[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5336 Introduced in House (IH)]
<DOC>
119th CONGRESS
1st Session
H. R. 5336
To amend the Internal Revenue Code of 1986 to equalize treatment of
capital gains and earned income.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
September 11, 2025
Mrs. Ramirez (for herself, Ms. Jayapal, Mr. Garcia of Illinois, Ms.
Tlaib, Ms. Ansari, Ms. McCollum, Mr. Thanedar, Ms. Omar, Mr. Deluzio,
and Mrs. Watson Coleman) introduced the following bill; which was
referred to the Committee on Ways and Means
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to equalize treatment of
capital gains and earned income.
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 ``Equal Tax Act''.
SEC. 2. PREFERENTIAL RATES FOR DIVIDENDS AND CAPITAL GAINS LIMITED TO
INCOMES OF $1,000,000 OR LESS.
(a) In General.--Section 1(h) of the Internal Revenue Code of 1986
is amended by inserting ``on so much of such gain as does not cause the
taxable income of the taxpayer to exceed $1,000,000 (computed after
taking into account all other taxable income of the taxpayer)'' after
``the tax imposed by this section for such taxable year''.
(b) Treatment of Qualifying Family Farm or Business.--Section 1(h)
of such Code, as amended by subsection (a), is further amended by
inserting ``and without regard to gain realized from the transfer by
gift or bequest of a qualifying family farm or business described in
section 139J(c)'' after ``all other taxable income of the taxpayer''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2025.
SECTION 3. DEEMED REALIZATION OF CAPITAL GAINS AT TIME OF GIFT OR
DEATH.
(a) Treatment as Sale.--
(1) In general.--Part IV of subchapter P of chapter 1 of
the Internal Revenue Code of 1986 is amended by adding at the
end the following new section:
``SEC. 1261. GAINS FROM CERTAIN PROPERTY TRANSFERRED BY GIFT OR UPON
DEATH.
``(a) In General.--Any property which is transferred by gift or at
death shall be treated as sold for its fair market value on the date of
such gift or death.
``(b) Exceptions.--
``(1) Spouse or surviving spouse.--This section shall not
apply to a transfer of property to the spouse or surviving
spouse of the transferor (or to a qualified spousal trust).
``(2) Certain tangible personal property.--In the case of
tangible personal property, this section shall only apply to
the following:
``(A) Property held in connection with a trade or
business.
``(B) Property held for investment.
``(C) Collectibles (as defined in section 408(m)
(determined without regard to paragraph (3) thereof)).
``(3) Charitable contributions.--This section shall not
apply to any transfer to an organization described in section
170(c).
``(c) Special Rules for Trusts.--
``(1) Certain grantor trusts.--In the case of any property
which--
``(A) is held in a trust of which the grantor or
another person is treated as the owner under subpart E
of part I of subchapter J of chapter 1, and
``(B) is includible in the gross estate of the
grantor or such other person under chapter 11,
such property shall be treated as transferred under subsection
(a) when the grantor or such other person ceases to be treated
as the owner of such property, or such property ceases to be
includible in the gross estate of the grantor or such other
person (including by reason of the death of the grantor or such
other person, or the distribution of such property to a person
other than the grantor or such other person).
``(2) Other trusts.--In the case of any property held in
trust and not described in paragraph (1), such property shall
be treated as transferred under subsection (a) upon the
transfer of such property to a trust.
``(3) Transfers from and modifications of trusts.--The
Secretary may by regulation prescribe such rules to treat the
modification of the terms of a trust or the transfer or
distribution of trust assets (including to another trust) as a
transfer described in subsection (a) as are necessary or
appropriate to prevent the avoidance of this section.
``(4) Generation-skipping trusts.--At the end of each 30-
year period for which any property is continuously held in
trust (other than property described in paragraph (1)), such
property shall be treated as transferred pursuant to subsection
(a).
``(5) Qualifying spousal trust.--
``(A) In general.--The property of a qualifying
spousal trust shall be treated as transferred under
subsection (a)--
``(i) upon the death of the spousal
beneficiary,
``(ii) upon the distribution of such
property from such trust to any person other
than the spousal beneficiary, or
``(iii) at such time such property ceases
to be held by a qualifying spousal trust.
``(B) Qualifying spousal trust.--For purposes of
this section, a trust is a qualifying spousal trust
if--
``(i) the sole beneficiary of such trust is
the spouse, or surviving spouse of the
transferor, or
``(ii) such spouse or surviving spouse is
the sole life tenant, or sole income
beneficiary, of such trust.
``(d) Exclusion of Certain Gifts.--In the case of gifts (other than
gifts of future interests in property) made to any person during the
taxable year, so much of the dollar amount of such gifts to such person
as does not exceed the amount in effect for the calendar year under
section 2503(b) in which the taxable year begins shall not be taken
into account under subsection (a) for such taxable year. Where there
has been a transfer to any person of a present interest in property,
the possibility that such interest may be diminished by the exercise of
a power shall be disregarded in applying this subsection, if no part of
such interest will at any time pass to any other person.
``(e) Regulations.--The Secretary shall prescribe such regulations
as may be necessary to prevent the avoidance of the purposes of this
section.''.
(2) Clerical amendment.--The table of sections for part IV
of subchapter P of chapter 1 of such Code is amended by adding
at the end the following new item:
``Sec. 1261. Gains from certain property transferred by gift or upon
death.''.
(b) Coordination of Related Party Loss Rules.--Section 267 of such
Code is amended by adding at the end the following new subsection:
``(h) Property Treated as Sold at Death.--Subsection (a)(1) shall
not apply to any property that is transferred at death and treated as
sold under section 1261.''.
(c) Treatment of Basis for Gifts and Bequests to Which Tax
Applies.--
(1) Elimination of carryover basis for gifts.--Section
1015(a) of such Code is amended--
(A) by striking ``If the property'' and inserting
the following:
``(1) Gifts before january 1, 2026.--If the property'';
(B) by inserting ``, and before January 1, 2026''
after ``after December 31, 1920''; and
(C) by adding at the end the following new
paragraph:
``(2) Gifts after december 31, 2025.--If the property was
acquired by gift after December 31, 2025, the basis shall be
the fair market value of such property at the time of the
gift.''.
(2) Rules for transfers between spouses.--
(A) In general.--Section 1041(b) of such Code is
amended to read as follows:
``(b) Transferee Has Transferor's Basis.--In the case of any
transfer of property described in subsection (a), the basis of the
transferee in the property shall be the adjusted basis of the
transferor.''.
(B) Transfers at death.--Section 1041(a) of such
Code is amended by inserting ``(including at death)''
after ``transfer of property''.
(C) Conforming amendments.--
(i) Section 1014 of such Code is amended by
adding at the end the following new subsection:
``(g) Property Acquired From Decedent Spouse.--In the case of
property which passes from the decedent to (or in trust for the benefit
of) the decedent's surviving spouse in a transfer described in section
1041(a)(1), the basis of such property in the hands of the transferee
shall be determined under section 1041(b) and not this section.'', and
(ii) Section 1015(e) of such Code is
amended by striking ``1041(b)(2)'' and
inserting ``1041(b)''.
(3) Basis must be consistent with gains recognized in
deemed realization.--
(A) Property acquired from decedent.--Section 1014
of such Code, as amended by the preceding provisions of
this Act, is amended by adding at the end the following
new subsection:
``(h) Basis Must Be Consistent With Gains Recognized in Deemed
Realization.--The basis of any property to which subsection (a) applies
shall not exceed the amount for which the property was treated as sold
under section 1261.''.
(B) Property acquired by gift.--Section 1015 of
such Code is amended by adding at the end the following
new subsection:
``(f) Basis Must Be Consistent With Gains Recognized in Deemed
Realization.--The basis of any property to which subsection (a)(2)
applies shall not exceed the amount for which the property was treated
as sold under section 1261.''.
(d) Conforming Amendments.--
(1) Section 7477(a) of such Code is amended by striking
``chapter 12'' and inserting ``chapter 1 or 12''.
(2) Section 7517(a) of such Code is amended by striking
``chapter 11'' and inserting ``chapter 1, 11''.
(e) Effective Date.--The amendments made by this section shall
apply to transfers by gift, or at death by decedents dying, after
December 31, 2025.
SEC. 4. EXCLUSION OF CERTAIN AMOUNTS OF REALIZED CAPITAL GAIN.
(a) In General.--Part III of subchapter B of chapter 1 of the
Internal Revenue Code of 1986 is amended by inserting before section
140 the following new section:
``SEC. 139J. EXCLUSION OF GAIN FROM TRANSFERS OF APPRECIATED ASSETS AT
DEATH.
``(a) In General.--Gross income shall not include--
``(1) so much of the net capital gain for the taxable year
from transfers at death to which 1261(a) applies as does not
exceed $1,000,000, and
``(2) in the case of property that is a qualifying family
farm or business that meets the certification requirement of
subsection (d), 50 percent of so much of any gain from a
transfer described in paragraph (1) as exceeds $1,000,000.
``(b) Inflation Adjustment.--
``(1) In general.--In the case of any taxable year
beginning after 2026, the $1,000,000 amounts in subsection (a)
shall be increased by an amount equal to--
``(A) such dollar amount, multiplied by
``(B) the cost-of-living adjustment determined
under section 1(f)(3) for the calendar year in which
the taxable year begins, determined by substituting in
subparagraph (A)(ii) thereof `calendar year 2025' for
`calendar year 2016'.
``(2) Rounding.--If the dollar amount in subsection (a),
after being increased under paragraph (1), is not a multiple of
$10,000, such amount shall be rounded to the next lowest
multiple of $10,000.
``(c) Definitions.--For purposes of this section--
``(1) Qualifying family farm or business.--The term
`qualifying family farm or business' means real property
located in the United States if during periods aggregating 3
years or more of the 5-year period ending on the date of the
bequest of such real property, such real property was used as a
farm for farming purposes or a family business.
``(2) Other definitions.--The terms `farm' and `farming
purposes', and `material participation' have the respective
meanings given such terms by paragraphs (4) and (5) of section
2032A(e), respectively.
``(d) Use Certification as Farm for Farming Purposes or Family
Business.--The certification requirement of this subsection is a
certification that the use of the qualifying family farm or business
referred to in subsection (a) will be as a farm for farming purposes or
family business (as the case may be) for not less than the 120-month
period beginning on the date of the bequest referred to in subsection
(a).
``(e) Special Rules.--For purposes of this section, the following
rules shall apply:
``(1) Rules similar to the rules of subsections (e) and (f)
of section 121.
``(2) Rules similar to the rules of paragraphs (4) and (5)
of section 2032A(b) and paragraph (3) of section 2032A(e).
``(f) Treatment of Disposition or Change in Use of Property.--
``(1) In general.--If, as of the close of any taxable year,
there is a recapture event with respect to any qualifying
family farm or business transferred to the taxpayer in a
bequest described in subsection (a), then the tax of the
taxpayer under this chapter for such taxable year shall be
increased by an amount equal to the product of--
``(A) the amount determined by dividing--
``(i) the amount of gain excluded from
gross income of the taxpayer under subsection
(a)(2) on the date such property was
transferred to the taxpayer, over
``(ii) 120, and
``(B) the number of full months remaining in the
120-month term described in subsection (d) as of the
date of such recapture event.
``(2) Recapture event defined.--For purposes of this
subsection, the term `recapture event' means--
``(A) Cessation of operation.--The cessation of the
operation of any property the sale or exchange of which
to the taxpayer is described in subsection (a) as a
qualifying family farm or business.
``(B) Change in ownership.--
``(i) In general.--Except as provided in
clause (ii), the disposition of a taxpayer's
interest in any property the sale or exchange
of which to the taxpayer is described in
subsection (a).
``(ii) Agreement to assume recapture
liability.--Clause (i) shall not apply if the
person acquiring such interest in the property
agrees in writing to assume the recapture
liability of the person disposing of such
interest in effect immediately before such
disposition. In the event of such an
assumption, the person acquiring the interest
in the property shall be treated as the
taxpayer for purposes of assessing any
recapture liability (computed as if there had
been no change in ownership).
``(3) Special rules.--
``(A) No credits against tax.--Any increase in tax
under this subsection shall not be treated as a tax
imposed by this chapter for purposes of determining the
amount of any credit under subpart A, B, or D of part
IV of subchapter A.
``(B) No recapture by reason of hardship.--The
increase in tax under this subsection shall not apply
to any disposition of property or cessation of the
operation of any property as a farm for farming
purposes by reason of any hardship as determined by the
Secretary.''.
(b) Clerical Amendment.--The table of sections for part III of
subchapter B of chapter 1 of such Code is amended by inserting after
the item relating to section 139I the following new item:
``Sec. 139J. Exclusion of gain from transfers of appreciated assets at
death.''.
(c) Effective Date.--The amendments made by this section shall
apply to transfers at death by decedents dying after December 31, 2025,
in taxable years beginning after such date.
SEC. 5. INFORMATION REPORTING OF CERTAIN GIFTS.
(a) In General.--Subpart B of part III of subchapter A of chapter
61 of the Internal Revenue Code of 1986 is amended by adding at the end
the following new section:
``SEC. 6050Z. RETURNS RELATING TO CERTAIN GIFTS AND BEQUESTS.
``(a) In General.--In the case of an applicable transfer, the
individual making such gift, or the executor in the case of a transfer
at death, shall furnish to the Secretary the following information:
``(1) The name and taxpayer identification number of the
person to whom such transfer was made.
``(2) A description of the property transferred.
``(3) The fair market value of the property transferred and
the basis of such property to the transferee.
``(b) Applicable Transfer.--
``(1) In general.--For purposes of this section, the term
`applicable transfer' means--
``(A) any gift (other than a covered security (as
defined in section 6045(g)(3))) which is taken into
account under section 1261, and
``(B) so much of any transfer at death (other than
such a covered security) which is so taken into account
under section 1261 and the gain from which is
includible in gross income for the taxable year of such
transfer.
``(2) De minimis.--
``(A) Gifts.--For gifts exceeding the limitation
for such year under section 2503(b) and not taken into
account under section 1261, see subsection (d) thereof.
``(B) Transfers at death.--For amount of gain
excluded from gross income in case of a transfer at
death, see section 139J(a).
``(c) Statements To Be Furnished to Persons With Respect to Whom
Information Is Required.--Every person required to make a return under
subsection (a) shall furnish to each person whose name is required to
set forth in such return a written statement showing the information
described in subsection (a).
``(d) Timing.--The returns and statements required under this
section shall be furnished at such time and in such form and manner as
the Secretary shall by regulation prescribe.''.
(b) Clerical Amendment.--The table of sections for subpart B of
part III of subchapter A of chapter 61 of such Code is amended by
adding at the end the following new item:
``Sec. 6050Z. Returns relating to certain gifts.''.
(c) Effective Date.--The amendments made by this section shall
apply to transfers after December 31, 2025, in taxable years beginning
after such date.
SEC. 6. EXTENSION OF TIME FOR PAYMENT OF TAX.
(a) Extension of Time.--
(1) In general.--Subchapter B of chapter 62 of the Internal
Revenue Code of 1986 is amended by adding at the end the
following new section:
``SEC. 6168. EXTENSION OF TIME FOR PAYMENT OF CAPITAL GAINS ON CERTAIN
ASSETS REALIZED BY REASON OF DEATH.
``(a) 5-Year Installment Payment.--
``(1) In general.--In the case of any gain with respect to
eligible property that is recognized under section 1261 by
reason of the death of the taxpayer, the taxpayer may elect to
pay part or all of tax imposed on such gain in 2 or more (but
not exceeding 5) equal installments.
``(2) Date for payment of installments.--If an election is
made under paragraph (1), the first installment shall be paid
not later than the date on which the tax for the taxable year
in which the gain described in paragraph (1) occurs is due, and
each succeeding installment shall be paid on or before the date
which is 1 year after the date prescribed by this paragraph for
payment of the preceding installment.
``(b) Eligible Capital Asset.--For purposes of this section, the
term `eligible property' means any property other than personal
property of a type which is actively traded (within the meaning of
section 1092(d)(1)).
``(c) Portion of Tax Eligible.--The amount of tax to which this
section applies shall not exceed the excess of--
``(1) the tax computed under chapter 1 (determined after
application of section 1261), over
``(2) the tax computed under chapter 1 (determined without
regard to section 1261).
``(d) Election.--Any election under subsection (a) shall be made
not later than the time prescribed by section 6072 for filing the
return of tax imposed under chapter 1 (including extensions thereof),
and shall be made in such manner as the Secretary shall by regulations
prescribe. If an election under subsection (a) is made, the provisions
of this subtitle shall apply as though the Secretary were extending the
time for payment of the tax.
``(e) Proration of Deficiency to Installments.--If an election is
made under subsection (a) to pay any part of the tax imposed under
chapter 1 in installments and a deficiency has been assessed, the
deficiency shall (subject to the limitation provided by subsection
(a)(2)) be prorated to the installments payable under subsection (a).
The part of the deficiency so prorated to any installment the date for
payment of which has not arrived shall be collected at the same time
as, and as a part of, such installment. The part of the deficiency so
prorated to any installment the date for payment of which has arrived
shall be paid upon notice and demand from the Secretary. This
subsection shall not apply if the deficiency is due to negligence, to
intentional disregard of rules and regulations, or to fraud with intent
to evade tax.
``(f) Time for Payment of Interest.--If the time for payment of any
amount of tax has been extended under this section, interest payable
under section 6601 on any unpaid portion shall be paid annually at the
same time as, and as part of, each installment payment of the tax.
``(g) Regulations.--The Secretary shall prescribe such regulations
as may be necessary to the application of this section.
``(h) Cross-References.--
``(1) Security.--For authority of the Secretary to require
security in the case of an extension under this section, see
section 6165.
``(2) Interest.--For provisions relating to interest on tax
payable in installments under this section, see subsection (k)
of section 6601.''.
(2) Coordination with transferee liability.--Section 6109
of such Code is amended by redesignating subsections (g), (h),
and (i) as subsections (h), (i), and (j), respectively, and by
inserting after subsection (f) the following new subsection:
``(g) Period of Assessment in Case of Extension of Time for Payment
of Tax Under Section 1261.--For purposes of subsection (c), the period
of limitation for assessment against the transferor of any tax imposed
under section 1261 the payment of which is extended under section 6168
shall not be treated as expiring earlier than the due date for the last
payment under (a)(2) of such section.''.
(3) Clerical amendment.--The table of sections for subpart
B of chapter 62 of such Code is amended by adding at the end
the following new item:
``Sec. 6168. Extension of time for payment of capital gains on certain
assets realized by reason of death.''.
(b) Interest.--Section 6601 of such Code is amended by
redesignating subsection (k) as subsection (l) and by inserting after
subsection (j) the following new subsection:
``(k) Special Rate for Tax Extended Under Section 6168.--If the
time for payment of an amount of tax imposed by section 1261 is
extended as provided in section 6168, in lieu of the annual rate
provided by subsection (a), interest shall be paid at a rate equal to
45 percent of the annual rate provided by subsection (a). For purposes
of this subsection, the amount of any deficiency which is prorated to
installments payable under section 6168 shall be treated as an amount
of tax payable in installments under such section.''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2025.
SEC. 7. LIMITATION ON USE OF LIKE-KIND EXCHANGES TO AVOID TAX ON REAL
ESTATE GAINS.
(a) Limitation on Nonrecognition of Gain.--Section 1031(a) of the
Internal Revenue Code of 1986 is amended by adding at the end the
following new paragraph:
``(4) Limitations.--
``(A) Annual limitation.--The amount of gain
excluded from recognition under paragraph (1) with
respect to any property of the taxpayer during the
taxable year which is not qualified property shall not
exceed $500,000.
``(B) Aggregate limitation.--The aggregate amount
of gain excluded from recognition under subparagraph
(A) by the taxpayer for all taxable years shall not
exceed $1,000,000.
``(C) Qualified property.--For purposes of this
paragraph, the term `qualified property' means
property--
``(i) which is used for farming purposes,
or
``(ii) which is exchanged for property that
will serve the same specific purpose.''.
(b) Effective Date.--The amendment made by this section shall apply
to exchanges of real property after December 31, 2025.
SEC. 8. LIMITATION ON DEDUCTION FOR QUALIFIED BUSINESS INCOME.
(a) In General.--Section 199A(a)(2) of the Internal Revenue Code of
1986 is amended--
(1) in subparagraph (A), by striking ``the taxable income
of the taxpayer for the taxable year'' and inserting ``so much
of the taxable income of the taxpayer for the taxable year as
does not exceed $1,000,000'', and
(2) in subparagraph (B), by striking ``the net capital gain
(as defined in section 1(h)) of the taxpayer for such taxable
year'' and inserting ``all income of the taxpayer for such
taxable year other than qualified business income''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2025.
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