H.R. 5427

[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5427 Introduced in House (IH)]

<DOC>

119th CONGRESS
1st Session
H. R. 5427

To amend the Internal Revenue Code of 1986 to eliminate tax loopholes 
that allow billionaires to defer tax indefinitely through planning 
strategies such as ``buy, borrow, die'', to modify over 30 tax 
provisions so that billionaires are required to pay taxes annually, and 
for other purposes.

_______________________________________________________________________

IN THE HOUSE OF REPRESENTATIVES

September 17, 2025

Mr. Cohen (for himself, Mr. Beyer, Ms. Tlaib, Mr. Garcia of Illinois, 
Mr. McGovern, Ms. Norton, Mr. Davis of Illinois, Ms. DeLauro, Mr. Boyle 
of Pennsylvania, Ms. McCollum, Mr. Nadler, Mr. Garamendi, Ms. Kelly of 
Illinois, Ms. Dean of Pennsylvania, Mr. Mullin, Ms. Omar, Mr. Landsman, 
Ms. Scanlon, Ms. Clarke of New York, Mr. Huffman, Mr. Norcross, Ms. 
Sanchez, Mr. Evans of Pennsylvania, Mr. Frost, Ms. Lee of Pennsylvania, 
Ms. Simon, Mr. Jackson of Illinois, and Mrs. Ramirez) 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 eliminate tax loopholes 
that allow billionaires to defer tax indefinitely through planning 
strategies such as ``buy, borrow, die'', to modify over 30 tax 
provisions so that billionaires are required to pay taxes annually, 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; AMENDMENT OF 1986 CODE; TABLE OF CONTENTS.

(a) Short Title.--This Act may be cited as the ``Billionaires 
Income Tax Act''.
(b) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this Act an amendment or repeal is expressed in 
terms of an amendment to, or repeal of, a section or other provision, 
the reference shall be considered to be made to a section or other 
provision of the Internal Revenue Code of 1986.
(c) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; amendment of 1986 Code; table of contents.
Sec. 2. Purpose.
TITLE I--ELIMINATION OF DEFERRAL FOR APPLICABLE TAXPAYERS

Sec. 101. Elimination of deferral of tax.
Sec. 102. Carryback of capital losses attributable to mark-to-market 
rules.
TITLE II--APPLICATION OF OTHER PROVISIONS TO APPLICABLE TAXPAYERS AND 
ENTITIES

Subtitle A--Individuals

Sec. 201. Applicable taxpayers not eligible for adjusted gross income 
limitation on net investment tax.
Sec. 202. Treatment of covered expatriates.
Subtitle B--Rules for Applicable Entities and Trusts

Sec. 211. Treatment of like-kind exchanges by applicable entities.
Sec. 212. Treatment of transfers by applicable entities in exchange for 
stock.
Sec. 213. Special rules for applicable trusts.
Subtitle C--Treatment of Deferred Compensation and Certain Life 
Insurance and Annuity Contracts

Sec. 221. Elimination of deferral of tax on certain compensation.
Sec. 222. Rules relating to certain life insurance and annuity 
contracts of applicable taxpayers.
Subtitle D--Repeal of Special Treatment for Certain Investments

Sec. 231. Treatment of exclusion for certain small business stock.
Sec. 232. Modifications for investments in qualified opportunity funds.

SEC. 2. PURPOSE.

The purpose of this Act is to require billionaires to pay taxes 
annually by eliminating the ability of high income and high net worth 
taxpayers to use tax planning strategies such as ``buy, borrow, die'' 
to defer paying taxes indefinitely, specifically by--
(1) under the provisions of title I of this Act--
(A) requiring high income and high net worth 
taxpayers to pay tax on the income they earn on an 
annual basis, just like working people do on their 
income from wages, through mark-to-market taxation, and
(B) shutting down the ability of the ultra wealthy 
to buy and hold appreciating assets and borrow against 
those assets to support their lavish lifestyles, all 
completely tax-free, and
(2) under the provisions of title II of this Act, closing 
loopholes in the tax code that allow high income and high net 
worth taxpayers to shield their income from taxation, including 
the loophole that allows ultra wealthy taxpayers to transfer 
untaxed appreciated assets to their heirs at death and such 
heirs to sell such assets completely tax-free.

TITLE I--ELIMINATION OF DEFERRAL FOR APPLICABLE TAXPAYERS

SEC. 101. ELIMINATION OF DEFERRAL OF TAX.

(a) In General.--Subchapter E of chapter 1 is amended by adding at 
the end the following new part:

``PART IV--ELIMINATION OF DEFERRAL FOR APPLICABLE TAXPAYERS

``Subpart A. General provisions.
``Subpart B. Definitions and rules relating to applicable taxpayers.
``Subpart C. Other definitions and rules.

``Subpart A--General Provisions

``Sec. 490. Elimination of deferral of tax for applicable taxpayers.
``Sec. 491. Treatment of tradable covered assets.
``Sec. 492. Deferral recapture amount on applicable transfers of 
nontradable covered assets.
``Sec. 493. Special rules for application of nondeferral rules to 
certain pass-through entities.
``Sec. 494. Treatment of gifts, bequests, and transfers in trust.

``SEC. 490. ELIMINATION OF DEFERRAL OF TAX FOR APPLICABLE TAXPAYERS.

``In the case of an applicable taxpayer for any taxable year--
``(1) if there is a taxable event with respect to any 
tradable covered asset of the taxpayer during the taxable year, 
gain or loss shall be recognized as provided in section 491,
``(2) if there is an applicable transfer by the taxpayer 
during the taxable year of any nontradable covered asset--
``(A) if such applicable transfer is a disregarded 
nonrecognition event, gain or loss shall be recognized 
as provided in section 492(a)(1), and
``(B) the tax imposed by this chapter for the 
taxable year shall be increased as provided in section 
492 with respect to any gain from any such transfer,
``(3) gain or loss with respect to any applicable entity 
held by the taxpayer shall be taken into account as provided in 
section 493, and
``(4) in the case of any gift, bequest, or transfer in 
trust by an applicable taxpayer or applicable entity held by an 
applicable taxpayer, section 494 shall apply.

``SEC. 491. TREATMENT OF TRADABLE COVERED ASSETS.

``(a) In General.--For purposes of this title, in the case of a 
taxable event with respect to any tradable covered asset of an 
applicable taxpayer--
``(1) notwithstanding any other provision of this title--
``(A) gain or loss shall be recognized and taken 
into account in the taxable year in which the taxable 
event occurs as if the taxpayer had sold the tradable 
covered asset for its fair market value--
``(i) in the case of a taxable event 
described in subsection (b)(1), on the date of 
the taxable event, and
``(ii) in the case of a taxable event 
described in subsection (b)(2), immediately 
before the taxable event, and
``(B) except as provided in subsection (c)(1), gain 
or loss taken into account by reason of a taxable event 
described in subsection (b)(1) with respect to a 
tradable covered asset which is a capital asset shall 
be treated as long-term capital gain or long-term 
capital loss, respectively, and
``(2) proper adjustments shall be made in the amount of 
gain or loss subsequently realized for gain or loss taken into 
account under paragraph (1).
``(b) Taxable Event.--For purposes of this part, the term `taxable 
event' means, with respect to any tradable covered asset--
``(1) the holding of such asset as of the close of any 
taxable year with respect to which a taxpayer is an applicable 
taxpayer, and
``(2) any disregarded nonrecognition event.
``(c) Special Rules.--
``(1) Characterization as ordinary income or loss.--Except 
as provided by the Secretary, subsection (a)(1)(B) shall not 
apply to any gain or loss from a tradable covered asset if, 
under any other provision of this title, such gain or loss--
``(A) is treated as gain or loss from the sale or 
exchange of an asset which is not a capital asset, or
``(B) is treated as ordinary income or loss on a 
basis other than the taxpayer's holding period in such 
asset.
``(2) Holding period.--For purposes of this title, any 
taxable event described in subsection (b)(1) with respect to 
any tradable covered asset shall not be taken into account in 
determining the holding period of the taxpayer with respect to 
such tradable covered asset.
``(3) Proper adjustments for subsequent gain or loss.--For 
purposes of subsection (a)(2), section 492(a)(1)(B), section 
493(c)(1)(A)(ii), and section 493(c)(3)(C), the proper 
adjustments required under such provisions shall include such 
adjustments in basis of property, or such other adjustments in 
respect of property, as the Secretary determines necessary or 
appropriate.

``SEC. 492. DEFERRAL RECAPTURE AMOUNT ON APPLICABLE TRANSFERS OF 
NONTRADABLE COVERED ASSETS.

``(a) In General.--If there is an applicable transfer during a 
taxable year of a nontradable covered asset of an applicable taxpayer--
``(1) in the case of an applicable transfer which is a 
disregarded nonrecognition event--
``(A) notwithstanding any other provision of this 
title, gain or loss shall be recognized and taken into 
account by the taxpayer (including for purposes of 
paragraph (2) and subsection (c)) in the taxable year 
in which the transfer occurs as if the taxpayer had 
sold the nontradable covered asset for its fair market 
value immediately before such transfer, and
``(B) proper adjustments shall be made in the 
amount of gain or loss subsequently realized for gain 
or loss taken into account under subparagraph (A), and
``(2) if there is gain from the applicable transfer, the 
tax imposed by this chapter for the taxable year (determined 
without regard to this section) shall be increased by the sum 
of the deferral recapture amounts determined under subsection 
(b) for each such transfer.
``(b) Deferral Recapture Amount.--
``(1) In general.--For purposes of this part--
``(A) In general.--The term `deferral recapture 
amount' means, with respect to any applicable transfer 
of any nontradable covered asset, the aggregate amount 
of interest (determined in the manner provided under 
paragraph (3)) on the deemed tax amount determined 
under paragraph (2) for each taxable year to which gain 
is allocated under paragraph (2)(A) and which precedes 
the taxable year of the applicable transfer.
``(B) Limitation on amount.--The amount determined 
under subparagraph (A) with respect to any applicable 
transfer shall not exceed the applicable percentage of 
the gain from such transfer. For purposes of this 
subparagraph, the applicable percentage is the excess 
of--
``(i) 49 percent, over
``(ii) in the case of the transfer of a 
nontradable covered asset which--
``(I) is a capital asset, the rate 
of tax in effect under section 
1(h)(1)(D) for the taxable year of the 
transfer, or
``(II) is not a capital asset, the 
highest rate of tax in effect under 
section 1 for such taxable year.
``(2) Deemed tax amount.--For purposes of paragraph (1)--
``(A) In general.--The deemed tax amount for any 
taxable year preceding the taxable year of any 
applicable transfer of a nontradable covered asset 
shall be the amount determined--
``(i) first, except as provided in 
subparagraph (B), by allocating the amount of 
gain from such transfer ratably to each day in 
the taxpayer's holding period of such asset, 
and
``(ii) then by multiplying the amount 
allocated under clause (i) to days in such 
preceding taxable year by--
``(I) if such asset is a capital 
asset, the rate of tax in effect under 
section 1(h)(1)(D) for the taxable year 
of such transfer, or
``(II) if such asset is not a 
capital asset, the highest rate of tax 
in effect under section 1 for such 
taxable year.
``(B) Special rule for periods before becoming 
applicable taxpayer.--Notwithstanding subparagraph 
(A)(i), any gain allocated under such subparagraph to 
any taxable year preceding the first taxable year for 
which the taxpayer is treated as an applicable taxpayer 
shall be allocated to such first taxable year.
``(C) Increase in deemed tax amount by tax on net 
investment income.--If gain from a transfer to which 
this section applies for any taxable year is of a type 
taken into account in computing net investment income 
(as defined in section 1411), the deemed tax amount 
under this paragraph for any preceding taxable year to 
which such gain is allocated under subparagraph (A)(i) 
shall be increased by an amount equal to the amount of 
such allocated gain multiplied by the rate of tax in 
effect under section 1411(a)(1) for the taxable year of 
such transfer.
``(3) Computation of interest.--
``(A) In general.--The amount of interest referred 
to in paragraph (1) on any deemed tax amount determined 
under paragraph (2) for any preceding taxable year 
shall be determined for the period--
``(i) beginning on the due date for such 
preceding taxable year, and
``(ii) ending on the date on which the 
applicable transfer occurs,
by using the rates determined under section 6621(b) 
(plus 1 percentage point), and the method applicable 
under section 6621, for underpayments of tax for such 
period.
``(B) Due date.--For purposes of this paragraph, 
the term `due date' means, with respect to any 
preceding taxable year, the date prescribed by law 
(determined without regard to extensions) for filing 
the return of the tax imposed by this chapter for such 
taxable year.
``(c) Special Rule for Taxpayers With Net Capital Losses.--
``(1) In general.--If a taxpayer has a net capital loss for 
any taxable year for which there is an increase in tax under 
subsection (a)(2), such increase in tax shall be reduced (but 
not below zero) by the credit equivalent of such net capital 
loss.
``(2) Credit equivalent.--For purposes of this subsection, 
the term `credit equivalent' means, with respect to any net 
capital loss for any taxable year, an amount equal to such loss 
multiplied by the rate of tax in effect under section 
1(h)(1)(D) for such taxable year.
``(3) Coordination with carryovers of loss.--For purposes 
of subsection (b) of section 1212, the net capital loss for a 
taxable year to which paragraph (1) applies (determined without 
regard to this subsection) shall be reduced (but not below 
zero) by an amount equal to the amount of the reduction under 
paragraph (1) for such taxable year divided by the rate of tax 
in effect under section 1(h)(1)(D) for such taxable year.
``(d) Special Rules for Certain Dividend Distributions.--
``(1) Excess dividend distributions.--
``(A) In general.--For purposes of applying this 
section, any excess dividend shall be treated as gain 
from an applicable transfer of a nontradable covered 
asset occurring on the date such dividend is received.
``(B) Excess dividend.--For purposes of this part, 
the term `excess dividend' means, with respect to any 
nontradable covered asset which consists of stock in a 
C corporation, any dividend in respect of such stock 
received during any taxable year to the extent such 
dividend does not exceed its ratable portion of the 
total excess dividends (if any) for such taxable year.
``(C) Total excess dividends.--For purposes of this 
paragraph--
``(i) In general.--The term `total excess 
dividends' means, with respect to stock in a C 
corporation described in subparagraph (B), the 
excess (if any) of--
``(I) the amount of the dividends 
in respect of such stock received by 
the taxpayer during the taxable year, 
over
``(II) 125 percent of the average 
amount of dividends received in respect 
of such stock by the taxpayer during 
the 3 preceding taxable years (or, if 
shorter, the portion of the taxpayer's 
holding period before the taxable 
year).
``(ii) No excess for 1st year.--Except as 
provided by the Secretary, the total excess 
dividends with respect to any stock shall be 
zero for the taxable year in which the 
taxpayer's holding period in such stock begins.
``(D) Adjustments.--Under regulations prescribed by 
the Secretary--
``(i) determinations under this paragraph 
shall be made on a share-by-share basis, except 
that shares with the same holding period may be 
aggregated and other shares may be aggregated 
to the extent provided by the Secretary,
``(ii) proper adjustments shall be made for 
stock splits and stock dividends,
``(iii) if the taxpayer does not hold the 
stock during the entire taxable year, dividends 
received during such year shall be annualized, 
and
``(iv) if the taxpayer's holding period 
includes periods during which the stock was 
held by 1 or more other persons, dividends with 
respect to such stock received by such other 
person shall be taken into account as if 
received by the taxpayer.
``(2) Capital gain dividends of certain reits.--
``(A) In general.--For purposes of applying this 
section, if an applicable taxpayer holds directly (or 
indirectly through 1 or more nontradable interests) 
stock in a real estate investment trust which is a 
nontradable covered asset, any capital gain dividend 
received by such taxpayer from such entity shall be 
treated as gain from an applicable transfer of a 
nontradable covered asset occurring on the date such 
dividend is received.
``(B) Reporting.--A real estate investment trust 
shall include in the written notice for a capital gain 
dividend under section 857(b)(3)(B) its holding period 
in the asset giving rise to the capital gain dividend. 
The Secretary shall provide rules for the determination 
of holding periods in cases where the dividend is 
properly allocable to gain from more than 1 asset.
``(3) Holding period.--Except as prescribed by the 
Secretary, if an applicable taxpayer is treated under this 
subsection as receiving gain from an applicable transfer of a 
nontradable covered asset, the taxpayer's holding period for 
purposes of computing the deferral recapture amount under this 
section shall be the taxpayer's holding period with respect to 
the stock or ownership interest in the entity to which 
paragraph (1) or (2) applies (or, if shorter, the holding 
period included in the notice described in paragraph (2)(B) in 
the case of a capital gain dividend).
``(e) Holding Period.--For purposes of this section--
``(1) In general.--The taxpayer's holding period shall be 
determined under section 1223, except that if a tradable 
covered asset of an applicable taxpayer is converted to, or 
exchanged for, a nontradable covered asset, such period shall 
only include the period after the most recent taxable event 
under this part with respect to such tradable covered asset.
``(2) Secretarial authority.--The Secretary shall prescribe 
such regulations, rules, or guidance providing for other 
modifications to holding periods as may be necessary to carry 
out the purposes of this section.

``SEC. 493. SPECIAL RULES FOR APPLICATION OF NONDEFERRAL RULES TO 
CERTAIN PASS-THROUGH ENTITIES.

``(a) Treatment of Ownership Interests in Applicable Entities.--For 
purposes of applying this part, except as provided in this section, any 
ownership interest in an applicable entity held directly (or indirectly 
through 1 or more nontradable interests) by an applicable taxpayer 
which is a tradable or nontradable covered asset shall be treated in 
the same manner as any other such asset.
``(b) Additional Requirements for Applicable Taxpayers Who Are 
Significant Owners.--For purposes of this part--
``(1) In general.--In the case of any applicable taxpayer 
which is a significant owner of an applicable entity--
``(A) such taxpayer shall meet the reporting 
requirements under paragraph (2) with respect to such 
entity, and
``(B) such taxpayer shall take into account amounts 
with respect to such entity as required under paragraph 
(3).
``(2) Reporting requirements for significant owners.--
``(A) Notice to entity of status.--
``(i) In general.--In the case of the first 
taxable year for which a taxpayer--
``(I) is an applicable taxpayer,
``(II) is a significant owner of an 
applicable entity, and
``(III) holds directly a 
nontradable interest in such applicable 
entity,
such taxpayer shall, at such time and in such 
manner as the Secretary shall prescribe, notify 
such applicable entity that such taxpayer is a 
taxpayer meeting the requirements of subclauses 
(I), (II), and (III) and that the applicable 
entity is subject to the notice requirements 
under subsection (c) with respect to such 
taxpayer. Such taxpayer shall include with such 
notice such information as the Secretary may 
prescribe.
``(ii) Period of notice.--Any notice 
provided by a taxpayer under clause (i) shall 
remain in effect, and such entity shall 
continue to be subject to the reporting 
requirements under subsection (c) with respect 
to such taxpayer, for the period specified by 
the Secretary. The Secretary may require 
additional reporting by the taxpayer for 
purposes of carrying out this clause.
``(B) Reporting of elections to treat nontradable 
interests as tradable assets.--If--
``(i) section 496(a)(1) applies to an 
applicable taxpayer for any taxable year for 
which a notice with respect to such taxpayer is 
in effect under subparagraph (A), and
``(ii) the applicable taxpayer made the 
election under section 496(a)(3) to treat any 
nontradable interest in an applicable entity as 
a tradable covered asset for purposes of 
section 496(a)(1),
the applicable taxpayer shall, at such times and in 
such manner as the Secretary shall prescribe, report to 
such applicable entity notice of such election, the 
amount of gain described in section 496(c)(1) with 
respect to such treatment, and the requirement for the 
entity to make the basis adjustments described in 
section 496(c)(2).
``(3) Certain gain or loss of applicable entity taken into 
account by significant owners.--
``(A) In general.--Each applicable taxpayer for 
which a notice with respect to such taxpayer is in 
effect under paragraph (2)(A) or subsection (c)(2) with 
respect to an applicable entity for any taxable year of 
the taxpayer shall, in computing the taxpayer's tax 
liability under this chapter for such taxable year, 
take into account such taxpayer's share of any gain or 
loss reported under subsection (c)(1)(A)(i) or 
(c)(1)(B)(i) to the taxpayer for any taxable year of 
such entity ending with or within such taxable year of 
the taxpayer.
``(B) Basis adjustments.--Under rules prescribed by 
the Secretary, if gain or loss is taken into account by 
an applicable taxpayer under subparagraph (A) with 
respect to any tradable covered asset by reason of the 
taxpayer holding a nontradable interest in an 
applicable entity--
``(i) the applicable entity's adjusted 
basis of such asset (solely for purposes of 
computing the taxpayer's share of such adjusted 
basis), and
``(ii) the taxpayer's adjusted basis of 
such nontradable interest,
shall each be appropriately adjusted to reflect gain or 
loss so taken into account. Such rules shall also 
provide proper adjustments to adjusted bases where such 
ownership is held through tiered entities.
``(C) Special rules for deferral recapture 
amount.--
``(i) Holding period.--Except as prescribed 
by the Secretary, if an applicable taxpayer 
takes into account gain under subparagraph (A) 
for any taxable year from an applicable 
transfer by such applicable entity of a 
nontradable covered asset, the taxpayer's 
holding period with respect to such asset for 
purposes of computing the deferral recapture 
amount under section 492 shall be the shorter 
of--
``(I) the entity's holding period 
in such asset, or
``(II) the taxpayer's holding 
period in such entity.
``(ii) Other rules.--The Secretary shall 
prescribe rules for purposes of this section--
``(I) for the treatment of 
fragmented holding periods,
``(II) for the determination of 
holding periods in the case of tiered 
structures, and
``(III) to prevent the shifting of 
any deferral recapture amount between 
taxpayers holding ownership interests 
in an applicable entity.
``(D) Taxpayers failing to file notice.--Under 
rules required by the Secretary, if a taxpayer fails to 
file a notice with any applicable entity as required 
under paragraph (2)(A), such taxpayer shall take into 
account, in computing the taxpayer's tax liability 
under this chapter for any taxable year for which such 
notice (or a related notice under subsection (c)(2)) 
would otherwise have been in effect, gain or loss 
described in subparagraph (A) which would have been 
reported if such notice had been filed.
``(4) Significant owner.--For purposes of this subsection--
``(A) In general.--The term `significant owner' 
means, with respect to any applicable entity, an 
applicable taxpayer who, at any time during the 
applicable taxpayer's taxable year--
``(i) is a 5-percent owner with respect to 
such entity, or
``(ii) holds nontradable interests in such 
entity with an aggregate applicable value of 
greater than $50,000,000.
``(B) 5-percent owner.--
``(i) In general.--The term `5-percent 
owner' means, with respect to any applicable 
entity, an applicable taxpayer who owns (or is 
considered as owning within the meaning of 
section 318) at least 5 percent of--
``(I) in the case of a corporation, 
the stock (by vote or value) in such 
corporation, or
``(II) in the case of an applicable 
entity other than a corporation, the 
capital or profits interests in such 
entity.
``(ii) Constructive ownership rules.--For 
purposes of this subparagraph--
``(I) subparagraph (C) of section 
318(a)(2) shall be applied by 
substituting `5 percent' for `50 
percent', and
``(II) in the case of an applicable 
entity which is not a corporation, 
ownership in such entity shall be 
determined in accordance with 
regulations prescribed by the Secretary 
which shall be based on principles 
similar to the principles of section 
318 (as modified by subclause (I)).
``(c) Additional Entity Reporting Requirements.--
``(1) In general.--Except as provided in paragraph (4), an 
applicable entity for any taxable year shall, at such times and 
in such manner as the Secretary shall prescribe, report to each 
applicable taxpayer with respect to which a notice is in effect 
under subsection (b)(2)(A) or paragraph (2)--
``(A) in the case of tradable covered assets held 
by such entity, such taxpayer's share of--
``(i) gain or loss determined by the entity 
under rules similar to the rules under section 
491, and
``(ii) proper adjustments shall be made in 
the amount of gain or loss subsequently 
realized for gain or loss taken into account 
under clause (i),
``(B) in the case of nontradable covered assets 
held by such entity--
``(i) such person's share of any gain or 
loss on any applicable transfer during such 
taxable year of any such asset, and
``(ii) the holding period in each such 
asset, and
``(C) such other information as the Secretary 
determines necessary to carry out this part.
``(2) Notice of taxpayers holding indirect interests in 
other applicable entities.--
``(A) In general.--Under rules prescribed by the 
Secretary, except as provided in subparagraph (B), if 
an applicable entity in a tier of entities--
``(i) receives a notice under subsection 
(b)(2)(A) with respect to an applicable 
taxpayer, such entity shall notify each other 
applicable entity in which such applicable 
taxpayer holds, by reason of holding a 
nontradable interest in such entity, a 
nontradable interest in such other entity that 
the person holding such interest in such other 
entity is an applicable taxpayer with respect 
to which the notice requirements of paragraph 
(1) apply to such other entity, or
``(ii) receives a notice under clause (i) 
or this clause, such entity shall notify each 
other applicable entity in which the applicable 
taxpayer holds, by reason of holding an 
interest in the entity receiving such notice, a 
nontradable interest in such other entity that 
the person holding such interest in such other 
entity is an applicable taxpayer with respect 
to which the notice requirements of paragraph 
(1) apply to such other entity.
Any such notice shall remain in effect, and any entity 
receiving such notice shall treat such taxpayer as an 
applicable taxpayer, for the period specified by the 
Secretary. The Secretary may require additional 
reporting by such entities for purposes of carrying out 
this clause.
``(B) Requirement only applies if applicable 
taxpayer is significant owner.--An applicable entity 
shall be required to report under subparagraph (A) to 
another applicable entity only if the applicable 
taxpayer is a significant owner (within the meaning of 
subsection (b)(4)) of such other entity, determined 
only by taking into account interests in such other 
entity which such applicable taxpayer holds by reason 
of its ownership interests in the entity otherwise 
required to report and such other ownership interests 
in such other entity as the Secretary may require to be 
taken into account to prevent the avoidance of the 
purposes of this part.
``(3) Special rules for disregarded nonrecognition 
events.--In the case of an applicable transfer of a nontradable 
covered asset of an applicable entity which is a disregarded 
nonrecognition event--
``(A) notwithstanding any other provision of this 
title, gain or loss shall be recognized and taken into 
account in the taxable year in which the transfer 
occurs as if the entity had sold the nontradable 
covered asset for its fair market value immediately 
before such transfer (or such other value as is 
determined as of such time under rules prescribed by 
the Secretary),
``(B) such entity shall report the amount of gain 
or loss required to be taken into account under 
subparagraph (A) to--
``(i) each applicable taxpayer with respect 
to which a notice is in effect which such 
entity has received under subsection (b)(1), 
and
``(ii) each other applicable entity from 
which it has received a notice under paragraph 
(2) with respect to such an applicable 
taxpayer, and
``(C) proper adjustments shall be made in the 
amount of gain or loss subsequently realized for gain 
or loss taken into account under subparagraph (A).
``(4) Delay in reporting requirement.--If--
``(A) a notice is received by an applicable entity 
under subsection (b)(2)(A) or paragraph (2) for any 
taxable year of the entity with respect to any person 
holding directly (or indirectly through 1 or more 
nontradable interests) a nontradable interest in such 
entity, and
``(B) no notice is in effect with respect to such 
person or any other person for the preceding taxable 
year,
then, except as provided by the Secretary, such notice shall be 
treated as first taking effect for purposes of this subsection, 
section 351(h), and section 1031(i) for the taxable year 
immediately following the taxable year in which the notice is 
received. This paragraph shall not apply to a notice described 
in subparagraph (A) received by an applicable entity from a 
person who was a significant owner (within the meaning of 
subsection (b)(4)) of such entity (or any predecessor entity) 
on the date of the enactment of this part.
``(5) Secretarial authority.--In prescribing rules for the 
application of this subsection, the Secretary may provide--
``(A) simplified methods for applicable entities to 
meet the requirements of this subsection, including the 
aggregation of gains and losses where appropriate,
``(B) rules for determining a holder's share of 
amounts required to be reported by an applicable entity 
under paragraph (1), and
``(C) any rules necessary to prevent the avoidance 
of the purposes of this section, including through the 
delay in the reporting requirement under paragraph (4).
``(d) Definitions and Rules Relating to Application of Section.--
For purposes of this part--
``(1) Applicable entity.--The term `applicable entity' 
means any--
``(A) partnership,
``(B) S corporation, or
``(C) other pass-through entity specified in 
regulations or guidance prescribed by the Secretary.
``(2) Election to treat entity as applicable taxpayer for 
taxable events involving tradable assets.--If an applicable 
entity elects the application of this paragraph for any taxable 
year--
``(A) this section shall not apply with respect to 
any gain or loss in connection with a taxable event 
involving any tradable covered asset held directly (or 
indirectly through 1 or more nontradable interests) by 
such entity, and
``(B) such entity shall be treated as an applicable 
taxpayer for purposes of applying sections 490(1) and 
491 to such taxable event.
Such an election shall be made at such time and in such manner 
as the Secretary may prescribe and, once made, shall be 
irrevocable without the consent of the Secretary.
``(e) Nontradable Interest.--For purposes of this part, the term 
`nontradable interest' means any ownership interest in an applicable 
entity which is a nontradable covered asset.
``(f) Regulations and Guidance.--The Secretary shall prescribe such 
regulations and guidance as are necessary to carry out the provisions 
of this section, including regulations or guidance necessary--
``(1) to prevent the use of pass-through entities to avoid 
the purposes of this part,
``(2) to simplify the application of this part.

``SEC. 494. TREATMENT OF GIFTS, BEQUESTS, AND TRANSFERS IN TRUST.

``(a) In General.--
``(1) Deemed sale.--If any person described in paragraph 
(3) transfers any covered asset by gift, upon death, or in 
trust, such covered asset shall be treated as sold by such 
person for its fair market value to the transferee on the date 
of such gift, death, or transfer.
``(2) No recognition for losses on transfers by gift or in 
trust.--
``(A) In general.--No loss shall be recognized with 
respect to any covered asset which is treated as sold 
under subsection (a) by reason of a transfer by gift or 
in trust.
``(B) Amount of gain for transferee.--If a loss is 
not recognized by the transferor by reason of 
subparagraph (A) and the transferee sells or otherwise 
disposes of the covered asset (or of other property the 
basis of which in the taxpayer's hands is determined 
directly or indirectly by reference to such property) 
at a gain, then such gain shall be recognized only to 
the extent that it exceeds so much of such loss as is 
properly allocable to the covered asset sold or 
otherwise disposed of by the transferee.
``(3) Person described.--A person is described in this 
section if such person is--
``(A) an individual who is an applicable taxpayer 
for the taxable year in which the transfer is made, or
``(B) an applicable entity with respect to which 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 transfer.
``(b) Special Rules for Certain Grantor Trusts.--
``(1) Transfers of nontradable covered assets into certain 
grantor trusts.--For purposes of applying this section to any 
transfer in trust, except as otherwise provided in this 
paragraph, any transfer of a nontradable covered asset from the 
person treated as the owner of an applicable grantor trust 
(other than a grantor trust which is a wholly revocable trust) 
to such trust shall be treated as a transfer to which 
subsection (a) applies.
``(2) Deemed distributions.--In the case of any applicable 
grantor trust, any property held by such trust shall be treated 
as transferred by the owner in a transfer to which subsection 
(a) applies--
``(A) on any date that--
``(i) the owner ceases to be treated as the 
owner under this chapter,
``(ii) such property is distributed to any 
person other than the owner, or
``(iii) the property would no longer be 
included in the owner's gross estate under 
chapter 11, or
``(B) on the date of the death of the owner.
``(3) Applicable grantor trust.--For purposes of this 
subsection--
``(A) In general.--The term `applicable grantor 
trust' means the portion of any trust with respect to 
which an applicable taxpayer is considered the owner 
under subpart E of part I of subchapter J.
``(B) Exceptions.--The Secretary shall provide for 
appropriate exceptions to the treatment of categories 
of trusts as applicable grantor trusts under 
subparagraph (A), including arrangements which are 
ordinarily used in the course of a trade or business, 
employee benefit arrangements, and arrangements for 
securitization transactions.
``(c) Exceptions.--
``(1) Spousal exception.--
``(A) In general.--Subsection (a) shall not apply 
to any transfer if such transfer--
``(i) is--
``(I) made to the spouse or the 
surviving spouse of the transferor, or
``(II) made to a former spouse of 
the transferor if the transfer is 
incident to divorce, or
``(ii) is a transfer of qualified 
terminable interest property or of property to 
which section 2056(b)(5) or 2523(e) applies.
``(B) Certain remainder interests treated as 
transferred by spouse.--Property described in 
subparagraph (A)(ii) shall be treated as sold by the 
spouse or surviving spouse on the earlier of the date 
of the disposition of such property by such spouse or 
surviving spouse or the date of the death of such 
spouse or surviving spouse.
``(C) Qualified terminable interest property.--For 
purposes of this paragraph, the term `qualified 
terminable interest property' means any property 
described in section 2056(b)(7) or 2523(f)(2).
``(D) Disallowance of spousal exception where 
spouse or surviving spouse not united states citizen or 
long-term resident.--
``(i) In general.--Subparagraph (A) shall 
not apply if the spouse or surviving spouse of 
the decedent is not a citizen or long-term 
resident of the United States.
``(ii) Long-term resident.--For purposes of 
clause (i), the term `long-term resident' means 
any individual (other than a citizen of the 
United States) who is a lawful permanent 
resident of the United States--
``(I) for the taxable year in which 
the transfer described in subsection 
(a) occurs, and
``(II) in at least 8 taxable years 
during the period of 15 taxable years 
ending with the taxable year during 
which the transfer described in 
subsection (a) or (b)(1) occurs.
For purposes of the preceding sentence, an 
individual shall not be treated as a lawful 
permanent resident for any taxable year if such 
individual is treated as a resident of a 
foreign country for the taxable year under the 
provisions of a tax treaty between the United 
States and the foreign country and does not 
waive the benefits of such treaty applicable to 
residents of the foreign country.
``(2) Gifts and bequests to charity.--
``(A) In general.--Subsection (a) shall not apply 
to any transfer if such transfer is made to or for the 
use of an organization described in section 170(c).
``(B) Special rule for split-interest trusts.--In 
the case of any transfer--
``(i) to a charitable remainder annuity 
trust (as defined in section 664) or a 
charitable remainder unitrust (as defined in 
section 664), or
``(ii) of an interest described in section 
170(f)(2)(B),
subsection (a) shall not apply to the portion of such 
transfer which is to or for the use of an organization 
described in section 170(c).
``(C) Special rule for pooled income funds.--In the 
case of any transfer to a pooled income fund (as 
defined in section 642(c)(5)), subsection (a) shall not 
apply to the portion of such transfer which is to or 
for the use of an organization described in section 
170(b)(1)(A) (other than in clauses (vii) or (viii)).
``(3) Qualified disability trusts and cemetery perpetual 
care funds.--Subsection (a) shall not apply to transfers to any 
qualified disability trust (as defined in section 
642(b)(2)(C)(ii)) or to transfers to any cemetery perpetual 
care fund described in section 642(i).
``(d) Basis of Transferee.--
``(1) In general.--Notwithstanding sections 1014 and 1015, 
to the extent that subsection (a) applies to any transfer of 
property--
``(A) except as provided in subparagraph (B), the 
basis of the property in the hands of the transferee 
shall be the fair market value of the property 
(consistent with the amount taken into account by the 
transferor under subsection (a)), and
``(B) in the case such transfer is a transfer upon 
death to any individual described in subsection 
(c)(1)(A)(i), the basis of the property in the hands of 
the transferee shall be the same as it would be in the 
hands of the transferor, except that if such basis 
(adjusted for the period before the date of the 
transfer as provided in section 1016) is greater than 
the fair market value of the property at the time of 
death, then for the purpose of determining loss the 
basis shall be such fair market value.
``(2) Consistent basis rules for transfers by death.--In 
the case of any transfer upon death, rules similar to section 
1014(f) shall apply for purposes of this section.
``(e) Application of Depreciation Recapture Rules.--Paragraphs (1) 
and (2) of section 1245(b) and paragraphs (1) and (2) of section 
1250(d) shall not apply to any property treated as sold by reason of 
subsection (a).

``Subpart B--Definitions and Rules Relating to Applicable Taxpayers

``Sec. 495. Applicable taxpayer defined.
``Sec. 496. Special rules for taxpayers entering or changing status as 
applicable taxpayers.

``SEC. 495. APPLICABLE TAXPAYER DEFINED.

``(a) In General.--For purposes of this part--
``(1) In general.--The term `applicable taxpayer' means, 
with respect to any taxable year, any taxpayer--
``(A) which is an individual who met either the 
income test of paragraph (2) or the asset test of 
paragraph (3) for each of the 3 immediately preceding 
taxable years (including taxable years beginning before 
the date of the enactment of this part which are 
included in any such 3-taxable-year period), or
``(B) which is--
``(i) an applicable trust, or
``(ii) the estate of an individual who was 
an applicable taxpayer for any taxable year 
during the 4-taxable-year period ending with 
the taxable year in which the individual died.
``(2) Income test.--The requirements of this paragraph are 
met for any taxable year if the applicable adjusted gross 
income of the taxpayer for the taxable year exceeds 
$100,000,000 ($50,000,000 in the case of a married individual 
filing separately).
``(3) Asset test.--The requirements of this paragraph are 
met for any taxable year if the aggregate applicable value of 
all tradable and nontradable covered assets held by the 
taxpayer as of the close of the taxable year exceeds 
$1,000,000,000 ($500,000,000 in the case of a married 
individual filing separately).
``(4) Special rules relating to applicable taxpayer 
status.--
``(A) Termination of status of individual 
taxpayers.--A taxpayer who is treated as an applicable 
taxpayer under paragraph (1)(A) for any taxable year 
shall continue to be so treated until the first taxable 
year with respect to which--
``(i) the taxpayer does not, for each of 
the 3 taxable years immediately preceding such 
taxable year, meet either--
``(I) the income test of paragraph 
(2) in effect for such preceding 
taxable year, or
``(II) the asset test of paragraph 
(3) in effect for such preceding 
taxable year,
except that each such paragraph shall be 
applied for purposes of this clause by 
substituting an amount equal to one-half of the 
dollar amount otherwise in effect for such 
taxpayer under such paragraph for each such 
preceding taxable year for such dollar amount, 
and
``(ii) the taxpayer elects, in such manner 
and form and at such time as the Secretary may 
prescribe, not to be so treated for such first 
taxable year.
``(B) Earlier termination election of applicable 
taxpayer status for divorced individuals.--If--
``(i) an applicable taxpayer ceases to be a 
married individual by reason of a decree of 
divorce or separate maintenance issued during 
any taxable year, and
``(ii) such taxpayer, for the first taxable 
year following the taxable year described in 
clause (i), does not meet either--
``(I) the income test of paragraph 
(2), except that such paragraph shall 
be applied for purposes of this 
subclause by substituting `$1,000,000' 
for the dollar amount otherwise in 
effect for such taxpayer under such 
paragraph, or
``(II) the asset test of paragraph 
(3), except that such paragraph shall 
be applied for purposes of this 
subclause by substituting `$10,000,000' 
for the dollar amount otherwise in 
effect for such taxpayer under such 
paragraph,
then such taxpayer may elect, in such manner and form 
and at such time as the Secretary may prescribe, not to 
be treated as an applicable taxpayer beginning with 
such first taxable year.
``(C) Election.--An election under subparagraph (A) 
or (B)--
``(i) shall be made with the taxpayer's 
return of tax for the taxable year to which 
such election first applies (or such other time 
as the Secretary shall prescribe) and shall be 
in such form and manner as the Secretary may 
prescribe, and
``(ii) shall apply to such first taxable 
year and all subsequent taxable years until the 
first taxable year for which the taxpayer is 
again treated as an applicable taxpayer by 
reason of meeting the requirements of paragraph 
(1)(A).
``(5) Special rules for married individuals.--
``(A) Applicable taxpayers becoming married 
individuals.--If an individual was an applicable 
taxpayer for the taxable year before the individual 
became a married individual (within the meaning of 
section 7703), such individual and the individual's 
spouse shall be treated as applicable taxpayers for 
such taxable year of marriage and subsequent taxable 
years until such status is otherwise terminated under 
this section.
``(B) Married individuals filing separately.--If a 
married individual filing separately is treated as an 
applicable taxpayer for any taxable year, such 
individual's spouse shall be treated as an applicable 
taxpayer for such taxable year.
``(C) First-year elections.--Under rules prescribed 
by the Secretary, if an individual is first treated as 
an applicable taxpayer for a taxable year by reason of 
the application of subparagraph (A) or (B), section 496 
shall apply to such taxpayer for such first taxable 
year only with respect to assets held separately by 
such individual unless such taxable year is also the 
first taxable year for which the individual's spouse is 
an applicable taxpayer.
``(6) Regulatory authority.--The Secretary shall prescribe 
such regulations and guidance as may be necessary to carry out 
the provisions of this subsection, including--
``(A) rules waiving the application of paragraph 
(5)(B) in cases where the Secretary determines 
equitable relief is appropriate,
``(B) rules providing for the application of this 
subsection in cases where the filing status of a 
taxpayer changes between any taxable year and any of 
the 3 immediately preceding taxable years, including 
the first taxable year in which a taxpayer files a 
joint return after becoming married, and
``(C) rules requiring such information reporting as 
the Secretary determines necessary to determine whether 
a taxpayer is an applicable taxpayer.
``(b) Applicable Adjusted Gross Income.--For purposes of this 
section, the term `applicable adjusted gross income' means modified 
adjusted gross income as defined in section 36B(d)(2)(B), except that--
``(1) clause (i) thereof shall be applied by substituting 
`sections 911, 931, and 933' for `section 911', and
``(2) in the case of a trust, no deduction under section 
651 or 661 shall be allowed.
``(c) Applicable Trust.--For purposes of this section--
``(1) In general.--The term `applicable trust' means a 
trust (other than a grantor trust) which, for each of the 3 
taxable years immediately preceding such taxable year 
(including taxable years beginning before the date of the 
enactment of this part which are included in any such 3-
taxable-year period), meets either--
``(A) the income test of subsection (a)(2), except 
that such subsection shall be applied for purposes of 
this subparagraph by substituting `$10,000,000' for the 
dollar amount otherwise in effect for such taxable year 
under such paragraph, or
``(B) the asset test of subsection (a)(3), except 
that such subsection shall be applied for purposes of 
this subparagraph by substituting `$100,000,000' for 
the dollar amount otherwise in effect for such taxable 
year under such paragraph.
``(2) Exceptions.--Such term shall not include--
``(A) a qualified disability trust (as defined in 
section 642(b)(2)(C)(ii)),
``(B) any portion of a trust which consists of 
property permanently set aside for the exclusive use of 
an organization described in section 170(c),
``(C) a pooled income fund (as defined in section 
642(c)(5)) or a cemetery perpetual care fund (as 
described in section 642(i)),
``(D) a settlement trust (as defined in section 
646),
``(E) any charitable remainder annuity trust (as 
defined in section 664),
``(F) any charitable remainder unitrust (as defined 
in section 664), or
``(G) any other category of trust identified in 
regulations or guidance provided by the Secretary.
``(3) Grantor trusts.--
``(A) Grantor trust defined.--For purposes of this 
section, the term `grantor trust' means any portion of 
a trust with respect to which the grantor or any other 
person is considered the owner under subpart E of part 
I of subchapter J.
``(B) Assets of grantor trust taken into account.--
For purposes of subsection (a)(1)(A), the assets of a 
grantor trust shall be included in the assets of--
``(i) the grantor of such trust if the 
grantor is considered the owner of such assets, 
and
``(ii) if a person other than the grantor 
is considered the owner of such assets, both 
the grantor and such person.
``(d) Special Rules for Foreign Persons and Expatriates.--For 
purposes of this part--
``(1) Nonresident alien individuals.--The following rules 
shall apply in determining whether a nonresident alien 
individual is an applicable taxpayer:
``(A) Income test.--For purposes of the income test 
under subsection (a)(2)--
``(i) such subsection shall be applied for 
purposes of this subparagraph by substituting 
`$50,000,000' for the dollar amount otherwise 
in effect for such taxable year under such 
paragraph, and
``(ii) the applicable adjusted gross income 
of such individual shall be equal to the 
taxable income of such individual, determined 
by only taking into account items of income, 
gain, deduction, and loss which are effectively 
connected with the conduct of trades or 
businesses within the United States.
``(B) Asset test.--For purposes of the asset test 
under subsection (a)(3)--
``(i) such subsection shall be applied for 
purposes of this subparagraph by substituting 
`$500,000,000' for the dollar amount otherwise 
in effect for such taxable year under such 
paragraph, and
``(ii) only assets which produce income 
described in subparagraph (A) shall be taken 
into account.
``(2) Expatriates.--
``(A) In general.--If, for the taxable year which 
includes a covered expatriate's expatriation date, such 
expatriate--
``(i) was an applicable taxpayer (without 
regard to this paragraph), or
``(ii) is an applicable taxpayer under the 
rules of subparagraph (B),
such expatriate shall be treated as an applicable 
taxpayer during each of the taxable years during the 
10-taxable-year period beginning with such taxable year 
(and such status shall not be terminated during such 
period by reason of any other provision of this part).
``(B) Special rules for determining status.--For 
purposes of subparagraph (A)(ii), a covered expatriate 
not otherwise treated as an applicable taxpayer shall 
be treated as an applicable taxpayer if, during any of 
the 5 taxable years immediately preceding the taxable 
year which includes the covered expatriate's 
expatriation date (including taxable years beginning 
before the date of the enactment of this part which are 
included in any such 5-taxable-year period), the 
expatriate meets either--
``(i) the income test of subsection (a)(2), 
except that such subsection shall be applied 
for purposes of this subparagraph by 
substituting `$50,000,000' for the dollar 
amount otherwise in effect for such taxable 
year under such paragraph, or
``(ii) the asset test of subsection (a)(3), 
except that such subsection shall be applied 
for purposes of this subparagraph by 
substituting `$500,000,000' for the dollar 
amount otherwise in effect for such taxable 
year under such paragraph.
``(C) Definitions.--Any term used in this paragraph 
which is also used in section 877A shall have the same 
meaning as when used in such section.

``SEC. 496. SPECIAL RULES FOR TAXPAYERS ENTERING OR CHANGING STATUS AS 
APPLICABLE TAXPAYERS.

``(a) Initial Treatment as Applicable Taxpayer.--
``(1) In general.--In the case of the first taxable year 
for which a taxpayer is an applicable taxpayer--
``(A) the taxpayer may make the election under 
paragraph (3) with respect to nontradable covered 
assets, and
``(B) if the taxpayer elects the application of 
this subparagraph, the net first-year tax liability of 
the taxpayer for such taxable year shall be payable in 
5 equal annual installments over the 5-taxable-year 
period beginning with such taxable year.
``(2) Net first-year tax liability.--For purposes of this 
section--
``(A) In general.--The term `net first-year tax 
liability' means, with respect to the first taxable 
year described in paragraph (1), the excess (if any) 
of--
``(i) such taxpayer's net income tax for 
such taxable year, over
``(ii) such taxpayer's net income tax for 
such taxable year determined without regard to 
gain or loss of the taxpayer taken into account 
for such taxable year by reason of a taxable 
event described in section 491(b)(1).
``(B) Net income tax.--The term `net income tax' 
means the regular tax liability reduced by the credits 
allowed under subparts A, B, and D of part IV of 
subchapter A.
``(3) Election to pay and defer tax on nontradable 
assets.--
``(A) In general.--Except as provided in 
subparagraph (C), a taxpayer may elect to treat any 
nontradable covered asset held by the taxpayer as of 
the end of the first taxable year described in 
paragraph (1) as a tradable covered asset for purposes 
of applying section 491(b)(1) and this subsection.
``(B) Determination of gain.--
``(i) In general.--For purposes of applying 
section 491(a)(1)(A), the fair market value of 
any asset with respect to which an election is 
in effect under subparagraph (A) shall be the 
amount specified by the taxpayer in such 
election, except that such value may not, 
unless otherwise provided by the Secretary, be 
less than the taxpayer's adjusted basis in such 
asset as of the end of the first taxable year 
described in paragraph (1).
``(ii) No deductions or credits for basis 
increases.--If there is any increase under this 
part in the taxpayer's adjusted basis of any 
asset by reason of an election under this 
paragraph, no deduction or credit shall be 
allowed under this title with respect to the 
portion of such adjusted basis attributable to 
such increase.
``(C) Only significant owner of applicable entity 
may elect.--In the case of a nontradable covered asset 
which is a nontradable interest in an applicable 
entity, an applicable taxpayer may make an election 
under subparagraph (A) with respect to such asset only 
if such taxpayer is a significant owner (as defined in 
section 493(b)(4)(A)) of such entity with respect to 
whom a notice is in effect under section 493(b)(2)(A) 
for the taxable year for which the election is being 
made.
``(4) Special rule where delay in reporting by applicable 
entity.--
``(A) In general.--If--
``(i) there is a delay in reporting to an 
applicable taxpayer by 1 or more applicable 
entities by reason of section 493(c)(4), and
``(ii) any gain or loss is reported by such 
entities to such taxpayer under section 
493(c)(1)(A)(i) and is taken into account in 
such taxpayer's taxable year immediately 
succeeding the first taxable year described in 
paragraph (1),
then, subject to such rules as the Secretary may 
prescribe, the taxpayer may elect under paragraph 
(1)(B) to treat the net tax liability described in 
subparagraph (B) as net first-year tax liability 
payable in 5 equal annual installments beginning with 
such succeeding taxable year. The rules of paragraph 
(5) shall apply to such installments in the same manner 
as such rules apply to installments for such first 
taxable year.
``(B) Net tax liability.--For purposes of 
subparagraph (A), the net tax liability described in 
this subparagraph is, with respect to the taxable year 
described in such subparagraph, the excess (if any) 
of--
``(i) such taxpayer's net income tax for 
such taxable year, over
``(ii) such taxpayer's net income tax for 
such taxable year determined without regard to 
gain or loss of the taxpayer described in 
subparagraph (A)(ii).
``(5) Rules relating to installment payments.--
``(A) Date for payment of installments.--If an 
election is made under paragraph (1), the first 
installment shall be paid on the due date (determined 
without regard to any extension of time for filing the 
return) for the return of tax for the first taxable 
year described in paragraph (1) and each succeeding 
installment shall be paid on the due date (as so 
determined) for the return of tax for the taxable year 
following the taxable year with respect to which the 
preceding installment was made.
``(B) Acceleration of payment.--
``(i) Disposition of assets.--
``(I) In general.--If, before the 
close of the 5-year period described in 
paragraph (1), a taxpayer sells or 
exchanges, transfers, or otherwise 
disposes of an asset with respect to 
which an election is in effect under 
paragraph (1)(B), then the applicable 
percentage of the unpaid portion of all 
remaining installments described in 
paragraph (1)(B) shall be due on the 
date of such disposition (or such later 
date as the Secretary may prescribe).
``(II) Applicable percentage.--For 
purposes of this subparagraph, the 
applicable percentage is the percentage 
determined by dividing the gain not 
taken into account in determining net 
income tax under paragraph (2)(A)(ii) 
with respect to the asset described in 
subclause (I) by the aggregate amount 
of all gain not so taken into account.
``(ii) Failure to pay, etc.--In the case of 
an addition to tax for failure to timely pay 
any installment required under this subsection, 
the death of the taxpayer, or the filing of a 
petition by the taxpayer in a title 11 or 
similar case, then the unpaid portion of all 
remaining installments shall be due on the date 
of such event (or in the case of a title 11 or 
similar case, the day before the petition is 
filed).
``(C) Proration of deficiency to installments.--If 
an election is made under paragraph (1) to pay the net 
first-year tax liability under this section in 
installments and a deficiency has been assessed with 
respect to such net tax liability, the deficiency shall 
be prorated to the installments payable under paragraph 
(1). 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.
``(D) Installments not to prevent credit or refund 
of overpayments or increase estimated taxes.--If an 
election is made under paragraph (1) to pay the net 
first-year tax liability under this subsection in 
installments--
``(i) no installment of such liability 
shall--
``(I) in the case of a request for 
credit or refund, be taken into account 
as a liability for purposes of 
determining whether an overpayment 
exists for purposes of section 6402 
before the date on which such 
installment is due, or
``(II) be treated as a tax imposed 
by section 1 for purposes of section 
6654, and
``(ii) the first sentence of section 6403 
shall not apply with respect to any such 
installment.
``(6) Elections.--
``(A) In general.--Any election under paragraph 
(1), (3)(A), or (4)(A) shall be made not later than the 
due date for the return of tax for the first taxable 
year described in paragraph (1) and shall be made in 
such manner as the Secretary shall provide.
``(B) Extensions.--The Secretary shall by 
regulation prescribe such circumstances and procedures 
under which extensions of time will be granted to make 
any election under paragraph (1), (3)(A), or (4)(A). 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 treated as not expressly provided by 
statute.
``(b) Treatment of Taxpayers Leaving and Reentering Applicable 
Status.--If a taxpayer's status as an applicable taxpayer is terminated 
under section 495(a)(4) and the taxpayer is again treated as an 
applicable taxpayer for a subsequent taxable year by reason of meeting 
the requirements of section 495(a)(1)(A), the following rules shall 
apply:
``(1) Subsequent year not treated as first year of 
applicable taxpayer status.--Subsection (a) shall not apply to 
any taxable year in which the taxpayer is again treated as an 
applicable taxpayer and such subsequent taxable year shall not 
be treated as the first taxable year for which the taxpayer is 
an applicable taxpayer for any other purpose of this part.
``(2) Nontradable assets.--If there is an applicable 
transfer by a taxpayer of a nontradable covered asset after the 
taxpayer is again treated as an applicable taxpayer, the 
taxpayer's holding period of such asset for purposes of section 
492 shall include all periods during which the taxpayer's 
status as an applicable taxpayer was previously terminated and 
the taxpayer held such asset.
``(c) Special Rules Relating to Ownership of Nontradable Interests 
in Applicable Entities.--
``(1) In general.--For purposes of subsection (a), if an 
applicable taxpayer elects under subsection (a)(3) to treat a 
nontradable interest in an applicable entity held directly as a 
tradable covered asset for the first taxable year described in 
subsection (a)(1), the amount of the gain taken into account 
under subsection (a) with respect to such interest shall be 
equal to the excess (if any) of--
``(A) the value of such interest specified by the 
taxpayer under subsection (a)(3)(B), over
``(B) the taxpayer's adjusted basis in such 
interest as of the close of such taxable year.
``(2) Adjustments to bases of entity's nontradable 
assets.--
``(A) Partnerships.--
``(i) In general.--If the applicable entity 
is a partnership, the partnership shall 
increase the adjusted bases of the 
partnership's assets by the amount described in 
paragraph (1). Such increase shall constitute 
an adjustment to the bases of partnership 
assets solely for determining the applicable 
taxpayer's share of such bases.
``(ii) Allocation.--The Secretary shall 
prescribe rules for the allocation of the 
increase in adjusted bases among partnership 
assets in a manner which has the effect of 
reducing the difference between the value and 
such adjusted bases. Such rules shall also 
provide proper adjustments to adjusted bases 
where ownership is held through tiered 
entities.
``(B) Other applicable entities.--Rules similar to 
the rules of clause (i) shall apply to applicable 
entities other than partnerships.
``(C) No deductions or credits for basis 
increases.--If there is any increase in the applicable 
entity's adjusted basis of any asset by reason of 
subparagraph (A), no deduction or credit shall be 
allowed under this title with respect to the portion of 
such adjusted basis attributable to such increase.
``(3) Definitions.--Any term used in this subsection which 
is also used in section 493 shall have the same meaning as when 
used in such section.
``(d) Special Election for Certain Tradable Assets of Applicable 
Taxpayers.--
``(1) In general.--If a qualified taxpayer makes an 
election under this subsection, then any stock held by such 
qualified taxpayer which would (but for such election) be a 
tradable covered asset and which is specified in such election 
shall be treated as a as a nontradable capital asset of the 
taxpayer for purposes of this part.
``(2) Limitations.--
``(A) Only stock of a single entity taken into 
account.--An election made under this subsection may 
not specify stock in more than one C corporation or 
specify more than one class of stock in such 
corporation.
``(B) Value.--
``(i) In general.--The aggregate value of 
stock specified in an election made under this 
subsection shall not exceed $1,000,000,000.
``(ii) Determination.--For purposes of 
clause (i), the value of any stock specified in 
an election made under this section shall be 
determined as of the last day of the first 
taxable year for which the taxpayer is an 
applicable taxpayer.
``(3) Qualified taxpayer.--For purposes of this subsection, 
the term `qualified taxpayer' means any taxpayer--
``(A) which is not an estate or trust, and
``(B) for which the first taxable year for which 
such taxpayer is an applicable taxpayer is a taxable 
year that begins before January 1, 2025.
``(4) Election.--
``(A) In general.--Any election under this 
subsection shall be made not later than the due date 
for the return of tax for the first taxable year for 
which the taxpayer is an applicable taxpayer and shall 
be made in such manner as the Secretary shall provide.
``(B) Extensions.--The Secretary shall by 
regulation prescribe such circumstances and procedures 
under which extensions of time will be granted to make 
any election under this subsection. 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 treated 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 ASSETS.

``(a) Covered Asset.--For purposes of this part, except as 
otherwise provided in this part, the term `covered asset' means any 
asset other than--
``(1) any interest of the taxpayer in an applicable savings 
plan or in a defined benefit plan,
``(2) any cash or cash equivalent, or
``(3) any private placement life insurance or annuity 
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,
``(B) interests in such assets are readily tradable 
on a secondary market (or the substantial equivalent 
thereof),
``(C) interests in such assets are available on an 
online or electronic platform that regularly 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 annually, and
``(2) any derivative with respect to an underlying 
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 purposes of this part--
``(1) In general.--The term `nontradable covered asset' 
means any covered asset which is not a tradable covered asset.
``(2) Certain assets only counted for determining aggregate 
value of assets.--
``(A) In general.--Any asset excluded from 
treatment as a covered asset under paragraph (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 insurance and annuity 
contracts.--For purposes of subparagraph (A)--
``(i) In general.--The applicable value of 
an private placement life insurance or annuity 
contract (as defined in section 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 contract to the extent 
necessary to prevent the avoidance of the 
purposes of this part, including regulations 
which ensure that such 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 opportunity 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 applicable 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,
``(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 Secretary 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 liabilities of the 
taxpayer.--Except as provided by the Secretary, the aggregate 
applicable value of all covered assets of the taxpayer as of 
any date (determined 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 
indebtedness) 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 determining the applicable 
value of any tradable covered 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 financial 
statement, or
``(D) provided to the taxpayer by such other 
persons as may be designated by the Secretary.
``(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 entities.--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 interest 
in such partnership under paragraph (2)(C) shall not be 
less than the value of the partner's capital account 
under section 704, and
``(C) the Secretary shall provide rules for 
determining the share of a holder of an ownership 
interest in such an entity of amounts included 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 purposes,
``(B) provide rules for the application of 
paragraph (2)(C), including in cases of transactions 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 applicable 
value of assets in taxable years beginning before the 
date of the enactment of this part.

``SEC. 498. OTHER DEFINITIONS; COORDINATION WITH TITLE.

``(a) Applicable Transfer.--For purposes of this part--
``(1) In general.--The term `applicable transfer' 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
``(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 opportunity 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 exchange 
shall be treated as a disregarded nonrecognition 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 transactions, is converted to, 
or exchanged for, a nontradable covered asset, such 
conversion or exchange shall be treated as a taxable 
event with respect to the asset being converted or 
exchanged if gain or loss (if any) on such conversion 
or exchange is, without regard to this part, not 
recognized under this chapter.
``(b) Applicable Savings Plan.--The term `applicable savings plan' 
means--
``(1) a defined contribution plan to which section 401(a) 
or 403(a) applies,
``(2) an annuity contract under section 403(b),
``(3) an eligible deferred compensation plan described 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 meaning of 
section 223(d)).
``(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 either 
directly or indirectly.
``(d) Regulatory Authority To Prevent Avoidance 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 application 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 payment or other 
distribution.''.
(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 December 31, 2025.

SEC. 102. CARRYBACK OF CAPITAL LOSSES ATTRIBUTABLE TO MARK-TO-MARKET 
RULES.

(a) In General.--Section 1212 is amended by adding at the end the 
following new subsection:
``(d) Carryback of Losses of Applicable Taxpayers 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-market 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 application of 
paragraphs (2) and (3), such loss is allowed as a 
carryback to any such preceding taxable year, the 
amount so allowed shall be treated 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 carried back shall be the 
excess (if any) of such loss over the portion of such loss 
which, after the application 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-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 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 purposes 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 character as 
attributable to marked-to-market.--Any amount carried 
forward as a long-term capital loss to any taxable year 
under subsection (b)(1)(B) (after the application of 
subparagraph (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 reduction in net capital loss under 
section 492(c)(3) (relating to reduction for credit 
against tax attributable to deferral recapture amount) 
shall, except as provided by the Secretary, 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 
section 491(b)(1) with respect to tradable 
covered 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).
``(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 ownership 
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 December 31, 2025.

TITLE II--APPLICATION OF OTHER PROVISIONS TO APPLICABLE TAXPAYERS AND 
ENTITIES

Subtitle A--Individuals

SEC. 201. APPLICABLE TAXPAYERS NOT ELIGIBLE FOR ADJUSTED 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 applicable taxpayer (as defined 
in section 495) for any taxable 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) multiplied by the 
amount determined under paragraph (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 Applicable Taxpayers.--
Section 877A is amended by redesignating subsection (i) as subsection 
(j) and by inserting after subsection (h) the following new subsection:
``(i) Special Rules for Applicable Taxpayers.--
``(1) In general.--In the case of a covered expatriate who 
is an applicable taxpayer (as defined in section 495) for the 
taxable year which includes the expatriation date--
``(A) no election may be made under subsection (b) 
with respect to any property treated as sold by reason 
of subsection (a) (after application of subparagraph 
(B)), and
``(B) the covered expatriate shall, for purposes 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.--Notwithstanding 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.

Subtitle B--Rules for Applicable Entities and Trusts

SEC. 211. TREATMENT OF LIKE-KIND EXCHANGES BY APPLICABLE ENTITIES.

(a) In General.--Section 1031 is amended by adding at the end the 
following new subsection:
``(i) Special Rules for Applicable Entities.--Subsection (a) shall 
not apply to an exchange by an applicable entity 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 exchange.''.
(b) Effective Date.--The amendment made by this section shall apply 
to exchanges completed after December 31, 2025.

SEC. 212. TREATMENT OF TRANSFERS BY APPLICABLE ENTITIES IN EXCHANGE FOR 
STOCK.

(a) In General.--Section 351 is amended by redesignating subsection 
(h) as subsection (i) and by inserting after subsection (g) the 
following new subsection:
``(h) Special Rules for Applicable Entities.--
``(1) In general.--Subsection (a) shall not apply to an 
exchange by an applicable entity if an applicable notice 
received by the entity is in effect at the time of such 
exchange.
``(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 section 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-percent owner 
under section 493(b)(4)(B), except that `20 percent' 
shall be substituted for `5 percent' 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 December 31, 2025.

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 inserting ``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 taxable 
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 revoked only with the 
consent of the Secretary.''.
(b) Treatment of Loans.--Section 643(i) is amended--
(1) by inserting ``or an applicable trust (as defined 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 exempt from tax 
under this chapter'',
(3) by striking ``United States person'' in paragraph 
(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 subchapter J is 
amended by adding at the end the following 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 amount of tax imposed under this chapter shall 
be increased 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 taxpayer and section 492 applied to any covered 
asset of the trust) as--
``(1) the amount required to be included in income 
attributable to the gain on such applicable transfer, bears to
``(2) the total amount of the gain on such applicable 
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 section 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.
``(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 amended by striking 
``and'', at the end of subparagraph (B), by redesignating 
subparagraph (C) as subparagraph (D), and by inserting after 
subparagraph (B) the following new subparagraph:
``(C) such information as the Secretary shall 
require for purposes of determining the increase (if 
any) in tax under section 686, and''.
(3) Clerical amendment.--The table of sections 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 necessary 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 paragraph (2), the 
amendments made by this section shall apply to taxable years 
beginning after December 31, 2025.
(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 Contracts

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 following new section:

``SEC. 409B. SPECIAL RULES FOR CERTAIN DEFERRED COMPENSATION.

``(a) In General.--In the case of an individual who is an 
applicable taxpayer for any taxable year, the taxpayer's tax under this 
chapter for the taxable year (determined 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
``(2) 10 percent of the amount of any severance pay which 
is includible in the gross income of the individual during the 
taxable year.
``(b) Deferral Recapture Amount.--For purposes of this section--
``(1) In general.--The term `deferral recapture amount' 
means, with respect to any applicable deferred compensation 
includible in gross income for the taxable year, the aggregate 
amount of interest (determined in the manner provided under 
paragraph (3)) on the deemed tax amount determined under 
paragraph (2) for each preceding taxable year to which 
compensation is allocated under paragraph (2)(A).
``(2) Deemed tax amount.--
``(A) In general.--The deemed tax amount for any 
taxable year preceding the taxable year in which 
applicable deferred compensation is includible in gross 
income shall be the amount determined--
``(i) first, except as provided in 
subparagraph (B), by allocating the amount of 
such compensation ratably to each day in the 
deferral period with respect to the applicable 
deferred compensation, and
``(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 taxable 
year in which the compensation is includible in 
gross income of the individual.
``(B) Special rule for periods before becoming 
applicable taxpayer.--Notwithstanding subparagraph 
(A)(i), any compensation which would be otherwise 
allocated under such subparagraph to any taxable year 
preceding the first taxable year for which the taxpayer 
is treated as an applicable taxpayer shall be allocated 
to such first taxable year.
``(3) Computation of interest.--
``(A) In general.--The amount of interest referred 
to in paragraph (1) on any deemed tax amount determined 
under paragraph (2) for any preceding taxable year with 
respect to applicable deferred compensation shall be 
determined 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 6621(b) (plus 1 percentage point), and 
the method applicable under section 6621, for 
underpayments of tax for such period.
``(B) Due date.--For purposes of this paragraph, 
the term `due date' means, with respect to any 
preceding taxable year, the date prescribed by law 
(determined without regard to extensions) for filing 
the return of the tax imposed 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 
compensation.
``(c) Definitions.--For purposes of this section--
``(1) Applicable taxpayer.--The term `applicable taxpayer' 
has the meaning given such term by section 495.
``(2) Applicable deferred compensation.--
``(A) In general.--Except as provided in 
subparagraph (B), the term `applicable deferred 
compensation' means--
``(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 
because such compensation is not 
treated 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 services 
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.
``(C) Earnings and interest.--Any earnings, 
interest, or similar adjustment included in an amount 
of applicable deferred compensation shall not be 
treated as separately deferred from such amount.
``(3) Severance pay.--The term `severance pay' means any 
compensation the payment or vesting of which is contingent, in 
whole or in part, upon the termination of employment or other 
services, including cash, property, reimbursement or direct 
provision of living, travel, and business expenses, and life, 
health, or other insurance, to the extent otherwise 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 
compensation was first deferred, without regard 
to vesting, transferability, or risk of 
forfeiture, and
``(ii) ending on the date such compensation 
is includible in gross income or, if 
applicable, the date described in section 
83(a)(1) with respect to such compensation.
For purposes of the preceding sentence, compensation 
shall be treated as first deferred as of the date the 
applicable taxpayer first has a legally 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 subparagraph (A)(ii).
``(C) Property transferred pursuant to the exercise 
of an option.--In the case of property acquired 
pursuant to an option described 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 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 APPLICABLE 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 described 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 compensation 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 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 includible in gross 
income of the individual for the taxable year,
``(4) the amount of such severance pay includible 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 83 compensation.--With respect to transfers 
of property to which section 83 applies, the information 
required under paragraphs (2) and (3) of subsection (b) shall 
be reported separately 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 pursuant to more than 1 plan or 
arrangement or involves amounts which were first deferred on 
more than 1 date, the information required under paragraphs (2) 
and (3) of subsection (b) shall be reported separately with 
respect to each such plan or arrangement and each such date.
``(d) Statements To Be Furnished to Individuals With Respect to 
Whom Information Is Reported.--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 sentence shall be 
furnished to the individual on or before January 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
``(B) the cost-of-living adjustment under section 
1(f)(3) for the calendar year in which such taxable 
year begins, determined by substituting `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 regulations specifying what constitutes a payment to 
an individual 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 
following new clause:
``(xxix) section 6050AA(a) (relating to 
returns of information with respect to 
applicable deferred compensation), and''.
(2) Statements.--Section 6724(d)(2), as so in effect, is 
amended--
(A) by striking ``or'' at the end of subparagraph 
(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 section 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 2022, is amended by inserting after the item 
relating 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 received under certain 
life insurance and annuity contracts of applicable taxpayers.--
``(A) In general.--In the case of any applicable 
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 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 paragraph 
(4)(A) with respect to a life insurance 
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, surrenders, 
redemptions and maturities.--Notwithstanding 
paragraph (5)(A) or (5)(E), amounts described 
in clause (i)(I) shall include amounts 
described in clause (i) or (ii) of paragraph 
(5)(E) received under an applicable private 
placement life insurance or annuity contract.
``(iii) Amounts under pre-1982 and 
qualified plan contracts, etc. excluded.--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 education 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 `applicable 
private placement life insurance or annuity 
contract' means a private placement life 
insurance or annuity contract the holder 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 placement life 
insurance or annuity contract as an applicable 
private placement life insurance or annuity 
contract in cases where an applicable taxpayer 
(or a related person) has an interest in such 
contract not described in clause (i) if such 
treatment is necessary to prevent the avoidance 
of the purposes of this paragraph.
``(D) Private placement life insurance 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 
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 purposes 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 Distributions From Applicable 
Private Placement Life Insurance 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 
defined in subsection (e)(12))'' after ``a modified 
endowment contract (as defined in section 7702A)'' in 
paragraph (1), and
(B) by inserting ``and Applicable Private Placement 
Life Insurance or Annuity Contracts'' after ``Modified 
Endowment 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 Benefits.--
(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 section 72(e)(12)).
``(2) Amounts previously included.--The Secretary shall 
prescribe rules to ensure that paragraph (1) shall not apply to 
any portion of any amount received which was previously 
included in gross income.''.
(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 ANNUITY CONTRACTS.

``(a) In General.--Every person who issues a life insurance or 
annuity contract or who reinsures such a contract 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 person,
``(2) the name, address, and TIN of each person who 
receives an applicable amount (as defined in section 72(e)(12)) 
during the year with respect to any life insurance or annuity 
contract issued or reinsured 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 required 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 statement showing--
``(A) the name, address, and phone number of the 
information contact of the person required to make such 
return, and
``(B) the information required to be shown on such 
return with respect to the person described 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 January 31 of the year following the calendar year 
for which the return under subsection (a) is required to be 
made.
``(c) Regulatory Authority.--The Secretary may prescribe such 
regulations and other guidance as necessary 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 private 
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 
subparagraph (LL),
(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 
placement life 
insurance and annuity 
contracts).''.

(3) Clerical amendment.--The table of sections 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 
insurance and annuity contracts.''.
(4) Effective date.--The amendments made by this subsection 
shall apply to taxable years beginning after December 31, 2025.

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 taxpayers.--
``(A) In general.--This subsection shall not apply 
to any gain from the sale or exchange of qualified 
small business stock by an applicable 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 QUALIFIED OPPORTUNITY FUNDS.

(a) Termination of Election.--
(1) In general.--Section 1400Z-2(a)(2)(B) is amended to 
read as follows:
``(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 
taxpayer, the last day of the taxable year 
preceding 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 taxpayers and 
entities.--For purposes of paragraph (2)(B)--
``(A) Applicable entities.--No election may be made 
under paragraph (1) by an applicable entity with 
respect to any sale or exchange 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), 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 Investments Held 10 Years.--
Section 1400Z-2(c) is amended 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 applicable 
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 investment 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--
``(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 investment on 
the date that investment is sold or exchanged, and
``(2) in the case of any other taxpayer, the fair market 
value of such investment on the date the investment is sold or 
exchanged.''.
(c) Effective Date.--The amendments made by this section shall 
apply to sales or exchanges after November 30, 2025, in taxable years 
ending after such date.
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