"Death" tax repeal advances in Congress.

Through the "death" tax, the U.S. government has the power to take up to 55 percent of many small businesses upon the death of the owner. The International Franchise Association views this as a form of double or triple taxation, and is working hard for its permanent repeal, as this extremely complex tax mandates excessive compliance costs on American business owners.

On April 13, the U.S. House of I Representatives voted 272-162 to pass H.R. 8, the Death Tax Repeal Permanency Act of 2005, introduced by Reps. Kenny Hulshof (R-Mo.) and Bud Cramer (D-Ala.) which would eliminate the Death Tax once and for all. In anticipation of the vote, on April 12, IFA circulated a letter urging support of the permanent repeal to every member of the House. IFA is an active member of the Family Business Estate Tax Coalition, a broad group of more than 60 businesses, trade associations and others in a unified effort to fully and permanently repeal the death tax.

Didn't Congress Already Eliminate the Death Tax?

Not exactly. In 2001, Congress approved a broad tax cut law that gradually phases out the death tax over 10 years by increasing the size of the estates that are exempt from the tax, and reducing the rate of tax on an estate. For example, in 2001, only estates worth less than $675,000 were exempt from the 55 percent estate tax. However, according to the tax relief law, by 2009, estates worth less than $3.5 million are exempt, from what will then be a 45 percent tax. The law as it is now written states that full repeal of the death tax goes into affect in 2010, but if Congress does not act, the full tax as it was in 2001 will be reinstated in 2011, due to the law's expiration.

While H.R. 8 easily passed the House, just as it did last year, the U.S. Senate continues to pose a more difficult arena for the bill. This year, supporters of permanent repeal are hopeful that the Senate bill (S. 420), introduced by Sens. Jon Kyl (R-Ariz.) and Bill Nelson (D-Fla.), has a greater chance of passing because of the Republicans' gain of four seats in the past elections, for a total of 55 of the 100 seats.

All or Nothing?

Fearing that the votes for full repeal are still not there, several key senators are considering a compromise. Instead of complete repeal, they are looking at proposals that would exclude the great majority of estates from the tax.

In fact, during consideration of H.R. 8 in the House, an amendment was debated, but not adopted to leave the estate tax structure in place and to raise the exemption to $3.5 million for individuals and $7 million for married couples by 2009. Advocates suggested that more than 98 percent of all estates are worth less than $3.5 million. Another proposal being discussed would leave the estate tax in place, but raise the exemption to $10 million, and reduce the tax rate to 15 percent; again greatly reducing the number of estates still subject to the death tax.

Some small-business groups have also expressed support for an alternative to permanent repeal, should the Senate be unable to pass S. 420, but other groups remain skeptical of any proposal short of full repeal.

IFA will continue to fight for relief from the death tax, and applauds both houses of Congress for elevating the discussion on this important measure for family businesses.

WHAT THE MEDIA IS SAYING

Navy Times

Be Your Own Boss

The UPS store is one of dozens of companies working with the International Franchise Association's Veterans Transition Franchise Initiative program, which offers veterans financial incentives to buy franchises.

... Since 2002, 291 franchises have been sold through the program since the relaunch and about 130 applications are under consideration.

Jessica Bonanno is manager of government relations and political education for the International Franchise Association. She can be reached at or 202-662-0775 or [e-mail].