[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.
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IN THE HOUSE OF REPRESENTATIVES
January 9, 2009
Mr. Pomeroy introduced the following bill; which was referred to the
Committee on Ways and Means
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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made by such subtitles, are hereby repealed; and the Internal Revenue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the amendments made by such subsections, are hereby repealed; and the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.
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