ROBINHOOD Act of 2026
- Sponsor
- Sen. Gallego, Ruben [D-AZ]
- Committees
- Finance Committee (primary)
- Last action
- Jun 2, 2026
Bottom line
The ROBINHOOD Act of 2026 aims to increase tax revenue from the wealthiest Americans by closing a perceived loophole that allows them to borrow against appreciated assets without paying capital gains taxes.
What it actually does
This bill amends the Internal Revenue Code to treat certain loans and long-term leases taken by high-net-worth individuals as a deemed sale of their long-term capital assets. This triggers capital gains tax on an amount of assets equal to the loan value, aiming to prevent the use of such financial instruments to access wealth without realizing taxable income. It defines 'applicable taxpayers' based on high income or asset thresholds and specifies rules for various asset types and entities.
Proponents argue
Proponents argue that the current tax system allows high-net-worth individuals to avoid paying their fair share of taxes by borrowing against their appreciated assets, effectively living off their wealth without ever realizing taxable gains. This bill would ensure that wealth accessed through such loans is subject to capital gains taxation, promoting tax fairness and increasing federal revenue to fund public services. They contend it addresses a significant source of tax avoidance among the ultra-rich.
Opponents contend
Opponents contend that this bill would impose an unfair and potentially unconstitutional 'wealth tax' on unrealized gains, disrupting long-standing tax principles that only tax income upon realization. They argue it would create significant liquidity challenges for high-net-worth individuals, forcing them to sell assets to pay taxes on deemed income, potentially destabilizing markets and hindering investment. Critics also raise concerns about the complexity of valuation for nontradable assets and the administrative burden on taxpayers and the IRS.
The bill is moderately complex, requiring careful reading to understand the definitions of 'applicable taxpayer' and 'covered assets.' The estimated reading time is appropriate for an informed reader to grasp its core mechanisms.
Section 2(a), new IRC Section 1299(a)
Deemed Sale of Long-Term Capital Assets for Applicable Taxpayers
This provision mandates that when an 'applicable taxpayer' receives a loan, an equivalent amount of their long-term capital assets (chosen by the taxpayer) will be treated as if they were sold for their fair market value on the last day of the taxable year the loan was issued. This 'deemed sale' triggers a capital gains tax liability, effectively taxing the appreciation of assets that are used as collateral or are otherwise identified to cover the loan amount, even if no actual sale occurs.
Supporters argue
Supporters argue this provision directly addresses the issue of wealthy individuals avoiding taxes by borrowing against appreciated assets instead of selling them. It ensures that wealth accessed through loans is subject to the same capital gains taxation as wealth accessed through direct sales, promoting fairness in the tax system.
Critics contend
Opponents contend that this constitutes a tax on 'unrealized' gains, which is a fundamental shift in tax policy and could be unconstitutional. They argue it creates a liquidity problem, forcing taxpayers to sell assets to pay taxes on income they haven't actually received, potentially leading to forced asset sales and market instability.
Tradeoffs
This provision balances the goal of tax fairness and increased revenue with concerns about taxing unrealized gains, potential liquidity issues for taxpayers, and the administrative complexity of valuing assets for deemed sales.
Section 2(a), new IRC Section 1299(c)
Restriction on Offsetting Deemed Capital Gains with Losses
This section specifies that any long-term capital gain recognized from the deemed sale of assets due to a loan cannot be reduced or offset by any long-term capital losses incurred in the same taxable year or carried forward from previous years. This means that the capital gains triggered by the deemed sale are fully taxable, regardless of any investment losses the taxpayer might have.
Section 2(a), new IRC Section 1299(f)
Treatment of Leases as Loans
This provision extends the 'deemed sale' rule to certain long-term leases. If an applicable taxpayer enters into a lease for property with a term greater than 5 years, or extends an existing lease to exceed 5 years, or enters into a new lease for substantially identical property, that lease is treated as a loan. The fair market value of the leased property is considered the 'amount of the loan' for purposes of triggering the deemed sale of capital assets.
Section 2(a), new IRC Section 1299(g)
Treatment of Existing Loans
For loans issued to an applicable taxpayer before the bill's enactment date, the total outstanding principal balance as of that date will be treated as a single new loan issued on January 1, 2027. This means that even pre-existing loans will trigger the deemed sale of long-term capital assets, subjecting the associated wealth to capital gains tax after the effective date.
Section 2(a), new IRC Section 1299A
Definition of 'Applicable Taxpayer'
This section defines who qualifies as an 'applicable taxpayer,' the target of the new tax rules. It includes individuals who, for each of the three preceding taxable years, met either an income test (adjusted gross income over $100 million, or $50 million for married filing separately) or an asset test (aggregate value of covered assets over $1 billion, or $500 million for married filing separately). It also includes applicable trusts and estates of former applicable taxpayers, with specific rules for married individuals, foreign persons, and expatriates.
Section 2(a), new IRC Section 1299B
Definitions and Rules for 'Covered Assets' and 'Applicable Value'
This section defines 'covered assets' as both 'tradable' and 'nontradable' assets. Tradable assets include those traded on established markets, readily tradable on secondary markets, or those for which the Secretary can reasonably determine fair market value annually. Nontradable assets include savings plans, cash, private placement life insurance, and qualified opportunity fund investments. It also specifies how to determine the 'applicable value' for these assets, using fair market value for tradable assets and the greatest of several valuation methods (cost basis, adjusted basis, last established value, financial statement value, value for securing debt) for nontradable assets. The aggregate value is reduced by debt and other liabilities.
Leases to 'applicable entities' (partnerships, S corps, etc.) are generally *not* treated as loans for deemed sale purposes, unless the transaction violates the economic substance doctrine.
Section 2(a), new IRC Section 1299(h)(4)
Why it matters:This is likely standard legislative practice to provide specific carve-outs or limitations within broader anti-avoidance rules, acknowledging that some entity-level leases may serve legitimate business purposes. However, it also creates a potential avenue for sophisticated tax planning.
Case for: Supporters would argue this exception prevents legitimate business leases by applicable entities from being unfairly subjected to the deemed sale rules, as such entities often engage in leasing for operational purposes. The economic substance doctrine safeguard ensures that abusive transactions are still caught.
Case against: Critics might argue that this exception for entity-level leases, even with the economic substance doctrine caveat, creates a potential loophole. High-net-worth individuals could structure their leasing activities through applicable entities to avoid the deemed sale, especially if the economic substance doctrine is difficult to apply consistently.
Estimated impact: Potentially allows for significant amounts of wealth to be accessed through entity-level leases without triggering the deemed sale, depending on how strictly the economic substance doctrine is applied and enforced.
Termination of 'applicable taxpayer' status for individuals requires meeting *both* lower income/asset thresholds (half the original amount) for three preceding years *and* making an election not to be treated as an applicable taxpayer.
Section 2(a), new IRC Section 1299A(a)(4)(A)
Why it matters:This is a common legislative technique to ensure that once a taxpayer reaches a certain status, they don't easily cycle in and out due to minor fluctuations. The election requirement adds an administrative step, ensuring intentionality.
Case for: Proponents would argue this ensures stability and prevents strategic manipulation of income or assets to temporarily exit 'applicable taxpayer' status, only to re-enter later. The lower thresholds provide a reasonable off-ramp for those whose wealth genuinely declines.
Case against: Critics might argue that requiring an explicit election, even after meeting lower thresholds, adds unnecessary administrative burden and could trap individuals in 'applicable taxpayer' status longer than warranted, especially if they are unaware of the election requirement.
Estimated impact: Ensures a more consistent application of the deemed sale rules to individuals who have been high-net-worth for an extended period, even if their income or assets dip slightly.