H.R. 533, “the Opportunity for Family Farms and Small Businesses Act of 2009” was introduced by Rep. Randy Neugebauer, a Republican of Texas. The Bill tries to repeal the estate tax with one sentence, stating, “Section 901 of the Economic Growth and Tax Relief Reconciliation Act of 2001 shall not apply to title V of such Act. ”
In 2001 (before the 9/11 attacks), Congress passed a Bill, signed into law by President Bush, that would “repeal” the estate tax over a period of 10 years. The “applicable exclusion amount” (often mistakenly called the “unified credit”) increased from $600,000 in 2001 to $3,500,000 today. This is the amount of assets that a person can own at their death before their estate is subject to the estate tax.
The law as written provides that in 2010, the estate tax is repealed, but for one year and for one year only. Then, in 2011, the law goes back to what it was in 2001 (after the passage of the act, not before), with the applicable exclusion amount going down to $1,000,000. Also, the rate, that is the percentage amount that an estate has to pay is scheduled to go up too, but that is a topic for another post.
In a simplified example, the law as it is currently written provides that if a person dies in 2009 owning $10,000,000 in assets, their estate will owe $2,925,000 in estate tax. ($10,000,000 minus the $3,500,000 exclusion = $6,500,000, and $6,500,000 X 45% is $2,925,000).
If that same person died in 2010, then the amount of estate tax their estate will owe is zero. That’s why 2010 is being called the “Throw Momma from the Train Year.” In 2011, the exclusion goes back down to $1,000,000 and the rates go up, making the amount owed to Uncle Sam even higher.
Rep. Neugebauer’s bill would take the law as it stands in 2010, and extend it forever.
Nice try, Rep. Neugebauer, but the Democrats control and House, the Senate, and the Presidency, and the economy is down, so it ain’t happening.
I don’t think the law as it stands will happen either. My prediction is that the 2009 rules will be extended into the future, with a possible inflation adjustment.
But permanent repeal is dead.