Update, 12/17: The bill has passed and is on its way to the President. Details here.
Update, 12/10: The Senate has released legislative language that clears up the questions below. Details here.
The White House has struck a deal with Congressional taxwriters to avoid the tax law train wreck scheduled for January 1. So far we have no firm language on the deal, or even a detailed official listing of the contents. Here’s what I think we know so far:
The Bush-era rates will be extended through 2012. That means 35% top rates on ordinary income and 15% rates on dividends and capital gain
There is a two-year deal on the estate tax with a $5 million lifetime exemption and a 35% top rate. This is excellent news, considering that the estate tax is slated to return January 1 with a 55% rate and a $1 million exemption. It’s not clear whether the two-years are 2010 and 2011 or 2011 and 2012, but I’m guessing 2011-2012 . There is no word on whether estates of 2010 decedents will be allowed to “opt in” to 2011 or 2009 law to avoid the messy basis rules that would otherwise apply to 2010 estates. (*Update: CCH has posted an article saying the 35% estate tax is retroactive to 1/1/2010. I’m skeptical; Tax Analysts says that’s unclear.)
UPDATE, 12/9: Wall Street Journal reports that estate tax isn’t retroactive to 2010, but that 2010 estates will have option to choose 2011 rules.
The package includes unlimited expensing of otherwise depreciable assets in 2011 only. Based on a prior White House explanation, this appears to be a twist on the current bonus depreciation, rather than an unlimited Section 179 allowance. While Section 179 allows full write-off of the cost of all assets newly placed-in-service, this proposal will only apply to “new” assets. Purchases of “used” property won’t qualify. We also don’t know whether the the allowance will apply to qualified leasehold improvements like the prior bonus depreciation.
(UPDATE: WSJ says there will 50% bonus depreciation for 2012.)
The extenders get extended. Tax Analysts reports ($link):

“Traditional” tax extenders — including the research credit — would be extended for two years retroactively to 2010 and through the end of 2011 under the compromise…

It is also likely to include continued ethanol subsidies, but that isn’t confirmed (UPDATE, 10:24 am: Grassley tells The Des Moines Register that ethanol and biodiesel pork tax credits are restored through 2011; biodiesel subsidy is restored retroactively. That means lots of lobbyist love just in time for 2012 fundraising).
UPDATE, 2:54 pm: Wall Street Journal ($link?) reports:

The framework doesn’t address several popular “extenders” that will expire this year, but White House officials said they were included in the agreement. Among them: transfers of IRA assets to charities by those over age 70

Tags: Bush-era tax deal, Daniel Shaviro, Linda Beale, Obama Tax Policy, Peter Pappas, Robert D Flach, Russ Fox, TaxProf, William Perez

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