Sponsors (13)
The bill creates a new recurring wealth tax that increases tax burdens and compliance risks for many taxpayers while preserving nonprofit exemptions and offering limited payment relief for illiquid wealthy taxpayers—trading broader revenue and fairness goals for higher costs and administrative uncertainty for payers.
Nonprofit organizations under section 501(a) are exempted from the new wealth tax, so charities, religious organizations, and other tax-exempt entities avoid new tax liability.
High-net-worth taxpayers who can demonstrate severe liquidity constraints can request up to a 5-year payment extension, easing short-term cash-flow pressure for those who owe the wealth tax but lack liquid assets.
The bill clarifies valuation penalty rules to deter large undervaluations of assets, strengthening enforcement and promoting fairer tax compliance by targeting substantial understatements.
Many taxpayers subject to the new wealth tax will face a recurring annual tax liability beginning the first calendar year after enactment, increasing overall tax burdens for affected individuals and entities.
The bill disallows income-tax deductions for wealth taxes, raising the net tax cost for individuals and entities that pay the wealth tax and increasing ongoing tax liabilities for affected payers.
Stronger valuation penalties (including a 20% penalty rate and $5,000 annual floor) increase the audit, penalty, and compliance risk for taxpayers who misvalue assets, potentially raising professional compliance costs and exposure to fines.
Based on analysis of 2 sections of legislative text.
Creates a new wealth tax, adds valuation-related penalties, allows up to 5-year payment deferrals for hardship, and exempts 501(a) organizations.
Official title: To amend the Internal Revenue Code of 1986 to establish a wealth tax, and for other purposes.
Introduced April 14, 2025 by Summer Lee · Last progress April 14, 2025
Creates a new federal wealth tax in the Internal Revenue Code (a new Chapter 18) that applies to high-net-worth taxpayers beginning the first calendar year after enactment. It adds valuation-based accuracy penalties, allows Treasury to defer payment up to five years for taxpayers with severe liquidity constraints or undue hardship, exempts 501(a) tax-exempt entities, and makes related technical changes to deduction and penalty rules.