As we have described in our six previous Client Alerts this year, Congress and the President have been battling over the tax provisions of multi-trillion dollar tax and spending legislation.  The week before Thanksgiving, the House of Representatives passed legislation called the “Build Back Better” bill (“BBB”).  It is now being considered by the Senate. 

The cone of uncertainty we previously described in connection with the tax provisions of the BBB has now been lifted. The House deleted most, but not all, of the tax provisions that would have been adverse to many estate planning techniques. The deleted provisions include: (1) raising top individual income and capital gains tax rates; (2) cutting in half the current $11.7 million lifetime gift and estate tax exemption; (3) ending tax free basis adjustments for assets owned by a decedent at death (often resulting in basis “step-up”); (4) denying valuation discounts for family limited partnerships and family limited liability company interests; and (5) substantially restricting tax planning benefits of certain grantor trust techniques, such as grantor retained annuity trusts (“GRATs”), sales to certain grantor trusts known as IDGTs or IDITs, and irrevocable life insurance trusts (“ILITs”). 

At this point, the deleted provisions appear unlikely to be readded to the version of the BBB, if any, that passes the Senate.  Accordingly, the full range of estate planning techniques that have been successfully employed for many years remains viable, but are still at risk to future legislative or administrative (such as Treasury Regulations) efforts to curtail them.

Notable tax provisions that remain in the BBB are outlined below.


Individuals, Estates, and Trusts

Beginning in 2022, the BBB would add several surtaxes.

  • Single and married filing jointly with modified adjusted gross incomes over $10 million and estates and trusts with over $200,000 would pay a 5% surtax on excess amounts.  For married filing separately, the threshold would be $5 million.
  • Single and married filing jointly with modified adjusted gross incomes over $25 million and estates and trusts with over $500,000 would pay an additional 3% on excess amounts.  For married filing separately, the threshold would be $12.5 million.
  • These surtaxes would apply to all income of such taxpayers, effectively raising the long-term capital gains tax for taxpayers with incomes exceeding $25 million to 31.8% (20% long-term capital gains tax rate, plus 8% in surtaxes and 3.8% net investment income tax).

The BBB would extend the current 3.8% net investment income tax (often referred to as the “Obamacare tax”) to cover net investment income derived from the ordinary course of a trade or business, but would exclude wages subject to FICA taxes.  The BBB would also permanently disallow excess business losses for non-corporate taxpayers.

Whereas the 2017 tax act limited the state and local tax (“SALT”) deduction to $10,000, the BBB would increase that deduction limitation to $80,000 for single and married filing jointly, and would increase it to $40,000 for estates, trusts, and married filing separately.


Corporations with over $1 billion in profits would be subject to a 15% minimum corporate income tax under a modified corporate alternative minimum tax.  Corporations that buy back their stock would be subject to a 1% excise tax on the value of any stock that a corporation purchased, subject to limited transaction exemptions.


The BBB would make several significant modifications to retirement plan tax rules.  “Megaplans” became a target of populist criticism in the 2020 election campaigns and those plans in particular would be negatively affected by the BBB.

Beginning January 1, 2022

  • No Roth or traditional IRA contributions would be permitted if total Individual Retirement Accounts (“IRAs”) and Defined Contribution Plans (“DCPs”) for the contributor would exceed $10 million. 
  • No Roth conversions of (i) after-tax elective deferrals to 401K/Simplified Employee Pension plans (“SEPs”) or (ii) to after-tax IRAs would be permitted.  This would eliminate the “Backdoor Roth” often utilized by higher income taxpayers.
  • No pre-tax IRA or pre-tax DCP contribution conversions to Roth plans (the “Mega Backdoor Roth”) would be permitted.  This limitation would apply to married taxpayers with taxable incomes over $450,000 and single or married filing separately taxpayers with taxable incomes over $400,000.

Beginning January 1, 2028

  • For Individual Retirement Accounts (“IRAs”) or DCPs with more than $10 million in assets, Required Minimum Distributions (“RMDs”) would increase to 50% of value in excess of $10 million until there were $10 million or less in assets.  The present value of a Defined Benefit Plan would not be included in that value determination.
  • If the applicable IRA or DCP had a value in excess of $20 million, 100% of value in excess of $20 million would be a RMD.
  • No additional traditional or Roth IRA contributions would be permitted if contributions would increase the value above $10 million or if taxable income for the contributor exceeded $450,000 for married filing jointly taxpayers or $400,000 for single or married filing separately.


President Biden and allies in Congress initially sought a return to the pre-2017 tax act lifetime exemption of $5 million per person, indexed for inflation, cutting in half the current $11.7 million exemption that is a product of the 2017 act’s increase in the exemption to a base of $10 million, plus inflation.  As passed by the House, the BBB does not contain any such reduction or any other notable changes to the estate, gift, and generation-skipping transfer tax laws.  Notwithstanding that, even without the BBB, the 2017 tax act’s doubling of the previous exemption level will automatically sunset under existing law at the end of 2025 and return to the pre-2017 tax act $5 million amount, adjusted for inflation, beginning in 2026. 

Under existing law, increases in exemption and exclusion amounts will occur in 2022.  As already noted, the 2021 gift and estate tax exemption is $11,700,000, increasing to $12,060,000 for 2022.  The annual exclusion gift tax free amount per year per donee for 2021 is $15,000, increasing to $16,000 for 2022.  Annual exclusion gifts do not use up any of the donor’s lifetime exemption and generally no gift tax return is required if no other taxable gifts other than the annual exclusion gifts are made during the year.

Although an unlimited marital deduction generally is allowed for gifts to U.S. citizen spouses, the deduction is not allowed for gifts made to spouses who are not U.S. citizens. There is, however, a special annual exclusion for gifts to non-citizen spouses of $159,000 for 2021 that will increase to $164,000 for 2022. 


This publication is for general information only. It is not legal advice, and legal counsel should be contacted before any action is taken that might be influenced by this publication.

About Gunster

Gunster, Florida’s law firm for business, provides full-service legal counsel to leading organizations and individuals from its 11 offices statewide. Established in 1925, the firm has expanded, diversified and evolved, but always with a singular focus: Florida and its clients’ stake in it. A magnet for business-savvy attorneys who embrace collaboration for the greatest advantage of clients, Gunster’s growth has not been at the expense of personalized service but because of it. The firm serves clients from its offices in Boca Raton, Fort Lauderdale, Jacksonville, Miami, Orlando, Palm Beach, Stuart, Tallahassee, Tampa, Vero Beach, and its headquarters in West Palm Beach. With over 200 attorneys and 200 committed support staff, Gunster is ranked among the National Law Journal’s list of the 500 largest law firms and has been recognized as one of the Top 100 Diverse Law Firms by Law360. More information about its practice areas, offices and insider’s view newsletters is available at


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