The American College of Trust and Estate Counsel
Talking Points for Meeting with Congressional Staff Members
The Washington Affairs Committee met on October 1, 2012, with 15 congressional staff members, including members of the staffs of the Joint Committee on Taxation and other congressional committees and offices. The following are the “talking points” that were given to staff members and discussed at the meeting.
• End of 2012 Problems
• If a taxpayer allocated GST exemption since 2004, is the inclusion ratio calculated on the basis that GST exemption remains in effect or is it nullified by the “as if [it] had never been enacted” language?
• If taxpayers took advantage of the GST relief provisions in the 2001 act (the availability of section 9100 relief for failure to timely allocate GST exemption, qualified severance, substantial compliance or automatic allocation), are those actions still given effect in 2013 and beyond given the “as if [it] had never been enacted” language?
• If a taxpayer used the unified credit amount in effect in 2011 or 2012 to make gifts, does the benefit of the credit amount get “clawed back” at death if the exemption amount in effect at death is lower than the amount in effect at the time of the gift?
• If a taxpayer made gifts in 2011 or 2012 and then makes additional gifts in a later year, does the statutory language adjust appropriately so that the right amount is taxed at the right rate? (This issue was arguably addressed by the 2010 addition to Section 2505(a), but that provision also sunsets at the end of 2012.)
• Estate and Gift Tax Provisions Unrelated to Rate or Exemption That Should Be Made Permanent
• The GST relief provisions
• The 2001 changes to Section 6166 and conservation easements
• Legislative Issues Unrelated to the 2001 Act
• 9100 Relief For Missed Lifetime QTIP Elections: A proposal to extend relief to taxpayers who fail to timely make a gift tax QTIP election comparable to the relief already provided to executors who fail to make a timely QTIP election on the estate tax return (see ACTEC submission).
• Automatic Lifetime QTIP Election: An alternative or additional proposal to make the QTIP election automatic for inter vivos transfers of property interests meeting QTIP requirements, with an election out for those taxpayers not desiring a marital deduction (see ACTEC submission).
• Respect Post-Mortem Reformation to Qualify for Marital Deduction: A proposal to permit post-mortem reformations of marital interests to qualify for the marital deduction in order to grant U.S. citizen surviving spouses the same relief currently provided to non-citizen spouses (see ACTEC submission).
• Relaxation or Modification of the Return Requirement for Electing Portability: A proposal to permit the availability of portability to be demonstrated by an attachment to the decedent’s final income tax return (see ACTEC submission).
• Election Out of Taxable Termination: A proposal to permit an executor of a deceased beneficiary’s estate to elect out of taxable termination treatment by including the value of the trust assets in the beneficiary’s gross estate for federal tax purposes (see ACTEC submission).
• The Administration’s Grantor Trust Proposal: This proposal has generated widespread speculation in the estate planning community. It would be helpful to know the specific problem or abuse at which this proposal is aimed, and then we could engage in a discussion of this proposal and its alternatives.
• Allow a Marital Deduction for Gifts and Bequests to Spouse Who is a Long-Term Green Card Holder: A proposal to allow a marital deduction for gifts and bequests to a spouse who is a long-term green card holder in light of the revised expatriation rules, which would subject the green card holder surviving spouse to an expatriation tax if he or she leaves the United States.
• Current expatriation rules treat a long-term green card holder the same as a citizen, charging an exit tax if the person gives up his or her green card. These rules were enacted after the current law denying a marital deduction when the spouse is a green-card holder.
• The legislative history indicates that Congress’ concern with allowing a marital deduction for a non-citizen spouse was that the spouse might leave the U.S. and take the assets out of the country, thus turning the deferral of the marital deduction into a permanent exemption from the estate tax.
• Where the exit tax would apply, it is no longer necessary to deny a marital deduction because those assets will be subject to tax either when the spouse leaves the country or when she dies.
• Explore replacement of the unified credit with a unified exemption: A unified exemption would be (i) simple, (ii) more appropriate to a fairly flat tax rate, (iii) more compatible with portability, and (iv) more consistent with people’s common understanding of the law. If there is interest in pursuing this subject, ACTEC would be available to engage in a discussion about it.