Billionaires Income Tax Act
Sponsored By: Representative Rep. Cohen, Steve [D-TN-9]
Introduced
Summary
Elimination of tax deferral for applicable taxpayers. This bill would require many very wealthy individuals, certain trusts, and designated entities to recognize gains each year on tradable assets and treat many transfers of nontradable assets as taxable sales.
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- Individuals and households: People who meet a three‑year income test of applicable adjusted gross income over $100 million or an asset test of over $1 billion would become "applicable taxpayers" and face annual mark‑to‑market treatment on tradable covered assets. Nontradable assets would use an "applicable value" test based on cost, adjusted basis, recent financial statements, or other Secretary‑prescribed methods.
- Pass‑through entities and owners: Partnerships, S corporations, and similar entities would face new, ongoing reporting and cross‑entity notice rules that pass gains and required disclosures up and down ownership chains. A "significant owner" is defined as a 5 percent owner or any owner whose nontradable interests exceed $50 million, and certain entity elections are irrevocable without IRS consent.
- Deferred pay, insurance, and investor breaks: The bill creates a deferral recapture charge that includes interest and is capped at 49 percent of the gain and it adds new reporting for large deferred compensation payments over $5 million. It also tightens rules for private‑placement life insurance and annuities, limits the qualified small business stock exclusion for post‑Nov. 30, 2025 sales, and narrows Qualified Opportunity Fund benefits for applicable taxpayers.
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Bill Overview
Analyzed Economic Effects
10 provisions identified: 0 benefits, 7 costs, 3 mixed.
Extra taxes on big deferred pay
If enacted, applicable taxpayers would owe an added tax on nonqualified deferred pay, capped at 10% of the includible amount, plus an extra 10% tax on severance pay. Payers who make more than $5,000,000 of deferred pay or severance to a person would have to file an IRS return and give the person a statement by January 31. The $5,000,000 threshold would adjust for inflation after 2026. Penalties for not filing or not furnishing statements would apply. These changes would apply for years beginning after December 31, 2025.
Gifts, death, and trusts taxed
If enacted, transfers of covered assets by gift, at death, or into certain trusts by an applicable taxpayer would be treated like a sale at fair market value. Nontradable assets sold or transferred would face a deferral recapture tax that spreads the gain over the holding period, uses prior years’ tax rates, adds interest, and caps the total by a statutory percentage. Some transfers to charities and certain trusts would be excluded. Transfers involving grantor trusts could trigger tax at set times, with Treasury able to carve out ordinary business and similar cases. The spousal exception would not apply if the spouse is not a U.S. citizen or a defined long‑term resident. Beneficiaries of applicable foreign trusts would owe an extra, proportional tax linked to the trust’s recapture unless the trust pays it. These rules would generally apply for years beginning after December 31, 2025.
Investment tax without income cap
If you are an applicable taxpayer, the Net Investment Income Tax would apply without the usual adjusted gross income threshold. More of your investment income would be subject to this tax in any year you are treated as applicable. This would apply for years beginning after December 31, 2025.
Private‑placement insurance taxed more
If enacted, amounts from private‑placement life insurance or annuity contracts held by applicable taxpayers would be taxed under new rules. Certain distributions would face an extra 10% tax, and death benefits from these contracts would not be excluded from income. Insurers and reinsurers would have to file annual IRS reports listing people who received applicable amounts. These changes would apply to amounts received in years beginning after December 31, 2025.
QSBS exclusion ends for billionaires
Applicable taxpayers would lose the qualified small business stock (QSBS) gain exclusion for sales on or after November 30, 2025, unless the stock was acquired before that date. The provision also would tax certain private‑placement death benefits received in years beginning after December 31, 2025, with rules to avoid taxing amounts already included in income.
Annual tax on tradable gains
Applicable taxpayers would have to mark tradable assets to market when a taxable event happens and count gains or losses as if sold at fair market value. The bill defines what is tradable, how assets are valued, and when conversions between tradable and nontradable assets trigger tax. Qualified Opportunity Fund interests would be treated as nontradable for these rules. If you have a marked‑to‑market loss, you could elect to carry it back up to 3 years, but only against prior marked‑to‑market gains and without creating a net operating loss. Treasury would have broad power to set valuation, anti‑avoidance, and compliance rules. These changes would generally apply for years beginning after December 31, 2025.
First‑year election and 5‑year payments
In your first year as an applicable taxpayer, you could elect to treat certain nontradable assets as tradable and then pay the first‑year tax over five equal annual installments. You must make the election by the return due date. Selling an elected asset, death, bankruptcy, or missing a payment could speed up what you still owe. Installments follow special collection rules and are not treated like estimated tax or overpayments. These changes would apply for years beginning after December 31, 2025.
Who this tax would cover
This bill would set who is treated as an “applicable taxpayer.” For each of the past 3 years, you would need over $100 million in income (or $50 million if married filing separately) or over $1 billion in assets (or $500 million if married filing separately). For non‑grantor trusts, the tests would be $10 million income or $100 million assets. Nonresident aliens would use $50 million income and $500 million assets, counting only U.S.‑connected items. Covered expatriates could be treated as applicable taxpayers for 10 years after expatriation. You could later end your status if you fail eased tests for 3 years, with a special earlier option after divorce. These rules would generally apply for years beginning after December 31, 2025.
Opportunity Zone breaks limited
For applicable taxpayers, the bill would curb Qualified Opportunity Fund tax benefits. Deferral elections could end after the earlier of December 31, 2026, or the last day of the year before you first become applicable (with a special November 30, 2025 date for some 2025 cases). The 10‑year basis step‑up would be limited to the lesser of two stated fair market values. Entities with an applicable notice in effect could not make the QOF election. These changes would apply mainly to sales after November 30, 2025.
New rules for pass‑through entities
Partnerships, S‑corps, and similar entities could elect to be treated like applicable taxpayers for tradable‑asset events, and that choice would generally be irrevocable without IRS consent. When an IRS notice is in effect, entities would need to report detailed gain/loss shares and holding periods to applicable taxpayers and pass notices through tiers. If such a notice is in effect, the entity could not use tax‑free exchange rules under sections 1031 or 351 for exchanges after 2025. These changes would apply for years beginning after December 31, 2025.
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Sponsors & CoSponsors
Sponsor
Rep. Cohen, Steve [D-TN-9]
TN • D
Cosponsors
Rep. Beyer, Donald S. [D-VA-8]
VA • D
Sponsored 9/17/2025
Rep. Tlaib, Rashida [D-MI-12]
MI • D
Sponsored 9/17/2025
Rep. García, Jesús G. "Chuy" [D-IL-4]
IL • D
Sponsored 9/17/2025
Rep. McGovern, James P. [D-MA-2]
MA • D
Sponsored 9/17/2025
Del. Norton, Eleanor Holmes [D-DC-At Large]
DC • D
Sponsored 9/17/2025
Rep. Davis, Danny K. [D-IL-7]
IL • D
Sponsored 9/17/2025
Rep. DeLauro, Rosa L. [D-CT-3]
CT • D
Sponsored 9/17/2025
Rep. Boyle, Brendan F. [D-PA-2]
PA • D
Sponsored 9/17/2025
Rep. McCollum, Betty [D-MN-4]
MN • D
Sponsored 9/17/2025
Rep. Nadler, Jerrold [D-NY-12]
NY • D
Sponsored 9/17/2025
Rep. Garamendi, John [D-CA-8]
CA • D
Sponsored 9/17/2025
Rep. Kelly, Robin L. [D-IL-2]
IL • D
Sponsored 9/17/2025
Rep. Dean, Madeleine [D-PA-4]
PA • D
Sponsored 9/17/2025
Rep. Mullin, Kevin [D-CA-15]
CA • D
Sponsored 9/17/2025
Rep. Omar, Ilhan [D-MN-5]
MN • D
Sponsored 9/17/2025
Landsman
OH • D
Sponsored 9/17/2025
Rep. Scanlon, Mary Gay [D-PA-5]
PA • D
Sponsored 9/17/2025
Rep. Clarke, Yvette D. [D-NY-9]
NY • D
Sponsored 9/17/2025
Rep. Huffman, Jared [D-CA-2]
CA • D
Sponsored 9/17/2025
Rep. Norcross, Donald [D-NJ-1]
NJ • D
Sponsored 9/17/2025
Rep. Sánchez, Linda T. [D-CA-38]
CA • D
Sponsored 9/17/2025
Rep. Evans, Dwight [D-PA-3]
PA • D
Sponsored 9/17/2025
Rep. Frost, Maxwell [D-FL-10]
FL • D
Sponsored 9/17/2025
Rep. Lee, Summer L. [D-PA-12]
PA • D
Sponsored 9/17/2025
Rep. Simon, Lateefah [D-CA-12]
CA • D
Sponsored 9/17/2025
Rep. Jackson, Jonathan L. [D-IL-1]
IL • D
Sponsored 9/17/2025
Rep. Ramirez, Delia C. [D-IL-3]
IL • D
Sponsored 9/17/2025
Rep. Chu, Judy [D-CA-28]
CA • D
Sponsored 2/9/2026
Rep. Lofgren, Zoe [D-CA-18]
CA • D
Sponsored 2/9/2026
Rep. Budzinski, Nikki [D-IL-13]
IL • D
Sponsored 2/23/2026
Rep. Larson, John B. [D-CT-1]
CT • D
Sponsored 2/23/2026
Rep. Deluzio, Christopher R. [D-PA-17]
PA • D
Sponsored 2/23/2026
Roll Call Votes
No roll call votes available for this bill.
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