Senate GOP Urges Treasury to Abandon Estate Tax Rules

For over 50 years, Bloomberg Tax’s renowned flagship daily news service, Daily Tax Report® has helped leading practitioners and policymakers stay on the cutting edge of taxation and...

By Aaron E. Lorenzo

Sept. 28 — The Treasury Department should scrap a proposal that critics say would raise estate taxes, a group of Senate Republicans said in a letter to Treasury Secretary Jacob J. Lew.

The proposed regulations (REG-163113-02), released in August, would limit the use of valuation discounts by minority shareholders in family-owned businesses.

Administration officials have said the discounts have been abused, but Sen. John Thune (R-S.D.), who spearheaded the letter, warned that the proposed rules would significantly increase the estate tax burden on family businesses if finalized in their current form. Some estimate the increase could amount to 30 percent or more.

That would lead to economic consequences by discouraging families from continuing to operate and build their businesses, he wrote.

“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,” said the letter signed by 41 Senate Republicans, including Thune, a Finance Committee member.

The letter, obtained by Bloomberg BNA Sept. 28, is expected to be made public on Sept. 29.

House Activity

A similar opposition letter is expected to emerge in the House, where legislation opposing the rules has been introduced.

Rep. Warren Davidson (R-Ohio) has introduced a bill (H.R. 6100) that would block funding for IRS work on the proposed regulations. A previously introduced bill (H.R. 6042) from Rep. Jim Sensenbrenner (R-Wis.) would nullify the proposed rules.

Several supporters of the Davidson bill—which has 42 co-sponsors—said they are targeting an end-of-the-year spending package as the legislative vehicle for a provision to block the IRS rules, though stand-alone consideration also remains a possibility. A Senate bill is also expected to be introduced, with Sen. Marco Rubio (R-Fla.) considering support (188 DTR G-5, 9/28/16).

Withdrawal Requested

The lawmakers' letter said artificially inflating estate values would wipe out the benefits of estate tax relief enacted on a bipartisan basis as part of the American Taxpayer Relief Act of 2012, the legislation that averted the so-called fiscal cliff.

A more focused solution would be preferable, the letter said.

“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,” it said.

A Sept. 28 letter to Lew organized by the National Association of Manufacturers and signed by more than 3,800 companies struck the same tone. It cautioned the administration against finalizing what it termed a sweeping rule that would reduce jobs, investment and economic growth.

To contact the reporter on this story: Aaron E. Lorenzo in Washington at

To contact the editor responsible for this story: Meg Shreve at

Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.

Request Daily Tax Report