With the new Biden administration, a 50-50 split in the Senate with Vice President Harris holding the tiebreaking vote, and a slim Democratic majority in the House of Representatives – there is quite a bit of conjecture as to what might change relative to the U.S. federal estate and gift tax landscape.

Based upon a review of President Biden’s tax proposals, as expressed during the campaign, the following changes are within the realm of possibility at the federal level:

  • Raising the top individual income tax rate from 37% to 39.6%
  • Raising corporate income tax rates from 21% to 28%
  • Elimination of the “step-up in basis” provision for estates
  • Almost doubling the tax on long-term capital gains and qualified dividends for individuals with over $1 million in income
  • Return the estate and gift tax exemption and rate to 2009 levels (currently the exemption is $11.7 million and the top marginal rate is 40% – a return to 2009 levels would be a $3.5 million exemption and top marginal rate of 45%)

There has even been some discussion to resurrect the proposed restriction regulations on valuation discounts proposed by the Obama/Biden administration in 2016 that were withdrawn in 2017. It is uncertain as to which of the potential policy changes might occur and the timing of any changes. The current legislative focus appears to be on the continued economic issues caused by the pandemic, and many experts are estimating that major tax policy changes will not be enacted or become effective until 2021 at the earliest.

The initial focus of the Biden administration relative to tax policy is likely to be on the income tax policy side of the equation with gift and estate tax policy following behind, although it would not be out of the realm of possibility for all tax policy to be taken up simultaneously. The other concern in lockstep with these potential tax policy changes is whether they would be retroactive or not. There is precedent for legislative changes to be made retroactive to the beginning of the calendar year in which they are enacted. On the other hand, there could be a push due to administrative ease and to avoid unintended or unfair consequences, to make the changes effective on January 1 of the next calendar year. This is precisely what occurred in late 2017 with the passage of the Tax Cut and Jobs Act.

Mark Mazur, Treasury Department Deputy Assistant Secretary for Tax Policy (an appointee of President Biden), made some comments at a recent ABA Virtual Event in late January that indicated that retroactive tax increases are not being actively considered by the White House[1].

The strong possibility of increased tax rates and potential for changes to gift and estate tax regulations reinforce the need for heightened flexibility in planning and strong collaboration between a clients’ advisor team. MPI continues to provide high-quality and tested valuation work for its clients and has grown our team to accommodate the increased demand for estate planning valuations in 2020-2021.

The professional team at MPI encourages you to leverage our resources and take advantage of our eight decades of institutional knowledge as you contemplate planning and valuation matters.

About MPI

MPI, a prestigious national consulting firm founded in 1939, specializes in business valuation, forensic accounting, litigation support and corporate advisory work. MPI conducts every project as if it is going to face the highest level of scrutiny, and its senior professionals have extensive experience presenting and defending work product in front of financial statement auditors, management teams, corporate boards and fiduciaries, the IRS, other government agencies, and in various courts.


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