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Lawmakers Target Spending Bill to Block Estate Tax Rules

The opposed regulations would limit the use of valuation discounts

*Reproduced with permission from Daily Tax Report, 188 DTR G-5 (Sep. 28, 2016). Copyright 2016 by The Bureau of National Affairs, Inc. (800-372-1033)

Senate Republican leaders are joining efforts in the House to block Internal Revenue Service estate tax regulations on valuation discounts.

The proposed regulations (REG-163113-02), introduced in August, would limit the use of valuation discounts by family-owned businesses, which the agency has said have been abused. House Republicans, who argue the proposed rules will increase estate and gift taxes on businesses, have responded by introducing two separate bills aimed at stopping the regulations from being finalized. Senate Republicans are making a similar move (184 DTR G-9 (Sept. 22, 2016)).

Representative Warren Davidson (R-Ohio) has introduced legislation (H.R. 6100) that would block funding for IRS work on the proposed rules. The measure goes a step beyond an earlier bill, H.R. 6042, introduced by Rep. Jim Sensenbrenner (R-Wis.), that would only nullify the proposed regulations.

Senator John Thune (R-S.D.), a member of the Senate Finance Committee, said his office is working on a letter to Treasury Secretary Jacob J. Lew that should be made public this week. It’s “basically asking Jack Lew not to go forward with what they’re proposing to do,” he told Bloomberg BNA on Sept. 27. The IRS's proposal “would change the way that death tax valuations have worked and is basically an attempt by regulatory action to go around the will of the Congress and the will of the American people,” he said.

At the same time, Sen. Marco Rubio (R-Fla.) could back companion legislation to the Davidson bill in the Senate. “It's legislation that we’re looking at co-signing onto but I’m not sure that we sponsored it yet,” he told Bloomberg BNA on Sept. 27. Rubio said he's not finished reviewing the details of the bill but will make a final decision on whether to support it once he does.

Plan for Passage

Several supporters of the Davidson bill—of which there are currently 33 co-sponsors—said they’re targeting an end-of-the-year spending package as the legislative vehicle for a provision to block the IRS rules.

Ways and Means Committee member Pat Tiberi (R-Ohio), a co-sponsor of the Davidson bill, said he would press committee leadership to try to advance the issue this year, but he had yet to speak directly with Chairman Kevin Brady (R-Texas).

There’s growing congressional opposition to the IRS's actions, Tiberi said, criticizing the Obama administration for using the regulatory process to push policy changes that don't have political support.

Rep. Bill Flores (R-Texas), another co-sponsor of Davidson's bill, said the measure isn't something the House is going to be able to push through between now and the end of the week when Congress is expected to vote on a continuing resolution. But “hopefully we can do it when we get to the next funding point, which is probably Dec. 9,” he said.

The Davidson bill would “cut the IRS off at the knees” as it tries to “pursue this non-statutory behavior,” Flores said.

Other lawmakers agreed. “We’re all hustling, but it comes down to what you can get into the budget at the end of the year,” said Rep. Dave Brat (R-Va.), who has also sponsored the bill, adding that “the only answer is to try to get it attached” to either a continuing resolution or “mini-buses” in the future. The term mini-buses refers to House Speaker Paul D. Ryan’s (R-Wis.) plan to fund the government through several small funding packages as opposed to one large omnibus bill.

Alexei Woltornist, the communications director for Davidson, said the lawmaker is considering passing the bill as both a stand-alone measure and as a provision in a spending package. “We are going for a ‘both and' approach,” he said in an email.

Davidson's staff is working with the Ways and Means Committee in pursuit of the traditional route, as well as “working on the process of getting on the omnibus,” he said. Woltornist said the continuing resolution is less of a target because “everyone knows it is pretty much a done deal.”

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