Letting the estate tax R.I.P.?

It now looks like the move to make the now-dead estate tax retroactive to Jan. 1, 2010, is itself starting to show failing life signs.

The Dow Jones Newswires service reports that Ways and Means Chairman Charles Rangel (D.-N.Y.) is unsure whether there will be legislation to re-impose the federal estate tax retroactive to the first of this year.

This is exactly what I suspected would happen (slide 12 of my presentation this week to Austin CPAs). Of course, I thought
it would be estate tax opponents leading the charge, not the man who
heads the House tax-writing committee and who has been an advocate of
the estate tax.

"I don't like retroactivity, but you never can tell," Rangel told reporters Tuesday evening after a House floor vote.

On the Senate side, however, Finance Committee Chairman Max Baucus (D.-Mont.) is still all for a retroactive estate tax law that will mean the tax remains in effect throughout
2010. Of course, it was the Senate that let the estate tax die, so those folks sort of have to be for cleaning up the mess they made.

Constitutional questions: But what about a retroactive tax? The constitutionality of such a move was the subject of much legal debate as the elimination of the estate tax loomed:

What if estate attorneys act conservatively and cautiously, but Congress does nothing in 2010 or it retroactively reinstates the taxes? What if it ultimately determined that the taxes cannot be retroactively reinstated?  How will we deal with beneficiaries (and plaintiffs lawyers waiting in the wings) who don't have the same concerns as do fiduciaries and their advisers about what might or might not happen in the future?   

Now the discussion has intensified. Some legal scholars say it's not a problem. Others vehemently disagree.

If the estate tax is instituted retroactively, you can bet the final decision will rest with the courts, and probably the U.S. Supreme Court. This is, after all, America, the most litigious society in the world!

And we know what all that means. Estate planners, not to mention grieving families, are going to be kept in tax limbo for a while until all this shakes out.

Related posts:

• Senate pulls the estate tax plug
• First step toward permanent estate tax
• The estate tax, a Dickens of a law
• The heiress, farmer and estate taxes
• Death and taxes will continue
• A tax by any other name
• R.I.P. estate tax … maybe (Bankrate.com)
• Estate tax is back … almost (Eye on the IRS)
• The estate tax is dead (Eye on the IRS)

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