procedures under which extensions of time will 
be granted to make any election under this sub-
section. 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 treat-
ed 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 AS-
SETS. 
‘‘(a) COVERED ASSET.—For purposes of this part, 
except as otherwise provided in this part, the term ‘cov-
ered asset’ means any asset other than— 
‘‘(1) any interest of the taxpayer in an applica-
ble savings plan or in a defined benefit plan, 
‘‘(2) any cash or cash equivalent, or 
‘‘(3) any private placement life insurance or an-
nuity 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, 
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‘‘(B) interests in such assets are readily 
tradable on a secondary market (or the sub-
stantial equivalent thereof), 
‘‘(C) interests in such assets are available 
on an online or electronic platform that regu-
larly 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 annu-
ally, and 
‘‘(2) any derivative with respect to an under-
lying 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 pur-
poses of this part— 
‘‘(1) IN GENERAL.—The term ‘nontradable cov-
ered asset’ means any covered asset which is not a 
tradable covered asset. 
‘‘(2) CERTAIN ASSETS ONLY COUNTED FOR DE-
TERMINING AGGREGATE VALUE OF ASSETS.— 
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‘‘(A) IN
GENERAL.—Any asset excluded 
from treatment as a covered asset under para-
graph (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
INSUR-
ANCE
AND
ANNUITY
CONTRACTS.—For pur-
poses of subparagraph (A)— 
‘‘(i) IN
GENERAL.—The applicable 
value of an private placement life insur-
ance or annuity contract (as defined in sec-
tion 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 con-
tract to the extent necessary to prevent the 
avoidance of the purposes of this part, in-
cluding regulations which ensure that such 
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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
OPPOR-
TUNITY
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 appli-
cable 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, 
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‘‘(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 Sec-
retary 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 LI-
ABILITIES OF THE TAXPAYER.—Except as provided 
by the Secretary, the aggregate applicable value of 
all covered assets of the taxpayer as of any date (de-
termined 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 in-
debtedness) 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 deter-
mining the applicable value of any tradable covered 
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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 finan-
cial statement, or 
‘‘(D) provided to the taxpayer by such 
other persons as may be designated by the Sec-
retary. 
‘‘(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 ENTI-
TIES.—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 in-
terest in such partnership under paragraph 
(2)(C) shall not be less than the value of the 
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partner’s capital account under section 704, 
and 
‘‘(C) the Secretary shall provide rules for 
determining the share of a holder of an owner-
ship interest in such an entity of amounts in-
cluded 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 pur-
poses, 
‘‘(B) provide rules for the application of 
paragraph (2)(C), including in cases of trans-
actions 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 ap-
plicable value of assets in taxable years begin-
ning before the date of the enactment of this 
part. 
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‘‘SEC. 498. OTHER DEFINITIONS; COORDINATION WITH 
TITLE. 
‘‘(a) APPLICABLE TRANSFER.—For purposes of this 
part— 
‘‘(1) IN GENERAL.—The term ‘applicable trans-
fer’ 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 
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‘‘(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 oppor-
tunity 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 ex-
change shall be treated as a disregarded non-
recognition 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 trans-
actions, is converted to, or exchanged for, a 
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nontradable covered asset, such conversion or 
exchange shall be treated as a taxable event 
with respect to the asset being converted or ex-
changed if gain or loss (if any) on such conver-
sion or exchange is, without regard to this part, 
not recognized under this chapter. 
‘‘(b) APPLICABLE SAVINGS PLAN.—The term ‘appli-
cable savings plan’ means— 
‘‘(1) a defined contribution plan to which sec-
tion 401(a) or 403(a) applies, 
‘‘(2) an annuity contract under section 403(b), 
‘‘(3) an eligible deferred compensation plan de-
scribed 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 mean-
ing of section 223(d)). 
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‘‘(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 ei-
ther directly or indirectly. 
‘‘(d) REGULATORY AUTHORITY TO PREVENT AVOID-
ANCE 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 appli-
cation 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 pay-
ment or other distribution.’’. 
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(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 De-
cember 31, 2025. 
SEC. 102. CARRYBACK OF CAPITAL LOSSES ATTRIBUTABLE 
TO MARK-TO-MARKET RULES. 
(a) IN GENERAL.—Section 1212 is amended by add-
ing at the end the following new subsection: 
‘‘(d) CARRYBACK OF LOSSES OF APPLICABLE TAX-
PAYERS 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-mar-
ket 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 applica-
tion of paragraphs (2) and (3), such loss is al-
lowed as a carryback to any such preceding tax-
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able year, the amount so allowed shall be treat-
ed 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 car-
ried back shall be the excess (if any) of such loss 
over the portion of such loss which, after the appli-
cation 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- 
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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 
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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 pur-
poses 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
CHAR-
ACTER AS ATTRIBUTABLE TO MARKED-TO-MAR-
KET.—Any amount carried forward as a long- 
term capital loss to any taxable year under sub-
section (b)(1)(B) (after the application of sub-
paragraph (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 re-
duction in net capital loss under section 
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492(c)(3) (relating to reduction for credit 
against tax attributable to deferral recapture 
amount) shall, except as provided by the Sec-
retary, 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 sec-
tion 491(b)(1) with respect to tradable cov-
ered 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). 
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‘‘(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 owner-
ship 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 De-
cember 31, 2025. 
TITLE 
II—APPLICATION 
OF 
OTHER PROVISIONS TO AP-
PLICABLE 
TAXPAYERS 
AND 
ENTITIES 
Subtitle A—Individuals 
SEC. 201. APPLICABLE TAXPAYERS NOT ELIGIBLE FOR AD-
JUSTED 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 applica-
ble taxpayer (as defined in section 495) for any tax-
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able 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) multi-
plied by the amount determined under para-
graph (2)(A).’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
December 31, 2025. 
SEC. 202. TREATMENT OF COVERED EXPATRIATES. 
(a) APPLICATION OF EXPATRIATE RULES TO APPLI-
CABLE TAXPAYERS.—Section 877A is amended by redes-
ignating subsection (i) as subsection (j) and by inserting 
after subsection (h) the following new subsection: 
‘‘(i) SPECIAL
RULES
FOR
APPLICABLE
TAX-
PAYERS.— 
‘‘(1) IN GENERAL.—In the case of a covered ex-
patriate who is an applicable taxpayer (as defined in 
section 495) for the taxable year which includes the 
expatriation date— 
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‘‘(A) no election may be made under sub-
section (b) with respect to any property treated 
as sold by reason of subsection (a) (after appli-
cation of subparagraph (B)), and 
‘‘(B) the covered expatriate shall, for pur-
poses 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.—Notwith-
standing 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, 2025. 
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‘‘(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 sec-
tion 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-per-
cent owner under section 493(b)(4)(B), except 
that ‘20 percent’ shall be substituted for ‘5 per-
cent’ 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 De-
cember 31, 2025. 
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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 in-
serting ‘‘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 tax-
able 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 re-
voked only with the consent of the Secretary.’’. 
(b) TREATMENT
OF
LOANS.—Section 643(i) is 
amended— 
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(1) by inserting ‘‘or an applicable trust (as de-
fined 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 ex-
empt from tax under this chapter’’, 
(3) by striking ‘‘United States person’’ in para-
graph (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 sub-
chapter J is amended by adding at the end the fol-
lowing 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 
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amount of tax imposed under this chapter shall be in-
creased 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 tax-
payer and section 492 applied to any covered asset of the 
trust) as— 
‘‘(1) the amount required to be included in in-
come attributable to the gain on such applicable 
transfer, bears to 
‘‘(2) the total amount of the gain on such appli-
cable 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 sec-
tion 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. 
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‘‘(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 amend-
ed by striking ‘‘and’’, at the end of subparagraph 
(B), by redesignating subparagraph (C) as subpara-
graph (D), and by inserting after subparagraph (B) 
the following new subparagraph: 
‘‘(C) such information as the Secretary 
shall require for purposes of determining the in-
crease (if any) in tax under section 686, and’’. 
(3) CLERICAL AMENDMENT.—The table of sec-
tions 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 nec-
essary 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 para-
graph (2), the amendments made by this section 
shall apply to taxable years beginning after Decem-
ber 31, 2025. 
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(2) FOREIGN TRUSTS.—The amendments made 
by subsection (e) shall apply to applicable transfers 
occurring in taxable years beginning after December 
31, 2025. 
Subtitle C—Treatment of Deferred 
Compensation and Certain Life 
Insurance 
and 
Annuity 
Con-
tracts 
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 fol-
lowing new section: 
‘‘SEC. 409B. SPECIAL RULES FOR CERTAIN DEFERRED COM-
PENSATION. 
‘‘(a) IN GENERAL.—In the case of an individual who 
is an applicable taxpayer for any taxable year, the tax-
payer’s tax under this chapter for the taxable year (deter-
mined 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 
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‘‘(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 tax-
able year in which the compensation is in-
cludible in gross income of the individual. 
‘‘(B) SPECIAL RULE FOR PERIODS BEFORE 
BECOMING
APPLICABLE
TAXPAYER.—Notwith-
standing subparagraph (A)(i), any compensa-
tion which would be otherwise allocated under 
such subparagraph to any taxable year pre-
ceding the first taxable year for which the tax-
payer is treated as an applicable taxpayer shall 
be allocated to such first taxable year. 
‘‘(3) COMPUTATION OF INTEREST.— 
‘‘(A) IN GENERAL.—The amount of inter-
est referred to in paragraph (1) on any deemed 
tax amount determined under paragraph (2) for 
any preceding taxable year with respect to ap-
plicable deferred compensation shall be deter-
mined 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 
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6621(b) (plus 1 percentage point), and the 
method applicable under section 6621, for un-
derpayments of tax for such period. 
‘‘(B) DUE
DATE.—For purposes of this 
paragraph, the term ‘due date’ means, with re-
spect to any preceding taxable year, the date 
prescribed by law (determined without regard to 
extensions) for filing the return of the tax im-
posed 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 com-
pensation. 
‘‘(c) DEFINITIONS.—For purposes of this section— 
‘‘(1) APPLICABLE TAXPAYER.—The term ‘appli-
cable taxpayer’ has the meaning given such term by 
section 495. 
‘‘(2) 
APPLICABLE
DEFERRED
COMPENSA-
TION.— 
‘‘(A) IN GENERAL.—Except as provided in 
subparagraph (B), the term ‘applicable deferred 
compensation’ means— 
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‘‘(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 be-
cause such compensation is not treat-
ed 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 serv-
ices 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. 
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‘‘(C) EARNINGS
AND
INTEREST.—Any 
earnings, interest, or similar adjustment in-
cluded in an amount of applicable deferred com-
pensation shall not be treated as separately de-
ferred from such amount. 
‘‘(3) SEVERANCE
PAY.—The term ‘severance 
pay’ means any compensation the payment or vest-
ing of which is contingent, in whole or in part, upon 
the termination of employment or other services, in-
cluding cash, property, reimbursement or direct pro-
vision of living, travel, and business expenses, and 
life, health, or other insurance, to the extent other-
wise 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 com-
pensation was first deferred, without re-
gard to vesting, transferability, or risk of 
forfeiture, and 
‘‘(ii) ending on the date such com-
pensation is includible in gross income or, 
if applicable, the date described in section 
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83(a)(1) with respect to such compensa-
tion. 
For purposes of the preceding sentence, com-
pensation shall be treated as first deferred as of 
the date the applicable taxpayer first has a le-
gally 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 sub-
paragraph (A)(ii). 
‘‘(C) PROPERTY TRANSFERRED PURSUANT 
TO THE EXERCISE OF AN OPTION.—In the case 
of property acquired pursuant to an option de-
scribed 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 
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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 APPLICA-
BLE 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 de-
scribed 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 compensa-
tion 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 
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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 includ-
ible in gross income of the individual for the taxable 
year, 
‘‘(4) the amount of such severance pay includ-
ible 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
COMPENSATION.—With re-
spect to transfers of property to which section 83 
applies, the information required under paragraphs 
(2) and (3) of subsection (b) shall be reported sepa-
rately 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 pur-
suant to more than 1 plan or arrangement or in-
volves amounts which were first deferred on more 
than 1 date, the information required under para-
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100 
graphs (2) and (3) of subsection (b) shall be re-
ported separately with respect to each such plan or 
arrangement and each such date. 
‘‘(d) STATEMENTS TO BE FURNISHED TO INDIVID-
UALS WITH RESPECT TO WHOM INFORMATION IS RE-
PORTED.—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 sen-
tence shall be furnished to the individual on or before Jan-
uary 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 2026, the $5,000,000 amount 
under subsection (a) shall be increased by an 
amount equal to the product of— 
‘‘(A) such dollar amount, and 
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101 
‘‘(B) the cost-of-living adjustment under 
section 1(f)(3) for the calendar year in which 
such taxable year begins, determined by sub-
stituting ‘calendar year 2025’ 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 regula-
tions specifying what constitutes a payment to an indi-
vidual 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 fol-
lowing new clause: 
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102 
‘‘(xxix) section 6050AA(a) (relating to 
returns of information with respect to ap-
plicable deferred compensation), and’’. 
(2) STATEMENTS.—Section 6724(d)(2), as so in 
effect, is amended— 
(A) by striking ‘‘or’’ at the end of subpara-
graph (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 sec-
tion 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 
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103 
2022, is amended by inserting after the item relat-
ing 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, 2025. 
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 RE-
CEIVED UNDER CERTAIN LIFE INSURANCE AND AN-
NUITY CONTRACTS OF APPLICABLE TAXPAYERS.— 
‘‘(A) IN GENERAL.—In the case of any ap-
plicable 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 
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104 
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 para-
graph (4)(A) with respect to a life in-
surance 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, SUR-
RENDERS, 
REDEMPTIONS
AND
MATU-
RITIES.—Notwithstanding 
paragraph 
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105 
(5)(A) or (5)(E), amounts described in 
clause (i)(I) shall include amounts de-
scribed in clause (i) or (ii) of paragraph 
(5)(E) received under an applicable private 
placement life insurance or annuity con-
tract. 
‘‘(iii) AMOUNTS UNDER PRE-1982 AND 
QUALIFIED
PLAN
CONTRACTS, ETC. EX-
CLUDED.—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 edu-
cation 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 ‘applica-
ble private placement life insurance or an-
nuity contract’ means a private placement 
life insurance or annuity contract the hold-
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106 
er 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 place-
ment life insurance or annuity contract as 
an applicable private placement life insur-
ance or annuity contract in cases where an 
applicable taxpayer (or a related person) 
has an interest in such contract not de-
scribed in clause (i) if such treatment is 
necessary to prevent the avoidance of the 
purposes of this paragraph. 
‘‘(D) PRIVATE
PLACEMENT
LIFE
INSUR-
ANCE 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 
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107 
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 pur-
poses 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, 2025. 
(b) 10-PERCENT ADDITIONAL TAX FOR DISTRIBU-
TIONS FROM APPLICABLE PRIVATE PLACEMENT LIFE IN-
SURANCE 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 
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108 
defined in subsection (e)(12))’’ after ‘‘a modi-
fied endowment contract (as defined in section 
7702A)’’ in paragraph (1), and 
(B) by inserting ‘‘AND APPLICABLE PRI-
VATE PLACEMENT LIFE INSURANCE OR ANNU-
ITY CONTRACTS’’ after ‘‘MODIFIED ENDOW-
MENT 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, 2025. 
(c) REPEAL
OF EXCLUSION
FOR DEATH BENE-
FITS.— 
(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 sec-
tion 72(e)(12)). 
‘‘(2) AMOUNTS
PREVIOUSLY
INCLUDED.—The 
Secretary shall prescribe rules to ensure that para-
graph (1) shall not apply to any portion of any 
amount received which was previously included in 
gross income.’’. 
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109 
(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, 2025. 
(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 AN-
NUITY CONTRACTS. 
‘‘(a) IN GENERAL.—Every person who issues a life 
insurance or annuity contract or who reinsures such a con-
tract 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 per-
son, 
‘‘(2) the name, address, and TIN of each per-
son who receives an applicable amount (as defined in 
section 72(e)(12)) during the year with respect to 
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any life insurance or annuity contract issued or rein-
sured 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 re-
quired 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 state-
ment showing— 
‘‘(A) the name, address, and phone num-
ber of the information contact of the person re-
quired to make such return, and 
‘‘(B) the information required to be shown 
on such return with respect to the person de-
scribed 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 Janu-
ary 31 of the year following the calendar year for 
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which the return under subsection (a) is required to 
be made. 
‘‘(c) REGULATORY AUTHORITY.—The Secretary may 
prescribe such regulations and other guidance as nec-
essary 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 pri-
vate 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 sub-
paragraph (LL), 
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(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 place-
ment life insurance and an-
nuity contracts).’’. 
(3) CLERICAL AMENDMENT.—The table of sec-
tions 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 insur-
ance and annuity contracts.’’. 
(4) EFFECTIVE DATE.—The amendments made 
by this subsection shall apply to taxable years begin-
ning after December 31, 2025. 
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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
TAX-
PAYERS.— 
‘‘(A) IN GENERAL.—This subsection shall 
not apply to any gain from the sale or exchange 
of qualified small business stock by an applica-
ble taxpayer (as defined in section 495). 
‘‘(B) 
EXCEPTION.—Subparagraph 
(A) 
shall not apply to any qualified small business 
stock acquired before November 30, 2025.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this subsection shall apply to sales or exchanges on or 
after November 30, 2025. 
SEC. 232. MODIFICATIONS FOR INVESTMENTS IN QUALI-
FIED OPPORTUNITY FUNDS. 
(a) TERMINATION OF ELECTION.— 
(1) IN GENERAL.—Section 1400Z–2(a)(2)(B) is 
amended to read as follows: 
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‘‘(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 tax-
payer, the last day of the taxable year pre-
ceding 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
TAX-
PAYERS AND ENTITIES.—For purposes of paragraph 
(2)(B)— 
‘‘(A) APPLICABLE ENTITIES.—No election 
may be made under paragraph (1) by an appli-
cable entity with respect to any sale or ex-
change 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
2025.—In the 
case of a taxpayer which would be an applicable 
taxpayer for its first taxable year beginning in 
2025 (determined as if part IV of subchapter E 
applied to taxable years beginning in 2025), 
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clause (ii) of paragraph (2)(B) shall be applied 
by substituting ‘November 30, 2025’ 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 INVEST-
MENTS HELD 10 YEARS.—Section 1400Z–2(c) is amend-
ed 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 ap-
plicable 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 invest-
ment 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— 
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‘‘(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 invest-
ment on the date that investment is sold or ex-
changed, and 
‘‘(2) in the case of any other taxpayer, the fair 
market value of such investment on the date the in-
vestment is sold or exchanged.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to sales or exchanges after Novem-
ber 30, 2025, in taxable years ending after such date. 
Æ 
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