The U.S. Department of Treasury released proposed regulations under the Obama Administration that could have an impact on the taxation of family businesses, says the Washington-based Associated Builders and Contractors (ABC). The regulations under Section 2704 were not finalized by the end of Obama’s presidency but they remain pending.
The regulations would establish family attribution, a standard previously rejected by the courts, that would increase tax bases by 40 percent, ABC says.
ABC teamed up with several other trade groups, including the Real Estate Roundtable, S-Corp Association and the Independent Community Bankers of America, to sponsor a study on the effects of the Obama-era Section 2704 regulations.
The study, titled “An Economic Analysis of Proposals to Limit the Recognition of Valuation Discounts for Transfers of Interest in Large Family Businesses” and written by Dr. Robert Shapiro, states:
- limiting valuation discounts under the proposed rule would increase estate taxes for large family businesses by $633.3 billion over the next 46 years;
- because of this, businesses would divert resources equivalent to the additional taxes they will owe from their normal business investments;
- the projected reductions in equipment and machinery investment would reduce gross domestic product (GDP) growth by $2,476 billion from 2016 to 2062; and
- the slower growth will reduce job creation over the next decade by 105,990 jobs.
ABC says it plans to work with the Trump Administration to reduce red tape and encourage investment and growth.