On July 11, 2022, the IRS issued Revenue Procedure 2022-32. This Revenue Procedure replaces Revenue Procedure 2017-34 which provided surviving spouses two years after a decedent’s death to make a portability election and increases the deadline to make such election to five years.
For those who need a quick refresher on the portability election, it is an option available to estates of decedents dying after December 31, 2010 that were not otherwise required to file an estate tax return, provided that the decedent was survived by a spouse. The election allows the surviving spouse the benefit of any unused estate tax exemption (the “DSUEA” or the Deceased Spousal Unused Exclusion Amount) towards the surviving spouse’s later gifts or as an addition to the surviving spouse’s basic exclusion amount in his or her taxable estate.
Since the portability election is made by filing an estate tax return, the original filing date requirement was nine months after the decedent’s date of death with a permitted six-month extension. In light of confusion about whether and when to make such an election given the lack of a filing requirement, the IRS received a flood of requests for relief for those that missed this original deadline. The volume was requests was so great that the IRS decided it better to issue Revenue Procedure 2017-34 and provide a blanket extension for filing portability election related returns to two years after the decedent’s date of death. Apparently, even this generous extension did not fully stem the tide of inquiries for relief after the two-year period – and has now led to a five-year time period to make a portability election filing.
This is a significant change and benefit for affected taxpayers. Given where we sit in 2022, and the political landscape present today as opposed to that in 2017/2018, surviving spouses who previously chose to forego a portability election filing based on the increased estate tax exemptions provided in 2017 may wish to revisit those decisions now. While our advice to clients was usually predicated on assuming that there would be a return to the lower estate tax exemptions (which are scheduled to return in 2026), increases in personal wealth and how much less likely an extension of the higher estate exemptions may seem today, the calculus may be different today.