The Family Business Coalition letter to Treasury is gaining momentum, even being highlighted by Politico’s Morning Tax:
CAVALRY HAS ARRIVED: Opponents of new proposed Treasury regulations that would force more wealthy people to pay gift and estate taxes when passing on the family business are coming out in full force.
First, from off Capitol Hill: The Family Business Coalition is out with a new letter denouncing the proposed regulations, and continuing their call to do away with the estate tax altogether. “These proposed regulations would force even more family businesses and farms to grapple with the complicated and costly estate tax,” the group write.
And on the Hill: Rep. Warren Davidson (R-Ohio), who holds former Speaker John Boehner’s seat, is out with a new bill to block the rules. “Instead of undermining this essential part of our economy in his lame-duck presidency power grab, President Obama should be working with Congress to strengthen it,” Davidson said in a statement. Around 20 House Republicans have signed on to Davidson’s bill.
Our joint letter is already sending a strong message to Treasury, Congress and the media!
New Legislation Offered in House – Given the short window of time to for a legislative response, we’re thrilled to see early support for a new FBC endorsed bill, H.R. 6100 the Protect Family Farms and Businesses Act by Congressman Warren Davidson, representing Speaker Boehner’s former district (OH-8). On its first day, the bill has already gained 20 cosponsors. The legislation will serve as a way for more House members to show their opposition to the regulations. We’ll continue to keep you updated on all estate tax related legislation and a larger coordinated response from tax writing committees that should be forthcoming. You can send individual letters of support for the Protect Family Farms and Businesses Act to Rep. Davidson’s Chief of Staff at: Jason.Yaworske@mail.house.gov. FBC sent a letter of support to Rep. Davidson along with our coalition letter available here.
Web Portal Helping Businesses Submit Comments – Our web portal for comments at www.NoEstateTaxHike.org has served as the main hub for family businesses to send comments directly to Treasury. We urge all associations and their members to submit comments. An excerpt of recently submitted comments from the International Franchise Association is below as an example:
The IRS now wants to value those gifts as if they were indeed arms lengths sales for full fair market value in order to apply the Death Tax to them and wipe out parents’ equity in their businesses. This eliminates room in the exclusion of assets that may be gifted from one’s estate ($5.45 million per grantor) by artificially and unfairly inflating the value of every gift, leaving anything outside of the exclusion subject to the massive Death Tax. Franchises are especially vulnerable if these regulations are amended because of factors particular to franchising that naturally depress a business’ price.
– Robert Branca Vice Chairman of the Coalition of Franchisee Associations, a multi-unit, multi-state franchisee with the Dunkin’ Donuts system.
Read the letter in its entirety below…
Dear Secretary Lew:
The undersigned organizations oppose the Department of Treasury’s proposed changes to Section 2704 on estate and gift tax valuation discounts. These rules will significantly change family businesses’ succession plans and make it harder for family owned businesses to transition to the next generation. The changes proposed to Section 2704 would remove legitimate valuation discounts for estate, gift, and generation skipping taxes which businesses have used for the past two decades in order to prevent the IRS from overvaluing their businesses at death.
These proposed regulations would force even more family businesses and farms to grapple with the complicated and costly estate tax. Moreover, Treasury’s action does not comport with the will of Congress. On April 16, 2015, the House passed the Death Tax Repeal Act (H.R. 1105) on a bipartisan basis 240-179. In March 2015, the Senate passed a budget amendment to repeal the estate tax (S. Amdt. 607) and in 2013, 80 Senators voted to “to repeal or reduce the estate tax, but only if done in a fiscally responsible way” (S. Amdt. 693). Bypassing Congress to enact rules subjecting more family businesses to the estate tax rebukes the hard work elected officials have done to reform and repeal the tax altogether.
The undersigned organizations strongly oppose the Treasury Department forcing more family businesses to pay the estate tax through changes to Section 2704. Contrarily, we support full and permanent repeal of the estate tax for the following reasons:
Repealing the estate tax would spur job creation and grow the economy. Many studies have quantified the jobs that would be gained from estate tax repeal. A recent Tax Foundation study found that the US could create over 150,000 jobs by repealing the estate tax. A 2012 study by the House Joint Economic Committee found that the estate tax has destroyed over $1.1 trillion of capital in the US economy – loss of small business capital means fewer jobs and lower wages. Lawrence Summers, former Secretary of the Treasury under President Clinton; Alicia Munell, member of President Clinton’s Council of Economic Advisors; Joseph Stiglitz, a Nobel laureate for economics; and Douglas Holtz-Eakin, former CBO Director have all published work on the estate tax’s stifling effect on job growth and the economy as a whole.
The estate tax contributes a very small portion of federal revenues. The estate tax currently accounts for less than one percent of federal revenue. There is a good argument that not collecting the estate tax would create more economic growth and lead to an increase in federal revenue from other taxes. In addition, the estate tax forces family businesses to waste money on expensive insurance policies and estate planning. These burdensome compliance costs make it even harder for business owners to expand their businesses and create more jobs.
The estate tax falls particularly hard on minorities. The estate tax threatens to confiscate generational capital from African-American and minority communities. Estate tax liabilities bankrupted the Chicago Defender – the oldest black-owned daily newspaper in the United States. According to a 2004 Impacto Group poll, 50 percent of Hispanic business owners know someone who sold their business to pay the estate tax and a quarter expect to sell their business because of the estate tax.
A super-majority of likely voters support eliminating the estate tax. Poll after poll has indicated that a super-majority of likely voters support repealing the estate tax. Typically, twothirds of likely voters support full and permanent repeal of the estate tax. People instinctively feel that the estate tax is not fair.
The estate tax is unfair. It makes no sense to require grieving families to pay a confiscatory tax on their loved one’s lifetime savings. Often this tax is paid by selling family assets like farms and businesses. Other times, employees of the family business must be laid off and payrolls slashed. No one should be punished for fulfilling the American dream.
The undersigned organizations strongly suggest that the Treasury Department support family businesses seeking to pass to the next generation by withdrawing their proposed changes to Section 2704.
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