You have to keep a close eye on Washington, or before you know it, rules get changed and consequences can be severe for business sectors and consumers alike.

For a fleeting moment last week, it looked like the whole Stretch IRA concept was in danger of becoming illegal when some lawmakers went looking for a way to fund, of all things, a highway bill.

Senate Finance Committee Chairman Max Baucus (D-Mont.) proposed tougher requirements on inherited individual retirement accounts that would have required younger beneficiaries to pay taxes over five years instead of spreading them out over their lifetime — using the Stretch IRA concept. It would’ve raised an estimated $4.6 billion for the Treasury Department over the next decade, which Sen. Baucus wanted to use to help pay for a highway bill his committee is debating.

Under instant pressure about the proposal from Republicans, Baucus immediately said he would back off the effort to impose tougher requirements on inherited IRAs and said he would work with them to find replacement revenue for the highway bill. But he also hinted that Stretch IRAs could be in jeopardy again soon because he thinks the current law is being abused. Baucus told Bloomberg News in a Feb. 7 article, “IRAs are intended for retirement. They’re being used by some taxpayers to give tax-free benefits” to future generations… “Perhaps this provision and the subject can be taken up in tax reform.”

Yes, perhaps… (I say, like a parent telling his child “maybe” while having no real intention of ever saying “yes.”)

Ed Slott, the most high-profile Stretch IRA proponent out there, said in the Bloomberg article the proposal to curtail the tax planning technique allowing the buildup of tax-deferred gains inside inherited IRAs, if approved would, “really change the whole playing field for retirement planning.”

If any such proposal is indeed revisited in tax reform legislation discussions, the existence of Stretch IRAs could again be in jeopardy. IRAs would be limited to serving as a retirement savings tool while a valuable estate planning tool is removed from the reach of consumers who can use it to provide substantial inheritances for their children and grandchildren.

While pulling this out to potentially fund a highway bill was a bit of a curveball, you can bet the industry will be watching and ready to ramp up opposition to any such proposal when tax reform legislation discussions occur.

For more on this subject, read Michael Ham’s Feb. 9 article, “The End of the Stretch IRA?”