“For the 99.5 Percent Act” Introduced in the Senate

S. 994, 117th Cong. (2021)

On March 25, 2021, Senators Bernie Sanders and Sheldon Whitehouse introduced the “For the 99.5 Percent Act” (the Act), which would make sweeping modifications to the estate, gift, and generation-skipping transfer tax exemptions. If the bill passes, the changes will primarily affect transfers occurring after December 31, 2021. The Act would do the following:

• Reduce the current exemption amount ($11.7 million per individual for 2021) to $3.5 million per individual, adjusted for inflation. The exemption for married couples would be $7 million.
• Reduce the gift tax exemption to $1 million per individual, not adjusted for inflation.
• Make the estate and gift tax rate progressive, ranging from 45 percent of the value of estates between $3.5 million and $10 million to 65 percent of the values of estates in excess of $1 billion.
• Eliminate valuation discounts for nonbusiness assets.
• Treat grantor trusts created or funded by a grantor as owned by the grantor for both income and estate tax purposes.
• Impose a minimum term of ten years and minimum gifts upon the funding of new grantor retained annuity trusts.
• Require dynasty trusts to terminate for estate tax purposes after fifty years.
• Reduce the annual gift exemption from $15,000 per donee per year to $10,000 and impose an annual cumulative limitation per donor of two times the annual limitation.
• For estate tax purposes, allow the value of qualified real property used for farming or another trade or business to be lowered by up to $3 million, adjusted for inflation, where the property and trade or business will be kept in the family for at least eight years after the decedent’s death.
• Increase the maximum estate tax exclusion for conservation easements from $500,000 to $2 million.

Republicans introduced S. 617, The Death Act Repeal Act of 2021, on March 12, 2021, which would repeal the federal estate tax.