Proposing a constitutional amendment prohibiting the imposition of a tax on the realized or unrealized capital gains of an individual, family, estate, or trust.

Contracts

• Mergers & Acquisitions (M&A): For transactions involving sellers structured as trusts or estates, deal teams should evaluate closing dates. Closing after January 1, 2026, ensures constitutional protection against state-level tax leakage on the proceeds.
• Trust Indentures: Review trust agreements to ensure the definition of "Capital Gains" aligns with federal tax code definitions. This ensures that distributions are automatically categorized correctly to trigger the state-level protection.

Hiring/Training

• Tax Preparation Coordination: In-house tax teams and external CPAs must be instructed to modify the "Total Revenue" calculation for Business Trusts. They must strip realized capital gains from the revenue base for the 2026 report.

Reporting & Record-Keeping

• Fund Segregation: Trusts and Estates must maintain rigorous accounting that separates corpus/capital appreciation from ordinary income (rents, dividends, interest). The amendment prohibits taxing *gains*, but does not prohibit taxing *income*.
• Asset Basis Tracking: Entities must maintain federal-level basis tracking. In the event of a state audit regarding the nature of a transaction (business inventory vs. capital asset), federal definitions will likely control.

Fees & Costs

• Tax Liability Reduction: Business Trusts holding appreciating assets (real estate, IP) will see a reduction in Franchise Tax liability.
• No New Fees: There are no new filing fees associated with this amendment.