“We expect Round 1 in the great estate tax battle to take place this fall/winter,” says the Washington Wire, the electronic alert from the S Corporation Association of America (SCA). “The tax goes away in 2010, and then returns in full form in 2011, giving just about everybody a reason to come to the table.”  To prepare for this debate, forty-six trade associations (including the SCA) sent a letter to Congress urging it to support a permanent estate tax “fix” that includes a 35% top rate, a $5 million per spouse exclusion and up to $10 million for married couples. These are essentially the same terms that SenatorsJon Kyl (R-Ariz.) and Blanche Lincoln (D-Ark.) are currently proposing. Congress is expected to consider legislation extending certain expiring tax provisions before the end of the year, and should make an “estate tax fix” part of that bill.

Porter agrees Pomeroy is dead. At the San Diego BV and Tax Summit, attorney John Porter (Baker Botts LLP, Houston), agreed that the Pomeroy Bill “hasn’t gotten much traction.” (See last week’s BVWire™.) He also believes that in 2009, “all we’ll get is a band-aid” for the 2010 estate tax, and then Congress will enact permanent legislation in 2010. He doesn’t think the debate on valuation discounts has expired, however, citing the Treasury’s Greenbook. “The devil is in the details,” he said, although the current proposals wouldn’t eliminate discounts, they would just make sure that entity restrictions are “commercially reasonable.”