ADMINISTRATION PROPOSAL ON ESTATE TAX CHANGES1 Excerpted from the President's State of the Union Message of January 19, 1976 Also for the sake of future generations we must preserve the family farm and family-owned small businesses. Both strengthen America and give stability to our economy. I will propose estate tax changes so that family businesses and family farms can be handed down from generation to generation without having to be sold to pay taxes. Excerpted from the White House Fact Sheet on the President's State of the Union Message of January 19, 1976 ESTATE TAX PROPOSAL FOR FAMILY FARMS AND BUSINESSES The President proposed a change in the Federal estate tax laws to make it easier to continue the family ownership of a small farm or business. The proposed changes would stretch out the estate tax payment period so that Federal estate taxes can be paid out of the income of the farm or business. No payment will be required for five years and 20 years will be allowed for full payment of estate taxes at a 4 percent interest rate. This reform will help ensure the survival of smaller farms and businesses for future generations and allow them to expand their current operations. The proposed change would liberalize the present rules under section 6166 of the Internal Revenue Code which permit the payment in 10 annual installments of estate taxes attributable to a family farm or other closely-held business constituting a substantial part of an estate (35 percent of the total estate or 50 percent of the taxable estate). Currently, interest on deferred estate tax payments is charged at the normal rate on overdue tax payments (currently 9 percent, but 7 percent effective February 1, 1976). The proposal has the following features: At the estate's option, a five-year moratorium will apply to payment of that portion of the tax liability attributable to an ownership interest in a family farm or other closely-held business qualifying for ten-year installment payments under present section 6166 of the Internal Revenue Code. No interest will accrue during the five-year moratorium period and no principal or interest payments will be required during that period. At the end of the five-year period, the deferred tax will, at the estate's option, be payable in equal annual installments over the next 20 years. 1 This chapter includes all details submitted by the administration to the Congress for revision of estate tax laws as of the date of publication. No changes have been sub Interest on the installments will be reduced to 4 percent per annum from the 7 percent rate generally applicable to deferred tax payments. The five-year moratorium and twenty-year extended payment provisions will apply only to the estate tax liability attributable to the first $300,000 in value of the family farm or business. Between $300,000 and $600,000 there will be a dollar for dollar reduction in the value of the farm or business qualifying for the moratorium and extended payment provisions. That portion of the tax not qualifying will continue to be subject to ten-year installment payments with the 7 percent interest rate. PANEL DISCUSSIONS BEFORE THE COMMITTEE ON WAYS AND MEANS HOUSE OF REPRESENTATIVES NINETY-THIRD CONGRESS FIRST SESSION Part 10 of 11 (February 27, 1973) Estate and Gift Tax Revision Panel No. 10 Subject: ESTATE AND GIFT TAX REVISION Mr. Marvin K. Collie, Vinson, Elkins, Searls, Connally & Smith, Houston, Tex. Mr. James B. Lewis, Paul, Weiss, Rifkind, Wharton & Garrison, New York, N.Y. Mr. Bart A. Brown, Jr., Dinsmore, Shohl, Coates & Deupree, Prof. David Westfall, Harvard Law School, Cambridge, Mass. |