HR5427-119

What This Bill Does

The Billionaires Income Tax Act attacks the ability of very high-income and high-net-worth taxpayers to defer tax through buy-borrow-die strategies, unrealized gains, trusts, pass-through entities, deferred compensation, private-placement insurance, qualified small business stock, and opportunity funds. It creates a new Internal Revenue Code part for applicable taxpayers: individuals who, for each of three preceding taxable years, had applicable adjusted gross income over $100 million, or $50 million if married filing separately, or aggregate applicable value of covered assets over $1 billion, or $500 million if married filing separately. Applicable trusts and estates of recent applicable taxpayers are also covered. Tradable covered assets are marked to fair market value when taxable events occur, and first-year applicable taxpayers may elect special treatment for nontradable covered assets. Transfers of nontradable covered assets generally trigger a deferral recapture amount, with special rules for pass-through entities, gifts, bequests, trust transfers, foreign trusts, valuation, covered-asset definitions, and applicable taxpayer status changes. The bill allows carryback of capital losses attributable to mark-to-market rules, denies the AGI limitation for the net investment tax for applicable taxpayers, limits expatriate deferral elections, blocks certain section 351 transfers by applicable entities, changes trust-distribution rules, taxes certain deferred compensation and severance over $5 million, imposes reporting for deferred compensation payments, changes life insurance and annuity treatment and reporting, denies the qualified small business stock exclusion for applicable taxpayers for post-November 29, 2025 stock, and curtails opportunity fund deferral and basis benefits for applicable taxpayers and entities. The burden falls on billionaire taxpayers, their trusts, tax planners, investment entities, insurers, and reporting intermediaries; the benefit is earlier federal tax collection on wealth appreciation that otherwise could remain deferred.

Who Benefits and How

Federal taxpayers benefit because the bill raises revenue from very high-income and high-net-worth taxpayers who currently can defer tax on unrealized appreciation. Progressive tax policy advocates benefit because the bill targets buy-borrow-die strategies and billionaire wealth accumulation. Internal Revenue Service examiners benefit from definitions, reporting rules, and anti-avoidance authority tailored to covered assets and applicable taxpayers. Congressional tax committees benefit from earlier federal revenue collection on tradable assets, nontradable transfers, deferred compensation, and tax-preferred investment structures.

Who Bears the Burden and How

Billionaire taxpayers must recognize gains, recapture deferred tax, value covered assets, and lose several deferral preferences. Applicable trust attorneys must follow special transfer, distribution, and foreign-trust rules intended to prevent avoidance. Private-placement life insurers must report applicable amounts and face altered tax treatment for covered taxpayers. Tax attorneys must restructure advice around new anti-deferral, valuation, reporting, and anti-avoidance rules.

Key Provisions

• Creates applicable taxpayer thresholds of more than $100 million of income or $1 billion of covered assets over three years.
• Requires annual or event-based recognition for tradable covered assets and recapture on nontradable asset transfers.
• Tightens pass-through, gift, bequest, trust, foreign-trust, expatriation, deferred-compensation, and severance rules.
• Changes private-placement life insurance, annuity, qualified small business stock, and opportunity fund tax preferences.
• Requires new information reporting for applicable deferred compensation and life insurance or annuity amounts.