Applying Estate Tax Retroactively Increasingly Unlikely, Baucus Says
By Brett Ferguson and Heather M. Rothman
Publication Date: 07/28/2010
It is increasingly unlikely that the estate tax will be reinstated retroactively to the start of 2010, Senate Finance Committee Chairman Max Baucus (D-Mont.) told BNA July 27, but lawmakers could permit heirs with modest inheritances to elect to benefit from stepped-up basis rules and other expired provisions.
“Practically speaking, the later that we take up and pass the estate tax law or provision, the more difficult it is to make it retroactive. However, it's possible there could be an election for the executor which would, in effect, make that question moot,” Baucus said.
The 45 percent estate tax expired at the start of 2010, greatly benefitting the heirs of very wealthy individuals, but the expiration also meant that rules created to simplify the treatment of capital gains taxes for heirs also expired, creating a larger tax burden on many middle-class heirs.
Giving individuals the ability to elect to choose between the current expired laws or follow whatever estate tax law is passed would make it easier for many taxpayers and benefit both wealthy and middle-class households, but the proposal would represent a defeat for Democrats like Baucus who have insisted since the start of the year that making the estate tax retroactive would be the best and most consistent tax policy.
Republicans, meanwhile, have been trying to make the repeal of the estate tax permanent but lack the votes for such a plan. An amendment for permanent repeal from Sen. Jim DeMint (R-S.C.) garnered only 39 of the 60 votes needed to add the provision to a bill (H.R. 4213) to extend unemployment benefits.
Estate Tax Tied to Broader Tax Bill
Baucus told BNA that he expects the final estate tax language to be settled as a part of the broader legislation to extend the rest of the roughly $3 trillion in 2001 and 2003 tax cuts. It remains unclear whether a draft of that bill will be released prior to the Senate's August recess, scheduled to begin Aug. 9.
Split Over 2001, 2003 Tax Cuts
Extending the rest of the tax cuts is even more problematic for Democrats, who are split over whether the 2001 and 2003 tax cuts should be extended only temporarily and whether the extension should also apply to the current top individual income tax rate of 35 percent.
Senate Budget Committee Chairman Kent Conrad (D-N.D.) has said he believes that the economy is still too weak for Congress to be raising taxes on anyone, regardless of their income level, and lawmakers can focus on reducing the deficit once the economic recovery has gained a firm foothold.
The complete text of this article can be found in the BNA Daily Tax Report, July 28, 2010. For comprehensive coverage of taxation, pension, budget, and accounting issues, sign up for a free trial or subscribe to the BNA Daily Tax Report today. Learn more »
© 2010, The Bureau of National Affairs, Inc.
