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.
About This Bill
Committee
Latest Action · November 30, 2023
Read twice and referred to the Committee on Finance. (Sponsor introductory remarks on measure: CR S5694)
# Summary of S. 3367: Billionaires Income Tax Act
This bill would require very wealthy individuals and estates to pay taxes annually on investment gains, eliminating strategies that allow them to defer taxes indefinitely. It targets people with either annual income exceeding $100 million or assets over $1 billion (with lower thresholds for married couples filing separately).
**How It Works**
The bill creates two main taxation mechanisms. For tradable assets like publicly traded stocks, billionaires would pay taxes each year on gains as if they sold the assets, even without actually selling them. For non-tradable assets like private businesses, when someone sells or transfers the asset, they owe taxes on accumulated gains plus interest calculated back to when they first became subject to the law. The interest rate equals the federal underpayment rate plus one percentage point.
**Who It Affects**
The rules apply to individuals meeting the income or asset thresholds for three consecutive years, as well as certain high-wealth trusts and estates. Married individuals filing separately face lower thresholds ($50 million income or $500 million in assets). The bill also targets covered expatriates and includes special rules for foreign trusts. Significantly, it closes loopholes allowing wealthy people to pass appreciated assets to heirs tax-free and restricts certain investment vehicles like qualified opportunity funds and small business stock exclusions for billionaires.
**Key Provisions and Timeline**
The legislation takes effect for taxable years beginning after December 31, 2023. New billionaires can elect to spread their initial tax liability over five years. The bill also imposes a 10 percent tax on certain deferred compensation and private placement life insurance payments exceeding $5 million, with inflation adjustments beginning in 2025. It requires extensive reporting from pass-through entities and financial institutions to track applicable taxpayers' assets and transactions.
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