Estate Tax Set to Expire (Temporarily) as Congress Waits

Posted on September 21, 2009 by Karen Meckstroth

As we enter the last quarter of 2009, the future of the federal estate tax remains uncertain. 

  • Will the estate tax be repealed for a year in 2010?  (Doubtful.) 
  • Will Congress enact major tax legislation by the end of 2009?  (Also doubtful -- more likely, we will see a one-year fix to avoid repeal in 2010.) 
  • Will the federal estate tax exemption revert to $1,000,000 in 2011 or will Congress increase the exemption, perhaps by freezing the exemption at 2009 levels as suggested by the Obama administration?  (A couple months ago I predicted a $3.5 million exemption, but I have to admit that suspense about this question is building.) 
  • Will the top tax rate be 55% or 45%?  (Probably 45% in 2010 (the one-year quick fix), but who knows about 2011!)

An article appearing in the WSJ --  Estate Tax Faces Its Own Life-and-Death Struggle -- provides a status report:

President Barack Obama and congressional Democrats are united behind an effort to block a scheduled year-end repeal of the estate tax. But prospects are blurred by divisions between the House and Senate over the contours of a restored tax, as well as Capitol Hill's focus on health care . . . .

Officially, Republicans in Congress would like to see it disappear on schedule. . . .  But very few believe that is possible. . . .

[S]harply different bills in the House and Senate could make a long-term solution elusive. With health care and routine spending bills jamming the Senate calendar, an estate-tax fight -- first on the Senate floor, then with the House -- could make passage of a bill virtually impossible this year, House and Senate aides say. Lawmakers likely would fall back on a one-year extension of the current rate and exemption and leave the fight to next year. . . .

Even [Democratic Senator Blanche Lincoln of Arkansas, who is up for re-election in a state where opposition to the estate tax is solid,] has her eyes elsewhere. 'Our complete focus is on health care,' said Ben Portis, a spokesman for the senator. 'On the estate tax, there will be a time and place.'

Thank you to Professor Paul Caron, author of the Tax Prof Blog, for posting a summary of the WSJ article earlier today.

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Short-Term Fix to Estate Tax Seems More Likely

Posted on September 15, 2009 by Karen Meckstroth

David Shulman writes today in his South Florida Estate Planning Law blog about an article from The Hill that adds to the growing speculation that Congress will enact a one-year extension of current estate tax rates and postpone a permanent fix until next year: 

A split among Democrats and a busy fall agenda is likely to have lawmakers hold off this year on debating the future of the estate tax, even though it expires at the end of the year.

Experts and aides say a more realistic scenario involves Congress passing a one-year extension and then tackling the issue as part of broader tax reform next year.
 

Representative Pomeroy is holding out hope that there is time to enact new estate tax legislation this year:

Rep. Earl Pomeroy (D-N.D.), a senior member of the House Ways and Means Committee, said that the House tax-writing panel should consider a long-term solution this month or in October.

Pomeroy said lawmakers should do “something meaningful with the estate tax issue for the American people and eliminate the uncertainty of the present tax code.” Pomeroy said he has been asked by Ways and Means Committee Chairman Charles Rangel (D-N.Y.) to prepare new estate tax legislation for the panel.

 

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