Since the passage of the Economic Growth and Tax Relief and Reconciliation Act in 2001, clients and practitioners have been waiting for years for Congress to determine what happens to estate taxes after 2009. The Republicans hoped to completely repeal the estate tax. The Democrats wanted to keep the estate tax but raise the amount that is exempt from estate tax. 


On December 3, 2009, the U.S. House of Representatives passed the Permanent Estate Tax Relief for Families, Farmers, and Small Businesses Act of 2009 a/k/a HR 4154. (For a copy of HR 4154 click here),  which is their vision for federal estate tax reform. What does HR 4154 do?

  • HR 4154 makes the federal estate tax exemption of $3.5 million permanent, however, there are no inflation adjustments;
  • The zero estate tax for 2010 is repealed;
  • The basis step-up provisions which have traditionally been part of the federal estate tax law have been reinstated for 2010; and 
  • The estate tax rate is made permanent at 45%.

The House vote to approve the bill was 225 to 200. No Republicans supported the bill. Speculation continues that any estate tax reform legislation that occurs within the next few weeks will ultimately apply to 2010 only, and the more permanent issues will be decided next year. The stage now turns to the Senate, and it is expected to pass its own version of estate tax reform.