Congressional Family Business Caucus Gaining Momentum

By Pat Soldano
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Budget battles, new tax proposals and bad policy initiatives never take summer holidays

Here in our nation’s capital, we watch, analyze and help family businesses avoid getting soaked with potentially harmful legislation. Here is an insider’s view of what’s affecting family businesses as Congress gears up for its fall session.
With the debt ceiling battle over, one cloud hanging over Washington is  the Internal Revenue Service’s Inflation Reduction Act Strategic Operating Plan (IRA Plan), aimed at increasing taxes on complex partnership structures, large corporations and high-net-worth individuals, including many family businesses.
The plan called for $80 billion for tax enforcement and operations. The debt ceiling deal hammered out in June cut it back by $21 billion, but the cuts are mostly applicable in the last years of this decade, so the IRS has billions of new dollars beginning this year to ramp up auditing and enforcement.
The IRS, in its own words, will “increase enforcement activities to help ensure tax compliance of high-income and high-wealth individuals” to ensure “they are paying the taxes they owe.”
Get ready for increased audits of gift, estate and personal income tax returns.
President Biden’s original Build Back Better plan is dead, but pieces of it are back. One such measure is proposed regulations that would limit family businesses from executing estate and succession planning.
We’re watching as Senate Democrats work with Treasury to reduce the use of grantor trusts and valuation discounts, and to develop regulations to substitute for estate tax policy used to prepare for a new generation of leaders in family businesses. We’re monitoring the hallway conversations. Stay tuned.
September will see the third meeting of the bipartisan Congressional Family Business Caucus. Right now, the goal is getting more congresspeople signed up.
The second meeting, in May, was held in the U.S. Capitol Building’s House Budget Committee Room, a sign that the caucus’s stature is growing. The third meeting, scheduled for Sept. 20, is expected to feature several co-chairs, family business owners, and family office and center executives. In May, the meeting featured two of four co-chairs, Reps. Brad Schneider (D-Ill.) and Henry Cuellar (D-Texas). The other co-chairs are Reps. Claudia Tenney (R-N.Y.) and Jodey Arrington (R-Texas).
With conservatives at the House helm, how can Washington possibly raise taxes on successful individuals and family businesses? My good friend Russ Sullivan, a partner at the Washington, D.C., law firm Brownstein, provided a few good reasons to worry. The Treasury Department, it seems, can revise its regulations.
Recently, the Senate sent a letter to Treasury demanding it revoke guidance on the transfer of assets between a grantor and a grantor trust as a nontaxable event.
Next, it asked to revoke guidance holding that gift taxes do not apply to a grantor’s payment of income tax attributable to trust income. Then it asked to reissue regulations to address alleged abuse of valuation discounts. Lastly, it asked to require GRATs (Grantor Retained Annuity Trusts) to have a minimum remainder value. Talk of the old top capital gains rate of 39.6% is still alive, as are transfers of property by gift or on death considered realization events.
Sullivan recommends raising awareness by explaining to Congress the serious impact these measures have on family businesses. Next, he says, we need to recruit  champions for family business through the new Congressional Family Business caucus.
As the fall term kicks in, we need to stop the adverse regulatory guidance against America’s largest private employer, family businesses.  
Pat Soldano is the president of Family Enterprise USA and the Policy Taxation Group, nonpartisan organizations advocating for family enterprises of all sizes. 
Audio Sound Duration: 
July/August 2023

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