Sen. Chris Van Hollen (D-Md.) and several other Democratic senators this week introduced legislation that would require estates to pay capital gains tax before assets are distributed to heirs, with an exemption for the first $1 million of capital gains.
Details: The legislation is an alternative to proposals to end the “stepped-up basis” tax policy whereby the basis of assets held in an estate are reset and any capital appreciation during the decedent’s lifetime is not subject to tax. Both the Van Hollen proposal and removal of stepped-up basis would result in the forced sale of family-owned banks, farms, and other small businesses to pay tax.
Biden Plan: The American Jobs Plan released this week by the Biden administration to fund infrastructure spending through higher corporate tax rates does not include a repeal of stepped-up basis. The Biden plan would raise the corporate tax rate from 21 percent to 28 percent and increase taxes on U.S. companies’ overseas earnings, though additional tax proposals are expected from the White House.
ICBA Policy: ICBA supports preserving stepped-up basis with no realization of capital gains at death and repealing the estate tax, which taxes the value of an estate at the time of death. ICBA will continue working with Congress and the Biden administration on tax proposals affecting community banks.