Most Read
Image 01 Image 02 Image 03

Chamber of Commerce Endorses Senate Bill to Stop New Estate Tax Rules

Chamber of Commerce Endorses Senate Bill to Stop New Estate Tax Rules

New rules could keep family businesses out of the family and cost jobs in the long run.

The Chamber of Commerce has endorsed a bill that would stop President Barack Obama’s administration’s new estate tax rules, which they insist would keep those mean wealthy people from reducing value on their assets.

GOP senators proposed legislation to stop these rules because they believe it will harm small and family owned businesses because the owners would not be able to easily transfer the business to future generations.

This is what the administration proposed:

The government’s rules focus on what are known as valuation discounts. When businesses divide their ownership, the government lets them reduce that value for estate tax purposes, and more of the business can thus fit inside the $5.45 million-per-person exemption from estate and gift taxes.

Valuation discounts, often as much as 30% or 50% of the assets’ value, reflect the fact that minority stakes in a business aren’t worth their equivalent share of the entire business. That is because such interests can be difficult to sell, especially if they don’t come with decision-making power.

The rules would make it harder for business owners to get valuation discounts. The rules are prospective and likely won’t take full effect until January at the earliest. Meanwhile, estate planners are urging their clients to consider transferring assets now using the techniques.

Forbes explains further after it spoke with estate lawyer Carlyn McCaffrey, who has clients frantic about the new rules:

The proposed regulations would mean increased estate taxes on the death of owners of family businesses, possibly causing them to liquidate the business or sell big pieces to outsiders. McCaffrey’s client and his brother have been talking with her on and off this year about an intra-family sale of their New York City real estate business (apartment rentals worth north of $20 million) to their four adult children who are operating the family business now. “He asked, ‘Should I accelerate planning?’ and I said he probably should,” she says. That way they’re selling the business at the discounted amount, maybe 35%, which makes it feasible to get it down to the next generation already operating it, rather than waiting until they die and have it taxed at the full value.

The administration insists the rules would help “close a ‘loophole’ wealthy taxpayers use to artificially reduce the value of the assets being transferred.”

In September, 41 GOP senators, including Marco Rubio, asked Treasury Secretary Jack Lew to abandon these new rules:

“We ask that the proposed regulations not be finalized in their current form as they directly contradict long-standing legal precedent, create new uncertainty for taxpayers, and put family-owned businesses at a disadvantage relative to other types of businesses,” the 41 senators said in a letter to Treasury Secretary Jack Lew on Thursday.

The National Cattlemen’s Beef Association and 3,800 other organizations have also asked Lew to stop implementing the rules:

Danielle Beck, NCBA director of government affairs says the proposed regulations under section 2704 of the Internal Revenue Code would permanently change estate planning for families that own a controlling interest in a privately-held entity. It would eliminate or greatly reduce available valuation discounts for family-related entities, which in turn increase the tax associated with common transfers including inheritance.

She says the proposed guidance is one of the most sweeping changes to estate tax policies in the last 25 years. It would impose significant new tax costs on family-owned businesses, cost jobs and threaten the ability for families to pass businesses on to the next generation of owners.

Now the Chamber of Commerce has stepped up with the senators and organizations who hope to stop the estate tax rules from happening. The Chamber agrees the “rules would hurt families’ abilities to pass businesses on to future generations.”

The Chamber also stated that the valuation discounts on the books now “promote the flow of wealth to younger generations, which is good for the economy and the continuation of family businesses.”

DONATE

Donations tax deductible
to the full extent allowed by law.

Tags:
,

Comments

UnCivilServant | October 24, 2016 at 2:41 pm

Once that’s in can they just abolish the death tax entirely? The money and assets have already been taxed multiple times at that point.

casualobserver | October 24, 2016 at 4:13 pm

I’ve heard a number of progressives in my personal life utter words that more or less add up to, “You don’t need all that money after you die and it isn’t fair for some to start off with millions or billions when others have to struggle.” Or something like that. And more than a few in the elected class have echoed that.

It just goes to show you that at its core, progressivism is all about defining and limiting every aspect of life. The idea is to let people have only as much money as the “smart” people think is appropriate. Anything more is the property of the state to use for “social justice.” And that is why the path to pure socialism is so easy for many – especially the more recent generations who have been immersed in it since kindergarten.

Font Resize
Contrast Mode
Send this to a friend