Sante Ghetti

Proposed Federal Rules Could Impact Your Family-Owned Business

Sante Ghetti |

The U.S. Department of Treasury issued proposed regulations on minority discount valuations (referred to as the “2704 Regs.” after Section 2704 of the Internal Revenue Code).  The minority discount valuation issue deals with how the Internal Revenue Service (IRS) values a partial-ownership stake in, for example, a family-owned business.  If the partial-owner does not own a controlling stake in the business—typically less than 50 percent—and cannot initiate a sale or liquidation of the business, then the value of the stake is given a “minority valuation discount.”  This is an important consideration when the IRS evaluates the value of business ownership for estate tax purposes, and any changes could have a significant impact on family-owned businesses.

This proposed regulation could significantly change family businesses’ succession plans and make it harder for family-owned businesses to transition to the next generation.  These changes would remove legitimate valuation discounts for estate, gift, and generation skipping taxes which businesses have used for the past two decades in order to prevent the IRS from overvaluing their businesses at death.  The proposal could further add challenges to family-owned businesses who are already dealing with complicated and costly estate and gift taxes.

Want to learn more? 

The National Small Business Association has arranged for Brian Reardon, president of the S Corporation Association and a senior advisor at Venn Strategies, LLC., to discuss how these proposed changes could impact your family-owned business.  Here are the details if you’d like to join the call:

Call Information:

Thursday, October 6, 2016

2:00 p.m. Eastern

Conference Call Dial-in: 1-712-432-3066

Conference Code:  983852

Will your business be impacted by this initiative?  Here’s how you can act today:

Contact the Small Business Office of Advocacy

The SBA Office of Advocacy is charged with defending the Main Street business community against harmful federal rules, and they need to hear from you on this issue, as they will be submitting comments on the proposed rule. You can share your thoughts with them at: advocacy@sba.gov

Submit Your Own Formal Comments

You are encouraged to submit comments to the Treasury Department before the end of the 90-day comment period deadline of November 1, 2016.  A public hearing on these proposed regulations has been scheduled for December 1, 2016 in Washington, D.C.