Full Text of HB3475 102nd General Assembly
HB3475 102ND GENERAL ASSEMBLY |
| | 102ND GENERAL ASSEMBLY
State of Illinois
2021 and 2022 HB3475 Introduced 2/22/2021, by Rep. Delia C. Ramirez SYNOPSIS AS INTRODUCED: |
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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 |
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| 1 | | AN ACT concerning revenue.
| 2 | | Be it enacted by the People of the State of Illinois,
| 3 | | represented in the General Assembly:
| 4 | | Section 1. Short title. This Act may be cited as the | 5 | | Extremely High Wealth Mark-to-Market Tax Act. | 6 | | Section 5. Tax imposed; tax years beginning on or after | 7 | | January 1, 2020 and beginning prior to January 1, 2021. | 8 | | (a) Notwithstanding any other provision of law, resident | 9 | | individual taxpayers with net assets worth $50,000,000 or more | 10 | | on December 31, 2020, shall recognize gain or loss as if each | 11 | | asset owned by the individual taxpayer were sold for its fair | 12 | | market value on that date. Any resulting net gains from these | 13 | | deemed sales, up to the phase-in cap amount, shall be included | 14 | | in the taxpayer's income for tax years beginning on or after | 15 | | January 1, 2020 and beginning prior to January 1, 2021. Proper | 16 | | adjustment shall be made in the amount of any gain or loss | 17 | | subsequently realized for gains or losses taken into account | 18 | | under this subsection. At the taxpayer's option, the tax | 19 | | payable as a result of this Section shall either be payable in | 20 | | one installment or else shall be payable annually in 10 equal | 21 | | installments beginning in the year of the effective date of | 22 | | this Act and with all such installment payments commencing | 23 | | after the initial installment payment also being subject to an |
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| 1 | | annual nondeductible deferral charge of 7.5% annually. For | 2 | | resident individual taxpayers who would recognize net gains as | 3 | | a result of this Section except for the operation of this | 4 | | sentence, if the taxpayer can show that any portion of such | 5 | | gains was accumulated prior to the taxpayer becoming a | 6 | | resident individual of Illinois, and if the taxpayer can also | 7 | | show that such portion of such gains was previously taxed by | 8 | | any prior state or jurisdiction in which the taxpayer was a | 9 | | resident prior to becoming a resident individual of Illinois, | 10 | | then credit shall be provided in the amount of any such tax on | 11 | | such gains paid to any such prior states or jurisdictions in | 12 | | which the taxpayer was a resident prior to becoming a resident | 13 | | individual of Illinois. Any credits so provided by this | 14 | | subsection, however, shall not exceed the lesser of the total | 15 | | tax owed under this Section on such gains and the tax imposed | 16 | | on such gains by such other prior states or jurisdictions in | 17 | | which the taxpayer was a resident prior to becoming a resident | 18 | | individual of Illinois. | 19 | | (b) For tax years included in this Section, whether an | 20 | | individual is a resident individual for purposes of this Act | 21 | | shall be determined using the pursuant to the criteria in the | 22 | | Illinois Income Tax Act.
| 23 | | Section 10. Tax imposed; subsequent years. For taxable | 24 | | years beginning on or after January 1, 2021, resident | 25 | | individual 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 | 2 | | shall recognize gains or losses as if each asset owned by such | 3 | | taxpayer on such date were sold for its fair market value on | 4 | | such date, but with adjustment made for tax paid on gain in | 5 | | previous years. Any resulting net gains from these deemed | 6 | | sales, up to the phase-in cap amount, shall be included in the | 7 | | taxpayer's income for such taxable year. Proper adjustment | 8 | | shall be made in the amount of any gain or loss subsequently | 9 | | realized for gain or loss taken into account under the this | 10 | | Section. To the extent that the losses of a taxpayer exceed | 11 | | such taxpayer's gains, such net losses shall not be recognized | 12 | | in such taxable year and shall instead carry forward | 13 | | indefinitely. For resident individual taxpayers who would | 14 | | recognize net gains as a result of this section except for the | 15 | | operation of this sentence, but who were not resident | 16 | | individuals for all of the preceding five tax years, solely | 17 | | for purposes of deemed sales pursuant to this section, the tax | 18 | | basis of each asset owned on the last day of the last tax year | 19 | | before the resident individual became an Illinois resident | 20 | | shall be the fair market value of the asset as of that day. | 21 | | Section 15. Phase-in cap amount. For each date on which | 22 | | gains or losses are recognized as a result of this Act, the | 23 | | phase-in cap amount shall be equal to a quarter of the worth of | 24 | | a 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 | 2 | | determining whether a resident individual taxpayer has net | 3 | | assets worth $50,000,000 or more, the term "assets" shall | 4 | | include all of the following, but only to the extent allowable | 5 | | under the Illinois Constitution, the United States | 6 | | Constitution, and any other governing federal law: all owned | 7 | | real or personal, tangible or intangible, property, wherever | 8 | | situated that is: (1) owned by the taxpayer; (2) owned by the | 9 | | taxpayer's spouse, minor children, or any trust or estate of | 10 | | which the taxpayer is a beneficiary; (3) contributed by the | 11 | | taxpayer, or the taxpayer's spouse, minor children, or any | 12 | | trust or estate of which the taxpayer is a beneficiary, to any | 13 | | private foundation, donor advised fund, and any other entity | 14 | | described in section 501(c) or section 527 of the Internal | 15 | | Revenue Code of which the taxpayer, or the taxpayer's spouse, | 16 | | minor children, or any trust or estate of which the taxpayer is | 17 | | a beneficiary, is a substantial contributor (as such term is | 18 | | defined in Section 4958(c)(3)(B)(i) of the Internal Revenue | 19 | | Code); and (4) without duplication, all gifts and donations | 20 | | made within the past 5 years by the taxpayer, or the taxpayer's | 21 | | spouse, minor children, or any trust or estate of which the | 22 | | taxpayer is a beneficiary, as if such gifts and donations were | 23 | | still owned by the taxpayer. For the purpose of this section, | 24 | | "net assets" shall include the fair market value of assets | 25 | | less the fair market value of liabilities of the taxpayer and, | 26 | | in appropriate cases as determined by the Department of |
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| 1 | | Revenue, liabilities of such other persons described in the | 2 | | definition of assets. | 3 | | Section 25. Fair market value. | 4 | | (a) The fair market value of each asset owned by the | 5 | | taxpayer shall be the price at which such asset would change | 6 | | hands between a willing buyer and a willing seller, neither | 7 | | being under any compulsion to buy or to sell, and both having | 8 | | reasonable knowledge of relevant facts. The value of a | 9 | | particular asset shall not be the price that a forced sale of | 10 | | the property would produce. Further, the fair market value of | 11 | | an asset shall not be the sale price in a market other than | 12 | | that in which such item is most commonly sold to the public, | 13 | | taking into account the location of the item wherever | 14 | | appropriate. In the case of an asset which is generally | 15 | | obtained by the public in the retail market, the fair market | 16 | | value of such an asset shall be the price at which such item or | 17 | | a comparable item would be sold at retail. | 18 | | (b) For purposes of this Section, any feature of an asset, | 19 | | such as a poison pill, that was added with the intent, and has | 20 | | the effect, of reducing the value of the asset shall be | 21 | | disregarded, and no valuation or other discount shall be taken | 22 | | into account if it would have the effect of reducing the value | 23 | | of a pro rata economic interest in an asset below the pro rata | 24 | | portion 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 | 3 | | forms as necessary for the reporting of gains by assets. | 4 | | Assets shall be listed with (i) a description of the asset, | 5 | | (ii) the asset category, (iii) the year the asset was | 6 | | acquired, (iv) the adjusted Illinois basis of the asset as of | 7 | | December 31 of the tax year, (v) the fair market value of the | 8 | | asset as of December 31 of the tax year, and (vi) the amount of | 9 | | gain that would be taxable under this Act, unless the | 10 | | Department shall determine that one or more categories is not | 11 | | appropriate for a particular type of asset. | 12 | | (b) Asset categories separately listed shall include, but | 13 | | not 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 | 10 | | of such forms by any resident individual expected to have net | 11 | | assets in excess of $50,000,000. Such taxpayers shall include, | 12 | | but not be limited to, taxpayers with an adjusted gross income | 13 | | summed over the previous 10 years in excess of $30,000,000. | 14 | | Section 35. Mark-to-market in other states. In the event | 15 | | that any resident individual taxpayer becomes an Illinois | 16 | | resident subsequent to paying tax to another state as a result | 17 | | of recognizing gain or loss pursuant to any mark-to-market or | 18 | | deemed-realization regime of that other state, proper | 19 | | adjustment shall be made in the amount of any gain or loss | 20 | | subsequently realized for gain or loss taken into account | 21 | | under such mark-to-market or deemed-realization regime of that | 22 | | other state for purposes of computing gain or loss under | 23 | | Sections 5 or 10 of this Act. | 24 | | Section 40. Collection. The Department of Revenue shall |
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| 1 | | collect the mark-to-market taxes imposed by this Act. Money | 2 | | collected, after deducting amounts necessary for | 3 | | administration and enforcement by the Department, shall be | 4 | | paid into the General Revenue Fund in the State treasury. | 5 | | Section 45. Rules. The Department of Revenue shall adopt | 6 | | rules necessary or appropriate to carry out the purposes of | 7 | | this Act, including rules to prevent the use of year-end | 8 | | transfers, related parties, or other arrangements to avoid its | 9 | | provisions.
| 10 | | Section 99. Effective date. This Act takes effect upon | 11 | | becoming law.
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