Sponsors (13)
The bill introduces a recurring wealth tax with stronger valuation enforcement—boosting tax fairness and revenue—while offering limited relief (nonprofit exemption and payment deferrals), trading substantial new tax burdens and higher compliance costs for improved enforcement and clarity over undervaluation penalties.
Nonprofit and religious organizations (entities under section 501(a)) keep their current tax-exempt status and are exempted from the new wealth tax, avoiding new tax burdens on charities and faith-based groups.
Taxpayers with severe liquidity constraints (including some high-net-worth individuals) can request up to a 5-year payment extension for the wealth tax, reducing short-term cash flow strain for eligible filers.
All taxpayers benefit from clarified valuation penalties (e.g., defined penalty rates and floor) that are intended to deter large undervaluations and strengthen overall tax compliance and fairness.
Most taxpayers—including middle-class families and small-business owners—will face a new recurring wealth tax starting the first calendar year after enactment, increasing overall tax burdens.
Entities and individuals who pay the wealth tax cannot deduct those payments on their income tax returns, raising the net tax cost for taxpayers, small businesses, and financial institutions.
Stricter valuation penalties (20% rates and a $5,000 annual floor) increase audit, compliance risk, and potential costs for taxpayers who misvalue assets, particularly affecting small businesses and individuals with complex holdings.
Based on analysis of 2 sections of legislative text.
Adds an annual federal wealth tax, new valuation penalties, limited 5-year payment extensions for liquidity hardship, and exempts 501(a) entities.
Introduced April 14, 2025 by Summer Lee · Last progress April 14, 2025
Creates a new federal annual wealth tax by adding a new chapter to the Internal Revenue Code and adds related tax and administrative rules. The bill disallows deductions for the new wealth tax, sets new valuation-understatement penalties, allows limited payment extensions for taxpayers with severe liquidity hardship, requires Treasury rulemaking within 12 months, and exempts section 501(a) tax-exempt entities. The changes apply to calendar years beginning after enactment.