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Family Business Coalition Pushes Repeal of Estate Tax

The Family Business Coalition, which works very closely with the National Association of Electrical Distributors on a number of key issues in Washington, D.C., has sent a letter to President Trump’s Treasury Secretary, asking for a full repeal of the Estate Tax.

Earlier this week, the President released his tax reform plan, which included reducing business tax rates and simplifying the individual income tax rates. When the plan was being outlined, Gary Cohn, the Director of the National Economic Council, made a bold statement about the future of the Estate Tax (also called the Death Tax).

“We are going to repeal the Death Tax. The threat of being hit by the Death Tax leads small business owners and farmers in this country to waste countless hours and resources on complicated estate planning to make sure their children aren’t hit with a huge tax when they die. No one wants their children to have to sell the family business to pay an unfair tax,” Cohn said.

The Estate Tax says individuals can inherit up to $5.45 million in assets without being taxed, but everything over that amount is taxed at a 40 percent rate. When family-owned businesses, like electrical distributors, have warehouses filled with inventory, not to mention property and vehicles, it is up to surviving family members to pay the estate tax on everything the business owns. In many cases, the Estate Tax forces families to liquidate assets to pay the tax. The Estate Tax was passed in 2013 as a way to avoid what was called the “fiscal cliff” in December of 2013 as a way to avoid a government shutdown.

In a letter to Treasury Secretary Steven Mnuchin, the Family Business Coalition says it is encouraged by the direction the current administration is taking on the Estate Tax, but wants to make sure it is repealed “to create a healthier, more predictable playing field for family owned and operated businesses.”

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April 27, 2017



Secretary Steven Mnuchin

U.S. Department of the Treasury
1500 Pennsylvania Ave NW
Washington, DC 20220

Dear Secretary Mnuchin:

On August 4, 2016 the Department of Treasury under Secretary Lew proposed changes to Section 2704 Estate, Gift, and Generation-skipping Transfer Taxes: Restrictions on Liquidation of an Interest which if implemented would increase the number of family businesses and farms subject to the federal estate tax (death tax). The regulations would remove important tools business owners use to adjust for lack of control and marketability when valuing minority shares of a small business. The Family Business Coalition (FBC) reiterates our request for the pending 2704 estate and gift tax regulations to be withdrawn. 

We are encouraged by your comments to Senator Thune (R-SD) regarding the fair valuation of small business interests at the January 19, 2017 Senate confirmation hearing: “We need to make sure that people who own minority interest in operating businesses — that the valuation for tax purposes are reflected appropriately, and anybody who follows the markets knows that there is a significant difference between control and non-control and the IRS should follow their valuations.”

The pending 2704 regulations would disregard lack of control and lack of marketability in family business valuations, artificially increasing family businesses’ exposure to estate and gift taxes as a result. Withdrawing the regulations is consistent with the spirit of President Trump’s April 21, 2017 Executive Order 13789 instructing the Treasury Department to review all significant tax regulations issued on or after January 1, 2016 that: 1) impose an undue financial burden on U.S. taxpayers, 2) add undue complexity to the tax laws or 3) exceed the statutory authority of the IRS.

In addition, President Trump’s April 25, 2017 Executive Order 13790 Promoting Agriculture and Rural Prosperity in America calls for a task force to recommend policy changes that: “promote the preservation of family farms and other agribusiness operations as they are passed from one generation to the next, including changes to the estate tax and the tax valuation of family or cooperatively held businesses.”

During the comment period for the proposed changes to Section 2704, FBC sent a letter signed by 119 small business associations and advocacy groups calling for Treasury to withdraw the regulations. 24 members of the Ways and Means Committee and 41 Senators wrote to Treasury on November 3rd and September 29th respectively requesting that the regulations be withdrawn. These letters are attached for your consideration.

It is within the power of the Treasury Department to put an immediate halt to this pending expansion of the estate tax and we urge you to act now. We look forward to working with you and President Trump to create a healthier, more predictable playing field for family owned and operated businesses.

 

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