Estate Tax Legislation Update
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Yesterday the U.S. Senate approved an amendment to the Budget Resolution that would extend the 2009 estate tax rate (45%) and exemption ($3.5 million) through 2012. Under current law the estate tax would be “repealed” in 2010, but would return in 2011 with an exemption of only $1 million.
Click “Continue Reading” to view a report from Marshall Jones of West Palm Beach.
2007 ESTATE TAX UPDATE—POSSIBLE FREEZE AT 2009 RATE AND EXEMPTION LEVELS
It appears possible we may see a five year extension of the 2009 estate tax rates and exemptions—45% maximum rate and $3.5 million per spouse exemption—during the current session of Congress. If the Senate’s Budget Resolution amendment regarding estate taxation remains unchanged when they wrap it up on Friday, March 23rd, the Senate Finance Committee will go into its joint meetings with the House Ways and Means Committee with authority to, in effect, freeze the estate tax rates at the 2009 levels. A subsequent attempt by Senator Kyl to reduce the minimum acceptable rate to 35% and the exemption to $5 million failed.
On Wednesday evening, March 21st, the Senate approved an amendment sponsored by Senator Baucus addressing tax issues in the budget by a vote of 97-1. In addition to proposed extensions of middle class tax cuts (including 10% tax rate, child tax credit, marriage penalty, among others), it includes estate reform for Finance Committee consideration that would in essence “freeze 2009” – set a $3.5 million exemption and 45% rate through 2012. This amendment is essentially “paid for” in the budget by the surplus that was generated under the assumptions in the underlying budget resolution. The consideration of the Senate’s budget resolution will continue throughout this week and likely will be wrapped up late Friday.
A subsequent amendment introduced by Senator Kyl failed by a vote of 47-51. It would have allowed the Finance Committee to consider an estate tax proposal with a $5 million exemption and a rate no more than 35%. This amendment also would have extended the capital gains and dividend reductions currently in law. Of note, four Senators who voted against this amendment—Senators Lincoln, Nelson of Nebraska, Nelson of Florida, and Snow—had previously supported more generous reform.
The House and Senate will have to reconcile their two versions of the budget resolution, and if that occurs and the Baucus amendment stays intact through conference, the Finance Committee would then have to put together its tax bill. In consideration of a tax extender bill, the Finance Committee could include other revenue raisers to accommodate additional relief, but finding non-controversial revenue raisers is becoming increasingly difficult. In addition, as noted earlier, the leadership of House Ways and Means Committee may have other priorities that they would rather address (such as longer-term AMT relief) which would provide for an interesting tax policy debate between the two chambers.
