To amend the Internal Revenue Code of 1986 to restore the estate tax, to repeal the carryover basis rule, to reduce estate tax rates by 20 percent, to increase the unified credit against estate and gift taxes to the equivalent of a $3,000,000 exclusion and to provide an inflation adjustment of such amount, and for other purposes.

Summary: Estate Tax Reduction Act of 2007 - Repeals provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 that eliminate the estate and generation-skipping transfer taxes and the basis rules for property acquired from a decedent after December 31, 2009 (thus restoring such taxes and rules).

Amends the Internal Revenue Code to: (1) reduce to 39.2% the maximum estate tax rate; (2) increase to $3 million the unified credit against the estate tax; and (3) provide for an inflation adjustment to the increased credit amount after 2007.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Estate Tax Reduction Act of 2007''.

SECTION 2. RESTORATION OF ESTATE TAX; REPEAL OF CARRYOVER BASIS.

    (a) In General.--Subtitles A and E of title V of the Economic 
Growth and Tax Relief Reconciliation Act of 2001, and the amendments 
made by such subtitles, are hereby repealed; and the Internal Revenue 
Code of 1986 shall be applied as if such subtitles, and amendments, had 
never been enacted.
    (b) Sunset Not To Apply.--
            (1) Subsection (a) of section 901 of the Economic Growth 
        and Tax Relief Reconciliation Act of 2001 is amended by 
        striking ``this Act'' and all that follows and inserting ``this 
        Act (other than title V) shall not apply to taxable, plan, or 
        limitation years beginning after December 31, 2010.''.
            (2) Subsection (b) of such section 901 is amended by 
        striking ``, estates, gifts, and transfers''.
    (c) Conforming Amendments.--Subsections (d) and (e) of section 511 
of the Economic Growth and Tax Relief Reconciliation Act of 2001, and 
the amendments made by such subsections, are hereby repealed; and the 
Internal Revenue Code of 1986 shall be applied as if such subsections, 
and amendments, had never been enacted.

SEC. 3. 20 PERCENT REDUCTION IN ESTATE TAX RATES.

    (a) In General.--Subsection (c) of section 2001 of the Internal 
Revenue Code of 1986 is amended to read as follows:
    ``(c) Rate Schedule.--

``If the amount with respect to     The tentative tax is:
        which the tentative tax is 
        to be computed is:
    Not over $10,000...............
                                        14.4% of such amount. 
    Over $10,000 but not over 
        $20,000.
                                        $1,440, plus 16% of the excess 
                                                of such amount over 
                                                $10,000 
    Over $20,000 but not over 
        $40,000.
                                        $3,040, plus 17.6% of the 
                                                excess of such amount 
                                                over $20,000 
    Over $40,000 but not over 
        $60,000.
                                        $6,560, plus 19.2% of the 
                                                excess of such amount 
                                                over $40,000 
    Over $60,000 but not over 
        $80,000.
                                        $10,400, plus 20.8% of the 
                                                excess of such amount 
                                                over $60,000 
    Over $80,000 but not over 
        $100,000.
                                        $14,560, plus 22.4% of the 
                                                excess of such amount 
                                                over $80,000 
    Over $100,000 but not over 
        $150,000.
                                        $19,040, plus 24% of the excess 
                                                of such amount over 
                                                $100,000 
    Over $150,000 but not over 
        $250,000.
                                        $31,040, plus 25.6% of the 
                                                excess of such amount 
                                                over $150,000 
    Over $250,000 but not over 
        $500,000.
                                        $56,640, plus 27.2% of the 
                                                excess of such amount 
                                                over $250,000 
    Over $500,000 but not over 
        $750,000.
                                        $124,640, plus 29.6% of the 
                                                excess of such amount 
                                                over $500,000 
    Over $750,000 but not over 
        $1,000,000.
                                        $198,640, plus 31.2% of the 
                                                excess of such amount 
                                                over $750,000 
    Over $1,000,000 but not over 
        $1,250,000.
                                        $276,640, plus 32.8% of the 
                                                excess of such amount 
                                                over $1,000,000 
    Over $1,250,000 but not over 
        $1,500,000.
                                        $358,640, plus 34.4% of the 
                                                excess of such amount 
                                                over $1,250,000 
    Over $1,500,000 but not over 
        $2,000,000.
                                        $444,640, plus 36% of the 
                                                excess of such amount 
                                                over $1,500,000 
    Over $2,000,000................
                                        $624,640, plus 39.2% of the 
                                                excess of such amount 
                                                over $2,000,000.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to estates of decedents dying, and gifts made, after the date of the 
enactment of this Act.

SEC. 4. UNIFIED CREDIT INCREASED TO EQUIVALENT OF $3,000,000 EXCLUSION; 
              INFLATION ADJUSTMENT OF UNIFIED CREDIT.

    (a) Increase in Unified Credit.--Subsection (c) of section 2010 of 
the Internal Revenue Code of 1986 (relating to applicable credit 
amount) is amended by striking all that follows ``were the applicable 
exclusion amount'' and inserting ``. For purposes of the preceding 
sentence, the applicable exclusion amount is $3,000,000.''
    (b) Inflation Adjustment.--Section 2010 of such Code is amended by 
redesignating subsection (d) as subsection (e) and by inserting after 
subsection (c) the following new subsection:
    ``(d) Cost-of-Living Adjustment.--In the case of any decedent 
dying, and gift made, in a calendar year after 2007, the $3,000,000 
amount set forth in subsection (c) shall be increased by an amount 
equal to--
            ``(1) $3,000,000, multiplied by
            ``(2) the cost-of-living adjustment determined under 
        section 1(f)(3) for such calendar year by substituting 
        `calendar year 2006' for `calendar year 1992' in subparagraph 
        (B) thereof.
If any amount as adjusted under the preceding sentence is not a 
multiple of $10,000, such amount shall be rounded to the nearest 
multiple of $10,000.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to estates of decedents dying, and gifts made, after the date of 
the enactment of this Act.