Daily Tax Update - July 13, 2005

KYL, BAUCUS AGREE TO ESTATE TAX FRAMEWORK:
Yesterday, Senators Jon Kyl (R-AZ) and ranking Finance Committee member Max Baucus (D-MT) said that they had reached an agreement on the framework for a bipartisan compromise on an estate tax bill.   Kyl said that the parameters involved a tax rate that was "as low as possible" and a "good-sized" exemption amount that would exclude smaller farms and businesses from paying the tax. A prior compromise proposed by Kyl would exempt estates up to $8 million for individuals, and set the estate tax rate to the capital gains rate, which is currently 15 percent and scheduled to revert to 20 percent in 2008.

  • Kyl said, "We have an agreement on basic parameters, but we're both trying to be a little flexible to make sure we can satisfy the requirements of members of our conference and to make sure we can get the votes necessary to pass something." Kyl said that under the agreement, any estate tax bill would retain the current law's "step-up in basis," which allows the value of inherited property to be "stepped up" to its fair market value at the time of inheritance when calculating capital gains. The Senators also agreed to keep the extended periods estates may use to pay off their tax bills. The size of the exemption and the rate issues have not been resolved. Kyl added, "My own view, I think it's no secret, is that [the estate tax rate] should be pegged to the capital gains rate. The majority of folks don't get hit by it, but a lot do. As long as anybody's getting hit by it, we know it's an unfair tax."
  • Republican Senators hope to hold a vote on an estate tax bill by the end of this month.
TAX BILL INTRODUCED JULY 12:
  • H.R. 3260 sponsored by Rep. Martin Sabo (D-MN) would deny employers a deduction for payments of excessive compensation.

INTERNAL REVENUE SERVICE - CIRCULAR 230 DISCLOSURE:
As provided for in Treasury regulations, advice (if any) relating to federal taxes that is contained in this communication (including attachments) is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any plan or arrangement addressed herein.

STEPTOE & JOHNSON LLP - TAX PRACTICE
Steptoe & Johnson LLP has one of the largest and most diverse law firm tax practices in the country. The practice covers the entire spectrum of federal taxation, including representation of businesses before the Congress, Treasury and the national office of the IRS; transactional planning for domestic and multinational corporations; complex audit and controversy work for corporations and other business interests contesting IRS adjustments; litigation before the Tax Court, Court of Federal Claims, district courts, courts of appeals and the Supreme Court. The firm's tax practice also encompasses all aspects of employee benefits (ERISA), executive compensation, tax-exempt organizations and charitable giving.  Steptoe has an extensive state and local tax practice, representing an array of business clients on complex sales and use tax, corporate income tax and property tax matters, both advising those clients and handling audits, administrative appeals, and litigation for them.  Read  more information on Steptoe's tax practice