CRS report discusses pending congressional bills on estate tax Share Share LinkedIn X Facebook Permalink By Elder Law Prof Blog February 28, 2008 Underprovisions of the Economic Growth and Tax Relief Reconciliation Act of2001 (EGTRRA, P.L. 107-16), the estate tax exclusion is scheduled tocontinue to rise, from $2 million for decedents dying in 2008, to $3.5million in 2009. The estate tax is repealed for decedents dying in 2010only. The gift tax is to remain in place in 2010. In addition, when theestate tax is repealed, there is scheduled to be a significant changein the method used to determine the “basis” of all capital assetstransferred at death — from “step-up in basis” to “modified carryoverbasis.” Whatever basis-valuation rule is in effect for the year ofdeath applies to all capital assets transferred after any person’sdeath, whether or not their estate is large enough to be liable for theestate tax. The estate tax provisions of EGTRRA are scheduled to sunsetat the end of 2010. That explains why the repeal of the estate tax iscurrently scheduled to last for only one year. If Congress does notchange the law beforehand, on January 1, 2011, estate and gift tax lawwill return to what it would have been had EGTRRA never been enacted.The unified estate and gift tax will be reinstated with a combinedexclusion of $1 million. The maximum tax rate will revert (from 45% in2007-2009) to 55%. These large year-to-year differences in the estatetax law mean that wealthy individuals face a wide and erratic variationin their potential estate tax liability over the next four years,2008-2011, depending upon the year they might happen to die. FollowingEGTRRA, the House passed a bill to permanently repeal the estate tax ineach of the past three Congresses, but the Senate did not pass anylegislation addressing the estate tax. In addition, in the secondsession of the 109th Congress, the House passed two bills that wouldhave modified and retained the estate tax. Thus far in the 110thCongress, seven bills to permanently repeal the estate tax have beenintroduced in the House and four in the Senate. Seven bills to retainbut modify the estate tax have been introduced in the House and one inthe Senate. The repeal bills differ on whether or not they wouldpreserve the other changes made by EGTRRA to the taxation of gifts andthe basis for inherited assets. The modification bills differ on thelevel of the exclusion, what year it would take effect, whether or notit would be indexed for inflation, and whether any unused exclusioncould be carried over to the estate of the surviving spouse. They alsodiffer on the tax rates, whether special relief would be given tofamily-owned farms or businesses, and whether the gift tax would bedefined separately from or unified with the estate tax. The U.S.Treasury Department’s February 2008 estimates show the annual revenueloss from total repeal of the estate tax rising steadily from $58billion in FY2012, up to $84 billion in FY2018. Even though estate andgift taxes account for less than 2% of federal revenue, permanentrepeal of the estate tax accounts for one quarter of the estimatedrevenue loss of the Bush Administration’s FY2009 budget proposal tomake permanent the group of tax cuts enacted in 2001 and 2003, measuredover the 10-year forecast period, FY2009-FY2018. This report will beupdated when new estate tax bills are introduced and when new revenueloss estimates become available. Source: Open CRS, http://opencrs.cdt.org/document/RL34374 Posted in: Other