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US Chamber Supports Bill Against New Estate Tax Rules

by Mike Godfrey,, Washington

26 October 2016

The US Chamber of Commerce (USCC) wrote a letter on October 24 in support of the legislation introduced in the House of Representatives that would eliminate the proposed changes to Section 2704 of the Internal Revenue Code on estate and gift tax valuation discounts.

The proposed Protect Family Farms and Businesses Act, introduced by Warren Davidson (R – Ohio), would prevent the Treasury Department's new Section 2704 rules, or any future similar regulations, from having any "force or effect."

Under present regulations, 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 rules would allow the Internal Revenue Service to produce significantly higher valuations by disregarding any lack of marketability from restrictions on liquidation or redemption that an heir can currently use to claim a valuation discount.

USCC said "the proposed Treasury rules hurt the ability of businesses to apply proper valuation discounts for estate, gift, and generation-skipping taxes. These valuation discounts promote the continuation of family businesses by making it advantageous to transfer interests during life to children, which makes them more inclined to stay with the business, as compared to a situation where the parents hold on to assets during their lives and give them up only at death."

"In short," it added, "valuation discounts promote the flow of wealth to younger generations, which is good for the economy and the continuation of family businesses." The USCC stated that it would "prefer Treasury not take action to discourage or limit the ability for businesses to be passed on," and supported Davidson in his efforts "to prevent this backdoor estate tax hike."

TAGS: individuals | inheritance tax | compliance | tax | business | tax compliance | law | ministry of finance | legislation | gift tax | United States | regulation

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