To provide estate, gift, and generation-skipping transfer tax relief.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Sensible Estate Tax Relief Act of 
2012''.

SEC. 2. ESTATE, GIFT, AND GENERATION-SKIPPING TRANSFER TAX RELIEF.

    (a) Temporary Extension.--Section 901(a)(2) of the Economic Growth 
and Tax Relief Reconciliation Act of 2001 is amended by striking 
``December 31, 2012'' and inserting ``December 31, 2013''.
    (b) Modifications to Estate Tax.--
            (1) Exclusion amount.--Paragraph (3) of section 2010(c) of 
        the Internal Revenue Code of 1986 is amended to read as 
        follows:
            ``(3) Basic exclusion amount.--For purposes of this 
        section, the basic exclusion amount is $3,500,000.''.
            (2) Maximum estate tax rate.--The table in subsection (c) 
        of section 2001 of such Code is amended by striking ``Over 
        $500,000'' and all that follows and inserting the following:
                                      
    Over $500,000 but not over 
        $750,000.
                                        $155,800, plus 37 percent of 
                                                the excess of such 
                                                amount over $500,000.
    Over $750,000 but not over 
        $1,000,000.
                                        $248,300, plus 39 percent of 
                                                the excess of such 
                                                amount over $750,000.
    Over $1,000,000 but not over 
        $1,250,000.
                                        $345,800, plus 41 percent of 
                                                the excess of such 
                                                amount over $1,000,000.
    Over $1,250,000 but not over 
        $1,500,000.
                                        $448,300, plus 43 percent of 
                                                the excess of such 
                                                amount over $1,250,000.
    Over $1,500,000................
                                        $555,800, plus 45 percent of 
                                                the excess of such 
                                                amount over 
                                                $1,500,000.''.
    (c) Modifications of Estate and Gift Taxes To Reflect Differences 
in Credit Resulting From Different Tax Rates and Exclusion Amounts.--
            (1) Changing tax rates.--Notwithstanding section 304 of the 
        Tax Relief, Unemployment Insurance Reauthorization, and Job 
        Creation Act of 2010, section 901 of the Economic Growth and 
        Tax Relief Reconciliation Act of 2001 shall not apply to the 
        amendments made by section 302(d) of the Tax Relief, 
        Unemployment Insurance Reauthorization, and Job Creation Act of 
        2010.
            (2) Decreasing exclusions.--
                    (A) Estate tax adjustment.--Section 2001 of the 
                Internal Revenue Code of 1986 is amended by adding at 
                the end the following new subsection:
    ``(h) Adjustment To Reflect Changes in Exclusion Amount.--
            ``(1) In general.--If, with respect to any gift to which 
        subsection (b)(2) applies, the applicable exclusion amount in 
        effect at the time of the decedent's death is less than such 
        amount in effect at the time such gift is made by the decedent, 
        the amount of tax computed under subsection (b) shall be 
        reduced by the amount of tax which would have been payable 
        under chapter 12 at the time of the gift if the applicable 
        exclusion amount in effect at such time had been the applicable 
        exclusion amount in effect at the time of the decedent's death 
        and the modifications described in subsection (g) had been 
        applicable at the time of such gifts.
            ``(2) Limitation.--The aggregate amount of gifts made in 
        any calendar year to which the reduction under paragraph (1) 
        applies shall not exceed the excess of--
                    ``(A) the applicable exclusion amount in effect for 
                such calendar year, over
                    ``(B) the applicable exclusion amount in effect at 
                the time of the decedent's death.
            ``(3) Applicable exclusion amount.--The term `applicable 
        exclusion amount' means, with respect to any period, the amount 
        determined under section 2010(c) for such period, except that 
        in the case of any period for which such amount includes the 
        deceased spousal unused exclusion amount (as defined in section 
        2010(c)(4)), such term shall mean the basic exclusion amount 
        (as defined under section 2010(c)(3), as in effect for such 
        period).''.
                    (B) Gift tax adjustment.--Section 2502 of such Code 
                is amended by adding at the end the following new 
                subsection:
    ``(d) Adjustment To Reflect Changes in Exclusion Amount.--
            ``(1) In general.--If the taxpayer made a taxable gift in 
        an applicable preceding calendar period, the amount of tax 
        computed under subsection (a) shall be reduced by the amount of 
        tax which would have been payable under chapter 12 for such 
        applicable preceding calendar period if the applicable 
        exclusion amount in effect for such preceding calendar period 
        had been the applicable exclusion amount in effect for the 
        calendar year for which the tax is being computed and the 
        modifications described in subsection (g) had been applicable 
        for such preceding calendar period.
            ``(2) Limitation.--The aggregate amount of gifts made in 
        any applicable preceding calendar period to which the reduction 
        under paragraph (1) applies shall not exceed the excess of--
                    ``(A) the applicable exclusion amount for such 
                preceding calendar period, over
                    ``(B) the applicable exclusion amount for the 
                calendar year for which the tax is being computed.
            ``(3) Applicable preceding calendar year period.--The term 
        `applicable preceding calendar year period' means any preceding 
        calendar year period in which the applicable exclusion amount 
        exceeded the applicable exclusion amount for the calendar year 
        for which the tax is being computed.
            ``(4) Applicable exclusion amount.--The term `applicable 
        exclusion amount' means, with respect to any period, the amount 
        determined under section 2010(c) for such period, except that 
        in the case of any period for which such amount includes the 
        deceased spousal unused exclusion amount (as defined in section 
        2010(c)(4)), such term shall mean the basic exclusion amount 
        (as defined under section 2010(c)(3), as in effect for such 
        period).''.
    (d) Effective Date.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the amendments made by this section shall apply to 
        estates of decedents dying, and generation-skipping transfers 
        and gifts made, after December 31, 2012.
            (2) Extension.--The amendment made by subsection (a) shall 
        take effect as if included in the enactment of the Economic 
        Growth and Tax Relief Reconciliation Act of 2001.
    (e) Application of EGTRRA Sunset.--Section 901 of the Economic 
Growth and Tax Relief Reconciliation Act shall apply to the amendments 
made by subsection (b).

SEC. 3. TREATMENT FOR PAYGO PURPOSES.

    The budgetary effects of this Act shall not be entered on either 
PAYGO scorecard maintained pursuant to section 4(d) of the Statutory 
Pay-As-You-Go Act of 2010.

Summary: Sensible Estate Tax Relief Act of 2012 - Extends through 2013 provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 pertaining to estates, gifts, and generation-skipping transfers.

Amends the Internal Revenue Code to: (1) allow a basic estate tax exclusion amount of $3.5 million, and (2) establish a maximum 45% estate tax rate.

Exempts the budgetary effects of this Act from the Statutory Pay-As-You-Go Act of 2010.