IEC Comments on Proposed Rule to Increase Estate Tax on Family Businesses

On November 2, 2016 IEC issued comments on the U.S. Treasury Department’s proposed regulations under Section 2704 of the Internal Revenue Code that, if finalized, would dramatically alter traditional valuation methodologies for estate and gift tax purposes. In particular, the proposed rule would remove the ability of individuals in family-owned business to apply valuation discounts for tax purposes for transfers of non-marketable or minority shares to their heirs. A marketability discount is permitted by the Code for shares of a family run business where the shares would not be easily convertible to cash and therefore, less valuable to a buyer on the free market. In the case of minority shares, a discount is permitted by the Code due to the fact that minority shares do not provide potential buyers control over managerial issues. On September 22, IEC along with 118 other organizations, sent a letter to Treasury opposing these changes.