Wealth Law Blog : Oregon Asset Protection Lawyers & Attorneys : Samuels Yoelin Kantor Seymour & Spinrad Law Firm : OR Estate Planning, Fiduciary Litigation

On December 16, 2009, the Wall Street Journal reported that the Democrats’ attempt to extend the Federal Estate Tax exemption of $3.5 million into 2010 has been blocked by the Republicans. Senator Max Baucus is quoted as saying, “We clearly will work to do this retroactively, so that when the law is changed, it will have retroactive application.” 

The Republicans believe that the repeal should be allowed to take effect as provided under current law, and Senator John Kyl (R, Arizona) stated, “The problem doesn’t have to exist. They’ll just leave the existing law alone and let the rate go to zero, where everyone wants it anyway.”

 Thus, as the law stands today, Federal Estate Tax will be

• zero in 2010;
• with certain exceptions the tax basis step-up will be repealed for 2010;
• The estate tax exemption will return to $1,000,000 in 2011.

It is an interesting and continuing revelation about the extent of the massive gridlock in the current Congress when the Democrats could not even muster enough votes to pass a mere extension of the $3.5 million exemption for the first three months of 2010.

It remains to be seen whether or not enough votes can be mustered to make any estate tax changes in 2010. If the Senate could not pass an estate tax bill with a 60 vote majority, I am skeptical that it will get accomplished in 2010. 

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From time to time, we will publish blurbs on recent local court opinions and state legislation: 

Force v. Dep’t. of Rev., 2008 WL 5191844 (Or.Tax Magistrate Div.) (pdf)

Background: Decedent’s personal representative completed federal and state estate tax returns resulting in no tax owed on decedent’s farm. The state of Oregon issued a notice of deficiency for approximately $27,000. The personal representative argued that the state of Oregon, by statute, had to use the federal valuation method, which would result in $0 in state tax. 

Holding: The federal determination of federal estate tax is not binding upon the state in its separate and distinct calculation of the Oregon inheritance tax. Instead, the state tax imposed is appropriately determined based upon the formula contained in IRC section 2011(b)(1) (2000) as expressly adopted in ORS 118.010(2).

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On October 22^nd, a bill to permanently extend the federal estate tax for 2010 and beyond was introduced by a bipartisan group of Congressional Representatives. All four Representatives are also members of the House Ways and Means Committee – the tax-writing committee in the House. The bill would rescind 2010’s scheduled repeal of the estate tax. In addition, over the next ten years, the bill would increase the federal estate exemption amount and reduce the top estate tax rate as indicated in the table set forth below:

After 2019, the $5 million exemption amount would be indexed for inflation. While the introduction of such legislation is often the last time it sees the light of day, the fact that a bipartisan group (two Democrats and two Republicans) introduced the legislation, combined with their common membership on the Ways and Means Committee, may give the bill some traction. Ultimately, Ways and Means Chairman Charlie Rangel will be instrumental in deciding the nature of any legislation that moves out of the committee. Stay tuned!

I welcome your comments and questions!

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