The US House of Representatives passed an estate tax reduction bill yesterday that is more likely to actually become law than other recent estate tax proposals.

The proposed legislation would increase the estate tax exemption for US citizens and US domiciliaries to $5 million beginning in 2010. It would also drastically reduce the estate tax rates for those subject to it.

The increased exemption would only apply to a limited number of nonresident aliens from countries with which the US has an appropriate tax treaty. Thus the change would affect some residents of Canada, Switzerland, Germany, the United Kingdom, and a few other countries.

The reduction in rates would apparently apply to all decedents.

The proposed legislation must still be addressed by the US Senate.