Legislation now being considered by the Senate to extend all of the existing tax rates from the 2001 and 2003 tax cuts retains the major provisions of President Obama's agreement with Republicans, including the 35 percent estate tax rate.
The version under consideration by the Senate now includes an extension of the 45 cents/gal ethanol blenders tax credit through Dec. 31, 2011 and the 54 cents/gal tariff on imported ethanol. The legislation would extend the biodiesel credit retroactively to cover all of 2010 and would be extended through Dec. 31, 2011. The bill extends the $1.00 per gallon production tax credit for biodiesel, the small agri-biodiesel producer credit of 10 cents per gallon and the $1.00 per gallon production tax credit for diesel fuel created from biomass. The $0.50 per gallon alternative fuel tax credit is extended through 2011. A summary of the Senate legislation can be accessed from the NCC website’s Issues area at http://www.cotton.org/issues/index.cfm.
Majority Leader Reid, D-Nev., said he intends to file a cloture motion that would set the Senate up for a Dec. 13 vote to limit debate on the bill. If the cloture motion receives 60 or more votes, Senate passage is virtually assured. House Democrats went on record as rejecting the agreement negotiated by President Obama, and congressional Republicans requested that it not be brought to the House floor.
One amendment that is expected to be offered during the Senate debate would return the estate tax rate to the 2009 level of a 45% rate with a $3.5 million-per-person exemption, compared to the 35 percent rate and $5 million exemption level in the agreement between the President and Republicans. Despite criticism from House Democrats, President Obama and White House officials continued to press their case for passage of a tax compromise negotiated with Republicans, even in the face of opposition by the House Democratic caucus.
Tax Cuts --The bill provides a two-year extension of all of the existing tax rates from the 2001 and 2003 Bush tax cuts for taxpayers, regardless of income. The extension encompasses the 10 percent, 15 percent, 25 percent and 28 percent tax brackets, and part of the 33 percent bracket; the 35 percent bracket, which otherwise would return to 39.6 percent for top earners; capital gains and dividends tax rate cuts, which would otherwise be taxed as ordinary income rates; and the $1,000 child tax credit, education incentives and marriage penalty relief.
Estate Tax --A two-year estate tax fix would reduce the top rate to 35 percent and the exemption level would be increased to $5 million per person. The stepped up basis is preserved, the exemption is indexed to inflation and any unused exemption is transferable to a spouse. Estates of those dying in 2010 are given a choice of the new exemption and rate or current 2010 law (no estate tax and modified carryover basis). In the absence of action, the estate tax rate would return to its pre-2001 level of 55 percent and the exemption level would fall to $1 million per person.
AMT --The alternative minimum tax exemption “patch” is extended for two years under the bill to keep taxes from rising on an additional 20 million taxpayers.
Extenders --A two-year extension is applied to all short-term expired or expiring tax extender provisions, including the research and development tax credit, deductions for state and local taxes, and the subpart F active financing exemption.
Social Security Payroll Tax --The bill cuts two percentage points off of the Social Security payroll tax.