Sponsors (33)
The bill tightens rules and taxes on unrealized appreciation, deferred compensation, and certain tax‑favored transactions to reduce avoidance and raise revenue, at the cost of higher taxes for wealthy taxpayers and heirs, greater compliance and valuation burdens, and reduced liquidity/flexibility for some businesses and investors.
High‑income and high‑net‑worth taxpayers (and their heirs) would face annual taxation of unrealized gains and tighter limits on deferral/nonrecognition, reducing common avenues to defer or avoid income tax and increasing tax fairness while raising federal revenue.
Applicable taxpayers with marked‑to‑market capital losses can carry those losses back up to three years and treat carried‑back amounts as long‑term capital losses, potentially producing earlier refunds and more favorable treatment against prior gains.
The bill increases reporting and information flows (including partner/ownership‑level rules and returns for large deferred compensation and life/annuity payments), improving IRS ability to enforce tax rules and ensuring pass‑through owners receive correct tax results.
High‑income individuals, small‑business owners, and heirs will likely face higher tax bills (elimination of step‑up, stricter rules on deferred compensation, QSBS, rollovers), reducing after‑tax wealth and potentially lowering inheritances.
Taxpayers, employers, issuers, and financial institutions will face materially higher compliance, reporting and tax‑preparation costs from annual mark‑to‑market reporting, new information returns, elections, and ordering rules.
Taxpayers holding illiquid or hard‑to‑value assets may face valuation disputes and administrability problems (annual valuation for unrealized gains creates practical challenges and IRS contestation), increasing uncertainty and potential litigation.
Based on analysis of 6 sections of legislative text.
Subjects certain high‑wealth taxpayers to annual mark‑to‑market tax on unrealized gains, limits borrowing and step‑up at death, and narrows some nonrecognition rules.
Introduced September 17, 2025 by Stephen Cohen · Last progress September 17, 2025
Imposes annual tax on income and unrealized appreciation for certain high‑income and high‑net‑worth taxpayers by requiring mark‑to‑market treatment of appreciated assets and restricting strategies that use borrowing or death to avoid tax. It also narrows common nonrecognition rules (like certain like‑kind exchanges and some transfer exceptions) and tightens rules for covered expatriates and estate transfers to prevent avoiding tax on accumulated gains. Takes effect for taxable years beginning after December 31, 2025, and adds coordination rules for losses, special carryback treatment for marked‑to‑market losses, and administrative changes that increase reporting and compliance for affected individuals, entities, estates, and advisors.