Support Permanent Reduction of the Death Tax on Family-Owned Businesses

Background:

• In 2001, Congress attempted to repeal the death tax and its harmful effects. Unfortunately, the 2001 law created great uncertainty about the future taxation of their business for construction owners considering a succession plan. The 2001 law phases the top death tax down rate to 45 percent in 2009 while increasing the tax exemption to $3.5 million, until the tax is repealed in 2010, and reinstated in 2011 at the pre-2001 level.

AGC Message:

• Congress has Attempted to Repeal the Death Tax, However the Changes are Not Permanent. AGC appreciates the effort that Congress has made to lower the death tax rate and eliminate it. However, the ambiguity and uncertainty increase the complexity of the law because the changes are not permanent. Contractors continue to tie up resources in compliance that could be used to create jobs and grow the economy.
• Permanent Reform Would Alleviate Business Uncertainty. While permanent full repeal of this tax is the best option on the table to ensure construction businesses are able to stay in business after the death of an owner, reasonable, permanent reform also provides the necessary continuity that AGC contractors are demanding.
• Construction Companies Must Use Resources in Estate Preparation Because the 55 Percent Rate Returns in 2011. Rather than spending time and money on business growth, job creation, and equipment purchases, contractors are forced to assume that the burdensome death tax will be fully reinstated in 2011. This means resources are still being directed at finding ways to pay for this tax (through fees to insurers, CPAs and attorneys), as well as planning for the liquidation of assets at the time of death in order to pay up to 55 percent in taxes.
• A Permanent Solution Allows Smart Business Planning. Congress intended for family-owned businesses to focus on growth and business planning which would grow our economy, create new jobs, and strengthen businesses to succeed for generations. A permanent legislative solution is necessary in order for contractors to create smart business plans.