On November 2, NMHC/NAA and a coalition of real estate groups sent a letter to the Treasury Department asking it to withdraw burdensome proposed regulations regarding the valuation of interests in family-owned businesses for estate and gift tax purposes.
Proposed in August, the regulations would target intra-family transfers and valuation discounts that result from lapsing rights and restrictions on liquidations. The regulations would limit 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.
In addition to threatening the transfer of family-owned businesses from one generation to the next, the new regulations would impair the job creation and economic growth driven by these businesses. In 2012, the 5.33 million family-owned businesses in the United States included more than one million real estate and construction companies. Moreover, family-owned businesses employ nearly 22 million workers with a total payroll in excess of $784 billion.
In the long term, Treasury is looking 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 $5.45 million or $10.9 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 increasingly subject to tax liability.
The regulations, which the real estate industry believes exceed Treasury’s authority to propose, would apply to lapses of rights or transfers of property subject to restrictions created after October 8, 1990. Treasury will be examining comments submitted by the real estate industry and other stakeholders prior to issuing a final regulation.
NMHC/NAA remain committed to opposing the development of unnecessary and onerous regulations. Further information on NMHC/NAA’s efforts regarding regulations on family-owned businesses can be found here. Additionally, House Ways and Means Committee Republicans also sent a letter to Treasury Secretary Lew which can be found here.
- Stepped-Up Basis and Taxation of Unrealized Capital Gains Fact Sheet
- Estate Tax
- Trade Group Coalition Letter to House Ways and Means Committee Opposing Proposed Tax Increases
- Family Business Estate Tax Coalition Letter Expressing Support for Stepped-Up Basis
- Family Business Estate Tax Coalition Letter in Support of Thune Amendment 3106