Category

Taxation

IRS Hearing Day on Family-Owned Business Estate Tax Regs

By | Regulations, Shopfloor Main, Shopfloor Policy, Taxation | No Comments

Family-owned businesses and their advocates are watching closely the hearing happening today at the IRS on the so-called “minority valuation proposed regulations.” These proposed regulations, released in August, would alter how families are able to value of minority interests in a family-owned company, in some cases resulting in a tax increase of over 30 percent.

In comments submitted by the NAM and the Family Business Estate Tax Coalition of which the NAM is a co-director and co-founder, we highlighted the numerous concerns manufacturers and family-owned businesses across the economy have about this proposal. Shortly after the release of the proposal, when the potential impact begun to be understood by the business community and as concerns were beginning to be raised, Treasury’s policy team began to assert that the proposal is not meant to reduce the use of minority valuation discounts for lack of marketability and lack of control that are used in determining the value of shares sold to family-members in a closely-held business. Instead that they were just seeking to target abuses in the valuation discounts utilized by some simply to avoid taxes. However, as the IRS and Treasury teams will hear today from the grand majority of the 30 people testifying at today’s hearing, the impact as understood by the tax and estate planning community is very different.

Manufacturers appreciate that Treasury is listening and that today’s hearing affords the public another opportunity to weigh in on this rule. However, the negative impact of these proposed regulations on NAM family-owned businesses cannot be overstated. In a recent letter, the third generation owner of an active manufacturing enterprise explained the potential impact of the regulations:

Our board has been working an ownership succession plan for years. Stock valuation and financing stock transfer are an ongoing challenge. Stock is transferred through the sales, gifts and redemptions of shares and the value of the stock is the fair market value at time of transfer. We are within a couple of years of completing the transfer of ownership from the 3rd to the 4th and 5th generations. Our advisors have informed us the proposed regulations will eliminate discounts that have traditionally been applied. If this happens, the cost of transferring the stock will increase by 43%. This will put an additional strain on our capital and would lead us to underinvest the capital required to grow or even sustain our company. It means diminished ability to invest in job creating, value creating and value-retaining projects.

The last line of our member’s letter says it all and today’s hearing should reinforce what they’ve already heard in the voluminous comments to Treasury that they should withdraw these proposed regulations and not harm family-owned businesses.

Timmons Calls on Mnuchin, Trump to “Make Our Economy Work Better for Everyone”

By | Communications, Presidents Blog, Shopfloor Main, Taxation | No Comments

National Association of Manufacturers President and CEO Jay Timmons released the following statement after the nomination of Steve Mnuchin as treasury secretary:

“Manufacturers welcome the nomination of Steve Mnuchin as treasury secretary and his commitment to accelerating economic growth with much needed tax reform. Tax reform that benefits manufacturing workers is one of the most important ways to jumpstart more jobs and opportunities for all Americans.

“Mr. Mnuchin has previously articulated exactly what manufacturers need to compete and win in a global economy: a fairer, simpler and more competitive tax code. That’s what we’ve called for in our ‘Competing to Win’ agenda, and that’s why we look forward to working with President-elect Donald Trump and Mr. Mnuchin to deliver on their promises and make our economy work better for everyone.”

CONTACT: Jennifer Drogus (202) 637-3090

#SmallBizSaturday: Help Family Owned Manufacturers Succeed

By | Shopfloor Main, Shopfloor Policy, Taxation | No Comments

Coming on the heels of Thanksgiving and “Black Friday”, Small Business Saturday is a perfect opportunity for Americans to pause and contemplate the critical role small businesses play in our nation’s economy. Many small businesses are family-owned and are responsible for 62 percent of the country’s employment and $5.9 trillion of the nation’s GDP. Often with deep roots, these family-owned businesses play critical roles in the philanthropic and the economic heart of local communities. Read More

NAM Applauds Introduction of Bills Protecting Family-Owned Businesses

By | Shopfloor Policy, Taxation | No Comments

The National Association of Manufacturers (NAM) applauds the leadership of Rep. Warren Davidson (R-OH) and Sen. Marco Rubio (R-FL) in introducing legislation to prevent the finalization of proposed regulations affecting the transfer of minority interests in a family-owned business. Since these proposed regulations were released in August, there has been a growing concern among small manufacturers about the potential harmful impact of these proposals on the continuity and succession planning of family-owned enterprises. Thousands of manufacturers across the United States are family-owned businesses. These businesses, often in their second and third generation, are at the heart of the manufacturing supply chain and are a critical piece of the economy.”

The proposed regulations purport to address what Treasury believes to be abusive tax planning. In reality however, as more than 3,800 family-owned businesses and trade associations representing these businesses expressed in an NAM-led letter sent to Treasury last week, “the proposed guidance is one of the most sweeping changes to estate tax policies in the last 25 years and would be detrimental to active enterprises and family-owned businesses that employ millions of workers throughout the nation.” While most taxpayers applaud efforts to target abuses in the tax system, if the proposed regulations are not corrected, they have the potential to threaten “the ability of families to pass businesses on to the next generation of owners.” Manufacturers applaud the leadership of these members in introducing this legislation and will continue to work to protect family-owned manufacturers so that they can continue to compete and succeed.

Ohio Companies to Treasury: 385 Regulations Negatively Impact Business

By | Shopfloor Policy, Taxation | No Comments

A group of nearly 50 Ohio companies, including a number of manufacturers, sent a letter to Treasury today about the negative impact the proposed Section 385 regulations are already having on businesses. In the letter, the Ohio companies warned that the regulations, if finalized in their current form, would “significantly impede the ability of our businesses to invest and create jobs in Ohio.”

The letter echoes sentiments the National Association of Manufacturers (NAM) has shared with the Treasury Department in meetings, testimony and comment letters about the uncertainty, costs and compliance challenges posed by these proposed debt/equity rules. The NAM has also taken this message to Capitol Hill, where manufacturers continue to brief congressional staff on the serious strain these regulations would have on manufacturers’ corporate finance operations, if the rules are not withdrawn or, at a minimum, significantly modified. Read More

House Committee Approves Bill to Repeal Pay Ratio, Conflict Minerals

By | Policy Experts, Shopfloor Policy, Taxation, Trade | No Comments

Blog co-authored with Ken Monahan, director of international trade policy.

More than six years since Congress approved the Dodd-Frank Wall Street Reform and Consumer Protection Act, the House Financial Services Committee on Tuesday took a step to modify or repeal various provisions from that law. The Financial CHOICE Act (H.R. 5983), approved by the committee, specifically addresses some of the provisions that manufacturers have been raising concerns with for years, including the pay ratio and conflict minerals requirements. Read More

Congress Increases Pressure Against Treasury’s Section 385 Regulations

By | Shopfloor Policy, Taxation | No Comments

The National Association of Manufacturers (NAM) has been front and center in the effort to push back on Treasury’s Section 385 debt/equity proposed regulations, leading the business community in writing to Treasury and Congress, educating members of Congress and their staff with more than 70 meetings and hosting fly-ins to bring corporate treasurers and tax executives from manufacturing companies to Washington to meet with Treasury, the administration and Congress. Now, the leaders of the House and Senate tax-writing committees are echoing many of the business community’s concerns in letters to Treasury Secretary Jacob Lew today. Read More

Manufacturers Ask SEC Not to Add to the Disclosure Burden

By | Shopfloor Policy, Taxation | No Comments

In April, the Securities and Exchange Commission (SEC) put out a concept release on modernizing certain disclosure requirements in Regulation S-K, basically the guiding document for the disclosures that public companies must file in their periodic reports. The National Association of Manufacturers (NAM) took the opportunity to comment on the release, raising strong concerns with existing disclosures and also recommending against additional disclosures that add to the compliance burden without providing any additional benefits to investors. Read More

Section 385: From Debt to Equity—Listen to NAM’s Latest Tax Podcast

By | General, Shopfloor Main, Shopfloor Policy, Taxation | No Comments

Though released as part of a package designed to curb cross-border mergers, the Treasury’s broad regulations do little to stop this activity. Instead, these efforts will have a significant negative impact on manufacturers in the United States while stifling investments, job creation and economic growth.

In this week’s Shopfloor podcast, National Association of Manufacturers (NAM) Vice President of Tax and Domestic Economic Policy Dorothy Coleman and NAM Senior Director of Tax Policy Carolyn Lee discuss the implications of these regulations.