The Specialty Advertising Association International, by its attorneys, hereby submits its views on H.R. 3003 and other bills which seek to revise the estate and gift tax laws and minimize the burden on small and moderate size estates. So that our views can be considered in their proper perspective, we shall begin with a brief description of our association client and the industry it represents. The Specialty Advertising Industry The Specialty Advertising Association International is the trade association that represents the specialty advertising industry. Its 2,400 member firms, located in virtually all states, manufacture or distribute specialty advertising products. Specialty advertising is an advertising medium that uses useful but inexpensive products to carry an advertising message. Examples of such products are ballpoint pens, key chains and calendars, which are custom-imprinted with the name, logo or other message of the advertiser and distributed free of charge for their promotional value. By any definition, specialty advertising is a small business industry. It is composed primarily of two types manufacturers that produce and/or imprint of businesses: products and distributor firms that sell them. There are from 800 to 1,000 manufacturers of products used for specialty advertising purposes, most of which have specialty advertising sales of less than $500,000. Of the 4,000 distributor firms in the industry, more than 70 percent are estimated to have sales of less than $250,000. Specialty advertising firms face all of the tax and other economic disadvantages of all small business companies. In addition, however, they have the problem of being in constant and direct competition with other advertising media composed primarily of large firms that do not have these disadvantages. These media consist of television, radio, newspaper and magazine publishing companies. Views On Proposed Legislation Mr. Chairman, we commend you and the members of your subcommittee for your in-depth consideration of this subject of vital interest to our industry and to taxpayers generally. Much has been said about the tax and other economic inequities faced by small business owners and we shall not elaborate on them here. We do wish to point out, however, that we believe these inequities impinge most heavily on specialty advertising firms because they have the additional burden of competing vigorously with large and, in some cases, huge companies. We note that the subcommittee's hearings have dealt with several bills. We further note that at least one of these measures, H.R. 3003, seeks to provide estate and gift tax relief for family enterprises, including small businesses, in addition to providing relief for taxpayers generally. Our Association has examined the provisions of H.R. 3003, the measure entitled the "Family Enterprise Estate and Gift Tax Equity Act." We believe that this bill deals with a number of inequities in a realistic manner and that it would provide much needed benefits to our industry. We, therefore, strongly support its enactment. The proposed reduction in the estate tax rates contained in H.R. 3003 is long overdue and we approve it, although we believe an even greater reduction is justified. We also strongly support provisions in H.R. 3003 which would increase the unified credit from $47,000 to $124,000, increase the present estate tax exemption from $175,000 to $600,000, increase the annual gift tax exclusion from $3,000 to $10,000, and provide an unlimited marital tax deduction. We also believe that the repeal of the $500,000 limitation in the valuation of qualified real property excluded from the gross estate under Section 2032A of the Internal Revenue Code is highly appropriate. The present exclusion of $500,000 is outdated and inadequate. Finally, it is exceedingly important to the specialty advertising industry to provide for extensions of time for payment of estate tax where the estate consists largely of interests in a closely held business. H.R. 3003 addresses this point adequately and we support it. In addition, however, we would urge consideration of a provision which would exclude from the value of an estate for tax purposes all small business property if a certain percent (e.g., 60 percent) or more of the estate consists of such property. We respectfully request that this letter be made part of the record of the subcommittee's hearings on estate and gift tax proposals. Sincerely, Malcolm D. Mac Cuttur Malcolm D. MacArthur Specialty Advertising Association International |