable year minimum. 2301. Simplified estate tax In the case of an individual (and, if married, such individual’s spouse) who elects the application of this subchapter— (1) chapter 11 shall thereafter not apply with respect to the transfer of the estate of such individual (or such spouse), (2) chapter 13 shall thereafter not apply with respect to any generation-skipping transfer (as defined in section 2611) made by such individual (or such spouse), and (3) a tax shall be imposed by section 2302 with respect to such individual (and such spouse) for the taxable year of the election and each taxable year thereafter. 2302. Imposition and rate (a) In general The tax imposed by this section for any taxable year shall be treated as an increase in the taxpayer’s tax under chapter 1 for the taxable year by an amount equal to 1 percent of the modified adjusted gross income of the taxpayer for the taxable year. (b) Modified adjusted gross income For purposes of this section, the term modified adjusted gross income (1) any amount excluded from gross income under section 911, 931, or 933, or (2) any amount of interest received or accrued by the taxpayer during the taxable year which is exempt from tax. 2303. Election (a) In general Except as the Secretary shall by regulation prescribe in the case of separation, divorce, remarriage, or other circumstances the Secretary determines equitable, election for this subchapter to apply, once made, shall be irrevocable. (b) Married Couples To File Jointly If the taxpayer and the taxpayer’s spouse elect the application of this subchapter and are married (within the meaning of section 7703) at the end of the taxable year, the taxpayer and the taxpayer’s spouse shall file a joint return for the taxable year. 2304. Seven taxable year minimum (a) In general In the case of a decedent whose last taxable year is not at least the 7th taxable year for which the tax under section 2302 is imposed, the application of this subchapter shall be treated as not having been elected. (b) Transition rule for 2015 2016 (1) In general In the case of a decedent who first elected the application of this subchapter during 2015 or 2016, subsection (a) shall not apply if the executor of the decedent’s estate elects to increase the amount of the tax imposed under chapter 1 for the decedent’s last taxable year by an amount equal to— (A) the highest amount of tax imposed by section 2302 with respect to such decedent for any taxable year (including the decedent’s last taxable year), multiplied by (B) an amount equal to the difference of— (i) 7, over (ii) the number of taxable years for which such tax was imposed with respect to such decedent (including the decedent’s last taxable year). (2) Special rule for decedent dying during year of election In the case of a decedent to whom paragraph (1) applies and who first elected the application of this subchapter with respect to the last taxable year of the decedent, the amount under subparagraph (A) shall not be less than the amount of tax which would have been imposed by section 2302 had such election first been elected with respect to the preceding taxable year. (c) Credit for taxes paid (1) In general In the case of a decedent to which subsection (a) applies, the Secretary shall by regulation provide for allowing for a credit against the tax imposed by chapter 11 with respect to the decedent to account for any taxes paid by the decedent under section 2302. (2) Interest The amount of any credit determined under paragraph (1) with respect to any tax paid shall include interest, which shall be determined— (A) at the overpayment rate established under section 6621, and (B) from the date of payment of such tax to the due date of the amount against which the credit is allowed. . (b) Effective date The amendments made by this section shall apply to taxable years beginning after, and estates of decedents dying after, December 31, 2014. 4. Carry-over basis (a) In general Part II of subchapter O of chapter 1 of such Code is amended by inserting after section 1021 the following new section: 1022. Treatment of property acquired from a decedent who elected simplified estate tax treatment (a) In general In the case of property acquired from a decedent who elected the application of subchapter D of chapter 11— (1) such property shall be treated for purposes of this subtitle as transferred by gift, and (2) the basis of the person acquiring property from such a decedent shall be the lesser of— (A) the adjusted basis of the decedent, or (B) the fair market value of the property at the date of the decedent’s death. (b) Property acquired from the decedent For purposes of this section, the following property shall be considered to have been acquired from the decedent: (1) Property acquired by bequest, devise, or inheritance, or by the decedent’s estate from the decedent. (2) Property transferred by the decedent during his lifetime— (A) to a qualified revocable trust (as defined in section 645(b)(1)), or (B) to any other trust with respect to which the decedent reserved the right to make any change in the enjoyment thereof through the exercise of a power to alter, amend, or terminate the trust. (3) Any other property passing from the decedent by reason of death to the extent that such property passed without consideration. . (b) Effective date The amendments made by this section shall apply with respect to estates of decedents dying after December 31, 2014. 5. Simplified estate tax returns (a) Information returns (1) In general Subpart C of part II of subchapter A of chapter 61 of such Code is amended by inserting after section 6018 the following new section: 6018A. Simplified estate tax returns (a) In general In the case of property acquired from a decedent who has in effect an election under subchapter D of chapter 11, the executor of the estate of such decedent shall make a return containing the following information with respect to such property: (1) The name and TIN of the recipient of such property. (2) An accurate description of such property. (3) The adjusted basis of such property in the hands of the decedent and its fair market value at the time of death. (4) The decedent’s holding period for such property. (5) Sufficient information to determine whether any gain on the disposition of the property would be treated as ordinary income. (b) Property acquired from decedent —For purposes of this section, section 1022 shall apply for purposes of determining the property acquired from a decedent. (c) Statements To Be Furnished to Certain Persons Every person required to make a return under subsection (a) shall furnish to each person whose name is required to be set forth in such return (other than the person required to make such return) a written statement showing— (1) the name, address, and phone number of the person required to make such return, and (2) the information specified in subsection (a) with respect to property acquired from, or passing from, the decedent to the person required to receive such statement. The written statement required under the preceding sentence shall be furnished not later than 30 days after the date that the return required by subsection (a) is filed. (d) Annual beneficiary asset status return Each recipient of property with respect to whom a statement is required to be furnished under subsection (c) and who owns any such property during the taxable year shall make a return with respect to such property containing the following information: (1) An accurate description of such property. (2) An accounting of the disposition of any such property during the taxable year. (3) The adjusted basis of such property as of the later of the end of the taxable year or the date of any such disposition. (e) Excepted property (1) In general Subsections (a) and (b) shall not apply with respect to— (A) any property the fair market value of which, at the time of the decedent’s death, does not exceed $10,000, and (B) any property the basis of which was determined by reference to the fair market value of the property at the date of the decedent’s death. (2) Inflation adjustment (A) In general In the case of any calendar year after 2015, the $10,000 amount under paragraph (1) shall be increased by an amount equal to— (i) such dollar amount, multiplied by (ii) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year, determined by substituting calendar year 2014 calendar year 1992 (B) Rounding If any amount as adjusted under subparagraph (A) is not a multiple of $100, such amount shall be rounded to the next lowest multiple of $100. . (2) Clerical amendment The table of sections for subpart C of part II of subchapter A of chapter 61 of such Code is amended by inserting after the item relating to section 6018 the following new item: Sec. 6018A. Simplified estate tax returns. . (b) Time for filing returns Section 6075(a) of such Code is amended— (1) by striking Estate tax return Estate tax return (1) In general Returns made , and (2) by adding at the end the following new paragraph: (2) Simplified estate tax (A) In general Returns made under section 6018A(a) shall be filed not later than 180 days after the date of the decedent’s death. (B) Annual beneficiary asset status returns Returns made under section 6018A(d) for a taxable year shall be filed concurrently with the individual’s return of income tax for the taxable year. . (c) Penalty for Failure To File Returns (1) In general Part 1 of subchapter B of chapter 68 of such Code is amended by adding at the end the following new section: 6720D. Failure to file information with respect to simplified estate tax returns (a) Information Required To Be Filed With Secretary Any person required to furnish any information under section 6018A(a) who fails to do so on the date prescribed therfor (determined with regard to any extension of time for filing) shall pay a penalty of $10,000 for each such failure. (b) Information Required To Be Furnished to Beneficiaries Any person required to furnish in writing to each person described in section 6018A(c) the information required under such section who fails to do so shall pay a penalty of $250 for each such failure. (c) Annual information return required To be furnished by beneficiary Any person required to furnish any information under section 6018A(d) who fails to do so on the date prescribed therefor (determined with regard to any extension of time for filing) shall pay a penalty of $5,000 for each such failure. (d) Reasonable cause exception No penalty shall be imposed under subsection (a), (b), or (c) with respect to a failure if it is shown that such failure is due to reasonable cause. (e) Intentional disregard If any failure under subsection (a), (b), or (c) is due to intentional disregard of the requirements under sections 6018A, the penalty under such subsection shall be 5 percent of the fair market value as of the date of death (in the case of section 6018A(d), as of the date prescribed for furnishing such return (determined with regard to any extension of time for filing)) of the property with respect to which the information is required. (f) Deficiency Procedures Not To Apply Subchapter B of chapter 63 (relating to deficiency procedures for income, estate, gift, and certain excise taxes) shall not apply in respect of the assessment or collection of any penalty imposed by this section. . (2) Clerical amendment The table of sections for part 1 of subchapter B of chapter 68 of such Code is amended by adding at the end the following new item: Sec. 6720D. Failure to file information with respect to simplified estate tax returns. . (d) Effective date The amendments made by this section shall apply with respect to estates of decedents dying after December 31, 2014. 6. Special rule for revocation of trusts in connection with election Any revesting in the grantor of title to property held in a trust, whether by revocation, dissolution, or otherwise, shall not be subject to any tax imposed by the Internal Revenue Code of 1986 if such revesting occurs in 2015 or 2016 and is in connection with the grantor’s election for subchapter D of chapter 11 to apply.

Summary: American Solution for Simplifying the Estate Tax Act of 2014 - Amends the Internal Revenue to: (1) allow taxpayers an election to make annual payments of 1% of their adjusted gross income for a minimum seven-year period in lieu of existing estate and generation-skipping transfer taxes, and (2) allow a step-up in basis for estate property of a taxpayer making an election under this Act. Sets forth requirements for the filing of an estate tax return for taxpayers who have made an election under this Act.