Farmers, small businesses push for estate tax reforms

Lobbyists for farm and small-business groups are pushing for a broader exemption to the estate tax bill.

Lobbyists for farm and small-business groups are pushing for a broader exemption to the estate tax bill that would benefit most of their members.

The American Farm Bureau Federation and the National Federation of Independent Business (NFIB), two powerful trade associations, were both quick to endorse legislation introduced by Rep. Shelley Berkley (D-Nev.) on Thursday that would increase the exemption under the estate tax as well as lower the tax rate.

Both organizations have made the political calculation that the votes aren’t there for a full repeal of the estate tax, which they would prefer. But enough Democrats could be won over to approve some readjusting of the law, and with the estate tax set to expire by the end of this year, the trade groups believe lawmakers will act before this congressional session is up to keep it in place.

“There aren’t 60 votes in the Senate for permanent repeal, so we are shifting from repeal to get the best possible deal we can for farmers and ranchers,” said Pat Wolff, a tax specialist for the Farm Bureau.

House Ways and Means Committee members plan to meet later this week to discuss what to do about that and other issues, like tax extenders, which will also expire before the end of this year.

Rep. Charles Rangel (D-N.Y.), chairman of the panel, is not saying whether he supports or opposes Berkley’s bill.

“The chairman looks forward to discussing the matter further with the committee and building a consensus approach to address the pending expiration of current law,” said Matthew Beck, a spokesman for the Ways and Means Committee.

The bill offered by Berkley, a Ways and Means Committee member, has bipartisan co-sponsors who also serve on the panel: Reps. Artur Davis (D-Ala.), Kevin Brady (R-Texas) and Devin Nunes (R-Calif.).

Under the current law, those who have assets valued at less than $3.5 million at the time of their death are exempt from the tax. The estate tax is set to expire at the end of 2009, and there will be no estate tax in 2010. But it will return in 2011 with a lower exemption level ($1 million) and at a higher tax rate (55 percent), restoring the levels in place before President George W. Bush signed his first round of tax cuts in 2001.

Under Berkley’s bill, those who have assets valued at less than $5 million would be exempt from the estate tax. The legislation also lowers the estate tax rate from the current rate of 45 percent to 35 percent. By raising the exemption level but keeping the tax in place, more small businesses and farmers will escape the tax but they also can appropriately plan to pay for it if they do fall under it in the future.

“It provides more protection from the tax and provides more certainty on what the rates are going to be,” said Bill Rys, tax counsel for the NFIB, of Berkley’s bill. “It is not just the tax. It is the planning that goes with the tax. That is where a lot of the cost is.”

Rys expects more of his association members would be exempt from the tax if Berkley’s bill passes.

The bill builds off a similar amendment offered by Sens. Blanche Lincoln (D-Ark.) and Jon Kyl (R-Ariz.) to the budget resolution in April. While Berkley’s bill offers a phased-in approach for a $5 million exemption, the Senate provision would have taken effect immediately if it became law.

Despite opposition from Senate Budget Committee Chairman Kent Conrad (D-N.D.) on the Senate floor, the amendment was adopted with the slimmest majority possible — 51 votes. It was later stripped out of the budget during conference, but advocates see that as a marker that raising the estate tax’s exemption level has majority support in this Congress.

“If you put together the number of members who are against repeal and the number of members who are against the $1 million exemption, you have a critical mass to do something before the end of this year,” Wolff said.

Rys said he sees the estate tax as the biggest driver of tax legislation by the end of 2009 because it is set to expire next year.

“It is the one issue and it doesn’t come up every year like the extenders,” the NFIB tax counsel said. “It does hold a certain amount of weight on what tax bills will move before the end of this year.”