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Tax Conference Explores Potential Policy Changes Under Biden

January 14, 2021

By Jeremy Conrad

Legislative Update

Andrew Grossman, Democratic chief tax counsel for the House Committee on Ways and Means, speaks during Wednesday’s plenary session.

With the presidential transition less than a week away, the D.C. Bar’s 2021 Tax Legislative and Regulatory Update conference on January 13 and 14 provided timely insight to 400 practitioners on potential tax policy changes under the Biden administration.

Held virtually this year and hosted by the D.C. Bar Taxation Community and Georgetown University Law Center, the popular event featured dozens of speakers from the Internal Revenue Service (IRS), the U.S. Treasury Department, congressional committees, private practice, and more. 

The January 13 morning breakout session “Individual Taxation: Charitable Giving and Estate Planning” addressed important considerations for attorneys advising clients in planning for the tax impacts of property transfer for charity or upon death, as well as possible changes that may be introduced to these systems under the new administration.

Edward Jay Beckwith, partner at BakerHostetler, reviewed recent guidance provided by the IRS, looked at the status of proposed regulations and procedural changes, and covered recent legislation impacting charitable contributions, including the recently passed Consolidated Appropriations Act. Beckwith pointed out that “whenever the rates or the rules relating to taxes change, what an individual might be incentivized to give, when they might give it, in what manner they might give it, and how much they might give can all be impacted.”
Employing the analysis of economists, Beckwith said that removal of the step-up in basis at death would eliminate the “constipation” of high-value assets that people often hold until they die. If there was a tax incurred both when assets are gifted and upon the owner’s death, individuals would be less likely to hoard assets, he said. New rules likely would not apply to charitable gifts, Beckwith said, meaning that giving could be used as an offset, resulting in an increase in charitable giving overall. Charitable giving also demonstrably increases as an individual’s tax rate increases, so if the tax rate returned to normal and there were long-term capital gains at ordinary tax rates, this might increase charitable giving, he added.

Beth Shapiro Kaufman, member of Caplin & Drysdale, provided an analysis of how the new administration might impact estate planning, quoting president-elect Joe Biden: “A guiding principle across our tax agenda is that the wealthiest Americans can shoulder more of the tax burden, including in particular by making investors pay the same tax rates as workers and bringing an end to expensive and unproductive tax loopholes.”

Kaufman presented figures showing that estate tax exemptions are currently the highest in history. They are far above the rates that the nation’s wealthiest incurred prior to 2009, the point in time Kaufman believes was referenced by the July 2020 Biden-Sanders Unity Task Force Recommendations, which stated that “estate taxes should also be raised back to the historical norm.”
One possibility Kaufman raised is that the country might choose to replace estate tax with a capital gains tax. While cautioning that a change of this kind is unlikely to take place early in the administration, she noted that the proposition potentially has bipartisan support. “President Trump actually proposed taxing capital gains at death in 2016 in lieu of having an estate tax, so if you think that this would be a total non-starter for Republicans, that may not be the case,” she said.

Kaufman’s predictions seemed to be supported by speakers in the afternoon’s plenary session, where discussions frequently touched on recent bipartisan successes and the potential for future bipartisan action. On the COVID-19 relief efforts, Andrew Grossman, Democratic chief tax counsel for the House Committee on Ways and Means, said that “when most people think of tax law, they think of fairly diametrically opposed sides of the political parties.” In reality, Grossman said, “tax committees were by and large sympatico with what they thought needed to be done in the context of a COVID relief bill.” 

Randell Gartin, the committee’s Republican chief tax counsel, agreed with Grossman’s characterization and pointed to potential bipartisan cooperation in pandemic relief and retirement-related legislation.
Tiffany Smith, Democratic chief tax counsel for the Senate Committee on Finance, also felt that retirement was an area of potential bipartisan action, adding that housing was another issue where common ground could be found. She said that she expected both bipartisan and bicameral efforts as the incoming administration approaches an array of issues such as unemployment insurance reform, while also juggling nominations and other administrative tasks. “I think we’ll be pretty busy this year,” she said.

If you missed attending the live conference, all sessions are now available for purchase, please visit our On Demand Library and review the Taxation Community programs.

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