Senators Introduce Retroactive Estate Tax BillSenators Bernard Sanders (I-VT), Sheldon Whitehouse (D-RI) and Tom Harkin (D-IA) introduced the Responsible Estate Tax Act on June 23, 2010. If passed, it would retroactively reinstate some estate tax provisions, change others and introduce new ones.
Specifically, the Responsible Estate Tax Act would reinstate the federal estate and generation-skipping transfer (GST) taxes and repeal “carryover basis,” effective for gifts made and estates of decedents dying after December 31, 2009. In addition, the bill also proposes a progressive rate structure and a “billionaire’s surtax.”
Some of the key features in the proposed legislation are:
Exemption for the first $3.5 million for individuals and $7 million for couples, which is the same exemption that existed in 2009.
Establishment of a progressive rate structure for larger estates: 45% for estates between $3.5 million and $10 million; 50% for estates between $10 million and $50 million, and 55% for those over $50 million.
Imposition of a 10% surtax (billionaire’s surtax) on the value of an estate above $500 million or $1 billion for couples
Loophole Closers
The bill contains the “loophole closers” contained in the 2011 Fiscal year budget. It would require consistent valuation for transfer and income tax purposes; modify the rules on valuation discounts, particularly with regard to certain non-business, non-publicly traded assets; and require a 10-year minimum term for Grantor Retained Annuity Trusts (GRATs). Some estimates believe closing these loopholes could raise at least $23.7 billion in revenue over 10 years.
Protection for Family Farmers and Landowners
Included in the initial draft is protection for family farmers and other landowners. The value of farmland can currently be reduced up to $1 million for estate tax purposes; this bill increases such reductions to $3 million and indexes it to inflation. In addition, the bill provides tax relief to farmers and other landowners by amending estate tax rules for conservation easements.
The loophole closers and the provisions with respect to farmers and other landowners would be effective as of the date of the enactment.
Still in the Early Stages
This proposal, which is in its very early stages, is both retroactive and progressive. It goes further than most of the other relevant House and Senate bills that have been introduced, without success, in the past year. As with any bill this controversial, it will be debated at length. We will stay on top of it and keep you apprised of its progression.