Surcharge on high income estates and trusts

(a) In general Subchapter A of chapter 1 is amended by adding at the end the following new part: VIII Surcharge on high income estates and trusts Sec. 59B. Surcharge on high income estates and trusts. 59B. Surcharge on high income estates and trusts (a) General rule In the case of an estate or trust, there is hereby imposed (in addition to any other tax imposed by this subtitle) a tax equal to the sum of— (1) 5 percent of so much of the modified adjusted gross income of the taxpayer as exceeds $200,000, plus (2) 3 percent of so much of the modified adjusted gross income of the taxpayer as exceeds $500,000. (b) Modified adjusted gross income For purposes of this section— (1) In general The term modified adjusted gross income means adjusted gross income reduced by any deduction (not taken into account in determining adjusted gross income) allowed for investment interest (as defined in section 163(d)) or business interest (as defined in section 163(j)). (2) Adjusted gross income Adjusted gross income shall be determined as provided in section 67(e) and reduced by the amount allowed as a deduction under section 642(c). (c) Special rules (1) Charitable trusts Subsection (a) shall not apply to a trust all the unexpired interests in which are devoted to one or more of the purposes described in section 170(c)(2)(B). (2) Not treated as tax imposed by this chapter for certain purposes The tax imposed under this section shall not be treated as tax imposed by this chapter for purposes of determining the amount of any credit under this chapter (other than sections 27 and 901) or for purposes of section 55. (3) Electing small business trusts For purposes of the determination of adjusted gross income, section 641(c)(1)(A) shall not apply and all portions of any electing small business trust shall be treated as a single trust. (d) Regulations The Secretary shall issue such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this section, including regulations or other guidance to prevent the avoidance of the purposes of this section.. (b) Coordination with certain provisions (1) Interest on certain deferred tax liability Section 453A(c) is amended by redesignating paragraph (6) as paragraph (7) and by inserting after paragraph (5) the following new paragraph: (6) Surcharge on high income estates and trusts taken into account in determining maximum rate of tax For purposes of paragraph (3)(B), in the case of an estate or trust, the maximum rate of tax in effect under section 1 shall be treated as being equal to the sum of such rate and the rates in effect under paragraphs (1) and (2) of section 59B(a).. (2) Limitation on foreign tax credit (A) Section 904(b)(3)(E)(i)(I) is amended by inserting increased, in the case of an estate or trust, by the sum of the rates set forth in paragraphs (1) and (2) of section 1A(a) after (whichever applies). (B) Section 904(d)(2)(F) is amended by adding at the end the following: For purposes of the first sentence of this subparagraph, in the case of an estate or trust, the highest rate of tax specified in section 1 shall be treated as being equal to the sum of such rate and the rates in effect under paragraphs (1) and (2) of section 59B(a).. (3) Election by individuals to be subject to tax at corporate rates Section 962(a)(1) is amended by striking and 55 and inserting 55, and 59B. (4) Interest on certain tax deferral Section 1291(c)(2) is amended by adding at the end the following: For purposes of the preceding sentence, in the case of an estate or trust, the highest rate of tax in effect under section 1 shall be treated as being equal to the sum of such rate and the rates in effect under paragraphs (1) and (2) of section 59B(a).. (5) Withholding of tax on foreign partners’ share of effectively connected income Section 1446(b)(2) is amended by adding at the end the following flush sentence: For purposes of subparagraph (A), in the case of a partner which is an estate or trust, the highest rate of tax in effect under section 1 shall be treated as being equal to the sum of such rate and the rates in effect under paragraphs (1) and (2) of section 59B(a).. (6) Partnership adjustments (A) Section 6225(b)(1) is amended by adding at the end the following flush sentence: For purposes of subparagraph (B), in the case of an estate or trust, the highest rate of tax in effect under section 1 shall be treated as being equal to the sum of such rate and the rates in effect under paragraphs (1) and (2) of section 59B(a).. (B) Section 6225(c)(4)(A) is amended— (i) by striking subsection (b)(1)(A) and inserting subsection (b)(1)(B), and (ii) by striking or at the end of clause (i), by adding or at the end of clause (ii), and by inserting after clause (ii) the following new clause: (iii) is not an estate or trust subject to one or both of the rates of tax in effect under paragraphs (1) and (2) of section 59B(a),. (7) Required payments for entities electing not to have required taxable year The second sentence of section 7519(b) is amended by inserting and, in the case of an estate or trust, increased by the sum of the rates in effect under paragraphs (1) and (2) of section 59B(a) before the period at the end. (c) Clerical amendment The table of parts for subchapter A of chapter 1 is amended by adding at the end the following new item: PART VIII—Surcharge on high income estates and trusts. (d) Effective date The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.