Estate tax relief and reform after 2009

(a)

Restoration of unified credit against gift tax

Paragraph (1) of section 2505(a) of the Internal Revenue Code of 1986 (relating to general rule for unified credit against gift tax), after the application of subsection (f), is amended by striking (determined as if the applicable exclusion amount were $1,000,000). (b)

Exclusion equivalent of unified credit equal to $3,500,000

Subsection (c) of section 2010 of the Internal Revenue Code of 1986 (relating to unified credit against estate tax) is amended to read as follows:

(c)

Applicable credit amount

(1)

In general

For purposes of this section, the applicable credit amount is the amount of the tentative tax which would be determined under section 2001(c) if the amount with respect to which such tentative tax is to be computed were equal to the applicable exclusion amount. (2)

Applicable exclusion amount

(A)

In general

For purposes of this subsection, the applicable exclusion amount is $3,500,000. (B)

Inflation adjustment

In the case of any decedent dying in a calendar year after 2009, the $3,500,000 amount in subparagraph (A) shall be increased by an amount equal to— (i)such dollar amount, multiplied by (ii)the cost-of-living adjustment determined under section 1(f)(3) for such calendar year by substituting calendar year 2008 for calendar year 1992 in subparagraph (B) thereof.

If any amount as adjusted under the preceding sentence is not a multiple of $10,000, such amount shall be rounded to the nearest multiple of $10,000.

(c)

Flat estate and gift tax rates

(1)

In general

Subsection (c) of section 2001 of the Internal Revenue Code of 1986 (relating to imposition and rate of tax) is amended to read as follows:

(c)

Tentative tax

The tentative tax is 15 percent of the amount with respect to which the tentative tax is to be computed.

(2)

Conforming amendments

(A)Paragraphs (1) and (2) of section 2102(b) of such Code are amended to read as follows:

(1)

In general

A credit in an amount that would be determined under section 2010 as the applicable credit amount if the applicable exclusion amount were $60,000 shall be allowed against the tax imposed by section 2101. (2)

Residents of possessions of the united states

In the case of a decedent who is considered to be a nonresident not a citizen of the United States under section 2209, the credit allowed under this subsection shall not be less than the proportion of the amount that would be determined under section 2010 as the applicable credit amount if the applicable exclusion amount were $175,000 which the value of that part of the decedent's gross estate which at the time of the decedent's death is situated in the United States bears to the value of the decedent's entire gross estate, wherever situated.

(B)Section 2502(a) of such Code (relating to computation of tax), after the application of subsection (f), is amended by adding at the end the following flush sentence:

In computing the tentative tax under section 2001(c) for purposes of this subsection, the last day of the calendar year in which the gift was made shall be substituted for the date of the decedent’s death each place it appears in such section.

(d)

Modifications of estate and gift taxes To reflect differences in unified credit resulting from different tax rates

(1)

Estate tax

(A)

In general

Section 2001(b)(2) of the Internal Revenue Code of 1986 (relating to computation of tax) is amended by striking if the provisions of subsection (c) (as in effect at the decedent's death) and inserting if the modifications described in subsection (g). (B)

Modifications

Section 2001 of such Code is amended by adding at the end the following new subsection:

(g)

Modifications to gift tax payable To reflect different tax rates

For purposes of applying subsection (b)(2) with respect to 1 or more gifts, the rates of tax under subsection (c) in effect at the decedent's death shall, in lieu of the rates of tax in effect at the time of such gifts, be used both to compute— (1)the tax imposed by chapter 12 with respect to such gifts, and (2)the credit allowed against such tax under section 2505, including in computing— (A)the applicable credit amount under section 2505(a)(1), and (B)the sum of the amounts allowed as a credit for all preceding periods under section 2505(a)(2).

For purposes of paragraph (2)(A), the applicable credit amount for any calendar year before 1998 is the amount which would be determined under section 2010(c) if the applicable exclusion amount were the dollar amount under section 6018(a)(1) for such year.

(2)

Gift tax

Section 2505(a) of such Code (relating to unified credit against gift tax) is amended by adding at the end the following new flush sentence:

For purposes of applying paragraph (2) for any calendar year, the rates of tax in effect under section 2502(a)(2) for such calendar year shall, in lieu of the rates of tax in effect for preceding calendar periods, be used in determining the amounts allowable as a credit under this section for all preceding calendar periods.

(e)

Effective date

The amendments made by this section shall apply to estates of decedents dying, generation-skipping transfers, and gifts made, after December 31, 2009. (f)

Additional modifications to estate tax

(1)

In general

The following provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001, and the amendments made by such provisions, are hereby repealed: (A)Subtitles A and E of title V. (B)Subsection (d), and so much of subsection (f)(3) as relates to subsection (d), of section 511. (C)Paragraph (2) of subsection (b), and paragraph (2) of subsection (e), of section 521.

The Internal Revenue Code of 1986 shall be applied as if such provisions and amendments had never been enacted.

(2)

Sunset not to apply to title V of egtrra

Section 901 of the Economic Growth and Tax Relief Reconciliation Act of 2001 shall not apply to title V of such Act. (3)

Repeal of deadwood

(A)Sections 2011, 2057, and 2604 of the Internal Revenue Code of 1986 are hereby repealed. (B)The table of sections for part II of subchapter A of chapter 11 of such Code is amended by striking the item relating to section 2011. (C)The table of sections for part IV of subchapter A of chapter 11 of such Code is amended by striking the item relating to section 2057. (D)The table of sections for subchapter A of chapter 13 of such Code is amended by striking the item relating to section 2604.