HR 5427119th CongressIn Committee

Billionaires Income Tax Act

Introduced: Sep 17, 2025

Sponsor: Rep. Cohen, Steve [D-TN-9] (D-Tennessee)

Economy & Taxes

Standard Summary

Comprehensive overview in 1-2 paragraphs

The Billionaires Income Tax Act is a proposed bill that would overhaul how taxes are collected from high income and high net worth individuals (referred to as “applicable taxpayers” in the bill). Its core aim is to end indefinite tax deferral commonly associated with wealth planning strategies like “buy, borrow, die” by shifting to annual, mark-to-market taxation for certain assets and by tightening rules around transfers, gifts, and investments. The bill would modify more than 30 provisions of the Internal Revenue Code and creates a distinct Title I focused on eliminating deferral, plus Title II that extends additional changes to individuals, trusts, and pass-through entities believed to be used by billionaires. If enacted, the measure would significantly increase annual tax obligations for the wealthiest Americans and reshape how they hold and transfer assets, while expanding reporting and compliance requirements for entities and owners.

Key Points

1Annual mark-to-market taxation for tradable assets
2- The bill establishes a new framework (Part IV, Sec. 490) that requires applicable taxpayers to recognize gains or losses from tradable covered assets in the year a taxable event occurs, treating them as if the asset were sold for fair market value that year.
3- This effectively eliminates the ability to indefinitely defer tax on readily marketable assets.
4Deferral recapture on transfers of nontradable assets
5- When an applicable taxpayer transfers nontradable covered assets, the transfer can trigger a deferral recapture tax (Sec. 492).
6- The tax due can be increased by a defined deferral recapture amount, which is calculated with interest and subject to a cap tied to the gain and the asset’s tax rate (capital asset vs. non-capital asset). This is designed to deter long-term, tax-deferred transfers.
7Expanded rules and reporting for pass-through entities and significant owners
8- The bill creates extensive rules for applicable entities (part of Title I, Sec. 493) and defines “significant owners” (5% owners or holders of nontradable interests valued over $50 million).
9- Significant owners would face reporting requirements to both the entity and the IRS, potentially including notices of status, share of gains/losses, holding periods, and other information. The goal is to prevent the use of partnerships, S corporations, or other pass-throughs to shield income from annual taxation.
10Deemed sale treatment for gifts, bequests, and transfers in trust
11- Gifts, bequests, and transfers in trust of covered assets are treated as if the asset were sold at fair market value on the transfer date (Sec. 494).
12- Losses on such transfers are generally not recognized by the transferor, and the transferee’s basis is adjusted in a manner determined by regulations.
13Title II provisions apply to individuals and entities beyond the core deferral elimination
14- The table of contents shows Subtitle A (Individuals) and Subtitle B (Entities) extending the bill’s principles to other areas, such as:
15- Sec. 201: Applicable taxpayers not eligible for certain adjusted gross income limitations on the Net Investment Income Tax (NIIT).
16- Sec. 202: Treatment of covered expatriates (likely increasing compliance or exit costs).
17- Sec. 211-213: Rules relating to like-kind exchanges, transfers in exchange for stock, and special rules for trusts.
18- Sec. 221-223: Provisions related to deferred compensation and life insurance/annuities.
19- Sec. 231-232: Repeal or modification of special treatment for certain investments (including small business stock and investments in qualified opportunity funds).
20- Overall, these titles aim to broaden the annual tax burden and limit various preferential treatments used by high-net-worth individuals and their entities.
21Broad purpose and mechanism
22- The Act states its purpose as ensuring billionaires pay taxes annually by removing loopholes that enable indefinite deferral and shielding of income, particularly targeting strategies surrounding appreciating assets, transfers at death, and complex investment structures.

Impact Areas

Primary group/area affected- Ultra-high-net-worth individuals and billionaires, plus their family offices, private investment vehicles, and closely held businesses.- Those who currently rely on deferral strategies, like holding appreciating assets and borrowing against them, and those who use pass-through entities to manage wealth.Secondary group/area affected- Heirs, beneficiaries, and grantor trusts involved with appreciated assets.- Tax professionals, wealth managers, and corporate/partnership structures that serve high-net-worth clients.Additional impacts- Generational wealth transfer dynamics could shift due to the deemed sale rules on gifts/bequests and the broader elimination of deferral opportunities.- Compliance and administrative burden will rise for individuals and for the entities and advisers that work with them, due to extensive reporting requirements and new valuation mechanics.- Potential effects on investment planning, estate planning, and funding of charitable activities, depending on how taxpayers respond to the new tax environment.- Possible market and behavior responses as wealth managers adjust to the new annual tax framework and the enforceability of the mark-to-market regime.The text provided is a bill introduction with the full detail spread across multiple sections (Title I and Title II). Some sections are dense and use technical terminology (e.g., tradable vs nontradable covered assets, deferral recapture, and various pass-through rules). The summary above captures the main thrust and the high-level mechanics as described in the bill’s table of contents and the sections that are shown. If you’d like, I can break down a specific section (e.g., Sec. 491 or Sec. 492) in plain language with an example to illustrate how the tax would be calculated.

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