WASHINGTON BUREAU — The House could move sometime this week to take up legislation extending the 2009 estate tax level to 2010.

The Association for Advanced Life Underwriting, Falls Church, Va., is preparing for possible House action by promoting reunification of the estate and gift tax credit.

The AALU is preparing to send members an alert asking them to call or write their members of Congress in support for reunification.

“We strongly urge Congressmen to make permanent the estate tax at a $3.5 million exemption level and 45 percent [maximum tax] rate as proposed by the [Obama] administration,” the AALU says in a draft of the alert.

“We also urge support for reunifying the estate and gift tax credits, providing portability of the unused credit of the first to die, and indexing the exemption level for inflation,” the AALU says.

The AALU also is urging its members to support including “portability” in any permanent estate legislation.

A portability provision would permit a surviving spouse to carry over any credit left over by the first spouse to die.

“Not allowing a surviving spouse to carryover the unused credit from the first to die essentially penalizes a married couple for not setting up a credit shelter trust with an estate planning attorney,” the AALU says in the draft alert.

Congressional staffers and insurance industry lobbyists say the estate tax measure that Rep. Charles Rangel, D-N.Y., chairman of the House Ways and Means Committee, plans to send to the floor is would freeze the exemption at $3.5 million and the maximum federal estate tax rate at 45%. The measure could be attached to statutory pay-go legislation or considered as a stand-alone bill, officials say.

Congress postponed debate on the estate-tax issue earlier this month, so that the House could focus on health care.

Several congressional staffers said debate on the estate-tax legislation could be postponed a second time.

“No final decisions have been made,” one staffer said. “Matters like the Medicare physician payment fix bill could crowd the estate tax measure off the schedule.”

If Congress fails to act on the estate-tax issue this year, current law will cause the estate tax to expire in 2010, then return to 2001 levels. The exemption would be $1 million, and the maximum estate-tax rate would be 55%.

Congress approved the 2001 estate-tax level snapback provision, along with provisions phasing out the tax from 2001 to 2010, in the Economic Growth and Tax Relief Reconciliation Act of 2001

The “tax policy enacted in 2001 decoupled the estate and gift tax credit and created a perverse incentive for business owners to hold their assets until death rather than passing them to the younger generation managing the business,” the AALU says in its alert.

Reunifying the estate and gift tax credit would allow for increased intergenerational transfer, and it would provide “greater liquidity for businesses, stimulating more efficient business decision making, and enhancing economic growth,” the AALU says.

Although the Rangel estate-tax measure may seek permanent estate tax reform, adoption of a 1-year fix is more likely, according to congressional staffers and AALU staffers.

Both the House and the Senate are divided over the issue, with Republicans and some conservative Democrats supporting a $5 million exemption and a 35% maximum tax rate.