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The death tax: will the new Congress bring relief to franchised small businesses?

With the economy in crisis and the new Obama administration struggling to right the ship, Congress is again faced with a decision so central to small businesses that few if any issue comes close to the level of motivation the franchise community has shown in achieving this goal. The issue: permanent repeal of the estate, or "Death," tax and the time has come again for Congress to act.

The Death Tax was temporarily repealed as part of the Bush administration's 2001 tax cuts. But because of the "sunset provision" in the law, the Death Tax will be fully repealed only for one year, 2010. Unless Congress acts, a tax at death will be reinstated in 2011 with rates from 37 percent to 55 percent, once again forcing many families to sell or break up their businesses when an owner dies.

Permanent repeal of the burdensome Death Tax will dramatically reduce the time, money and energy spent by family-business owners on estate planning and will preserve and expand employment opportunities. Efforts by Rep. Mac Thornberry (R-Tex.) and Joseph Pitts (R-Penn.) would fully and permanently repeal the Death Tax.

Alert: IFA Key Vote

Recognizing that the Democratic majority in Congress has not previously shown significant interest in permanent DeathTax repeal, extension of its temporary repeal is also being sought by the International Franchise Association and other small-business advocates. As part of its consideration of the annual budget resolution, the U.S. Senate earlier this year adopted an amendment to continue relief from the Death Tax. The provision, offered by Sen. Blanche Lincoln (D-Ark.) and Jon Kyl (R-Ariz.), provides a $5 million exemption level indexed to inflation, a 35 percent tax rate, reunification of the estate and gift credits, and portability between spouses. IFA flagged the Death Tax amendment vote as a "key vote" and will use it to measure elected officials' commitment to addressing the concerns of franchising.

The temporary provisions further complicate an already overly-complex tax code. The uncertainty surrounding repeal requires business owners to continue with estate-planning strategies that are costly, cumbersome and time consuming. If business owners are permitted to operate with the assurance that the death tax will be permanently repealed, resources currently allocated to mitigating the tax can be reinvested into expanding the businesses, thus shoring up job opportunities and providing a much-needed stimulus to local economies.

IFA members the vast majority of whom are small businesses, have a lot to lose if the Death Tax is not permanently repealed in 2010. It is well documented that imposition of this levy, at rates that can reach as high as 46 percent, forces business owners to sell or break up active businesses that are essential to the health of local economies. The phase-out and ultimate repeal of the Death Tax will help reduce the time, money, and energy spent by business owners on estate planning and preserves the many companies that are sold today for tax reasons when an owner dies.

IFA is a member of the Family Business Estate Tax Coalition, a broad group of individuals, businesses and trade associations unified in the effort to fully and permanently repeal the Death Tax. For more information on this issue, including ways to contact your member of Congress to encourage support, visit IFA's Death Tax Repeal Toolkit at


"We should take the opportunity to give these businesses the tools they need to reinvest in themselves so they can keep their businesses not only running, but growing and providing new jobs for their communities. Small businesses and family businesses are the engines of our local economies, and at this time of economic crisis, it is all the more crucial to make investments that will help them create jobs."

Statement of U.S. Sen. Blanche Lincoln (D-Ark.) upon the adoption of Senate Budget Resolution Amendment SA873 (Estate Tax Relief), April 3, 2009

Troy Flanagan is director of government relations for the International Franchise Association. He can be reached at 202-662-0792 or
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Comment:The death tax: will the new Congress bring relief to franchised small businesses?(GOVERNMENT RELATIONS)
Author:Flanagan, Troy
Publication:Franchising World
Geographic Code:1USA
Date:Jun 1, 2009
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