Fair Trusts for Fiscal Responsibility Act

Key Points

• This bill creates a brand-new annual tax on the assets held in large trusts. It targets trusts holding more than $50 million in property, cash, or investments. The tax would be added as a new Chapter 16 of the Internal Revenue Code.
• Tax rates are graduated: 0% on the first $50 million, 1% up to $100 million, 1.5% up to $250 million, 2% up to $1 billion, and 3% on everything above $1 billion. These thresholds will be adjusted for inflation starting in 2028.
• To prevent double taxation, the bill creates a "trust withholding credit account." When trust assets are eventually passed on through an estate or generation-skipping transfer, credits for previously paid trust asset taxes reduce the tax owed at that point.
• The bill includes detailed rules for valuing hard-to-price assets like private businesses and real estate. It eliminates common valuation discounts for family-controlled entities, closing a well-known estate planning loophole.
• When a grantor pays income taxes or trust asset taxes on behalf of an irrevocable trust they set up, that payment would now count as a taxable gift. This closes another common strategy wealthy families use to move money tax-free.
• Charitable trusts, retirement accounts, revocable trusts, and short-term commercial trusts are all exempt. The new rules would take effect for calendar years beginning after December 31, 2026.

Votes

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Related Bills

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