Proposed Legislation Impacting Discounts
Charity Advisor Resource Newsletter - Volume 1.1 (2009)
BY JONATHAN D. ACKERMAN
As an example, HR 436, which was introduced on January 9, 2009, proposes the elimination of valuation discounts on certain family-owned entities and entities that own passive investments. In essence, if this legislation is passed, the assets of the family limited partnership (FLP) will be treated as if they were owned directly by the owner of the FLP interest. Passive investments would include cash, cash equivalents, corporate stock, publicly traded partnerships and real estate (in certain circumstances), among other assets.
Clearly, Congress intends to eliminate the discount where the FLP owns solely marketable securities and cash. In addition, discounts for lack of control are eliminated entirely if the interest is not actively traded and a family (as defined under Code Section 2032A(e)(2)) controls the entity.
As an aside, HR 436 also includes provisions regarding the estate and gift tax rules, such as establishing a $3.5 Million applicable exclusion amount, and a 45% tax rate, and repealing the "repeal" of the estate tax starting in, and for the year, 2010, among others.
We will keep you abreast of the status of any such legislation in future issues of the CAR Newsletter.
Jonathan Ackerman, 2002 President of NCPG (now known as Partnership for Philanthropic Planning), represents donors and tax-exempt organizations on a national basis. His advice is often sought by charities in their creation and operation, especially with respect to contributions and other funding opportunities, as well as by families (and their advisors) who desire to integrate philanthropy into their estate plans.