The following is intended as general information and does not represent legal or tax advice. Individual circumstances vary - please consult your legal and tax advisors about your specific situation.

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Repeal the Estate Tax Permanently

A bill (HR 2143) that proposes to make the repeal of the estate tax permanent (instead of the current 2010 sunset) has been introduced by Rep. Dave Weldon (R-FL). While there are a number of cosponsors, it would appear unlikely that this bill could be passed this year due to the current makeup of the Senate. It is, however, another item to keep an eye on as the ongoing battle over estate taxes continues.

Signed by Tax Bill President Bush

On Thursday, June 7, 2001, the Economic Growth and Tax Relief Reconciliation Act of 2001 was signed by President Bush, who feels this bill completes a key promise made during the campaign. The President stated, "Tax relief is the right thing to do. It's an answer to prayers, such as this one: Lead us not into temptation. The big surplus accumulated in Washington was one great temptation for the spenders. And once we met basic needs, with a reasonable growth in our budget, instead of increasing the size of federal government, what we decided to do was to put faith in the American people."

Certain provisions, including rate reductions, will begin immediately. Other aspects, such as relief from the marriage penalty, are scheduled to be phased in over time beginning in 2006.

Rebate checks will be mailed by September as follows: $300 for single persons, $600 for married persons and $500 for heads of households. Due to the vast number of checks required to provide the rebates, $4 million has been authorized to pay for card stock for the checks.

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Notes on the Estate Tax Changes

Most Bypass/QTIP trust plans were created with an exemption of $675,000, and anticipated an increase by 2006 of the then current exemption equivalent of $1,000,000. With the applicable exclusion amount now increasing to $2 million by 2006, there could be a very significant impact on some estate plans. If there are any differences in the provisions for the remainder recipients of the bypass trust, as compared to the QTIP trust, the increased exclusion amount could move an additional $1 million of assets to the Bypass trust beneficiary and away from a different beneficiary. Thus, it is important to review all plans to determine whether or not the new exclusion will change the distribution in ways that are not intended by the testator.

The majority of states have a "pickup" estate tax. This tax is an allocation of the state credit amount from the federal government to the state. Obviously, under EGTRRA 2001, state tax revenues will be reduced. As the federal top rate is reduced from 55% to 45%, the total cost to the federal government is minimized, since less of the revenue is transferred to the states. Will states create new inheritance taxes?

While it is too early to determine, one might observe that a number of states in the past have had inheritance tax plans. Since all governmental entities typically attempt to protect their revenue sources, it is quite possible that states will indeed maintain their state inheritance taxes. Even if the federal tax is repealed, it still may be important to consider tax apportionment clauses to cover payment of the state inheritance taxes.

from GiftLaw 6/04/01

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America's Confidence in Nonprofits is High

According to a new survey by Independent Sector, a coalition of foundations, corporate giving programs, and nonprofit organizations dedicated to strengthening philanthropy and citizen action, 62 percent of Americans feel that charities are more effective in providing services today than they were five years ago -- the highest percentage in the 14-year history of the survey.

The survey, "Taking the Pulse of Americans' Attitudes Toward Charities," examined public perceptions of the nonprofit sector and the roles that organizations and charities play in society. The report found that 76 percent of those surveyed felt that charities play a major role in improving communities, while 69 percent believed that charitable organizations play a significant role in speaking out on important issues.

When measured against levels of confidence in other institutions, Americans also expressed high confidence in nearly all charitable organizations, including youth development groups (72 percent) and human-service agencies (68 percent), as compared to major corporations (29 percent), the federal government (27 percent), and Congress (22 percent).

"The high level of confidence Americans have place in the nonprofit sector is a sacred but fragile trust," said Sara E. Melendez, president and CEO of Independent Sector. "Nonprofits must redouble their efforts to ensure the public's confidence is not misplaced." To download a copy of the report, visit: www.independentsector.org/programs/research/factfind3.pdf .

"Independent Sector Report Finds Americans' Confidence in Nonprofit Sector Is on the Rise." Independent Sector Press Release 06/08/01.

from Philanthropy News Digest