On April 3, 2008, the U.S. Senate Finance Committee held a third hearing about the federal estate tax system, with a focus on its "simplification": Outside the Box on Estate Tax Reform: Reviewing Ideas to Simplify Planning. You can watch a replay of the hearing online here.
This is the information about the hearing provided on the website of the U.S. Senate Finance Committee:
April 3 , 2008, at 10:00 a.m.,
in 215 Dirksen Senate Office Building
Mr. Dennis Belcher, Partner, McGuire Woods LLP, Richmond, VA [Fellow, American College of Trust and Estate Counsel]
Ms. Shirley L. Kovar, Shareholder, Branton & Wilson, APC, San Diego, CA [Fellow, American College of Trust and Estate Counsel, & Chair of its Transfer Tax Study Committee]
Dr. Roby B. Sawyers, North Carolina State University, Department of Accounting, Raleigh, NC
Ms. Diana Aviv, President and Chief Executive Officer, Independent Sector, Washington, DC
Thereafter, on April 4, 2008, CCH's Tax News provided a report about the testimony at this hearing in an article by Jeff Carlson entitled "Finance Panel Mulls Reform of Estate Tax Rules":
By all indications, the Senate Finance Committee is serious about reforming estate tax rules.
On April 3, Committee Chairman Max Baucus, D-Mont., held a third hearing on the subject, ostensibly to get input from experts on where change is most needed in four areas: liquidity; portability; unification of gift and estate taxes; and charitable giving. * * *
Speaking on behalf of the American Institute of Certified Public Accountants (AICPA), Roby B. Sawyers, a practicing CPA and professor in the College of Management at North Carolina State University, took it one step further, suggesting that the estate, generation-skipping transfer (GST) and gift tax exemptions be reunified. * * *
Allowing portability or the transfer of a deceased spouse's unused exemption to the surviving spouse, also met with approval by lawmakers and panelists.
"In my view, portability may be the best estate tax-planning idea for a surviving spouse since the unlimited marital deduction in 1981," stated Shirley L. Kovar, Fellow, American College of Trust and Estate Counsel, Chair, Transfer Tax Study Committee. * * * No one on the panel disagreed.
Dennis I. Belcher, a partner with McGuire Woods LLP, called on Congress to modernize estate tax rules addressing installment payments, saying that business owners have changed the way they do business since the installment payment provision was enacted in 1976. * * *
Baucus, for his part, seemed surprised at the panelists' calls for "tweaking" the current laws, rather than making major changes. In his opening statement, he noted that "we seriously need reform," but the panelists' apparent lack of fire was disconcerting.
Nevertheless, the five lawmakers present at the hearing were anxious to let the public know they are going to take action.
Senate Minority Leader Jon Kyl, R-Ariz., informed panelists that lawmakers have some ideas of their own and are looking at a unified estate tax credit, lower estate tax rates and "some" technical changes. Specifically, Kyl said that the committee is considering raising the tax credit to $5 million, or indexing it to inflation, and taking homes out of the equation. * * *
Lincoln responded that the committee would digest the panelists' suggestions and soon begin drafting estate tax reform legislation.
Hopefully, your ideas will give us some momentum," added Kyl.
However, WebCPA posted an excellent article that considered changing political views towards wealth transfer taxes that, instead, favor simplicity and predictability, entitled "Lawmakers mull reform options for estate tax", b
Racing to find political common ground on estate tax policy before the Bush administration tax cuts expire, congressional leaders are urging Republicans and Democrats to “think outside the box” when considering reforms.
Among the alternatives placed on the table for discussion during recent Senate Finance Committee hearings: proposals to tax the beneficiaries of inheritances, rather than estates, as well as options under which estate taxes would be levied based on the heir’s “access to sophisticated tax advice.”
Representatives of the accounting profession, however, remained squarely inside the box in issuing their recommendations for estate tax reform to the committee. * * *
The article noted that the "outside the box" reference in the title of the third hearing was more than a catch phrase; it signals a new direction by lawmakers:
Senate Finance Committee Chairman Max Baucus, D-Mont., however, made it clear that with the current estate tax scheduled to be eliminated altogether in 2010 and then be resurrected at an even higher rate a year later, the time for tinkering with the Tax Code was over.
“Usually when people talk about the estate tax ... they talk about a little change here and a little change there, as though they were tuning a radio,” he said. “In this hearing, we put the old radio aside and we’re going to take a look outside of the box.”
Calling the present law “complicated, intimidating to small businesses, and lacking in certainty for the American people,” Baucus said that the committee needed to focus on more creative approaches to estate tax reform. * * *
Sen. Chuck Grassley's statement at the April 3rd hearing, as posted by LexisNexis News online under the headline "Estate tax reform mark-up necessary"), noted his intentions:
I again would like to thank the chairman for holding these hearings, but I also would like to urge the committee to move quickly toward a mark up of an estate tax bill at its earliest convenience.For information regarding the prior two hearings held by the U.S. Senate Finance Committee and research done for that Committee, see: EE&F Law Blog postings "US Senate Fin Cte to Hear FET Alternatives" (03/11/08); "CRS Summarizes Seven FET Proposals" (03/03/08); and "Joint Tax Cte's Report & Hearing on Federal Estate Tax" (11/14/07).
We need a bill which will simplify the estate tax as well as make those changes more permanent to provide individuals certainty and simplicity regarding the settling of their estate. A bill of this kind will ease anxiety and allow individuals to reinvest their money into their businesses and the economy as opposed to paying attorneys to keep their assets away from the government.
If we can accomplish this goal it will be a great success to show we averted the potential disastrous effect of 2011 and helped to simplify the estate tax code to the benefit of our constituents.
On April 2, 2008, Prof. Gerry Beyer had made reference on the Wills, Trusts & Estates Prof Blog to a report, dated April 2, 2008 (PDF, 51 pages), prepared for the April 3rd hearing by the U.S. Senate Finance Committee, in a posting entitled "Joint Committee on Taxation Report on Possible Areas of Tax Reform", as follows:
The staff of the Joint Committee on Taxation has prepared a document entitled Taxation of Wealth Transfers Within a Family: A Discussion of Selected Areas for Possible Reform. This report was scheduled for a public hearing before the Senate Committee on Finance on April 3, 2008. * * *
Ronald D. Aucutt is an Fellow of the American College of Trust & Estate Counsel, in Virginia & the District of Columbia, and a partner in McGuireWoods LLP, who writes a series of "Capitol Letters" posted publicly by ACTEC on its website.
The most recent editions (Nos. 7, 8, & 9) track & explain the renewed examination of the federal wealth transfer tax system, and provide many source links:
- No. 7 - December 14, 2007-- FINANCE COMMITTEE STARTS TO STUDY THE ESTATE TAX AGAIN
- No. 8 - January 3, 2008 -- THE RETURN OF CONGRESS & THE CHALLENGE OF THE ESTATE TAX
- No. 9 - April 7, 2008 -- SENATE HEARINGS KEEP ESTATE TAX REFORM HOPES ALIVE
The "back to basics" inquiries initiated by the U.S. Senate Finance Committee included the federal income tax during its hearing on April 15, 2008. See: PA EE&F Law Blog posting "Fundamentals of Taxation, before Reform" (04/18/08).