House Passes Pomeroy Bill to Provide Permanent Estate Tax Relief to 99.75% of Estates
Thursday, December 03, 2009
Washington, D.C. – Nearly every family, farmer and small business in America will be exempt from paying any estate tax under the bill authored by Congressman Earl Pomeroy and passed by the House today. H.R. 4154, the Permanent Estate Tax Relief for Families, Farmers, and Small Businesses Act of 2009, would make permanent the 2009 estate tax exemption level of $3.5 million for an individual ($7 million for a married couple) and a maximum tax rate of 45%. Additionally, the bill maintains the so-called “step-up in basis” tax rules, which protect many heirs from paying additional capital gains taxes on inherited assets.
“It is time to bring certainty to the estate tax so families across the country can properly plan for their estates. By making the 2009 estate tax level permanent we are addressing the uncertainty of not just next year, but of the years to follow,” Congressman Pomeroy said. “This bill provides the certainty families need to make long-term decisions and avoid the estate planning roller coaster that will result from current law.”
For calendar year 2009, the estate tax exemption amount is $3.5 million ($7 million total for a married couple) and the maximum tax rate on estates is 45%. H.R. 4154 would permanently extend this estate tax exemption amount and tax rate. Absent this change, the estate tax is scheduled to enter one year of full repeal in 2010 followed by a return of the estate tax in 2011 with much lower exemption amount ($1 million) and a much higher maximum tax rate (55%). In addition, the one year of estate tax repeal was coupled with enactment of so-called “carryover basis” tax rules, which will require heirs in 2010 to pay capital gains taxes on inherited assets based on the decedent’s original purchase price. Under step-up in basis rules, continued under H.R 4154, the value of the asset is calculated at the time of the decedent’s death. Preserving the step-up in basis rules will protect small businesses from paying an estimated $34 billion in capital gains taxes.
This bill is good for farmers and small businesses. According to the United States Department of Agriculture’s Economic Research Service, the $7 million exemption for couples will help the vast majority of family farmers, as the average farm household net worth ranged from $586,000 for small farms to $2.2 million for very large farms in 2008. Only 100 small business and farm estates would owe any estate tax in 2010 if the 2009 rules were extended, according to the Center on Budget and Policy Priorities.
“By making the 2009 estate tax level permanent, we will make the estate tax go away for 99.75 percent of all percent of families, farmers, and small businesses in this country. It’s time to resolve this issue once and for all, and this bill is the fair way to do it,” Congressman Pomeroy added.
