In a major victory for the apartment industry, the Treasury Department announced on October 2 that it will withdraw proposed estate tax regulations targeting intra-family transfers and valuation discounts that result from lapsing rights and restrictions on liquidations. NMHC/NAA have long called for these regulations to be rescinded as they would have limited valuation discounts - resulting in greater estate tax liability for closely held family businesses, as well as imposing new risks on the continuity of family-owned real estate businesses. If enacted the regulations would have impaired the robust job creation and economic growth driven by these businesses.
NMHC/NAA strongly opposed the rule and, most recently, joined a coalition of real estate trade associations in August to respond to a Treasury request for comments on whether to modify or rescind the proposed estate tax regulations. The industry also voiced our opposition to the regulations when they were first proposed in 2016 and identified them in a letter to President Trump that highlighted regulations which are especially harmful to the industry.
Treasury’s goal in proposing the estate tax regulations was supposedly to limit valuation discounts of interests in family owned businesses so that they may become subject to the estate tax. Under current law, estate tax exclusion is $5.49 million or $10.98 million per couple. Valuation discounts may enable ownership interests to fall short of these thresholds, enabling estates to be shielded from liability. A limitation on valuation discounts could cause estates to become subject to tax liability or further increases taxes owed. The regulations were proposed to apply to lapses of rights or transfers of property subject to restrictions created after October 8, 1990, occurring on or after the date these regulations are finalized.