A group of U.S. senators is asking U.S. Secretary of the Treasury Jacob Lew to hold off on a proposed regulation that could increase the estate tax burden on family farms and other businesses, in a letter sent to Lew on Thursday.
The proposed rule would set regulations concerning the valuation of interests in corporations and partnerships for estate, gift and generation-skipping transfer tax purposes.
In the letter to Lew, 41 Senate Republicans led by Sens. Orrin Hatch, Utah, chairman of the Senate Finance Committee and John Thune, S.D., a member of the committee, say the rules could harm family farms.
“Treasury should pursue policies that encourage the creation and growth of family businesses and not propose regulatory changes that make it more difficult and costly for families to transfer ownership to future generations,” the senators wrote.
“We thus request that Treasury withdraw the proposed regulations and ask that any regulations that Treasury may issue in the future more directly target perceived abuses in the valuation of transferred interests in family businesses.”
In addition to Thune and Hatch, the letter was signed by Sens. Pat Roberts, Kansas; John Cornyn, Texas; Johnny Isakson, Georgia; Chuck Grassley, Iowa; Mike Crapo, Idaho; Dean Heller, Nevada; Roy Blunt, Missouri; John McCain, Arizona; Steve Daines, Montana; David Perdue, Georgia; Tom Cotton, Arkansas; Susan Collins, Maine; Cory Gardner, Colorado; Jerry Moran, Kansas; Mike Enzi, Wyoming; Marco Rubio, Florida; Dan Coats, Indiana; Lamar Alexander, Tennessee; Richard Shelby, Alabama; John Barrasso, Wyoming; Mark Kirk, Illinois; Jim Inhofe, Oklahoma; Kelly Ayotte, New Hampshire; Roger Wicker, Mississippi; Jim Risch, Idaho; Ted Cruz, Texas; John Boozman, Arkansas; Shelly Moore Capito, West Virginia; Mike Rounds, South Dakota; Deb Fischer, Nebraska; Bob Corker, Tennessee; Tim Scott, South Carolina; Joni Ernst, Iowa; James Lankford, Oklahoma; Jeff Flake, Arizona; Thad Cochran, Mississippi; Thom Tillis, North Carolina; David Vitter, Louisiana; and Ben Sasse, Nebraska.
The future of the estate tax has been an issue in the current presidential election. Democratic nominee Hillary Clinton has proposed lowering the per-person exemption, while Republican nominee has proposed eliminating the estate tax.
The Treasury rule addresses the practice of discounting the value of minority interests in closely held businesses or land. Currently, married couples are allowed to pack assets inside a lifetime $10.9 million exclusion from the estate and gift taxes. Courts have allowed discounts up to 40% or 50% for minority interests in family businesses because they typically are worth less than their share of total assets. As a result, the current practice can allow taxpayers to pay less in estate and gift taxes.
The proposed rule would end that practice.
“We ask that the proposed regulations not be finalized in their current form as they directly contradict long-standing legal precedent, create new uncertainty for taxpayers, and put family-owned businesses at a disadvantage relative to other types of businesses,” the senators say in the letter to Lew.
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