[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[H.R. 7502 Introduced in House (IH)]
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117th CONGRESS
2d Session
H. R. 7502
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.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
April 14, 2022
Mr. Bowman (for himself, Mr. Pascrell, Mr. Danny K. Davis of Illinois,
Ms. Wild, Ms. Norton, Mrs. Watson Coleman, Mr. Carson, and Ms. Clarke
of New York) introduced the following bill; which was referred to the
Committee on Ways and Means, and in addition to the Committee on
Education and Labor, for a period to be subsequently determined by the
Speaker, in each case for consideration of such provisions as fall
within the jurisdiction of the committee concerned
_______________________________________________________________________
A BILL
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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