Overview
Title
To amend the Internal Revenue Code of 1986 to impose a tax on the net value of assets of a taxpayer, and for other purposes.
ELI5 AI
H.R. 7749, known as the "Ultra-Millionaire Tax Act of 2024," is a plan to make very rich people pay extra taxes on their treasures, helping improve the IRS's ability to collect and manage these taxes by giving them more money to do their job better.
Summary AI
H.R. 7749, titled the "Ultra-Millionaire Tax Act of 2024," aims to amend the Internal Revenue Code of 1986 by introducing a tax on the net value of a taxpayer's assets. The bill sets tax rates ranging from 2% to 6%, depending on the asset value, with special considerations for trusts and married individuals. It includes provisions for reporting asset values, auditing taxpayers, extending tax payment time for those with liquidity issues, and applying penalties for incorrect asset valuation. Additionally, the bill allocates funds for the Internal Revenue Service's enforcement, taxpayer services, and system modernization.
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AnalysisAI
General Summary of the Bill
The proposed legislation, known as the "Ultra-Millionaire Tax Act of 2024," seeks to amend the Internal Revenue Code of 1986 to impose a tax on the net value of assets held by ultra-wealthy individuals. The bill would introduce a new "Wealth Tax" calculated based on the value of a taxpayer's assets at the end of each calendar year. It establishes specific tax rates based on the value of these assets, with exemptions and rules designed for asset valuation, reporting, and enforcement. The bill also proposes substantial funding for the Internal Revenue Service (IRS) for enhanced enforcement and modernization efforts.
Summary of Significant Issues
Several issues arise from this bill. One of the main concerns is the implementation of a 30% audit requirement for taxpayers subject to the wealth tax. This could place a considerable burden on administrative resources and lacks clear guidelines on feasibility and fairness in selection.
The allocation of $100 billion in IRS funding over a decade, without detailed oversight measures, also creates potential for mismanagement or wasteful spending. This vast sum should ideally be accompanied by clear performance metrics to ensure that funds are used effectively.
The exclusion criteria for certain smaller assets creates potential loopholes. Assets valued at $50,000 or less might be strategically undervalued by taxpayers, which requires careful scrutiny to prevent exploitation.
Moreover, broad discretion granted to the Secretary in this bill could lead to inconsistencies in reporting requirements. Without explicit criteria, this could yield varied interpretations and compliance challenges among different entities.
Finally, penalties for wealth tax valuation understatements raise concerns of being overly punitive, possibly discouraging individuals from honest reporting due to significant financial penalties.
Impact on the Public and Stakeholders
Broadly, the bill could lead to increased federal revenue by targeting ultra-wealthy individuals who have a significant portion of the nation's wealth but sometimes benefit from favorable tax treatments. For the average taxpayer, the impact might be indirect but could potentially lead to increased public revenues that might be used for public services or debt reduction.
For ultra-wealthy individuals and their advisors, the new tax regime would necessitate more meticulous asset reporting and management, possibly leading to complex tax planning strategies or legal disputes over asset valuation. Trusts and estates could be particularly affected, requiring detailed compliance with nuanced rules set out in the bill.
The financial and legal services sectors could see an increase in demand as taxpayers navigate the new tax implications and seek to optimize their wealth management in light of these changes. However, this could also result in increased costs for those taxpayers needing to engage professional assistance to comply with the new regulations.
The IRS, having the potential for increased funding, might improve its modernization and taxpayer service efforts, enhancing its effectiveness in tax collection and services. However, the success of these improvements would heavily depend on the precise allocation of resources and efficient management practices.
Overall, while aiming to curb wealth inequality, this bill demands careful consideration of its compliance mechanisms and administrative burdens to ensure it achieves its goals without unintended negative consequences.
Financial Assessment
The "Ultra-Millionaire Tax Act of 2024," also known as H.R. 7749, is a bill designed to amend the Internal Revenue Code of 1986 by imposing a tax on individuals with substantial assets. This commentary focuses on the financial references and appropriations outlined in the bill and their relation to key issues.
Appropriations and Financial Allocation
The bill authorizes substantial appropriations totaling $100 billion over ten years, directed towards the Internal Revenue Service (IRS). These funds are allocated as follows:
- $70 billion for enforcement of the title.
- $10 billion for taxpayer services.
- $20 billion for business system modernization.
This financial injection is integral to supporting the IRS's capability to manage the new wealth tax and its related complexities.
IRS Funding Concerns
A significant point of consideration is the potential lack of detailed oversight and accountability in spending the $100 billion appropriated for the IRS. While the bill earmarks significant funds to enhance IRS operations, it does not provide specific performance metrics or outcomes. Without clear oversight mechanisms, there is a concern that these funds could be subject to wasteful spending, as identified in the issues.
Wealth Tax Structure and Financial Implications
The bill specifies a wealth tax ranging from 2% to 6% on the net value of taxable assets exceeding specific thresholds. The "zero bracket threshold" is set at $50 million, and the "top bracket threshold" is $1 billion. The wealth tax aims to target individuals with considerable wealth, attempting to balance income distribution.
However, the imposition of such a tax brings potential challenges. For instance, the valuation of non-publicly traded assets can become contentious without clear guidelines, potentially leading to disputes. Additionally, the penalty structure for underreporting could be seen as excessively punitive, with penalties reaching up to 50% of the underpayment.
Exclusions and Asset Valuation
The bill also outlines exclusions for particular assets, specifically those valued at $50,000 or less, which are not used in a trade or business and do not qualify for deductions under existing tax laws. However, determining eligibility for these exclusions might present loopholes, allowing taxpayers to potentially undervalue assets strategically.
Auditing and Efficiency
The requirement to audit at least 30% of taxpayers liable for the wealth tax underscores the necessity for effective use of the IRS's allocated funds. However, this provision could pose a substantial administrative burden, especially if existing resources are insufficient to carry out audits efficiently. This burden raises questions about the feasibility of implementing such frequent audits without adequate support.
Conclusion
H.R. 7749's financial references and allocations are substantial and aimed at effectively implementing a new wealth tax regime. However, the appropriations and financial structures within the bill encounter several challenges, particularly concerning oversight, valuation disputes, and audit feasibility. Ensuring that these funds and rules are used and enforced effectively requires careful consideration and possible adjustments to address the identified issues.
Issues
The imposition of a minimum 30% audit requirement as outlined in Section 2905 might be resource-intensive and lacks clear guidelines on how it would be funded or whether it's feasible given current resources. This could result in significant administrative burden and questions about fairness and efficiency in audit selection.
The appropriations of $100 billion over a ten-year period for IRS funding as detailed in Section 4 is substantial, yet lacks detailed oversight and accountability measures. This raises concerns about potential wasteful spending without clear performance metrics or outcomes.
The exclusion criteria for certain assets with a value of $50,000 or less in Section 2902 might lead to complexities in determining what qualifies under this exclusion, potentially exploiting loopholes allowing taxpayers to strategically undervalue their assets.
The enforcement of a tax on the net value of assets in Section 29 lacks explicit instructions for valuation of non-publicly traded assets, leading to possible disputes or inconsistencies unless further guidelines are provided.
The penalty for substantial wealth tax valuation understatement as indicated in Section 2901 could be seen as excessively punitive, potentially discouraging honest reporting errors due to penalties of up to 50% of the underreported amount.
The broad discretion granted to the Secretary in Section 2904 for defining reporting requirements might lead to inconsistencies across entities, resulting in varied interpretations and potential compliance issues.
The transparency and fairness in provisions related to nongrantor multibeneficiary trusts in Section 2901, including the computation of bracket amounts, may present complexities for trustees and beneficiaries, causing administrative burdens or errors.
Section 3 lacks a timeline or specific targets for strengthening disclosure requirements, potentially resulting in delays or inefficiencies in improving voluntary compliance and addressing noncompliance.
The language in Section 2 regarding rules for non-residents and covered expatriates is dense and might benefit from simplification or examples, potentially leading to misinterpretations or challenges in enforcement.
Sections
Sections are presented as they are annotated in the original legislative text. Any missing headers, numbers, or non-consecutive order is due to the original text.
1. Short title Read Opens in new tab
Summary AI
The first section of the bill states that this legislation can be called the “Ultra-Millionaire Tax Act of 2024.”
2. Imposition of wealth tax Read Opens in new tab
Summary AI
The text introduces a new wealth tax under the Internal Revenue Code, targeting individuals' and certain trusts' taxable assets. This tax includes specific thresholds and rates, defines how assets and trusts are treated for tax purposes, mandates reporting and audits, and clarifies non-deductibility from income taxes, with provisions for enforcement and penalties.
Money References
- — “(1) IN GENERAL.—The tax imposed by this section shall be equal to the sum of— “(A) 0 percent of so much of the net value of all taxable assets of the taxpayer as does not exceed the zero bracket threshold, “(B) 2 percent of so much of the net value of all taxable assets of the taxpayer in excess of the zero bracket threshold but not in excess of the top bracket threshold, plus “(C) the applicable percentage of so much of the net value of all such taxable assets of the taxpayer in excess of the top bracket threshold. “(2) ZERO BRACKET THRESHOLD; TOP BRACKET THRESHOLD.—For purposes of this section— “(A) ZERO BRACKET THRESHOLD.—The zero bracket threshold is $50,000,000. “
- (B) TOP BRACKET THRESHOLD.—The top bracket threshold is $1,000,000,000. “
- “(2) COMPUTATION OF TAX.— “(A) IN GENERAL.—In applying this chapter to a nongrantor multibeneficiary trust— “(i) the zero bracket threshold shall be equal to the sum of— “(I) $0, plus “(II) the lowest unused 0 percent bracket amount assigned to the trust by all beneficiaries of the trust, and “(ii) the top bracket threshold shall be equal to the sum of— “(I) $0, plus “(II) the lowest unused 2 percent bracket amount assigned to the trust by all beneficiaries of the trust. “(B) UNUSED 0 PERCENT BRACKET AMOUNT.—For purposes of this paragraph, the term ‘unused 0 percent bracket amount’ means, with respect to any beneficiary for any calendar year, the lesser of— “(i) the excess (if any) of— “(I) the zero bracket threshold, over “(II) the sum of— “(aa) the net value of all taxable assets of the beneficiary for the calendar year, plus “(bb) any unused 0 percent bracket amount assigned by the beneficiary to other nongrantor multibeneficiary trusts, or “(ii) the portion of the net value of all taxable assets of the trust which such beneficiary is eligible to receive. “(C) UNUSED 2 PERCENT BRACKET AMOUNT.—For purposes of this paragraph, the term ‘unused 2 percent bracket amount’ means, with respect to any beneficiary for any calendar year, the lesser of— “(i) the excess (if any) of— “(I) the top bracket threshold reduced by the zero bracket threshold, over “(II) the sum of— “(aa) the net value of all taxable assets of the beneficiary for the calendar year in excess of the zero bracket threshold, plus “(bb) any unused 2 percent bracket amount assigned by the beneficiary to other nongrantor multibeneficiary trusts, or “(ii) the portion of the net value of all taxable assets of the trust which such beneficiary is eligible to receive. “(D) ASSIGNMENT OF AMOUNTS.—The assignment of any amount of unused 0 percent bracket amount and unused 2 percent bracket amount shall be made at such time and in such manner as specified by the Secretary in regulations.
- In any case in which no affirmative assignment is made by a beneficiary, the amount assigned shall be $0.
- “(a) In general.—For purposes of this subtitle, the term ‘net value of all taxable assets’ means, as of any date, the value of all property of the taxpayer (other than property excluded under subsection (b)), real or personal, tangible or intangible, wherever situated, reduced by any debts (including any debts secured by property excluded under subsection (b)) owed by the taxpayer. “(b) Exclusion for certain assets.—Property of the taxpayer shall not be taken into account under subsection (a) if such property— “(1) has a value of $50,000 or less (determined without regard to any debt owed by the taxpayer with respect to such property), “(2) is tangible personal property, and “(3) is not property— “(A) which is used in a trade or business of the taxpayer, “(B) in connection with which a deduction is allowable under section 212, or “(C) which is a collectible as defined in section 408(m), a boat, an aircraft, a mobile home, a trailer, a vehicle, or an antique or other asset that maintains or increases its value over time (within the meaning of section 5.02(2) of Revenue Procedure 2018–08). “(c) Rules for determining property of the taxpayer.—For purposes of this subtitle— “(1) PROPERTY INCLUDED IN ESTATE.—Any property that would be included in the estate of the taxpayer if the taxpayer died shall be treated as property of the taxpayer. “
- “(B) LIMITATION.—No penalty shall be imposed by reason of subsection (b)(10) unless the portion of the underpayment attributable to substantial wealth tax valuation understatements for the calendar year exceeds $5,000.
2901. Imposition of tax Read Opens in new tab
Summary AI
The text outlines a tax on wealthy individuals based on the value of their taxable assets at the end of each year. It specifies different tax rates for various asset levels, outlines exceptions for certain trusts, and defines special conditions where tax can increase if specific health care legislation is enacted.
Money References
- (2) ZERO BRACKET THRESHOLD; TOP BRACKET THRESHOLD.—For purposes of this section— (A) ZERO BRACKET THRESHOLD.—The zero bracket threshold is $50,000,000.
- (B) TOP BRACKET THRESHOLD.—The top bracket threshold is $1,000,000,000.
- — (A) IN GENERAL.—In applying this chapter to a nongrantor multibeneficiary trust— (i) the zero bracket threshold shall be equal to the sum of— (I) $0, plus (II) the lowest unused 0 percent bracket amount assigned to the trust by all beneficiaries of the trust, and (ii) the top bracket threshold shall be equal to the sum of— (I) $0, plus (II) the lowest unused 2 percent bracket amount assigned to the trust by all beneficiaries of the trust. (B) UNUSED 0 PERCENT BRACKET AMOUNT.—For purposes of this paragraph, the term “unused 0 percent bracket amount” means, with respect to any beneficiary for any calendar year, the lesser of— (i) the excess (if any) of— (I) the zero bracket threshold, over (II) the sum of— (aa) the net value of all taxable assets of the beneficiary for the calendar year, plus (bb) any unused 0 percent bracket amount assigned by the beneficiary to other nongrantor multibeneficiary trusts, or (ii) the portion of the net value of all taxable assets of the trust which such beneficiary is eligible to receive. (C) UNUSED 2 PERCENT BRACKET AMOUNT.—For purposes of this paragraph, the term “unused 2 percent bracket amount” means, with respect to any beneficiary for any calendar year, the lesser of— (i) the excess (if any) of— (I) the top bracket threshold reduced by the zero bracket threshold, over (II) the sum of— (aa) the net value of all taxable assets of the beneficiary for the calendar year in excess of the zero bracket threshold, plus (bb) any unused 2 percent bracket amount assigned by the beneficiary to other nongrantor multibeneficiary trusts, or (ii) the portion of the net value of all taxable assets of the trust which such beneficiary is eligible to receive.
- In any case in which no affirmative assignment is made by a beneficiary, the amount assigned shall be $0. (3) NONGRANTOR MULTIBENEFICIARY TRUST.—For purposes of this chapter— (A) IN GENERAL.—The term “nongrantor multibeneficiary trust” means any trust or portion of a trust— (i) with respect to which no person is treated as an owner under subpart E of subchapter J of chapter 1, (ii) no property of which is attributable to a gratuitous transfer of assets by a person who is subject to tax under this chapter for the calendar year, and (iii) which has more than one beneficiary (determined as of the last day of the calendar year). (B) EXCEPTION.—Such term shall not include— (i) any trust described in section 401(a) and exempt from tax under section 501(a), (ii) any trust all of the unexpired interests in which are devoted to one or more of the purposes described in section 170(c)(2)(B), (iii) any charitable lead annuity trust (as defined in section 2642(e)(3)) or charitable lead unitrust, or (iv) any charitable annuity remainder trust (as defined in section 664(d)(1)) or any charitable remainder unitrust (as defined in section 664(d)(2)). (C) BENEFICIARY.—The term “beneficiary” shall not include any person whose interest in a trust is contingent on the death of another person with an interest in such trust. ---
2902. Net value of taxable assets Read Opens in new tab
Summary AI
The text explains how to determine the "net value of all taxable assets," which is the total value of a taxpayer's property minus their debts, while excluding certain types of low-value tangible personal property and specific trust-related assets. It also details rules for considering the property included in a person's estate, gifts to minors, and assets in various types of trusts, as well as guidelines for valuing these assets.
Money References
- (b) Exclusion for certain assets.—Property of the taxpayer shall not be taken into account under subsection (a) if such property— (1) has a value of $50,000 or less (determined without regard to any debt owed by the taxpayer with respect to such property), (2) is tangible personal property, and (3) is not property— (A) which is used in a trade or business of the taxpayer, (B) in connection with which a deduction is allowable under section 212, or (C) which is a collectible as defined in section 408(m), a boat, an aircraft, a mobile home, a trailer, a vehicle, or an antique or other asset that maintains or increases its value over time (within the meaning of section 5.02(2) of Revenue Procedure 2018–08). (c) Rules for determining property of the taxpayer.—For purposes of this subtitle— (1) PROPERTY INCLUDED IN ESTATE.—Any property that would be included in the estate of the taxpayer if the taxpayer died shall be treated as property of the taxpayer.
2903. Special rules Read Opens in new tab
Summary AI
In SEC. 2903, the rules address tax situations for different individuals: those who die during a year are taxed based on their death date; non-residents are taxed only on U.S. property; and covered expatriates are taxed as if the year ended before they left the U.S., with a 40% tax rate on certain income.
2904. Information reporting Read Opens in new tab
Summary AI
The section requires the Secretary to establish regulations within 12 months for reporting the net value of assets to help enforce tax laws. This reporting can be incorporated into existing income reporting, and responsibilities may be placed on financial institutions and businesses, potentially requiring them to estimate their own value.
2905. Enforcement Read Opens in new tab
Summary AI
The Secretary is required to audit at least 30% of taxpayers each year who need to pay a specific tax mentioned in this chapter.
3. Strengthening disclosure requirements Read Opens in new tab
Summary AI
The section outlines that the Secretary of the Treasury can make rules to stop people from using foreign entities to dodge reporting their financial information. It also requires the Treasury to create a plan to use data better to ensure everyone follows these reporting rules.
4. Internal Revenue Service funding Read Opens in new tab
Summary AI
The section outlines funding allocations for the Internal Revenue Service (IRS) for the fiscal years 2024 through 2034, authorizing $70 billion for enforcing tax laws, $10 billion for taxpayer services, and $20 billion for upgrading business systems.
Money References
- “There are authorized to be appropriated to the Secretary for the period of fiscal years 2024 through 2034— “(1) for enforcement of this title, $70,000,000,000, “(2) for taxpayer services, $10,000,000,000, and “(3) for business system modernization, $20,000,000,000.”. (b) Clerical amendment.—The table of sections for subchapter A of chapter 80 of the Internal Revenue Code of 1986 is amended by adding at the end the following new item: “Sec. 7813. Authorization of appropriations.”.
7813. Authorization of appropriations Read Opens in new tab
Summary AI
The section authorizes the allocation of funds for specific purposes over the fiscal years 2024 through 2034, including $70 billion for enforcing the title, $10 billion for taxpayer services, and $20 billion for modernizing business systems.
Money References
- There are authorized to be appropriated to the Secretary for the period of fiscal years 2024 through 2034— (1) for enforcement of this title, $70,000,000,000, (2) for taxpayer services, $10,000,000,000, and (3) for business system modernization, $20,000,000,000. ---