Tax News

Tax Analysts report:

In an attempt to bridge the gap between Republicans and Democrats on the issue of the estate tax, House Ways and Means Chair William M. Thomas, R-Calif., late June 19 announced the introduction of the Permanent Estate Tax Relief Act of 2006 (H.R. 5638).

It is unclear when the bill will be brought to the House floor, but Senate Majority Leader William H. Frist, R-Tenn., has said his goal is to pass a permanent estate tax fix by the July Fourth recess, which begins July 3.

While estate tax "compromise" negotiations have focused on the Senate, the introduction of Thomas's bill comes following the announcement the week of June 12 from Frist that compromise legislation would originate in the House before being taken up by the Senate. Thomas described that strategy to reporters earlier in the day as a "punt" on the part of the Senate but added that he had been waiting for an opportunity to act.

According to a Ways and Means Committee release, the legislation as introduced would "reunify" the estate, gift, and generation-skipping transfer taxes while permanently raising the estate tax exemption level to $5 million and tying the estate tax rate to the capital gains rate. Currently 15 percent, the capital gains tax rate is scheduled to increase to 20 percent in 2011 unless Congress extends the lower rate.

Under the legislation, estates valued at $25 million or more would be subject to a tax rate of twice the capital gains rate.

Thomas's bill also includes a provision to create a new 60 percent deduction for qualified timber capital gains.