Over the past several months, PATG has been tracking speculation from inside and outside Washington that the IRS may issue proposed regulations aimed at curbing the availability of valuation discounts for interests in closely-held entities. As you know, such a change could substantially increase the estate tax burden of many family enterprises.  Most recently, the IRS expressed its intention to target this legitimate and widely-used planning practice in its 2014-2015 Priority Guidance Plan on August 26, 2014 (See item 9 on Page 17).

As you may recall, the Obama Administration had previously sought legislative changes to limit discounts as part of its first four budget outlines it presented to Congress but omitted the proposal in the President’s most recent FY 2014 and 2015 budgets.  The provision had previously been included as a revenue-raising measure. With interest in the media, heightened attention among practitioners and growing interest in Congress related to estate tax-related revenue offsets, it appears that the risk of IRS action may be rising.

Working with Sen. John Thune (R-SD), PATG has sought to reduce the risk to families impacted by this potential regulatory action. To that end, Sen. Thune, the lead advocate for estate tax relief in the Senate, has authored a letter from Senate Finance Committee members to the IRS urging against such an aggressive and unilateral regulatory action. Senate Finance Committee signatories on the letter include Sen. Thune, Senate Finance Committee Ranking Member Orrin Hatch (UT), Senate Minority Whip John Cornyn (TX), and Sens. Mike Crapo (ID), Mike Enzi (WY), Chuck Grassley (IA), Johnny Isakson (GA) and Pat Roberts (KS).

The endorsement of Sen. Thune and the rest of these high-profile Senate tax-writers lends the credibility needed to send a strong signal of congressional opposition to potential IRS action as the agency continues to outline and prioritize regulatory efforts for the coming years. PATG will continue to work with Sen. Thune to ensure that legislators maintain a watchful position and are prepared to join us in opposition should such a regulation ever move forward.