102ND GENERAL ASSEMBLY
State of Illinois
2021 and 2022
HB3475

 

Introduced 2/22/2021, by Rep. Delia C. Ramirez

 

SYNOPSIS AS INTRODUCED:
 
New Act

    Creates the Extremely High Wealth Mark-to-Market Tax Act. Contains provisions concerning gains or losses of assets for individual taxpayers with net assets worth $50,000,000 or more. Effective immediately.


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FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

HB3475LRB102 14998 HLH 20353 b

1    AN ACT concerning revenue.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 1. Short title. This Act may be cited as the
5Extremely High Wealth Mark-to-Market Tax Act.
 
6    Section 5. Tax imposed; tax years beginning on or after
7January 1, 2020 and beginning prior to January 1, 2021.
8    (a) Notwithstanding any other provision of law, resident
9individual taxpayers with net assets worth $50,000,000 or more
10on December 31, 2020, shall recognize gain or loss as if each
11asset owned by the individual taxpayer were sold for its fair
12market value on that date. Any resulting net gains from these
13deemed sales, up to the phase-in cap amount, shall be included
14in the taxpayer's income for tax years beginning on or after
15January 1, 2020 and beginning prior to January 1, 2021. Proper
16adjustment shall be made in the amount of any gain or loss
17subsequently realized for gains or losses taken into account
18under this subsection. At the taxpayer's option, the tax
19payable as a result of this Section shall either be payable in
20one installment or else shall be payable annually in 10 equal
21installments beginning in the year of the effective date of
22this Act and with all such installment payments commencing
23after the initial installment payment also being subject to an

 

 

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1annual nondeductible deferral charge of 7.5% annually. For
2resident individual taxpayers who would recognize net gains as
3a result of this Section except for the operation of this
4sentence, if the taxpayer can show that any portion of such
5gains was accumulated prior to the taxpayer becoming a
6resident individual of Illinois, and if the taxpayer can also
7show that such portion of such gains was previously taxed by
8any prior state or jurisdiction in which the taxpayer was a
9resident prior to becoming a resident individual of Illinois,
10then credit shall be provided in the amount of any such tax on
11such gains paid to any such prior states or jurisdictions in
12which the taxpayer was a resident prior to becoming a resident
13individual of Illinois. Any credits so provided by this
14subsection, however, shall not exceed the lesser of the total
15tax owed under this Section on such gains and the tax imposed
16on such gains by such other prior states or jurisdictions in
17which the taxpayer was a resident prior to becoming a resident
18individual of Illinois.
19    (b) For tax years included in this Section, whether an
20individual is a resident individual for purposes of this Act
21shall be determined using the pursuant to the criteria in the
22Illinois Income Tax Act.
 
23    Section 10. Tax imposed; subsequent years. For taxable
24years beginning on or after January 1, 2021, resident
25individual taxpayers with net assets that are worth

 

 

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1$50,000,000 or more at the end of the last day of any tax year
2shall recognize gains or losses as if each asset owned by such
3taxpayer on such date were sold for its fair market value on
4such date, but with adjustment made for tax paid on gain in
5previous years. Any resulting net gains from these deemed
6sales, up to the phase-in cap amount, shall be included in the
7taxpayer's income for such taxable year. Proper adjustment
8shall be made in the amount of any gain or loss subsequently
9realized for gain or loss taken into account under the this
10Section. To the extent that the losses of a taxpayer exceed
11such taxpayer's gains, such net losses shall not be recognized
12in such taxable year and shall instead carry forward
13indefinitely. For resident individual taxpayers who would
14recognize net gains as a result of this section except for the
15operation of this sentence, but who were not resident
16individuals for all of the preceding five tax years, solely
17for purposes of deemed sales pursuant to this section, the tax
18basis of each asset owned on the last day of the last tax year
19before the resident individual became an Illinois resident
20shall be the fair market value of the asset as of that day.
 
21    Section 15. Phase-in cap amount. For each date on which
22gains or losses are recognized as a result of this Act, the
23phase-in cap amount shall be equal to a quarter of the worth of
24a taxpayer's net assets in excess of $50,000,000 on such date.
 

 

 

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1    Section 20. Net worth calculation. For the purposes of
2determining whether a resident individual taxpayer has net
3assets worth $50,000,000 or more, the term "assets" shall
4include all of the following, but only to the extent allowable
5under the Illinois Constitution, the United States
6Constitution, and any other governing federal law: all owned
7real or personal, tangible or intangible, property, wherever
8situated that is: (1) owned by the taxpayer; (2) owned by the
9taxpayer's spouse, minor children, or any trust or estate of
10which the taxpayer is a beneficiary; (3) contributed by the
11taxpayer, or the taxpayer's spouse, minor children, or any
12trust or estate of which the taxpayer is a beneficiary, to any
13private foundation, donor advised fund, and any other entity
14described in section 501(c) or section 527 of the Internal
15Revenue Code of which the taxpayer, or the taxpayer's spouse,
16minor children, or any trust or estate of which the taxpayer is
17a beneficiary, is a substantial contributor (as such term is
18defined in Section 4958(c)(3)(B)(i) of the Internal Revenue
19Code); and (4) without duplication, all gifts and donations
20made within the past 5 years by the taxpayer, or the taxpayer's
21spouse, minor children, or any trust or estate of which the
22taxpayer is a beneficiary, as if such gifts and donations were
23still owned by the taxpayer. For the purpose of this section,
24"net assets" shall include the fair market value of assets
25less the fair market value of liabilities of the taxpayer and,
26in appropriate cases as determined by the Department of

 

 

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1Revenue, liabilities of such other persons described in the
2definition of assets.
 
3    Section 25. Fair market value.
4    (a) The fair market value of each asset owned by the
5taxpayer shall be the price at which such asset would change
6hands between a willing buyer and a willing seller, neither
7being under any compulsion to buy or to sell, and both having
8reasonable knowledge of relevant facts. The value of a
9particular asset shall not be the price that a forced sale of
10the property would produce. Further, the fair market value of
11an asset shall not be the sale price in a market other than
12that in which such item is most commonly sold to the public,
13taking into account the location of the item wherever
14appropriate. In the case of an asset which is generally
15obtained by the public in the retail market, the fair market
16value of such an asset shall be the price at which such item or
17a comparable item would be sold at retail.
18    (b) For purposes of this Section, any feature of an asset,
19such as a poison pill, that was added with the intent, and has
20the effect, of reducing the value of the asset shall be
21disregarded, and no valuation or other discount shall be taken
22into account if it would have the effect of reducing the value
23of a pro rata economic interest in an asset below the pro rata
24portion of the value of the entire asset.
 

 

 

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1    Section 30. Administration.
2    (a) The Department of Revenue shall amend or create tax
3forms as necessary for the reporting of gains by assets.
4Assets shall be listed with (i) a description of the asset,
5(ii) the asset category, (iii) the year the asset was
6acquired, (iv) the adjusted Illinois basis of the asset as of
7December 31 of the tax year, (v) the fair market value of the
8asset as of December 31 of the tax year, and (vi) the amount of
9gain that would be taxable under this Act, unless the
10Department shall determine that one or more categories is not
11appropriate for a particular type of asset.
12    (b) Asset categories separately listed shall include, but
13not be limited to, the following:
14        (1) stock held in any publicly traded corporation;
15        (2) stock held in any private traded C corporation;
16        (3) stock held in any S corporation;
17        (4) interests in any private equity or hedge fund
18    organized as a partnership;
19        (5) interests in any other partnerships;
20        (6) interests in any other noncorporate businesses;
21        (7) bonds and interest bearing savings accounts, cash
22    and deposits;
23        (8) interests in mutual funds or index funds;
24        (9) put and call options;
25        (10) futures contracts;
26        (11) financial assets held offshore reported on IRS

 

 

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1    tax form 8938;
2        (12) real property;
3        (13) art and collectibles;
4        (14) pension funds;
5        (15) other assets;
6        (16) debts and liabilities; and
7        (17) assets not owned by the taxpayer but which count
8    toward the $50,000,000 threshold pursuant to Section 20.
9    (c) The Department shall specifically request the filing
10of such forms by any resident individual expected to have net
11assets in excess of $50,000,000. Such taxpayers shall include,
12but not be limited to, taxpayers with an adjusted gross income
13summed over the previous 10 years in excess of $30,000,000.
 
14    Section 35. Mark-to-market in other states. In the event
15that any resident individual taxpayer becomes an Illinois
16resident subsequent to paying tax to another state as a result
17of recognizing gain or loss pursuant to any mark-to-market or
18deemed-realization regime of that other state, proper
19adjustment shall be made in the amount of any gain or loss
20subsequently realized for gain or loss taken into account
21under such mark-to-market or deemed-realization regime of that
22other state for purposes of computing gain or loss under
23Sections 5 or 10 of this Act.
 
24    Section 40. Collection. The Department of Revenue shall

 

 

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1collect the mark-to-market taxes imposed by this Act. Money
2collected, after deducting amounts necessary for
3administration and enforcement by the Department, shall be
4paid into the General Revenue Fund in the State treasury.
 
5    Section 45. Rules. The Department of Revenue shall adopt
6rules necessary or appropriate to carry out the purposes of
7this Act, including rules to prevent the use of year-end
8transfers, related parties, or other arrangements to avoid its
9provisions.
 
10    Section 99. Effective date. This Act takes effect upon
11becoming law.