The amount of property that passes free of the federal estate tax was increased from $2,000,000 during 2008, to $3,500,000 during 2009, and to an unlimited amount during 2010 when the tax was to be repealed for one year. The tax was then scheduled to return in 2011.
The tax was not only scheduled to return in 2011, it was set to return from an unlimited amount to the amount that existed in 2000 which allowed a $1,000,000 taxable estate to remain untaxed.
The intended return of the Federal Estate Tax in 2011 was due to a “sunset provision” in EGTRRA, (The Economic Growth and Tax Relief Reconciliation Act of 2001), the law that created these changes to the tax.
A sunset provision is part of a law that requires the automatic termination of that law on a specific date. The sunset provision that is a part of EGTRRA was used to avoid the “Byrd Rule.”
The Byrd Rule
Named for its creator, Sen. Robert Byrd, the Byrd Rule allows the objection of just one U.S. Senator to defeat the passage of any law that will affect revenue for more than ten years.
Although any such objection may be overridden with the support of 3/5 of the Senate, it was not believed that 3/5 of the Senate would support EGTRRA when it was proposed.
In order to avoid the Byrd Rule, a sunset provision was included that automatically terminated the law within ten years. By ending within ten years, EGTRRA did not affect revenue for more than ten years and its passage could not be overridden by just one Senator.