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NRCA Action Alert: New proposed regulations threaten family businesses

September 2016

The Department of Treasury has issued proposed regulations targeting family businesses for higher estate and gift taxes, simply for being family-owned businesses. The regulations accomplish this by forcing the estates of family business owners to disregard important facts, such as control and marketability, when ownership of a business is passed to the next generation. Lack of control and marketability can greatly affect a business's value. Without these tools, which are factored into the valuation of a business, estate taxes could increase 30 percent or more.

For example, if a business owner passes equal portions of a company to three children at 33 percent each, separately the children would have no control over the company. Current regulations allow a valuation discount to reflect the lack of control or marketability to sell. The proposed regulations would remove the valuation discount of the minority shares because the children are related and, therefore, are believed to be able to exert "control" of the company. However, if there were three unrelated parties the minority discount valuation would remain in place. This significantly will increase estate taxes on family businesses.

NRCA needs you to lend your voice to make the Treasury Department withdraw the proposed regulations. NRCA has signed onto a massive business coalition letter and is asking you to add your business's name as well so we can show how many family businesses will be affected by this rule. Click here to have your company's name added to the letter. The deadline to sign the letter is Monday, Sept. 26.

NRCA also will be filing detailed comments to the Treasury Department that will be submitted Nov. 2. If your company would like to share how these regulations would affect your company, please let NRCA's Washington, D.C., office know. Contact Andrew Felz at aflez@nrca.net or (202) 546-7584.

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