October 11, 2017
On Oct. 4, the U.S. Treasury Department released a report announcing plans to withdraw its proposed regulations under Section 2704 of the Internal Revenue Code, entitled Estate, Gift and Generation-skipping Transfer Taxes: Restrictions on Liquidation of an Interest. The proposed rule was issued Aug. 4, 2016, during the Obama administration.
Had it been finalized, the proposal would have had a profound impact on the valuation and taxation of family businesses. The regulations as written would institute back-door “family attribution,” a standard that has been rejected by the courts for decades, which would jeopardize traditional discounts for minority ownership stakes, inflating tax bases by as much as 40 percent.
The Treasury report was written in response to President Trump’s April 21 Executive Order 13789, Identifying and Reducing Tax Regulatory Burdens, which asks the Treasury secretary to recommend specific regulatory actions the department could take to mitigate the burden imposed by regulations identified in the interim report.
ABC submitted comments to Treasury on the executive order with a coalition of stakeholders earlier this year, urging them to withdraw the proposed regulations. Additionally, when the rule was proposed, ABC submitted comments and also commented as a member of the Family Business Coalition.
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