Weekly Legislative Update - December 2, 2019
New Death Tax Regulations
On November 22, the Treasury Department published Treasury Decision 9884.
The regulations make clear that the federal estate/gift/GST exemptions of $11.58 million per individual and $23.16 million per couple with spousal portability (new 2020 exemptions announced in Rev. Proc. 2019-44) can be fully utilized without taxpayers fearing a "claw back" if the exemptions revert back to pre-TCJA levels after current policy is scheduled to expire in December of 2025.
Family businesses planning for succession can now transfer up to the maximum exemption amounts until 2025 without fearing a large tax bill if the estate/gift/GST exemptions aren't extended before 2026.
If a taxpayer gifted $10 million in 2018 when the exemption was $11.18 million per individual and died in 2026 when the exemption reverted back to $5.49 million per individual, there was a question as to whether that taxpayer would be required to pay a "claw back" 40% tax a portion of the amount already transferred tax free.
The resolution of this issue provides more certainty for businesses working towards transitioning to the next generation of ownership. Some of our members represent many large multi-generational family businesses and the resolution of this issue represents is one less hurdle family businesses must face in continuing on to the next generation of ownership.
TIA is encouraged to see the Treasury Department prioritizing regulations important to family owned and operated businesses.
TIA along with the Family Business Coalition sent this letter to Secretary Mnuchin regarding the changes.
During a time when many Democratic candidates for President are calling for a top death tax rate of 75% or higher (see a list of current Democratic death tax plans here) we welcome this positive news on the estate tax.
Magnuson Moss Warranty Act Update
There have been some recent developments in relation to Magnuson Moss.
Last week, the New Jersey Assembly passed Senate Bill 1712 - Notification of Vehicle Warranty's, (73-0) which would require the vehicle manufacturers to send a notice to consumers within 90-days of a new car lease or purchase of the consumers existing Magnuson Moss rights under federal law.
In addition, the measure requires the manufacturers to put the notice on their website.
The Governor has until January 14 to sign or veto the measure. All indications are that the Governor will sign the measure but we are lining up support in case the manufacturers push the Governor for a veto.
If this bill passes, this will be only the second state to pass a Magnuson Moss Notification Bill in the country. Maryland tried to pass a similar bill a year ago but it failed in the Senate after passing the House.
Many thanks to each of you for your continued support for the Magnuson Moss consumer notification.
Large Number of Small Businesses Will be Hurt by the SECURE Act
TIA is calling on Senators to remove two provisions in the House-passed SECURE Act (H.R. 1994) that would adversely affect small businesses and their employees. While TIA supports other provisions of the Act, particularly changes to 529 plans for apprenticeships, it strongly opposes the proposed elimination of the "Stretch IRA" and the increased penalties for the late filing of certain retirement plan forms. These two provisions will hurt small businesses which have retirement plans and their owners and employees -- all middle and upper middle income taxpayers --who saved for their retirement in those plans.
The elimination of the stretch IRA would create an unanticipated new tax which would dramatically reduce the value of the IRA. TIA is concerned that the unintended impact of the elimination of the stretch IRA will be to reduce the long term funding of small business retirement plans. It makes sense that owners will choose to save less in their plans and stop employer contributions prematurely so as to avoid the draconian tax treatment generated by the elimination of the stretch IRA.
This change would cause small business employees to lose the meaningful employer contributions that they would have received, since the owners would no longer contribute to the retirement plans.
The SECURE Act's substantial increases in penalties for the late filing of certain retirement plan reporting forms will harm small businesses and eventually the plan participants. It is small businesses, which do not have accounting or benefits departments to handle these types of filings, that will make mistakes and be hit with these excessive penalties.
If a small business is hit with such a large penalty, expect future employer contributions to the plan to be cut back and possibly the plan to be terminated.
TIA has urged Senators to substitute their own provisions from the Retirement Enhancement and Savings Act (S.972), known as "RESA," for these two harmful SECURE Act provisions. At a minimum, the Senate should extend the 10 year period to at least 20 years for the stretch IRA provision and stay with their provision on the increased penalties for late filing of retirement plan forms.
Despite repeated claims by very large entities as to how good this legislation is for small businesses, make no mistake that these provisions will harm small businesses and their employees.
GTE PAC Board Winners Announced!
We thank all those who supported the TirePAC efforts in Las Vegas at GTE!
Below are the PAC Board Winners:
1st Place- Anthony Blackman ($500- DONATED BACK)
2nd Place- Dick Gust ($250- DONATED BACK)
3rd Place- Mason Hess ($100- DONATED BACK)
We thank the winners for donating back to the PAC!
The next back board will be available at the OTR Conference.