HR6438-119

What This Bill Does

The ROBINHOOD Act adds a new Internal Revenue Code subchapter on certain secured loans and lines of credit. It imposes a tax equal to 20 percent of the amount borrowed during the taxable year on specified secured loans or lines of credit. The borrower pays the tax, and Treasury collects it annually. A specified secured loan or line of credit is a loan or revolving credit arrangement secured by one or more capital assets of an applicable borrower where available credit is based on the value of those assets. The bill excludes residential mortgage loans, home equity loans and lines of credit, margin loans, and loans or credit lines secured by farmland. An applicable borrower is an individual with adjusted gross income greater than $400,000, or $450,000 for a joint return. Treasury may issue regulations or guidance, and the amendments apply to loans and lines of credit extended after enactment.

Who Benefits and How

Federal revenue benefits from the new 20 percent excise tax on covered asset-backed borrowing. Tax policy advocates seeking to limit high-income borrowing against appreciated assets benefit because the bill targets loans secured by capital assets while excluding ordinary home, margin, and farmland credit categories. Treasury benefits from explicit rulemaking authority to define collection and implementation details.

Who Bears the Burden and How

High-income borrowers using covered loans or credit lines secured by capital assets bear the direct cost of the 20 percent tax. Private banks and lenders may need to identify covered borrowers, adjust loan documentation, and support borrower tax compliance. Treasury and IRS must issue guidance, collect the annual tax, and administer exclusions for mortgages, home equity, margin, and farmland-secured loans. Some borrowers may restructure financing to avoid covered loan treatment.

Key Provisions

• Creates a new IRC subchapter for certain secured loans and lines of credit.
• Imposes a 20 percent tax on the amount borrowed during the taxable year on covered asset-backed borrowing.
• Applies to individuals with adjusted gross income above $400,000 or $450,000 for joint returns.
• Excludes residential mortgages, home equity loans and credit lines, margin loans, and farmland-secured loans.
• Requires borrowers to pay the tax and Treasury to collect it annually.
• Authorizes Treasury regulations or guidance and applies to loans and credit lines extended after enactment.