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Tax reform framework dedicates one line to estate tax repeal
September 29, 2017 at 2:32 PM

Metal wheel with the words "tax reform" on itThe Trump Administration, along with the Senate Committee on Finance and the House Committee on Ways and Means, on Sept. 27, 2017, released the “Unified Framework for Fixing Our Broken Tax Code.” The framework is a consolidation of earlier proposals including the 2018 budget plan and the one-page memo previously released, as well as the Tax Reform Tax Force Blueprint released by House Republicans in 2016.

The framework generally provides as its goal changes to the tax code to provide tax relief for middle-class families, allow for simplified “post card” tax filing, tax relief for businesses, an end to incentives that ship jobs and capital and tax revenue overseas, and seeks to broaden the tax base by stopping special interest tax breaks and closing certain loopholes.

However, also like the other proposals, the framework is short on details. As it states, the proposal is meant to provide a template for the tax-writing committees to prepare tax reform legislation.

The complete proposal can be found here.

With respect to estate tax repeal, the proposal provides only the following: “Death and Generation-Skipping Transfer Taxes: The framework repeals the death tax and the generation-skipping transfer tax.”

As we have seen with the other proposals, left unaddressed is what exactly is meant by the “death tax,” the future of the gift tax, whether or not a carry-over basis regime would be implemented in the absence of an estate tax, or if capital gain could be recognized at death. (See this earlier Q&A on the future of the estate tax).

In addition, there is much uncertainty as to whether a tax reform plan can even be passed in the near future – especially after several failed attempts at repealing the Affordable Care Act (Obamacare). Despite being the minority party in the House and Senate, the Democrats retain the ability to filibuster legislation, requiring compromise on both sides. However, it is possible the Republicans could ultimately pass tax reform as budget reconciliation legislation, which, under what is called the Byrd rule, would need to sunset after 10 years (recall President George W. Bush’s sunset provision on his 2001 tax reform). Under the Byrd rule, any reconciliation legislation that increases the federal deficit beyond a 10-year term is subject to a point of order that can only be waived by 60 votes. As a result, a budget reconciliation bill with any hope of passing will provide for only a 10-year budget, resulting in a 10-year sunset.

Thus, even if the estate tax is repealed, the repeal will likely not be permanent. This will require that any planning consider that the estate tax may not be gone permanently, possibly opening the door to different, creative planning opportunities in light of the 10-year window.

We will continue to monitor the situation and will let you know of any new developments.

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