November 9, 2021 

Chairman Ron Wyden 
Senate Finance Committee 
219 Dirksen Senate Office Building
Washington, D.C. 20510 

Chairman Richard Neal 
House Ways and Means Committee 
1102 Longworth House Office Building
Washington, D.C. 20515 

cc: Ranking Members Mike Crapo and Kevin Brady 

Dear Chairmen Wyden and Neal, 

Family owned and operated businesses face a number of challenges when transitioning to the next generation of ownership, including navigating the tax code. As recent jobs reports indicate, the economy remains on delicate footing, and at a time when many family businesses are still struggling to stay afloat, several proposals put forth this Congress have the potential to make operating and passing on a family business, farm, or ranch even more difficult.

Earlier this year, both the small business and agriculture communities identified taxing unrealized capital gains at death--a kind of "double death tax"—as an unworkable policy for family businesses. Multiple Senate votes and its exclusion from the House Ways and Means Committee draft might have led one to believe the threat was over, only to see a similar concept resurrected in Chairman Wyden's "mark-tomarket" bill. Taxing phantom gains in any form, whether through unrealized gains at death or through the recently released mark-to-market approach has the potential to create serious liquidity issues for privately held businesses.

Family businesses across a wide number of industries tend to operate on small margins with their value almost entirely tied up in equipment, machinery, land, buildings, and other non-cash assets. That makes paying taxes on imaginary gains problematic. It also creates difficulties when attempting to pay estate taxes when no profitable sale has occurred, only the death of a business owner. Family businesses without sufficient liquid reserves to pay new taxes on capital and a more aggressive estate tax will be forced to fire workers, close branches, or shut down the businesses altogether. No family business should be forced into losing their business, employees, and their legacy in order to pay multiple layers of tax on the same dollar.

One disappointing feature of the Ways and Means passed language was the inclusion of indirect death tax hikes in the form of severe restrictions on legitimate grantor trusts and on common-sense family business valuation rules. While these may seem obscure or minor, the language reported out of committee has the potential to be the biggest death tax hike in over a decade. Grantor trusts are used in succession planning to help pass family businesses from one generation to the next. The estate valuation rules would require families to pay death tax on assets which are appraised at a theoretically high, as opposed to fair market, value. If a business owner dies, the value of the business likely declines-- it's unfair to value the business as if nothing has changed.

Another threat to the death tax is more straightforward--halving the exemption. The Tax Cuts and Jobs Act doubled the unified credit for estate, gift, and generation skipping taxes to roughly $12 million in 2021--twice that for surviving spouses. Rolling back the clock on this progress could result in 50 to 100 percent more families paying the estate tax every year.

Congress should be single-mindedly focused on helping small businesses keep their doors open and their workers employed. Taxing unrealized gains in any form, subjecting more families to the estate tax by cutting the current exemption in half, removing important tools that family businesses use for succession planning, and changing longstanding rules on valuing family businesses are not ideas that are likely to help spur job creation and economic recovery. While the recently released “framework” contains several concerning tax hikes, it wisely abandoned these aforementioned provisions. On behalf of family businesses across the country, the undersigned organizations urge you to keep these harmful policies off the table as negotiations continue.

Signed, 

The Association for Manufacturing Technology 
FMI - The Food Industry Association
Center for a Free Economy 
Heating, Air-conditioning, & Refrigeration Distributors International 
National Association of Electrical Distributors 
National Lumber & Building Material Dealers Association 
America's Business Benefit Association 
American Supply Association 
National Cotton Council of America 
International Franchise Association 
National Grocers Association 
Associated Equipment Distributors 
American Society of Appraisers 
Hardwood Federation 
North American Die Casting Association 
Decorative Hardwoods Association 
Foodservice Equipment Distributors Association 
Instiute For Liberty 
AMAC Action 
Air Conditioning Contractors of America 
Americans for Tax Reform 
Forest Landowners Association 
Associated Builders and Contractors, Inc. 
National Association of Home Builders 
Consumer Action for a Strong Economy 
Energy Marketers of America 
North American Meat Institute 
American Mold Builders Association 
Truck Renting and Leasing Association 
Council for Citizens Against Government Waste 
AmericanHort 
Mason Contractors Association of America 
Coalition of Franchisee Associations 
Global Cold Chain Alliance 
American Commitment 
FreedomWorks
Industrial Minerals Association - North America 
National Tooling and Mchining Association
National Taxpayers Union 
Gases and Welding Distributors Association 
Western Growers 
American Bus Association 
Plumbing-Heating-Cooling Contractors - National Association 
NAHAD - The Association for Hose and Accesories Distribution 
American Sheep Industry Association 
Wine & Spirits Wholesalers of America 
National Ground Water Association 
Associated Wire Rope Fabricators 
National Industrial Sand Association 
National Association for the Self-Employed 
Conservatives for Property Rights 
Auto Care Association 
National Black Chamber of Commerce 
National Small Business Association 
National Funeral Directors Association 
American Foundry Society 
National Christmas Tree Association 
American Business Defense Council 
Communicating for America, Inc. 
Frontiers of Freedom 
North American Renderers Association 
NATE: The Communications Infrastructure Contractors Association 
National Marine Distributors Association 
International Association of Plastics Distribution (IAPD) 
United States Cattlemen's Association 
International Sign Association 
Small Business & Enterpreneurship Council 
Family Business Association of California 
American Beverage Licensees 
Precision Metalforming Association 
American Horse Council 
Center for Freedom and Prosperity 
Professional Beauty Association 
Material Handling Equipment Distributors Association 
Printing United Alliance 
Outdoor Power Equipment and Engine Service Association 
Kentucky Forest Industries Association 
National Wooden Pallet & Container Association 
Maryland State Pest Control Association 
Kitchen Cabinet Manufacturers Association 
Funeral Directors Services Association of Greater Chicago 
Franchise Business Services 
Tire Industry Association 
American Pipeline Contractors Association 
Rural & Agriculture Council of America 
Retail Packaging Association 
American Rental Association 
Independent Electrical Contractors 
National Association of RV Parks & Campgrounds 
National Franchisee Association 
Precision Machined Products Association 
Equipment Dealers Association 
Window and Door Manufacturers Association 
NATSO 
Wholesale Florist & Florist Supplier Association 
Southeastern Lumber Manufacturers Association 
Taxpayers Protection Alliance 
Equipment Services Association 
Sazerac 
Service Station Dealers of America and Allied Trades 
National Utility Contractors Association 
National Community Pharmacists Association 
Less Government 
60 Plus Association 
Center for Individual Freedom 
Appalachian Hardwood Manufacturers, Inc. 
WMDA Service Station & Automotive Repair Association 
American Values 
Distribution Contractors Association 
National Tax Limitation Committee 
Power and Communication Contractors Association 
Family Business Coalition 
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