Congress has actually passed an infrastructure Act — The Infrastructure and Investment and Jobs Act “IIJA” and is working on a second spending bill titled the Build Back Better Act (“BBBA”), passed by the House and pending in the Senate.  It is hard to tell whose goose is getting fat and whose turkey is getting carved as these bills were making it through the legislative process, but now that we have one Act in hand, and one Bill totally passed by the House, we can have a greater degree of certainty.

Largely, the tax changes have NO impact on the estate tax planning of most of our clients.

The IIJA has these revenue raisers, none of which impact estate tax planning directly:

  • Cryptocurrency reporting: Requiring information reporting with respect to digital assets such as cryptocurrency, generally effective for returns and statements required to be filed or furnished after December 31, 2023 [estimated to raise approximately $28 billion over a 10-year period]
  • Superfund excise taxes extended through December 31, 2031, and modifying the amount of tax applicable to certain chemicals, generally effective as of July 1, 2022 [estimated to raise approximately $14.45 billion over a 10-year period]
  • Terminating the employee retention credit earlier than scheduled by making it applicable to wages paid before October 1, 2021 (rather than wages paid before January 1, 2022) [estimated to raise approximately $8.2 billion over a 10-year period]
  • Pension Smoothing: Modifying the section 430(h)(2)(C)(iv) table of applicable minimum and maximum percentages with respect to certain pension plans (i.e., “pension smoothing”) [estimated to raise approximately $2.9 billion over a 10-year period]  {Source:  https://home.kpmg/us/en/home/insights/2021/11/tnf-house-passes-infrastructure-bill-tax-provisions.html}

The Build Back Better Act, passed by the House, has many tax proposals but is notable for what it doesn’t do:

  • Does not change the top individual tax rate
  • Does not increase the top capital gains rate
  • No change to the estate tax exemption (keeping at 11.7M; this sunsets at end of 2025)
  • No changes to step-up in basis rules

Here is a good article by the Journal of Accountancy on what is in the proposal:  https://www.journalofaccountancy.com/news/2021/nov/tax-provisions-build-back-better-act.html  That is a myriad of tax provisions impacting corporations, special deductions, and IRAs.  The IRA provisions are extensive, but most notably require large distributions (which would be taxable( from “mega-sized” retirement accounts (in excess of $10M) of “high income taxpayers.”

There is a new “high-income surcharge” for those earnings $10M Adjusted Gross Income “AGI” (for a couple).  This is a significant tax, but it will hit very few.

To go out on a limb and make predictions, the Senate will probably pare the spending and tax provisions down in the BBBA, so I don’t think we will see new tax provisions added by the Senate.  So, if the BBBA becomes law, I think it will not impact my clients’ estate planning.

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.