There are rumors circulating around the country that the Congressional Super Committee may take action that would immediately repeal the $5 million gift tax exemption by Thanksgiving. This is sending countless tax lawyers and accountants scurrying to complete gift planning that the law tells them they have until December 31, 2012 to complete. The lifetime gift level tax exemption was temporarily increased to $5 million under the 2010 Tax Relief Act for 2011 and 2012. Neither the Obama administration nor Congress have commented on these rumors, causing great concern and uncertainty. An about-face reversal with little notice would be extremely disruptive, unfair, and inequitable.
Regardless of how many or few people this change would affect, the fact that this Congressional committee would have the ability to alter the law midstream on the taxpayers who have been working on their long-term plans is outrageous. Any taxpayer – wealthy or not – should be entitled to be able to rely on their current tax law when making tax decisions, and, if a law might be modified, have ample time to implement necessary changes. The real possibility that the aforementioned law might be changed as of the super committee deadline is unconscionable.
This disruption, just by the speculation that is not being refuted or confirmed, is causing great stress. Most of the taxpayers to be impacted by such a change are the very people who create the jobs in this country. With business people dropping everything to deal with these rumors which could have major effects on their business transition plans, it could also impede job growth.
If there were to be such action taken by the Super Committee, it is likely to do serious harm to the United States economy. But more importantly, it reveals the shallowness of any real commitment to tax equity and transparency. The country seems to be rallying around the concepts contained within the Simpson-Bowles and the Rivlin-Domenici reports, both pushing for greater transparency and comprehensive and reliable tax reform. It would be abhorrent if this ‘new direction’ had, as its first implementation, a huge gotcha moment.
A good article about why the government should not change things halfway. I mean that will do more harm than good for the people.
If the Committee does in fact make the change, it would only be effective for gifts made after 11/23. Any gifts made before that date would still be subject to the $5 million credit.
The estate and gift law passed last December was retroactive to 1/1/2010 but there was an option to opt in or out.
It is fairly common when tax law changes are proposed, the effective date is the date of introduction of the bill.
Steve, thanks for the comment. The uncertainty as to whether or not there will be a change is causing a massive scramble to try to get gifts done before the 11/23 deadline. That is difficult, if not impossible, in many cases. To potentially change a deadline set for 12/31/2012 back to 11/23/2011 is outrageous to taxpayers, lawyers, CPAs, trustees and others who are being pressure to act on short notice and feel as though the rug has been pulled out from under them, sending their long-term plans into a tailspin.