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ATR Warns On New US Estate Tax Rules

by Scott Hamilton, Tax-News.com, Washington

02 November 2016


On November 1, Americans for Tax Reform (ATR) President Grover Norquist submitted a comment letter to US Treasury Secretary Jacob Lew opposing the proposed regulation that would increase the incidence of the estate tax (or the "death tax," as it is also called).

Under present estate tax regulations under Section 2704 of the Internal Revenue Code, the fair market value of an interest in a family-held business where no current market is available is based on the "willing-buyer/willing-seller" test. However, the proposed changes would allow the Internal Revenue Service in the future to produce significantly higher valuations by restricting the use of the valuation discounts that an heir can currently claim.

Norquist explained that "families hit with the death tax are allowed two discounts when determining the value of their estate: a lack of control discount and a lack of marketability discount. A lack of control discount can be claimed when a family holds a minority ownership stake in an asset, resulting in the asset holding less value on the open market. A lack of marketability discount applies when an asset held by the family cannot easily be liquidated because of market barriers."

ATR noted that the new regulation would therefore "increase the tax burden for many family-owned businesses at a time when opposition to the death tax is as strong as ever." It is supporting the proposed Protect Family Farms and Businesses Act, introduced recently in both the Senate and the House of Representatives, that would prevent the new Section 2704 rules, or any future similar regulations, from having any "force or effect."

Norquist concluded that "the death tax hurts economic growth, is unpopular with the American people, and its repeal is supported by a majority of the US House of Representatives. … At a basic level, Americans know that the death tax is not fair. It is a tax you pay on savings you have already paid taxes on at least once, and potentially more than once. Those who are hit hardest generally are first and second generation small business owners, because the truly wealthy can avoid the tax through an army of accountants, attorneys, and charitable planners."

He urged Lew to "side with the will of the American people and withdraw this regulation."

TAGS: individuals | inheritance tax | compliance | tax | small business | business | tax compliance | interest | law | ministry of finance | United States | regulation | Tax

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