The IRS is underestimating the effect new estate and gift tax rules could have on small businesses across the country, the Small Business Administration (SBA) warned.
The SBA’s Office of Advocacy submitted a letter to the Internal Revenue Service Tuesday sharing their concerns.
They told the SBA they were concerned about the elimination of valuation discounts that would make it more difficult to pass down family businesses across generations. Business expressed their concerns with the Office of Advocacy and a Treasury representative on a conference call in October.
“By eliminating valuation discounts, the proposed regulations would negatively impact succession planning for many small businesses,” the letter reads. “As an example, the IRS proposed regulations would result in increased estate taxes on the death of owners of small family businesses, possibly causing them to liquidate the business or sell large or controlling interests to non-family members outside of the business.”
Valuation discounts allow businesses to devalue minority shares in a business. The Obama administration contends limiting valuation discounts will make it harder for wealthy businesses owners to take advantage of the tax code.
Congressional efforts to stop the implementation of the rules, including bills sponsored by Sen. Marco Rubio (R-Fla.) and Rep. Warren Davidson (R-Ohio), have received support from the U.S. Chamber of Commerce.
The SBA is recommending that the IRS publish a Regulatory Flexibility Act assessment for public comment so that small businesses can understand what they will need to do to comply with the act.
The letter states public comment could give affected businesses, “an opportunity to better evaluate the proposal and consider less burdensome regulatory alternatives to recommend to the IRS.”
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