The U.S. Treasury Department recently proposed a rule change that would lower or even eliminate valuation discounts on family-owned entities. Last week, the Internal Revenue Service hosted a forum to discuss the potential change this week.
At the forum, National Cattlemen’s Beef Association Vice President Kevin Kester said that will discourage families from expanding and passing the business on to the next generation, or even continuing their operations in the future. Family-owned cattle farms are often small businesses that face the same challenges as other small businesses in different sectors, including making payroll, complying with numerous regulations, and paying bills.
Kester says, “Ranching is a debt-intensive business, meaning operators work on an asset-rich, cash poor business model. That makes them vulnerable to the estate tax.”
When a principal in a business passes away, assets often must be sold to meet the tax burden. Producers have used valuation discounts to help them shoulder some of the tax burden and keep operations in their family.
Kester adds, “The proposed rule will upset expansion plans, halt future business growth, and require most operations to liquidate assets just to survive.”
(From the National Association of Farm Broadcasters News Service)