Nearly thirty bills have been introduced in the 111th Congress to repeal or revise the estate and gift taxes, but no real effort has been made to move such legislation through either the House or Senate taxwriting committees. This is because the legislative agendas have been dominated by health care and, additionally, other issues such as climate change, regulatory reform, and expiring tax provisions are waiting in the wings.

Since 2000, AALU has been the lead driver for permanent and sustainable reform. We support an exemption level of $2.5 - $3.5 million with a 45% rate, and we have been the primary advocate for reunification of the estate and gift taxes.

Currently, there is an undue amount of complexity and uncertainty around estate planning and a perverse incentive for families and business owners to hold assets until death, primarily to capitalize on the larger exemption level and step up in basis. Reunification would enable life insurance professionals to provide new planning opportunities and sell life insurance to fund those vehicles.

The budget proposed by President Barack Obama assumes that the 2009 rates (an exemption level of $3.5 million and a 45% rate) will be made permanent, and the preliminary analysis by the Congressional Budget Office (CBO), released March 2009, revealed the cost would be $256 billion. This amount did not include reunification, which made lobbying efforts challenging in a revenue hungry environment.

An even newer report from the CBO, however, reveals exciting new numbers that the 2009 rates with reunification of the estate and gift taxes would cost only $238 billion. The reduced cost could be for a number of reasons, one of which involves the devaluation of estates throughout 2009. Thus, our message is that Congress can and should enact permanent reform this year with reunification.

Most of September and October will be spent hammering out differences over health care. Nonetheless, as the end of 2009 approaches, Congress must deal with the estate tax. As the agenda remains cluttered, a one-year extension of the 2009 estate tax provisions remains the most likely option for Congress at this time. It is possible that the House could pass a one-year extension bill at $3.5 million and 45% in late September, early October, and send to the Senate thereafter.

That being said, Senate Finance Committee ranking Republican Charles Grassley (R-IA) has argued that Republicans in the Senate could filibuster a Democrat-drafted estate tax bill, thus giving Republicans leverage. He and other Republicans would like to see a lower rate and higher exemption amount.

In any case, Congress has had nearly nine years to relieve the public of estate tax ambiguity, and here we are four months before the 2010 repeal, still undecided. AALU will keep you abreast of all developments and advocate for your interests as we enter the final countdown.