Businesses urge Treasury to withdraw proposed estate tax rules

Thousands of companies and organizations representing family-owned business are urging the Treasury Department to withdraw proposed rules relating to the estate tax.

“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,” the businesses said in a letter sent to Treasury Secretary Jack Lew and House and Senate leaders and tax-writers.

“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.”

Treasury issued proposed rules in August that would limit the use of discounts when the IRS values minority shares in family-owned businesses for purposes of the estate tax.

Obama administration officials have said that the rules are designed to limit wealthy taxpayers’ ability to understate the fair market value of their assets. The estate tax currently only applies to estates valued at more than $10.9 million per married couple.

But Dorothy Coleman — vice president of domestic economic policy for the National Association of Manufacturers, which was involved in organizing the letter — said in a blog post that “the proposal would artificially inflate the value of the minority shares and increase the estate tax bill when the owner dies.”

Coleman said that the proposal would result in minority shares of family members being treated differently from minority shares from non-family members in private companies.

“At the heart of the August proposal is the flawed concept that a minority valuation discount should not apply in family-owned businesses because a family acts as one entity regardless of who actually has control,” Coleman said. “Indeed, IRS is unfairly targeting family-owned enterprises based on the erroneous assumption that families operate in complete unanimity.”

Rep. Warren Davidson (R-Ohio) last week introduced legislation to prevent the proposed rules from taking effect. Republicans generally oppose the estate tax, which they refer to as the “death tax.”