NW Chamber Friends –
Recently, the Internal Revenue Service proposed new estate tax regulations that would make transferring interests in family-owned businesses more onerous and costly than under current guidelines. Please see below for a brief explanation of the issue along with a request to Treasury Secretary Jacob Lew to withdraw the proposal.
We are encouraging all impacted parties to sign on to this letter. It is open to all family-owned businesses/corporations; business, industry and trade associations; state and local chambers, and allied organizations. To sign on, please follow this link. The deadline to sign is Monday, September 26, 2016 by 5:00pm EDT.
Please let us know if you have any questions or would like more information.
– Chris and Anna
Manager, Northwest Region
Congressional and Public Affairs
U.S. Chamber of Commerce
Proposed Estate Tax Changes
Under current law: Because of the estate and gift tax, many family owned, closely held business owners are challenged in how they can pass on their business interests to their heirs. If a business owner waits to transfer their business at death, the business interest is subject to the estate tax at full fair market value less the exemption amount.
A popular technique is to gift small ownership pieces over time, such as 10% of a business in one year. That interest is a “minority interest.” The value for tax purposes is also discounted relative to fair market value because control remains with the older generation.
With multiple transfers over time, the entire business can be “gifted” at a minority interest discount, the total amount subject to tax is substantially less than if the entire interest were taxed at death at fair market value.
IRS Proposal: The Section 2704 regulations would eliminate the discount applied to these “minority” gift transfers for closely held, family owned businesses. This is causing a significant amount of concern for family-owned businesses throughout the country, and many are trying to plan around this consequence before the regulations become final.
September xx, 2016
The Honorable Jacob Lew
United States Treasury Secretary
U.S. Department of the Treasury
1500 Pennsylvania Ave., N.W.
Washington, D.C. 20220
Re: Proposed Regulations under Section 2704 (Reg. 163113-02)
Dear Secretary Lew:
The undersigned companies and organizations representing family-owned businesses in the United States across a wide range of industries have serious concerns about the potential impact of proposed regulations under Internal Revenue Section 2704 (the “proposed minority discount rules”) released by the Treasury Department on August 2, 2016.
The proposed guidance is one of the most sweeping changes to estate tax policies in the last 25 years and would be detrimental to active enterprises and family-owned businesses that employ millions of workers throughout the nation. In particular, these rules would impose significant new tax costs on family-owned businesses, diverting capital from business investment, costing jobs and threatening the ability of families to pass businesses on to the next generation of owners.
Given the negative impact of the proposal on jobs, investment and economic growth, we respectfully request that the Treasury Department withdraw these regulations. As drafted, the proposed regulations fail to consider the appropriate concerns and economic realities of family-owned businesses.
Thank you in advance for considering our request.
cc: The Honorable Mark Mazur, Assistant Secretary for Tax Policy, U.S. Department of Treasury
The Honorable Paul Ryan, Speaker of the U.S. House of Representatives
The Honorable Nancy Pelosi, Democratic Leader, U.S. House of Representatives
The Honorable Mitch McConnell, Majority Leader, U.S. Senate
The Honorable Harry Reid, Democratic Leader, U.S. Senate
The Honorable Kevin Brady, Chairman, Ways and Means Committee, U.S. House of Representatives
The Honorable Sander Levin, Ranking Member, Ways and Means Committee, U.S. House of Representatives
The Honorable Orrin Hatch, Chairman, Finance Committee, U.S. Senate
The Honorable Ron Wyden, Ranking Member, Finance Committee, U.S. Senate
Members of the Ways and Means Committee
Members of the Finance Committee