Congress has passed an infrastructure spending bill and is considering a much larger package proposed by President Biden, and with new spending comes potential new tax legislation to pay for it.  Has the bill that has passed and the proposals on the table impacted estate tax planning?  The simple answer is “not so far.”  The package that was recently passed by the United States Senate, and must be reconciled with an earlier House of Representatives’ bill, proposes spending $550 billion as new federal investment in hard infrastructure projects, such as roads and bridges.  The spending is extended over ten years and is financed with some rather unusual provisions impacting superfund excise taxes, pension deductions, and crypto currency.  There is no funding in this current version of the bill that impacts individual income tax laws, in general, or estate tax laws, in particular.

President Biden has also proposed a much larger “infrastructure” package of $3.5 trillion over ten years, but the actual legislation is far from being ready for a vote.  The first step in the process, however, has occurred.  For the United States Senate to pass this infrastructure bill without Republican support, which has been withheld to date, will require it to follow the reconciliation process.  Reconciliation first requires a budget resolution to be passed and subsequent spending bills must fit in the framework of the budget resolution.  The budget resolution calls for the $3.5 trillion in spending to be funded “by a combination of new tax revenues, healthcare savings, and long-term economic growth.”  Consistent with President Biden’s campaign promises, the budget resolution “prohibits new taxes on families making less than $400,000.00 per year, and on small businesses and family farms.” See, Memorandum to Democratic Senators, dated August 9, 2021, from The Office of the Majority Leader.  The budget resolution then instructs various committees to propose bills on how to spend a maximum allocation provided to each committee.

The Senate Committee on Finance is instructed to prepare the tax legislation to raise income for the federal government in five areas:

  • Corporate and International Tax Reform
  • Tax Fairness for High-Income Individuals
  • IRS Tax Enforcement
  • Healthcare Savings
  • Carbon Polluter Import Fee

So, at this point, concerning potential for a $3.5 trillion spending bill, the funding of that spending is largely unknown.  No bills, either for the spending or for the revenue, have yet been reported out of committees.  In short, we are a long way from having legislation to truly analyze, and the potential for passing what might be referred to as a Democratic wish list, has daunting hurdles, including almost certainly requiring all 50 Democratic Senators to vote for the legislation and allowing only a few defectors in the thin majority for the Democratic party in the U.S. House.   Circling back to my concern as an estate planning attorney, there is no actual proposed legislation that will impact estate tax planning at this time because of the infrastructure bills.  The instructions to the Senate Finance Committee do not explicitly instruct the Senate Finance Committee to change estate tax exemptions, step-up in basis, or other taxes that would directly impact estates.  However, what does “tax fairness for high-income individuals” mean?  That is a broad area that will probably be fleshed out in the near future as legislation develops, so I will be monitoring developments.  For now, it is clear that “high-income individuals” means individuals earning at least $400,000.00 a year or more.

In conclusion, based on the scant information available, and the $500 billion infrastructure bill already passed, Pyke & Associates, P.C. has no recommendation for individuals to undertake or restrain from any particular form of planning or transactions.  Without more information as to what even the potential legislation would look like, to undertake such planning at this time is probably not prudent.

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, specific tax, legal or accounting advice. We can only give specific advice upon consulting directly with you and reviewing your exact situation.