text: SECTION 1. SHORT TITLE.
  
      This Act may be cited as the ``Estate Tax Repeal Acceleration 
  (ExTRA) for Family-Owned Businesses and Farms Act''.
  
  SEC. 2. REPEAL OF ESTATE TAX ON FAMILY-OWNED BUSINESSES AND FARMS.
  
      (a) Carryover Business Interest Exclusion.--Part IV of subchapter A 
  of chapter 11 of the Internal Revenue Code of 1986 (relating to taxable 
  estate) is amended by inserting after section 2058 the following new 
  section:
  
  ``SEC. 2059. CARRYOVER BUSINESS INTERESTS.
  
      ``(a) General Rules.--
              ``(1) Allowance of deduction.--For purposes of the tax 
          imposed by section 2001, in the case of an estate of a decedent 
          to which this section applies, the value of the taxable estate 
          shall be determined by deducting from the value of the gross 
          estate the adjusted value of the carryover business interests 
          of the decedent which are described in subsection (b)(2).
              ``(2) Application of carryover basis rules.--With respect 
          to the adjusted value of the carryover business interests of 
          the decedent which are described in subsection (b)(2), the 
          rules of section 1023 shall apply.
      ``(b) Estates to Which Section Applies.--
              ``(1) In general.--This section shall apply to an estate 
          if--
                      ``(A) the decedent was (at the date of the 
                  decedent's death) a citizen or resident of the United 
                  States,
                      ``(B) the executor elects the application of this 
                  section under rules similar to the rules of paragraphs 
                  (1) and (3) of section 2032A(d) and files the agreement 
                  referred to in subsection (e), and
                      ``(C) during the 8-year period ending on the date 
                  of the decedent's death there have been periods 
                  aggregating 5 years or more during which--
                              ``(i) the carryover business interests 
                          described in paragraph (2) were owned by the 
                          decedent or a member of the decedent's family, 
                          and
                              ``(ii) there was material participation 
                          (within the meaning of section 2032A(e)(6)) by 
                          the decedent, a member of the decedent's 
                          family, or a qualified heir in the operation of 
                          the business to which such interests relate.
              ``(2) Includible carryover business interests.--The 
          carryover business interests described in this paragraph are 
          the interests which--
                      ``(A) are included in determining the value of the 
                  gross estate,
                      ``(B) are acquired by any qualified heir from, or 
                  passed to any qualified heir from, the decedent (within 
                  the meaning of section 2032A(e)(9)), and
                      ``(C) are subject to the election under paragraph 
                  (1)(B).
              ``(3) Rules regarding material participation.--For purposes 
          of paragraph (1)(C)(ii)--
                      ``(A) in the case a surviving spouse, material 
                  participation by such spouse may be satisfied under 
                  rules similar to the rules under section 2032A(b)(5),
                      ``(B) in the case of a carryover business interest 
                  in an entity carrying on multiple trades or businesses, 
                  material participation in each trade or business is 
                  satisfied by material participation in the entity or in 
                  1 or more of the multiple trades or businesses, and
                      ``(C) in the case of a lending and finance business 
                  (as defined in section 6166(b)(10)(B)(ii)), material 
                  participation is satisfied under the rules under 
                  subclause (I) or (II) of section 6166(b)(10)(B)(i).
      ``(c) Adjusted Value of the Carryover Business Interests.--For 
  purposes of this section--
              ``(1) In general.--The adjusted value of any carryover 
          business interest is the value of such interest for purposes of 
          this chapter (determined without regard to this section), as 
          adjusted under paragraph (2).
              ``(2) Adjustment for previous transfers.--The Secretary may 
          increase the value of any carryover business interest by that 
          portion of those assets transferred from such carryover 
          business interest to the decedent's taxable estate within 3 
          years before the date of the decedent's death.
      ``(d) Carryover Business Interest.--
              ``(1) In general.--For purposes of this section, the term 
          `carryover business interest' means--
                      ``(A) an interest as a proprietor in a trade or 
                  business carried on as a proprietorship, or
                      ``(B) an interest in an entity carrying on a trade 
                  or business, if--
                              ``(i) at least--
                                      ``(I) 50 percent of such entity is 
                                  owned (directly or indirectly) by the 
                                  decedent and members of the decedent's 
                                  family,
                                      ``(II) 70 percent of such entity is 
                                  so owned by members of 2 families, or
                                      ``(III) 90 percent of such entity 
                                  is so owned by members of 3 families, 
                                  and
                              ``(ii) for purposes of subclause (II) or 
                          (III) of clause (i), at least 30 percent of 
                          such entity is so owned by the decedent and 
                          members of the decedent's family.
          For purposes of the preceding sentence, a decedent shall be 
          treated as engaged in a trade or business if any member of the 
          decedent's family is engaged in such trade or business.
              ``(2) Lending and finance business.--For purposes of this 
          section, any asset used in a lending and finance business (as 
          defined in section 6166(b)(10)(B)(ii)) shall be treated as an 
          asset which is used in carrying on a trade or business.
              ``(3) Limitation.--Such term shall not include--
                      ``(A) any interest in a trade or business the 
                  principal place of business of which is not located in 
                  the United States,
                      ``(B) any interest in an entity, if the stock or 
                  debt of such entity or a controlled group (as defined 
                  in section 267(f)(1)) of which such entity was a member 
                  was readily tradable on an established securities 
                  market or secondary market (as defined by the 
                  Secretary) at any time,
                      ``(C) that portion of an interest in an entity 
                  transferred by gift to such interest within 3 years 
                  before the date of the decedent's death, and
                      ``(D) that portion of an interest in an entity 
                  which is attributable to cash or marketable securities, 
                  or both, in any amount in excess of the reasonably 
                  anticipated business needs of such entity.
          In any proceeding before the United States Tax Court involving 
          a notice of deficiency based in whole or in part on the 
          allegation that cash or marketable securities, or both, are 
          accumulated in an amount in excess of the reasonably 
          anticipated business needs of such entity, the burden of proof 
          with respect to such allegation shall be on the Secretary to 
          the extent such cash or marketable securities are less than 35 
          percent of the value of the interest in such entity.
              ``(4) Rules regarding ownership.--
                      ``(A) Ownership of entities.--For purposes of 
                  paragraph (1)(B)--
                              ``(i) Corporations.--Ownership of a 
                          corporation shall be determined by the holding 
                          of stock possessing the appropriate percentage 
                          of the total combined voting power of all 
                          classes of stock entitled to vote and the 
                          appropriate percentage of the total value of 
                          shares of all classes of stock.
                              ``(ii) Partnerships.--Ownership of a 
                          partnership shall be determined by the owning 
                          of the appropriate percentage of the capital 
                          interest in such partnership.
                      ``(B) Ownership of tiered entities.--For purposes 
                  of this section, if by reason of holding an interest in 
                  a trade or business, a decedent, any member of the 
                  decedent's family, any qualified heir, or any member of 
                  any qualified heir's family is treated as holding an 
                  interest in any other trade or business--
                              ``(i) such ownership interest in the other 
                          trade or business shall be disregarded in 
                          determining if the ownership interest in the 
                          first trade or business is a carryover business 
                          interest, and
                              ``(ii) this section shall be applied 
                          separately in determining if such interest in 
                          any other trade or business is a carryover 
                          business interest.
                      ``(C) Individual ownership rules.--For purposes of 
                  this section, an interest owned, directly or 
                  indirectly, by or for an entity described in paragraph 
                  (1)(B) shall be considered as being owned 
                  proportionately by or for the entity's shareholders, 
                  partners, or beneficiaries. A person shall be treated 
                  as a beneficiary of any trust only if such person has a 
                  present interest in such trust.
      ``(e) Agreement.--The agreement referred to in this subsection is a 
  written agreement signed by each person in being who has an interest 
  (whether or not in possession) in any property designated in such 
  agreement consenting to the application of this section with respect to 
  such property.
      ``(f) Other Definitions and Applicable Rules.--For purposes of this 
  section--
              ``(1) Qualified heir.--The term `qualified heir' means a 
          United States citizen who is--
                      ``(A) described in section 2032A(e)(1), or
                      ``(B) an active employee of the trade or business 
                  to which the carryover business interest relates if 
                  such employee has been employed by such trade or 
                  business for a period of at least 10 years before the 
                  date of the decedent's death.
              ``(2) Member of the family.--The term `member of the 
          family' has the meaning given to such term by section 
          2032A(e)(2).
              ``(3) Applicable rules.--Rules similar to the following 
          rules shall apply:
                      ``(A) Section 2032A(b)(4) (relating to decedents 
                  who are retired or disabled).
                      ``(B) Section 2032A(e)(10) (relating to community 
                  property).
                      ``(C) Section 2032A(e)(14) (relating to treatment 
                  of replacement property acquired in section 1031 or 
                  1033 transactions).
                      ``(D) Section 2032A(g) (relating to application to 
                  interests in partnerships, corporations, and trusts).
              ``(4) Safe harbor for active entities held by entity 
          carrying on a trade or business.--For purposes of this section, 
          if--
                      ``(A) an entity carrying on a trade or business 
                  owns 20 percent or more in value of the voting 
                  interests of another entity, or such other entity has 
                  15 or fewer owners, and
                      ``(B) 80 percent or more of the value of the assets 
                  of each such entity is attributable to assets used in 
                  an active business operation, then the requirements 
                  under subsections (b)(1)(C)(ii) and (d)(3)(D) shall be 
                  met with respect to an interest in such an entity.''.
      (b) Carryover Basis Rules for Carryover Business Interests.--Part 
  II of subchapter O of chapter 1 of the Internal Revenue Code of 1986 
  (relating to basis rules of general application) is amended by 
  inserting after section 1022 the following new section:
  
  ``SEC. 1023. TREATMENT OF CARRYOVER BUSINESS INTERESTS.
  
      ``(a) In General.--Except as otherwise provided in this section--
              ``(1) qualified property acquired from a decedent shall be 
          treated for purposes of this subtitle as transferred by gift, 
          and
              ``(2) the basis of the person acquiring qualified property 
          from such a decedent shall be the lesser of--
                      ``(A) the adjusted basis of the decedent, or
                      ``(B) the fair market value of the property at the 
                  date of the decedent's death.
      ``(b) Qualified Property.--For purposes of this section, the term 
  `qualified property' means the carryover business interests of the 
  decedent with respect to which an election is made under section 
  2059(b)(1)(B).
      ``(c) Property Acquired From the Decedent.--For purposes of this 
  section, the following property shall be considered to have been 
  acquired from the decedent:
              ``(1) Property acquired by bequest, devise, or inheritance, 
          or by the decedent's estate from the decedent.
              ``(2) Property transferred by the decedent during his 
          lifetime--
                      ``(A) to a qualified revocable trust (as defined in 
                  section 645(b)(1)), or
                      ``(B) to any other trust with respect to which the 
                  decedent reserved the right to make any change in the 
                  enjoyment thereof through the exercise of a power to 
                  alter, amend, or terminate the trust.
              ``(3) Any other property passing from the decedent by 
          reason of death to the extent that such property passed without 
          consideration.
      ``(d) Coordination With Section 691.--This section shall not apply 
  to property which constitutes a right to receive an item of income in 
  respect of a decedent under section 691.
      ``(e) Certain Liabilities Disregarded.--
              ``(1) In general.--In determining whether gain is 
          recognized on the acquisition of property--
                      ``(A) from a decedent by a decedent's estate or any 
                  beneficiary other than a tax-exempt beneficiary, and
                      ``(B) from the decedent's estate by any beneficiary 
                  other than a tax-exempt beneficiary, and in determining 
                  the adjusted basis of such property, liabilities in 
                  excess of basis shall be disregarded.
              ``(2) Tax-exempt beneficiary.--For purposes of paragraph 
          (1), the term `tax-exempt beneficiary' means--
                      ``(A) the United States, any State or political 
                  subdivision thereof, any possession of the United 
                  States, any Indian tribal government (within the 
                  meaning of section 7871), or any agency or 
                  instrumentality of any of the foregoing,
                      ``(B) an organization (other than a cooperative 
                  described in section 521) which is exempt from tax 
                  imposed by chapter 1,
                      ``(C) any foreign person or entity (within the 
                  meaning of section 168(h)(2)), and
                      ``(D) to the extent provided in regulations, any 
                  person to whom property is transferred for the 
                  principal purpose of tax avoidance.
      ``(f) Regulations.--The Secretary shall prescribe such regulations 
  as may be necessary to carry out the purposes of this section.''.
      (c) Clerical Amendments.--
              (1) The table of sections for part IV of subchapter A of 
          chapter 11 of the Internal Revenue Code of 1986 is amended by 
          inserting after the item relating to section 2058 the following 
          new item:
  
  ``Sec. 2059. Carryover business exclusion.''.
              (2) The table of sections for part II of subchapter O of 
          chapter 1 of such Code is amended by inserting after the item 
          relating to section 1022 the following new item:
  
  ``Sec. 1023. Treatment of carryover business interests.''.
      (d) Effective Dates.--The amendments made by this section shall 
  apply to estates of decedents dying, and gifts made--
              (1) after the date of the enactment of this Act, and before 
          January 1, 2010, and
              (2) after December 31, 2010.
target: Estate Tax Repeal Acceleration (ExTRA) for Family-Owned Businesses and Farms Act - Amends the Internal Revenue Code to revise the estate tax exclusion provisions applicable to family-owned business interests.
  
  Allows an exclusion from the gross estate for the adjusted value of certain family business interests acquired from a decedent (carryover business interests). Defines "carryover business interests" and revises ownership requirements and material participation rules applicable to such interests.
  
  Provides that carryover business interests acquired from a decedent shall be treated as transferred by gift and that the basis of such property shall be the lesser of the adjusted basis of the decedent, or the fair market value of such property at the date of the decedent's death (thus eliminating the estate tax on such property).
feat_title: A bill to amend the Internal Revenue Code of 1986 to provide for the immediate and permanent repeal of the estate tax on family-owned businesses and farms, and for other purposes.