Estate Tax Extension in Flux

House Democratic Leadership and the Ways and Means Committee are discussing plans for advancing estate tax legislation this year.  At issue is whether to extend the current tax rate and exemption level for one-year or enact a permanent fix.  The current estate tax rate is 45 percent with an exemption level of $3.5 million for individuals and $7 million for couples.  If Congress does not act, the rate and exemption level will fall to zero in 2010, only to jump up to a 55 percent and $1 million, respectively, in 2011. Some rank and file committee Democrats favor a one-year extension of the current tax rate and exemption level while promising to address a permanent solution within the context of possible tax reform legislation in 2010.  However, House Democratic Leadership, moderate Democrats and Republicans favor enacting a permanent solution in 2009.  And, among those advocating for a permanent solution, there is considerable support for lowering the tax rate to 35 percent and raising the exemption level to $5 million for individuals and $10 million for couples.  In April, the Senate approved an amendment supporting the lower rate and higher exemption levels in the context of the fiscal year 2010 budget resolution. The cost of the making the estate tax permanent versus a one-year extension is also an issue.  A one-year extension would raise about $1 billion in revenue, whereas making permanent the current levels would cost $256 billion over 10 years.  AGC supports a permanent solution to the estate tax to provide AGC members more certainty in their tax planning.  In a letter to Capitol Hill, AGC signaled support for efforts to lower the estate tax rate and exemption levels. For more information, contact Karen Lapsevic at (202) 547-4733 or lapsevick@agc.org.