HR5336-119

What This Bill Does

The Equal Tax Act is a broad high-income and wealth-transfer tax bill. For taxable years beginning after 2025, preferential rates for dividends and capital gains apply only to gain that does not push taxable income above $1 million, while excluding gain from qualifying family farm or business gifts and bequests from that income ordering rule. Gifts and transfers at death are generally treated as sales at fair market value, with exceptions for transfers to spouses or qualified spousal trusts, transfers to charities, annual-exclusion gifts, and limited tangible personal property rules. Non-grantor trust property is treated as transferred when moved to trust and every 30 years, and Treasury may write anti-avoidance rules for trust modifications and distributions. A new section excludes up to $1 million of death-triggered net capital gain, indexed after 2026, plus 50 percent of gain above $1 million for qualifying family farms or businesses that meet a 120-month continued-use certification, with recapture if the use ends early. Donors and executors must report applicable gifts and death transfers with recipient identity, property description, fair market value, and basis. Taxpayers may elect to pay tax on certain death-triggered gains over two to five equal installments, with interest. Like-kind exchange deferral for nonqualified real property is capped at $500,000 per year and $1 million lifetime, while farming property and same-specific-purpose exchanges are treated as qualified property. The qualified business income deduction is limited to taxable income up to $1 million.

Who Benefits and How

Federal taxpayers benefit from higher revenue from very high-income taxpayers, large appreciated-asset transfers, and capped real-estate deferrals. Family farm owners benefit from a $1 million exclusion and 50 percent exclusion above that amount when certified farm use continues for 120 months. Small business owners benefit from similar death-transfer relief for qualifying family businesses that continue operating. Tax policy advocacy organizations benefit because appreciated assets transferred by gift or death become taxable realization events.

Who Bears the Burden and How

High-income investment taxpayers lose preferential capital-gains and dividend rates once taxable income exceeds $1 million. Large estate beneficiaries must recognize gain on appreciated property transferred at death except for statutory exclusions and deferrals. Real estate developers lose unlimited like-kind exchange deferral for nonqualified property after 2025. Treasury Department tax staff must issue anti-avoidance, reporting, trust, installment, recapture, and implementation regulations.

Key Provisions

• Limits preferential dividend and capital-gains rates to income up to $1 million after 2025.
• Treats gifts and transfers at death as fair-market-value realization events with spousal, charity, annual-exclusion, and tangible-property exceptions.
• Creates a $1 million death-transfer gain exclusion plus partial relief for qualifying family farms and businesses with 120-month continued use.
• Requires reporting of applicable gifts and bequests with recipient identity, property value, and basis.
• Allows up to five installment payments for certain death-triggered capital gains, limits nonqualified like-kind exchanges, and caps qualified business income deductions at $1 million.