What Happened At The IRS’s Hearing On Proposed Regulation Section 2704?
A view of the IRS's auditorium during the hearing.
On December 1, 2016 at the IRS auditorium located in Washington DC, there was a hearing on a proposed regulation called: Estate, Gift, and Generation-skipping Transfer Taxes: Restrictions on Liquidation of an Interest, (REG. 163113-02). The Washington Valuation Group (WVG) was present at the hearing and we want to share with you what transpired at that hearing, so you, our client, partner, or stakeholder, can understand what happened.
The hearing that started at 10:00 am was located in the IRS auditorium located at 1111 Constitution Ave NW, Washington DC 20224. This auditorium seats 250 people. There were close to 200 people in it that day. It was packed as never before for a hearing. The staff was overwhelmed and stressed by the unexpected number of attendees to that hearing. Security was tight and anyone who wanted to go anywhere within that building had to be escorted by a security officer.
Each attendee received a package that included an agenda, the names, and positions of the four-member panel. Three members of the panel were from the IRS, and one from the Treasury Department. The package also contained the list of all 37 speakers representing a wide variety of stakeholders. On that list were: three speakers from The National Association of Certified Valuators and Analysts (NACVA), two from both the American Institute of CPA (AICPA) and the American College of Trust and Estate Counsel (ACTEC) and the remainder, one speaker for each of the 30 different organizations.
The hearing started promptly at 10:00 am. Each speaker had 10 minutes maximum to make his/her point. The timing was strictly enforced. Overall, all speakers were within their time limits. The tone of the hearing was understandably emotional and grave. People were concerned and were voicing those concerns in various ways. Some were loud, others, with a very emotional voice, were almost begging the IRS to reconsider their proposed regulation, and provided the reasons they were concerned with real life examples to back up their cases.
The push back from all but one speaker was stunning and should have been expected since there were more than 9,800 written comments sent to IRS about this proposed regulation. A record! Mr. Frank Clemente, from the Americans for Tax Fairness, was the only dissenting voice. He advocated for the proposed regulation citing abuses and urged the IRS to go forward with their proposed regulation. No need to mention that the room was in awe. Cathy Hughes from the Treasury’s Department of Tax Policy appeased the audience by stating that the intent was not to do away with all discounts, and that there will be no put right, and also, the three–year lookback provision will not be retroactive. She did not mention anything about the minimum value standard issue (coming from nowhere) that does not meet the criteria of the Fair Market Value standard that is a Generally Accepted Standard of Value widely used in the industry for more than a century.
NACVA members at the IRS's hearing (Left to Right: Achille Ekeu, Robert Grossman, Mark Hanson, Peter Agrapides).
What Will Happen Now?
No one knows what, ultimately, is going to happen with the proposed regulation. There is a new Administration coming in January that favors getting rid of the estate tax altogether. The Treasury Department may decide, at a minimum, to adjust the proposed regulation, put it on the shelf for a while, or withdraw it altogether if it proves to be very controversial (and it is). As a last resort, Congress may step in and vote for a legislation called: “H.R. 6100 - Protect Family Farms and Business Act” that was introduced on September 21, 2016 by Congressman Warren Davidson (R-OH) and Senator Marco Rubio (R-FL) respectively in the US Chamber of Representatives and the US Senate. This legislation could kill this proposed regulation entirely. We'll keep you informed.
Here is the link to NACVA's Youtube Live discussion about what happened at the hearing: Click Here.
Achille Ekeu, MBA, CVA
The Washington Valuation Group (WVG)
Achille Ekeu is a Certified Valuation Analyst (CVA) member of the National Association of Certified Valuators and Analysts (NACVA) in the DC-MD Chapter. He provides valuation services for Estate and Gift Tax, Purchase, Sale of business, Debt Financing, Buy-Sell Agreements, and Litigation Support in Divorce/Shareholders disputes cases. He can be contacted by phone at 240-274-9570 or by email at firstname.lastname@example.org.