119-hr5336

[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5336 Introduced in House

    (IH) ]

<DOC>

119th CONGRESS
 1st Session
 H. R. 5336

 To amend the Internal Revenue Code of 1986 to equalize treatment of 
 capital gains and earned income.

_______________________________________________________________________

 IN THE HOUSE OF REPRESENTATIVES

 September 11, 2025

 Mrs. Ramirez (for herself, Ms. Jayapal, Mr. Garcia of Illinois, Ms. 
 Tlaib, Ms. Ansari, Ms. McCollum, Mr. Thanedar, Ms. Omar, Mr. Deluzio, 
 and Mrs. Watson Coleman) introduced the following bill; which was 
 referred to the Committee on Ways and Means

_______________________________________________________________________

 A BILL

 To amend the Internal Revenue Code of 1986 to equalize treatment of 
 capital gains and earned income.

 Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

 This Act may be cited as the ``Equal Tax Act''.

SEC. 2. PREFERENTIAL RATES FOR DIVIDENDS AND CAPITAL GAINS LIMITED TO 
 INCOMES OF $1,000,000 OR LESS.

    (a) In General.--

Section 1

    (h) of the Internal Revenue Code of 1986 
is amended by inserting ``on so much of such gain as does not cause the 
taxable income of the taxpayer to exceed $1,000,000 (computed after 
taking into account all other taxable income of the taxpayer)'' after 
``the tax imposed by this section for such taxable year''.

    (b) Treatment of Qualifying Family Farm or Business.--

Section 1

    (h) of such Code, as amended by subsection

    (a) , is further amended by 
inserting ``and without regard to gain realized from the transfer by 
gift or bequest of a qualifying family farm or business described in 

section 139J
            (c) '' after ``all other taxable income of the taxpayer''.
            (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2025.

SECTION 3. DEEMED REALIZATION OF CAPITAL GAINS AT TIME OF GIFT OR 
 DEATH.

    (a) Treatment as Sale.--

    (1) In general.--Part IV of subchapter P of chapter 1 of 
 the Internal Revenue Code of 1986 is amended by adding at the 
 end the following new section:

``

SEC. 1261. GAINS FROM CERTAIN PROPERTY TRANSFERRED BY GIFT OR UPON 
 DEATH.

 ``

    (a) In General.--Any property which is transferred by gift or at 
death shall be treated as sold for its fair market value on the date of 
such gift or death.
 ``

    (b) Exceptions.--
 ``

    (1) Spouse or surviving spouse.--This section shall not 
 apply to a transfer of property to the spouse or surviving 
 spouse of the transferor (or to a qualified spousal trust).
 ``

    (2) Certain tangible personal property.--In the case of 
 tangible personal property, this section shall only apply to 
 the following:
 ``
        (A) Property held in connection with a trade or 
 business.
 ``
        (B) Property held for investment.
 ``
            (C) Collectibles (as defined in 

section 408
            (m) (determined without regard to paragraph

    (3) thereof)).
 ``

    (3) Charitable contributions.--This section shall not 
 apply to any transfer to an organization described in 

section 170
            (c) .
 ``
            (c) Special Rules for Trusts.--
 ``

    (1) Certain grantor trusts.--In the case of any property 
 which--
 ``
        (A) is held in a trust of which the grantor or 
 another person is treated as the owner under subpart E 
 of part I of subchapter J of chapter 1, and
 ``
        (B) is includible in the gross estate of the 
 grantor or such other person under chapter 11,
 such property shall be treated as transferred under subsection

    (a) when the grantor or such other person ceases to be treated 
 as the owner of such property, or such property ceases to be 
 includible in the gross estate of the grantor or such other 
 person (including by reason of the death of the grantor or such 
 other person, or the distribution of such property to a person 
 other than the grantor or such other person).
 ``

    (2) Other trusts.--In the case of any property held in 
 trust and not described in paragraph

    (1) , such property shall 
 be treated as transferred under subsection

    (a) upon the 
 transfer of such property to a trust.
 ``

    (3) Transfers from and modifications of trusts.--The 
 Secretary may by regulation prescribe such rules to treat the 
 modification of the terms of a trust or the transfer or 
 distribution of trust assets (including to another trust) as a 
 transfer described in subsection

    (a) as are necessary or 
 appropriate to prevent the avoidance of this section.
 ``

    (4) Generation-skipping trusts.--At the end of each 30-
 year period for which any property is continuously held in 
 trust (other than property described in paragraph

    (1) ), such 
 property shall be treated as transferred pursuant to subsection

    (a) .
 ``

    (5) Qualifying spousal trust.--
 ``
        (A) In general.--The property of a qualifying 
 spousal trust shall be treated as transferred under 
 subsection

    (a) --
 ``
            (i) upon the death of the spousal 
 beneficiary,
 ``
            (ii) upon the distribution of such 
 property from such trust to any person other 
 than the spousal beneficiary, or
 ``
            (iii) at such time such property ceases 
 to be held by a qualifying spousal trust.
 ``
        (B) Qualifying spousal trust.--For purposes of 
 this section, a trust is a qualifying spousal trust 
 if--
 ``
            (i) the sole beneficiary of such trust is 
 the spouse, or surviving spouse of the 
 transferor, or
 ``
            (ii) such spouse or surviving spouse is 
 the sole life tenant, or sole income 
 beneficiary, of such trust.
 ``
            (d) Exclusion of Certain Gifts.--In the case of gifts (other than 
gifts of future interests in property) made to any person during the 
taxable year, so much of the dollar amount of such gifts to such person 
as does not exceed the amount in effect for the calendar year under 

section 2503

    (b) in which the taxable year begins shall not be taken 
into account under subsection

    (a) for such taxable year. Where there 
has been a transfer to any person of a present interest in property, 
the possibility that such interest may be diminished by the exercise of 
a power shall be disregarded in applying this subsection, if no part of 
such interest will at any time pass to any other person.
 ``

    (e) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary to prevent the avoidance of the purposes of this 
section.''.

    (2) Clerical amendment.--The table of sections for part IV 
 of subchapter P of chapter 1 of such Code is amended by adding 
 at the end the following new item:

``

Sec. 1261. Gains from certain property transferred by gift or upon 
 death.''.

    (b) Coordination of Related Party Loss Rules.--

Section 267 of such 
Code is amended by adding at the end the following new subsection:
 ``

    (h) Property Treated as Sold at Death.--Subsection

    (a)

    (1) shall 
not apply to any property that is transferred at death and treated as 
sold under 

section 1261.''.
            (c) Treatment of Basis for Gifts and Bequests to Which Tax 
Applies.--

    (1) Elimination of carryover basis for gifts.--

Section 1015

    (a) of such Code is amended--
        (A) by striking ``If the property'' and inserting 
 the following:
 ``

    (1) Gifts before january 1, 2026.--If the property'';
        (B) by inserting ``, and before January 1, 2026'' 
 after ``after December 31, 1920''; and
            (C) by adding at the end the following new 
 paragraph:
 ``

    (2) Gifts after december 31, 2025.--If the property was 
 acquired by gift after December 31, 2025, the basis shall be 
 the fair market value of such property at the time of the 
 gift.''.

    (2) Rules for transfers between spouses.--
        (A) In general.--

Section 1041

    (b) of such Code is 
 amended to read as follows:
 ``

    (b) Transferee Has Transferor's Basis.--In the case of any 
transfer of property described in subsection

    (a) , the basis of the 
transferee in the property shall be the adjusted basis of the 
transferor.''.
        (B) Transfers at death.--

Section 1041

    (a) of such 
 Code is amended by inserting ``(including at death)'' 
 after ``transfer of property''.
            (C) Conforming amendments.--
            (i) Section 1014 of such Code is amended by 
 adding at the end the following new subsection:
 ``

    (g) Property Acquired From Decedent Spouse.--In the case of 
property which passes from the decedent to (or in trust for the benefit 
of) the decedent's surviving spouse in a transfer described in 

section 1041

    (a)

    (1) , the basis of such property in the hands of the transferee 
shall be determined under 

section 1041

    (b) and not this section.'', and
            (ii) Section 1015

    (e) of such Code is 
 amended by striking ``1041

    (b)

    (2) '' and 
 inserting ``1041

    (b) ''.

    (3) Basis must be consistent with gains recognized in 
 deemed realization.--
        (A) Property acquired from decedent.--

Section 1014 
 of such Code, as amended by the preceding provisions of 
 this Act, is amended by adding at the end the following 
 new subsection:
 ``

    (h) Basis Must Be Consistent With Gains Recognized in Deemed 
Realization.--The basis of any property to which subsection

    (a) applies 
shall not exceed the amount for which the property was treated as sold 
under 

section 1261.''.
        (B) Property acquired by gift.--

Section 1015 of 
 such Code is amended by adding at the end the following 
 new subsection:
 ``

    (f) Basis Must Be Consistent With Gains Recognized in Deemed 
Realization.--The basis of any property to which subsection

    (a)

    (2) applies shall not exceed the amount for which the property was treated 
as sold under 

section 1261.''.
            (d) Conforming Amendments.--

    (1) Section 7477

    (a) of such Code is amended by striking 
 ``chapter 12'' and inserting ``chapter 1 or 12''.

    (2) Section 7517

    (a) of such Code is amended by striking 
 ``chapter 11'' and inserting ``chapter 1, 11''.

    (e) Effective Date.--The amendments made by this section shall 
apply to transfers by gift, or at death by decedents dying, after 
December 31, 2025.

SEC. 4. EXCLUSION OF CERTAIN AMOUNTS OF REALIZED CAPITAL GAIN.

    (a) In General.--Part III of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 is amended by inserting before 

section 140 the following new section:

``

SEC. 139J. EXCLUSION OF GAIN FROM TRANSFERS OF APPRECIATED ASSETS AT 
 DEATH.

 ``

    (a) In General.--Gross income shall not include--
 ``

    (1) so much of the net capital gain for the taxable year 
 from transfers at death to which 1261

    (a) applies as does not 
 exceed $1,000,000, and
 ``

    (2) in the case of property that is a qualifying family 
 farm or business that meets the certification requirement of 
 subsection
            (d) , 50 percent of so much of any gain from a 
 transfer described in paragraph

    (1) as exceeds $1,000,000.
 ``

    (b) Inflation Adjustment.--
 ``

    (1) In general.--In the case of any taxable year 
 beginning after 2026, the $1,000,000 amounts in subsection

    (a) shall be increased by an amount equal to--
 ``
        (A) such dollar amount, multiplied by
 ``
        (B) the cost-of-living adjustment determined 
 under 

section 1

    (f)

    (3) for the calendar year in which 
 the taxable year begins, determined by substituting in 
 subparagraph
        (A)
            (ii) thereof `calendar year 2025' for 
 `calendar year 2016'.
 ``

    (2) Rounding.--If the dollar amount in subsection

    (a) , 
 after being increased under paragraph

    (1) , is not a multiple of 
 $10,000, such amount shall be rounded to the next lowest 
 multiple of $10,000.
 ``
            (c) === Definitions. ===
-For purposes of this section--
 ``

    (1) Qualifying family farm or business.--The term 
 `qualifying family farm or business' means real property 
 located in the United States if during periods aggregating 3 
 years or more of the 5-year period ending on the date of the 
 bequest of such real property, such real property was used as a 
 farm for farming purposes or a family business.
 ``

    (2) Other 

=== definitions. ===
-The terms `farm' and `farming 
 purposes', and `material participation' have the respective 
 meanings given such terms by paragraphs

    (4) and

    (5) of 

section 2032A

    (e) , respectively.
 ``
            (d) Use Certification as Farm for Farming Purposes or Family 
Business.--The certification requirement of this subsection is a 
certification that the use of the qualifying family farm or business 
referred to in subsection

    (a) will be as a farm for farming purposes or 
family business (as the case may be) for not less than the 120-month 
period beginning on the date of the bequest referred to in subsection

    (a) .
 ``

    (e) Special Rules.--For purposes of this section, the following 
rules shall apply:
 ``

    (1) Rules similar to the rules of subsections

    (e) and

    (f) of 

section 121.
 ``

    (2) Rules similar to the rules of paragraphs

    (4) and

    (5) of 

section 2032A

    (b) and paragraph

    (3) of 

section 2032A

    (e) .
 ``

    (f) Treatment of Disposition or Change in Use of Property.--
 ``

    (1) In general.--If, as of the close of any taxable year, 
 there is a recapture event with respect to any qualifying 
 family farm or business transferred to the taxpayer in a 
 bequest described in subsection

    (a) , then the tax of the 
 taxpayer under this chapter for such taxable year shall be 
 increased by an amount equal to the product of--
 ``
        (A) the amount determined by dividing--
 ``
            (i) the amount of gain excluded from 
 gross income of the taxpayer under subsection

    (a)

    (2) on the date such property was 
 transferred to the taxpayer, over
 ``
            (ii) 120, and
 ``
        (B) the number of full months remaining in the 
 120-month term described in subsection
            (d) as of the 
 date of such recapture event.
 ``

    (2) Recapture event defined.--For purposes of this 
 subsection, the term `recapture event' means--
 ``
        (A) Cessation of operation.--The cessation of the 
 operation of any property the sale or exchange of which 
 to the taxpayer is described in subsection

    (a) as a 
 qualifying family farm or business.
 ``
        (B) Change in ownership.--
 ``
            (i) In general.--Except as provided in 
 clause
            (ii) , the disposition of a taxpayer's 
 interest in any property the sale or exchange 
 of which to the taxpayer is described in 
 subsection

    (a) .
 ``
            (ii) Agreement to assume recapture 
 liability.--Clause
            (i) shall not apply if the 
 person acquiring such interest in the property 
 agrees in writing to assume the recapture 
 liability of the person disposing of such 
 interest in effect immediately before such 
 disposition. In the event of such an 
 assumption, the person acquiring the interest 
 in the property shall be treated as the 
 taxpayer for purposes of assessing any 
 recapture liability (computed as if there had 
 been no change in ownership).
 ``

    (3) Special rules.--
 ``
        (A) No credits against tax.--Any increase in tax 
 under this subsection shall not be treated as a tax 
 imposed by this chapter for purposes of determining the 
 amount of any credit under subpart A, B, or D of part 
 IV of subchapter A.
 ``
        (B) No recapture by reason of hardship.--The 
 increase in tax under this subsection shall not apply 
 to any disposition of property or cessation of the 
 operation of any property as a farm for farming 
 purposes by reason of any hardship as determined by the 
 Secretary.''.

    (b) Clerical Amendment.--The table of sections for part III of 
subchapter B of chapter 1 of such Code is amended by inserting after 
the item relating to 

section 139I the following new item:

``

Sec. 139J. Exclusion of gain from transfers of appreciated assets at 
 death.''.
            (c) Effective Date.--The amendments made by this section shall 
apply to transfers at death by decedents dying after December 31, 2025, 
in taxable years beginning after such date.

SEC. 5. INFORMATION REPORTING OF CERTAIN GIFTS.

    (a) In General.--Subpart B of part III of subchapter A of chapter 
61 of the Internal Revenue Code of 1986 is amended by adding at the end 
the following new section:

``

SEC. 6050Z. RETURNS RELATING TO CERTAIN GIFTS AND BEQUESTS.

 ``

    (a) In General.--In the case of an applicable transfer, the 
individual making such gift, or the executor in the case of a transfer 
at death, shall furnish to the Secretary the following information:
 ``

    (1) The name and taxpayer identification number of the 
 person to whom such transfer was made.
 ``

    (2) A description of the property transferred.
 ``

    (3) The fair market value of the property transferred and 
 the basis of such property to the transferee.
 ``

    (b) Applicable Transfer.--
 ``

    (1) In general.--For purposes of this section, the term 
 `applicable transfer' means--
 ``
        (A) any gift (other than a covered security (as 
 defined in 

section 6045

    (g)

    (3) )) which is taken into 
 account under 

section 1261, and
 ``
        (B) so much of any transfer at death (other than 
 such a covered security) which is so taken into account 
 under 

section 1261 and the gain from which is 
 includible in gross income for the taxable year of such 
 transfer.
 ``

    (2) De minimis.--
 ``
        (A) Gifts.--For gifts exceeding the limitation 
 for such year under 

section 2503

    (b) and not taken into 
 account under 

section 1261, see subsection
            (d) thereof.
 ``
        (B) Transfers at death.--For amount of gain 
 excluded from gross income in case of a transfer at 
 death, see 

section 139J

    (a) .
 ``
            (c) Statements To Be Furnished to Persons With Respect to Whom 
Information Is Required.--Every person required to make a return under 
subsection

    (a) shall furnish to each person whose name is required to 
set forth in such return a written statement showing the information 
described in subsection

    (a) .
 ``
            (d) Timing.--The returns and statements required under this 
section shall be furnished at such time and in such form and manner as 
the Secretary shall by regulation prescribe.''.

    (b) Clerical Amendment.--The table of sections for subpart B of 
part III of subchapter A of chapter 61 of such Code is amended by 
adding at the end the following new item:

``

Sec. 6050Z. Returns relating to certain gifts.''.
            (c) Effective Date.--The amendments made by this section shall 
apply to transfers after December 31, 2025, in taxable years beginning 
after such date.

SEC. 6. EXTENSION OF TIME FOR PAYMENT OF TAX.

    (a) Extension of Time.--

    (1) In general.--Subchapter B of chapter 62 of the Internal 
 Revenue Code of 1986 is amended by adding at the end the 
 following new section:

``

SEC. 6168. EXTENSION OF TIME FOR PAYMENT OF CAPITAL GAINS ON CERTAIN 
 ASSETS REALIZED BY REASON OF DEATH.

 ``

    (a) 5-Year Installment Payment.--
 ``

    (1) In general.--In the case of any gain with respect to 
 eligible property that is recognized under 

section 1261 by 
 reason of the death of the taxpayer, the taxpayer may elect to 
 pay part or all of tax imposed on such gain in 2 or more (but 
 not exceeding 5) equal installments.
 ``

    (2) Date for payment of installments.--If an election is 
 made under paragraph

    (1) , the first installment shall be paid 
 not later than the date on which the tax for the taxable year 
 in which the gain described in paragraph

    (1) occurs is due, and 
 each succeeding installment shall be paid on or before the date 
 which is 1 year after the date prescribed by this paragraph for 
 payment of the preceding installment.
 ``

    (b) Eligible Capital Asset.--For purposes of this section, the 
term `eligible property' means any property other than personal 
property of a type which is actively traded (within the meaning of 

section 1092
            (d) (1) ).
 ``
            (c) Portion of Tax Eligible.--The amount of tax to which this 
section applies shall not exceed the excess of--
 ``

    (1) the tax computed under chapter 1 (determined after 
 application of 

section 1261), over
 ``

    (2) the tax computed under chapter 1 (determined without 
 regard to 

section 1261).
 ``
            (d) Election.--Any election under subsection

    (a) shall be made 
not later than the time prescribed by 

section 6072 for filing the 
return of tax imposed under chapter 1 (including extensions thereof), 
and shall be made in such manner as the Secretary shall by regulations 
prescribe. If an election under subsection

    (a) is made, the provisions 
of this subtitle shall apply as though the Secretary were extending the 
time for payment of the tax.
 ``

    (e) Proration of Deficiency to Installments.--If an election is 
made under subsection

    (a) to pay any part of the tax imposed under 
chapter 1 in installments and a deficiency has been assessed, the 
deficiency shall (subject to the limitation provided by subsection

    (a)

    (2) ) be prorated to the installments payable under subsection

    (a) . 
The part of the deficiency so prorated to any installment the date for 
payment of which has not arrived shall be collected at the same time 
as, and as a part of, such installment. The part of the deficiency so 
prorated to any installment the date for payment of which has arrived 
shall be paid upon notice and demand from the Secretary. This 
subsection shall not apply if the deficiency is due to negligence, to 
intentional disregard of rules and regulations, or to fraud with intent 
to evade tax.
 ``

    (f) Time for Payment of Interest.--If the time for payment of any 
amount of tax has been extended under this section, interest payable 
under 

section 6601 on any unpaid portion shall be paid annually at the 
same time as, and as part of, each installment payment of the tax.
 ``

    (g) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary to the application of this section.
 ``

    (h) Cross-References.--
 ``

    (1) Security.--For authority of the Secretary to require 
 security in the case of an extension under this section, see 
 

section 6165.
 ``

    (2) Interest.--For provisions relating to interest on tax 
 payable in installments under this section, see subsection

    (k) of 

section 6601.''.

    (2) Coordination with transferee liability.--

Section 6109 
 of such Code is amended by redesignating subsections

    (g) ,

    (h) , 
 and
            (i) as subsections

    (h) ,
            (i) , and

    (j) , respectively, and by 
 inserting after subsection

    (f) the following new subsection:
 ``

    (g) Period of Assessment in Case of Extension of Time for Payment 
of Tax Under 

Section 1261.--For purposes of subsection
            (c) , the period 
of limitation for assessment against the transferor of any tax imposed 
under 

section 1261 the payment of which is extended under 

section 6168 
shall not be treated as expiring earlier than the due date for the last 
payment under

    (a)

    (2) of such section.''.

    (3) Clerical amendment.--The table of sections for subpart 
 B of chapter 62 of such Code is amended by adding at the end 
 the following new item:

``

Sec. 6168. Extension of time for payment of capital gains on certain 
 assets realized by reason of death.''.

    (b) Interest.--

Section 6601 of such Code is amended by 
redesignating subsection

    (k) as subsection
            (l) and by inserting after 
subsection

    (j) the following new subsection:
 ``

    (k) Special Rate for Tax Extended Under 

Section 6168.--If the 
time for payment of an amount of tax imposed by 

section 1261 is 
extended as provided in 

section 6168, in lieu of the annual rate 
provided by subsection

    (a) , interest shall be paid at a rate equal to 
45 percent of the annual rate provided by subsection

    (a) . For purposes 
of this subsection, the amount of any deficiency which is prorated to 
installments payable under 

section 6168 shall be treated as an amount 
of tax payable in installments under such section.''.
            (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2025.

SEC. 7. LIMITATION ON USE OF LIKE-KIND EXCHANGES TO AVOID TAX ON REAL 
 ESTATE GAINS.

    (a) Limitation on Nonrecognition of Gain.--

Section 1031

    (a) of the 
Internal Revenue Code of 1986 is amended by adding at the end the 
following new paragraph:
 ``

    (4) Limitations.--
 ``
        (A) Annual limitation.--The amount of gain 
 excluded from recognition under paragraph

    (1) with 
 respect to any property of the taxpayer during the 
 taxable year which is not qualified property shall not 
 exceed $500,000.
 ``
        (B) Aggregate limitation.--The aggregate amount 
 of gain excluded from recognition under subparagraph
        (A) by the taxpayer for all taxable years shall not 
 exceed $1,000,000.
 ``
            (C) Qualified property.--For purposes of this 
 paragraph, the term `qualified property' means 
 property--
 ``
            (i) which is used for farming purposes, 
 or
 ``
            (ii) which is exchanged for property that 
 will serve the same specific purpose.''.

    (b) Effective Date.--The amendment made by this section shall apply 
to exchanges of real property after December 31, 2025.

SEC. 8. LIMITATION ON DEDUCTION FOR QUALIFIED BUSINESS INCOME.

    (a) In General.--

Section 199A

    (a)

    (2) of the Internal Revenue Code of 
1986 is amended--

    (1) in subparagraph
        (A) , by striking ``the taxable income 
 of the taxpayer for the taxable year'' and inserting ``so much 
 of the taxable income of the taxpayer for the taxable year as 
 does not exceed $1,000,000'', and

    (2) in subparagraph
        (B) , by striking ``the net capital gain 
 (as defined in 

section 1

    (h) ) of the taxpayer for such taxable 
 year'' and inserting ``all income of the taxpayer for such 
 taxable year other than qualified business income''.

    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2025.
 <all>