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Days Numbered for Senate to Move on Estate Tax Relief
Shortly before leaving Washington for its August recess, the Senate blocked a motion to consider legislation that would provide permanent relief on estate taxes, increase the minimum wage and extend numerous expiring business tax breaks.
By a vote of 56-42, lawmakers on Aug. 3 defeated a motion to vote on H.R. 5970, the "Estate Tax and Extension of Tax Relief Act of 2006." Sixty votes were needed to move the measure forward. Although the bill was approved by the House on July 28, Senate Democrats objected to linking a vote on boosting the minimum wage with cutting estate taxes.
Senators from both parties expressed an interest in considering certain tax break extensions separately when they return, but the fate of a tax-cut package remains unclear.
Prior to the Senate vote, NAHB sent a letter to Senate Majority Leader Bill Frist (R-Tenn.) in support of the bill and advised every senator that the association would consider the effort to move the tax measure forward as a “key vote” in their voting record on housing-related concerns.
In a procedural move, Frist changed his vote to “no” so that he would retain his right under Senate rules to bring up the bill again.
Key components of the estate tax provisions in H.R. 5970 would:
- Set Jan. 1, 2010 as the effective date for the legislation.
- Phase in the increase of the estate and gift tax exemption amount to $5 million per person and $10 million for couples. The exemption would start at $3.7 million in 2010 and gradually rise to $5 million on Jan. 1, 2015, at which point it would be indexed for inflation.
- Require estates valued between $10 and $25 million to be taxed at the capital gains tax rate (currently 15%, set to increase to 20% in 2011 unless extended). The estate values would be indexed for inflation.
- Stipulate that estates valued in excess of $25 million be indexed for inflation and subject to a phased-in reduced tax of 30%. The initial tax rate of 40% in 2010 would gradually decline to 30% by Jan. 1, 2015.
- Eliminate the deduction for state estate taxes as of Jan. 1, 2010.
The bill also contains other provisions of interest to the home building industry, including:
- An extension of the placed-in-service date for residential rental property (among other types of property) in the Gulf Opportunity Zone (GO-Zone) used for qualifying for bonus depreciation
- An expansion of the Section 199 manufacturing deduction to Puerto Rico
- An extension and expansion of the New Markets Tax Credit
- An extension of sales tax deductibility, including state and local sales taxes on home building and improvement supplies
- An extension of the brownfield expensing rules
- Permanent improvements to the Mortgage Revenue Bond (MRB) program
- A waiver of the first-time home buyer requirements for veterans in the MRB program
- A one-year tax deduction for private mortgage insurance
The goal of creating this “trifecta” bill was to draw support for the estate tax provision through inclusion of the minimum wage increase and the tax credit extenders.
Senate leaders have indicated that they would like to bring the legislation back to the Senate floor in September, although the limited number of days the Senate will be in session prior to the fall elections makes this an uncertainty.
To view the legislation, click here and enter the bill number in the box in the center of the page.
For more information, e-mail Greg Brown at NAHB, or call him at 800-368-5242 x8421.
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