How will H.R. 4154 fare in the Senate?

Earlier on this blog, I reported that on December 3, 2009, the House of Representatives voted today 225 to 200 to retain the 2009 estate tax exemption ($3.5 million) and rates (top rate of 45%) for deaths in 2010 and thereafter.

The question now becomes, “What will happen in the Senate?”

Here are some thoughts from Estate Tax Reform Bill Passes House, Moves to Senate, OMB Watch, Dec. 8, 2009:

Passage of the Pomeroy bill in the Senate is unlikely because several important senators have misgivings about certain provisions. Sens. Max Baucus (D-MT) and Kent Conrad (D-ND), chairs of the Senate Finance and Budget Committees, respectively, argue that Congress should index the tax for inflation, something the Pomeroy bill does not do. Moreover, the Pomeroy bill includes the Statutory Pay-As-You-Go Act of 2009 (H.R. 2920) that would give PAYGO budget rules the force of law in Congress. * * *

Estate tax legislation is therefore likely to go down one of two paths in the Senate. One alternative is for the Senate to bring up legislation similar to the Pomeroy bill, debate it, and pass it. The other option is for the Democratic leadership to tack a one-year estate tax extension onto a likely omnibus appropriations bill that insiders say Congress will pass before the end of 2009. Depending on how congressional events play out, either option is possible.

Some members of Congress have suggested that passing an estate tax bill in 2010 could be a possibility. However, passing legislation then means the government would retroactively apply the estate tax, an extremely rare occurrence * * *. There are also questions about the legality of such a measure, something Congress would like to avoid.

Special thanks to Karen Meckstroth (attorney and author of the Bay Area Wills, Trusts & Probate Report) for bringing this article to my attention.