As we have described in our four previous Client Alerts this year about potential tax legislation, Congress and the President have been debating the components of that legislation, which is part of the proposed $3.5 trillion tax and spending package. Just this week, Speaker Pelosi announced that the top line cost will need to be reduced, but she made no statement regarding revenues to be raised (i.e., tax law changes). Most commentators and experts “inside the Beltway” anticipate that process will come to a head between now and the end of the year because in 2022 politicians will turn their attention to next year’s midterm elections. Unfortunately, at this point, a cone of uncertainty has enveloped the legislative process because so many competing factions in Congress and the administration are fighting over their respective visions for tax and spending policies. Nonetheless, almost all of the tax components of the package would increase taxes and reduce the exemption from estate and gift taxes. Many effectively would curtail or prohibit current advanced tax planning techniques that have been commonly employed for many years.
We cannot predict now with any certainty how this process will play out or what specific tax law changes, if any, will be enacted this year. Indeed, even the effective dates are uncertain. While tax law changes typically are effective at the beginning of the calendar year after enactment, some or all of them can be made effective retroactively even to before the legislation is enacted or even proposed. As a result, this cone of uncertainty makes near term tax planning and tax-related activities even more challenging than usual because of the variations in the competing proposals and their potential for enactment, their tax effect, their effective dates, and so on.
We will continue to closely monitor the legislative process as it moves forward and will update you regarding any significant developments as, hopefully, the cone of uncertainty narrows and ultimately lifts.
Please direct any questions to Gunster's Private Wealth Services or Tax Law attorneys.
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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.
