Association for Advanced Life Underwriting officials believe that before Congress recesses it will extend the 2009 estate tax levels for another year, but won’t deal with permanent reform until next year.

Tom Korb, AALU vice president of policy and public affairs, made his cautionary comment in the wake of statements by House Democratic leaders pledging to enact legislation before the end of the year that would extend indefinitely the 2009 tax levels.

This is consistent with recent comments by Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee, that this is a “must-do proposition,” but that he could not commit to a permanent fix this year.

Specifically, the current levels are a $3.5 million personal exemption and a 45% maximum tax rate.

Congress must act before the end of the year because under current law there will be no estate tax in 2010. But, the law enabling that level expires in 2010, which means that without further action, the level for 2011 will be a $1 million per-person exemption and a 55% tax rate.

Rep. Charles Rangel, D-N.Y., chairman of the House Ways and Means Committee, said after a meeting of the Democrats on his committee that a vote on the estate tax will not occur until “after health care.”

Earlier, there had been anticipation that the House, which must originate tax legislation, would vote as early as this week on legislation dealing with the estate tax.

Earlier in the day, Rep. Steny Hoyer, D-Md., House majority leader, said the House would vote to permanently extend the 2009 estate tax level before the end of the year, but cautioned that an actual vote might not occur until December.

Korb, however, said in a bulletin to AALU members that AALU is not optimistic a permanent solution will occur this year. “Given the heavy set of issues crowding the congressional calendar, it looks unlikely that legislators will work out a long-term solution by year-end,” he said.

Moreover, he said, the one-year window “could create an opportunity to facilitate ultimate adoption of an optimum type of reform,” which means reunification of the gift and estate tax, and providing portability.

Portability would allow survivors of the second-to-die in a couple to include the mate’s deduction when paying estate taxes, AALU officials say.

Otherwise, under current law, the couple must establish a trust to accomplish this.

He said AALU’s efforts on behalf of the insurance industry to add reunification of the gift and estate tax lifetime exemption amount to long-term estate tax reform “has generated meaningful support in the Senate.”

AALU’s argument, he said, is that “reunification would remove a harmful disincentive that penalizes earlier transfer of small businesses, farms and other assets from one generation to the next.”

AALU lobbyists, he said, are also telling congressional staffers that adding reunification “would also increase estate planning opportunities which utilize life insurance and help ensure that families have sufficient assets to meet estate tax liabilities without selling family businesses and other assets.”

Korb also said that “replacing the year of repeal slated for 2010 by extending 2009 law and adding reunification would raise, rather than cost, revenue.”

And, he said, “if reunification is added on a one-year basis, it would make it easier to incorporate into a long-term reform package.”