Estate Tax Legislation

H.R. 4853 (Middle Class Tax Relief Act of 2010)

The bipartisan tax compromise package passed at the end of 2010 included some much needed estate tax relief provisions for our nation's family businesses. This is the most significant legislative victory for our coalition in nearly a decade.

The Middle Class Tax Relief Act of 2010

H.R. 4853 provides family-owned businesses with substantial relief and moves us one step closer to the Family Business Estate Tax Coalition’s goal of full repeal of this onerous tax before the estate tax returns to the 2001 rate of 55% with a $1 million exemption in two years.

Key provisions of current law include:

• An exemption of $5 million, effective January 1, 2011 for two years
• The exemption amount is indexed for inflation beginning in 2012
• A top tax rate of 35 percent, effective January 1, 2011 for two years
• The enactment of the “stepped-up basis” to reflect the increase in the value of assets
• Spousal transfer of any unused exemption amounts, effective January 1, 2011 for two years

If Congress fails to act, after 2012 the top estate tax rate will increase to 55 percent with a $1 million exemption and the spousal transfer will disappear. Because permanent repeal of the estate tax may not be attainable during this Congress, the FBETC supports permanently extending current law with a 35 percent top tax rate and $5 million exemption and believes it will bring the certainty that businesses need now.

The Impact on Family Business