Estate Tax Reform Likely Postponed Until 2010

The situation on estate tax reform has been very fluid on Capitol Hill over the past several days. As we reported on Sunday, late last week Senate and House leaders, recognizing that their procrastination on the issue had left few options, began to negotiate the inclusion of a temporary extension of the estate tax at current levels in the “must-pass” defense appropriations bill. Over the past 48 hours, those negotiations fell apart in the absence of an agreement on the duration of the measure. Some leaders had proposed a one-year freeze, others a two-year provision, and still others a two to three month extension. Consequently, the defense appropriations bill passed the House today without an estate tax provision.

On the Senate side, Democratic leaders attempted to move a three-month extension on the floor, but they were blocked by Republicans. House and Senate leaders now have indicated that they do not expect estate tax reform to happen this year (meaning the estate tax would officially expire on December 31) and have insisted they will pass legislation next year retroactively applying the tax.

Since at least one chamber of Congress is expected to remain in session through December 23, anything could still happen, but it is increasingly likely that legislative action will be postponed until 2010 and that the leadership will push for retroactivity at that time.

We will keep you posted.

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