Babies over Billionaires Act of 2022
Bill: H.R.7502 | Sponsor: Rep. Bowman, Jamaal (D-NY)
Policy area: Taxation

Summary:
Babies over Billionaires Act of 2022
This bill sets forth a special tax rule that requires the realization (i.e., deemed sold) at the end of the taxable year of the gains and losses of the publicly traded and private securities of taxpayers whose net worth exceeds $100 million. It limits the tax liability of such taxpayers to 35% of the amount by which their net worth exceeds $100 million at the end of the taxable year.
The Internal Revenue Service must annually audit taxpayers whose net worth exceeds $100 million in the current taxable year and any of the 3 preceding taxable years and impose a penalty of 20% of understatements of tax (40% if understatements are due to failure to report an asset).
The bill establishes the Family Investment Trust Fund to hold tax revenues generated by this bill for programs to support family well-being and the development of children.

To amend the Internal Revenue Code of 1986 to adopt mark-to-market 
    income tax rules for taxpayers with net worth above a specified 
                   threshold, 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 ``Babies over Billionaires Act of 
2022''.

SEC. 2. FINDINGS.

    Congress finds the following:
            (1) Billionaires have disproportionately benefitted from 
        financial gains during the pandemic as their collective net 
        worth grew by $1.7 trillion since the beginning of the pandemic 
        as employment for low-wage workers fell by 36.7 percent at the 
        trough of the pandemic in April 2020.
            (2) The 25 wealthiest billionaires in America made $401 
        billion from 2014 to 2018 and paid an effective tax rate of 3.4 
        percent.
            (3) The wealthiest 400 households in America paid an 
        average effective tax rate of just 8.2 percent between 2010 and 
        2018.
            (4) A gradual tax on the unrealized capital gains of 
        billionaires from tradable and non-tradable assets could raise 
        more than $1 trillion over 10 years.
            (5) Investing revenue from such a tax in children at birth, 
        particularly in the first 1000 days of life, would support 
        children's healthy physical development, brain development, 
        social-emotional health, and long-term well-being.

SEC. 3. DEEMED REALIZATION MARK-TO-MARKET RULES.

    (a) Imposition of Tax.--Part I of subchapter O of chapter 1 of the 
Internal Revenue Code of 1986 is amended by inserting after section 
1001 the following new section:

``SEC. 1002. DEEMED REALIZATION MARK-TO-MARKET RULES.

    ``(a) Annual Realization of Gains and Losses in Publicly Traded 
Assets.--Except as provided in subsection (c), for the purposes of 
section 1, 30 percent by value of the publicly traded securities of 
each covered taxpayer are deemed sold on the last day of each taxable 
year.
    ``(b) Realization of Gains and Losses on All Assets.--Except as 
provided in subsection (c), in the first taxable year in which a 
taxpayer has tax liability resulting from the operation of subsection 
(a) and every 5 taxable years thereafter (excluding any taxable year in 
which such taxpayer is not a covered taxpayer), for the purposes of 
section 1, 50 percent by value of such taxpayer's assets that is not a 
publicly traded security is deemed sold on the last day of such taxable 
year.
    ``(c) Phase-In Cap.--The amount of tax liability with respect to a 
taxpayer in a taxable year resulting from the operation of subsections 
(a) and (b) (determined without regard to this subsection) may not 
exceed 35 percent of the amount by which the taxpayer's net worth 
exceeds the exemption amount on the last day of such taxable year.
    ``(d) Net Losses.--Net losses shall not be recognized as a result 
of this subsection except to the extent that net gains were recognized 
by the taxpayer as a result of this subsection in any prior year. Any 
taxpayer who recognized net gains in any prior year as a result of this 
subsection may elect to have this subsection apply in the current year 
even if that taxpayer does not currently have net assets in excess of 
the exemption amount.
    ``(e) Covered Taxpayer Defined.--For the purposes of this section, 
the term `covered taxpayer' means, with respect to a taxable year, a 
taxpayer whose net worth exceeds the exemption amount on the last day 
of such taxable year.
    ``(f) Deemed Long-Term Capital Gains or Losses.--For purposes of 
determining the character of any gain or loss with respect to any piece 
of property deemed sold under this section, such property shall be 
treated as a capital asset held for more than 1 year.
    ``(g) Adjusted Basis.--
            ``(1) In general.--The Secretary shall adjust the 
        taxpayer's basis in an asset deemed sold under subsection (a) 
        or (b) as the Secretary determines appropriate to reflect the 
        amount of gain or loss that resulted from the operation of such 
        subsection.
            ``(2) Cost recovery.--Adjustments to a taxpayer's basis in 
        an asset made under paragraph (1) shall not be included in such 
        taxpayer's basis in such asset for the purposes of sections 
        167(c), 168, 179, or 197.
    ``(h) Payment Schedule.--
            ``(1) In general.--A taxpayer may elect to pay a tax 
        liability, increased by the deferral charge determined in 
        paragraph (2), resulting from the operation of subsection (b) 
        in 5 equal, annual installments beginning in the taxable year 
        in which this section takes effect.
            ``(2) Deferral charge.--The deferral charge determined in 
        this paragraph is equal to the amount that the Secretary 
        determines is a conservative estimate of the cost to the United 
        States of permitting a taxpayer to make an election under 
        paragraph (1).
    ``(i) Exemption Amount.--For the purposes of this section, the term 
`exemption amount' means $100,000,000.
    ``(j) Determination of Valuation.--
            ``(1) Regulations.--Not later than 1 year after the date of 
        the enactment of this section, the Secretary shall issue 
        regulations for determining the net worth of a taxpayer and the 
        deemed sale-price valuations of each asset of a taxpayer for 
        the purposes of this section. Such regulations may require the 
        use of formulaic valuation approaches for designated assets, 
        including formulaic approaches based on proxies for determining 
        presumptive valuations, formulaic approaches based on 
        prospective adjustments from purchase prices or other prior 
        events, or formulaic approaches based on retrospectively adding 
        deferral charges based on eventual sale prices or other 
        specified later events indicative of valuation.
            ``(2) Rule in the absence of regulation.--If the Secretary 
        has not issued regulations under paragraph (1), the fair market 
        value of each asset owned by the taxpayer shall be the price at 
        which such asset would change hands between a willing buyer and 
        a willing seller, neither being under any compulsion to buy or 
        to sell, and both having reasonable knowledge of relevant 
        facts. The value of a particular asset shall not be the price 
        that a forced sale of the property would produce. Further, the 
        fair market value of an asset shall not be the sale price in a 
        market other than that in which such item is most commonly sold 
        to the public, taking into account the location of the item 
        wherever appropriate. In the case of an asset which is 
        generally obtained by the public in the retail market, the fair 
        market value of such an asset shall be the price at which such 
        item or a comparable item would be sold at retail.
            ``(3) Limitation.--For purposes of this subsection, any 
        feature of an asset that was added with the intent, and has the 
        effect, of reducing the value of the asset shall be 
        disregarded, and no valuation or other discount shall be taken 
        into account if it would have the effect of reducing the value 
        of a pro rata economic interest in an asset below the pro rata 
        portion of the value of the entire asset.
            ``(4) Exception with respect to certain assets taken into 
        account in determining net worth.--Notwithstanding the 
        preceding provisions of this subsection, if the Secretary has 
        not issued regulations under paragraph (1) specifying 
        otherwise, for purposes of determining the taxpayer's net worth 
        for purposes of this section with respect to any taxable year 
        after the first taxable year with respect to which subsection 
        (b) applies to the taxpayer, the taxpayer may value assets that 
        are not publicly traded securities at the value of such asset 
        that the taxpayer most recently reported for purposes of 
        subsection (b).
    ``(k) Information Reporting.--The Secretary shall, not later than 1 
year after the date of the enactment of this section, issue 
regulations--
            ``(1) requiring such persons as the Secretary determines 
        appropriate to report such information to the Secretary as the 
        Secretary determines necessary to carry out this section, and
            ``(2) prohibiting such conduct as the Secretary determines 
        appropriate to prevent a taxpayer from avoiding the 
        requirements of this paragraph.
    ``(l) Audit Required.--The Secretary shall, with respect to each 
taxable year, audit each covered taxpayer and each taxpayer who was a 
covered taxpayer in any of the 3 preceding taxable years.
    ``(m) Penalties.--
            ``(1) Applicability.--Except as provided in paragraph (5), 
        a taxpayer that has tax liability as a result of the operation 
        of this section with an understatement of tax shall be subject 
        to the penalty described in paragraph (2) if the amount of such 
        understatement for a taxable year exceeds the greater of--
                    ``(A) $1,000,000, or
                    ``(B) 20 percent of the tax shown on an original 
                return or shown on an amended return filed on or before 
                the original or extended due date of the return for the 
                taxable year.
            ``(2) Penalty described.--The penalty described in this 
        paragraph is an amount equal to--
                    ``(A) 20 percent of the understatement of tax, or
                    ``(B) in the case of an understatement that is 
                substantially the result of a failure to fulfill a 
                requirement to report an asset, 40 percent of such 
                understatement.
            ``(3) Coordination with other penalties.--The penalty 
        imposed by paragraph (1) is in addition to any other penalties 
        imposed on such understatement.
            ``(4) Limitation on refund or credit.--The Secretary may 
        not refund or issue a credit with respect to a penalty imposed 
        under paragraph (1) unless such refund or credit is 
        attributable to the Secretary's miscalculation of the amount of 
        such penalty.
            ``(5) Exceptions.--The Secretary may not impose a penalty 
        under paragraph (1) if the understatement is the result of--
                    ``(A) a change in law after the earlier of--
                            ``(i) the date the taxpayer files a return 
                        for the applicable taxable year, or
                            ``(ii) the extended due date for the return 
                        of the taxpayer for the applicable taxable 
                        year, or
                    ``(B) the taxpayer's reasonable reliance on a 
                formal legal ruling issued by the Secretary.''.
    (b) Comprehensive Plan for Enhanced Enforcement of Reporting on 
Certain Foreign Accounts.--Not later than 180 days after the date of 
the enactment of this Act, the Secretary shall submit to Congress a 
comprehensive plan for managing efforts to leverage data collected 
under chapter 4 of the Internal Revenue Code of 1986 in agency 
compliance efforts. Such plan shall include an evaluation of the extent 
to which actions being undertaken as of the date of the enactment of 
this Act for the enforcement of the requirements of such chapter 
improve voluntary compliance and address noncompliance with such 
requirements.
    (c) Conforming Amendment.--The table of sections for part I of 
subchapter O of chapter 1 of the Internal Revenue Code of 1986 is 
amended by adding at the end the following new item:

``Sec. 1002. Deemed realization mark-to-market rules.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of enactment of this 
Act.
    (e) Sense of Congress.--It is the sense of Congress that the 
taxation by the several States of extreme wealth is in the public 
interest and that silence on the part of Congress shall not be 
construed to impose any barrier to the use of reasonable residency 
rules, including such rules that apportion a tax on deemed sales or 
extreme wealth over no more than five years, by the several States or 
the District of Columbia.
    (f) Authorization of Appropriations.--There are hereby authorized 
to be appropriated to the Secretary of the Treasury such sums as may be 
necessary to carry out this section and the amendments by this section.

SEC. 4. FAMILY INVESTMENT TRUST FUND.

    (a) In General.--Subchapter A of Chapter 98 of the Internal Revenue 
Code of 1986 is amended by adding at the end the following new section:

``SEC. 9512. FAMILY INVESTMENT TRUST FUND.

    ``(a) Creation of Trust Fund.--There is hereby established in the 
Treasury of the United States a trust fund to be known as the Family 
Investment Trust Fund, consisting of such amounts as may be 
appropriated or credited to such Trust Fund as provided in this section 
or section 9602(b).
    ``(b) Transfer to Trust Fund of Amounts Equivalent to Certain 
Taxes.--There are hereby appropriated to the Family Investment Trust 
Fund amounts equivalent to the taxes received in the Treasury as a 
result of the operation of section 1002.
    ``(c) Expenditures From Trust Fund.--Amounts in the Family 
Investment Trust Fund shall be available, as provided by appropriation 
Acts, in equal amounts to the Secretary of Education and the Secretary 
of Health and Human Services for programs relating to supporting family 
well-being and the development of children.''.
    (b) Clerical Amendment.--The table of sections for subchapter A of 
chapter 98 of such Code is amended by adding at the end the following 
new item:

``Sec. 9512. Family Investment Trust Fund.''.
    (c) Effective Date.--The amendments made by this Act shall apply to 
amounts received after the date of the enactment of this Act.
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