[Congressional Record Volume 145, Number 105 (Thursday, July 22, 1999)]
[Senate]
[Pages S9074-S9075]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. DURBIN (for himself and Mr. Dorgan):
  S. 1413. A bill to amend the Internal Revenue Code of 1986 to 
increase the deduction from the estate tax for family-owned business 
interest; to the Committee on Finance.


              FAMILY-OWNED BUSINESS ESTATE TAX RELIEF ACT

  Mr. DURBIN. Mr. President, I am pleased to be joined by Senator 
Dorgan today introducing legislation which would make it easier for a 
family to hold onto a small business or farm when the head of the 
family passes away. I am especially pleased to be joined by Senator 
Dorgan on this bill as he has been a good friend and colleague for 
almost two decades and a real leader on small business issues since his 
election to Congress in 1980.
  Mr. President, ownership is a powerful force. Anyone who has gone 
from renting to owning a home will tell you how much more work you put 
in as an owner. Suddenly, problems with the plumbing or the roof that 
used to be the landlord's problems are now your problems. Developments 
in the neighborhood take on new meaning and you tend to spend more time 
working with neighbors to figure out ways to make your community 
stronger.
  The trade-off for all this work is that whatever improvements we make 
to our homes and our communities, they're ours. And if our homes 
increase in value, we get to keep the difference.
  The same is true for small businesses and family farms. Most people 
who have gone from being an employee to owning a small business or farm 
will tell you that they work harder as an owner, save more, and take 
more pride in their work. As with homeowners, small businesspeople and 
farmers are willing to put in the extra work it takes to run a business 
because they know it will come back to them in the form of more 
customers and higher profits. It is this industrious spirit that has 
defined our nation for more than two centuries and allowed us to enjoy 
a level of prosperity unknown in any other part of the world, in any 
other era of human history.
  The bill we are introducing today makes a simple change in the tax 
code that will help families pass down the legacy of business ownership 
from one generation to the next.
  Mr. President, the federal estate tax is one of the most 
controversial provisions of the tax code. Whatever the merits or 
shortcomings of the estate tax, I believe most of my colleagues would 
agree that a family should not have to sell a small business or family 
farm just because the head of the family passes away. Unfortunately, 
small business owners face a very real concern that the estate tax may 
force their families to do just that, particularly families whose 
business' principal assets consist of machinery, real estate, 
equipment, and inventory . Those families fortunate enough to avoid 
selling their business or farm are often frustrated by having to 
finance their estate tax burden at the expense of needed investments in 
the business.
  Recognizing this problem, Congress worked on a bipartisan basis in 
1997 to include provisions in the Taxpayer Relief Act which provide 
targeted assistance to estates with family-owned businesses and farms. 
Among its provisions, the Taxpayer Relief Act provided an immediate 
increase in the estate tax exemption from $600,000 to $1.3 million for 
estates with businesses that are kept in the family, and improved the 
terms for installment payments made by estates with businesses by 
reducing the interest rate from 4 percent to 2 percent for the first $1 
million in taxable value of the business in excess of the $1.3 million 
exemption.
  The bill that Senator Dorgan and I are introducing today builds on 
the 1997 Taxpayer Relief Act by simply doubling the $1.3 million 
exemption for family-owned businesses and farms to $2.6 million. This 
new level would mean that a typical business with up to 25 employees 
would face no estate tax liability if the business is kept in the 
family after the owner dies. Somewhat larger businesses would enjoy a 
significant reduction in their estate tax burden.
  Mr. President, we should be doing what we can to promote small 
business and farm ownership in America. This bill does just that by 
simply making it easier for families to continue their tradition of 
small business ownership. I urge all my colleagues to join Senator 
Dorgan and me in supporting this legislation.

[[Page S9075]]

  Mr. President, I ask unanimous consent that this bill be printed in 
the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1413

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTIOIN 1. INCREASE IN ESTATE TAX DEDUCTION FOR FAMILY-OWNED 
                   BUSINESS INTEREST.

       (a) In General.--Section 2057(a)(2) of the Internal Revenue 
     Code of 1986 (relating to maximum deduction) is amended by 
     striking ``$675,000'' and inserting ``$1,975,000''.
       (b) Conforming Amendments.--Section 2057(a)(3)(B) of the 
     Internal Revenue Code of 1986 (relating to coordination with 
     unified credit) is amended by striking ``$675,000'' each 
     place it appears in the text and heading and inserting 
     ``$1,975,000''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to estates of decedents dying after the date of 
     the enactment of this Act.

  Mr. DORGAN. Mr. President, today I'm pleased to join Senator Durbin 
in introducing estate tax relief legislation to boost immediately to 
$2.6 million the amount of family business assets that can be 
transferred to the next generation without loading up that family 
business with a large tax debt. I feel strongly that we must prevent 
our estate tax laws from hindering the transfer of family farms, 
ranches and other small businesses to the next generation of family 
members who would continue to operate them. We made some important 
changes to the estate tax laws in the last Congress to make it easier 
for children to take over a family business when a parent dies and keep 
the business going. But these changes did not go far enough.
  Family-owned enterprises are a source of social stability and 
cohesion in this country. They generate jobs and wealth. Yet in far too 
many cases, the estate tax laws exert pressure on the children and 
grandchildren who inherit a modestly-sized family business to sell it, 
or a large part of it, to pay off those taxes. Our tax laws should 
encourage enterprises to stay in family ownership, with all the 
benefits that brings to our communities and to the nation. Yet 
frequently today the estate tax laws do the opposite.
  Congress took some steps in a major tax bill in 1997, which I 
supported, to enable family farms, ranches, and other small family 
businesses to be passed along to the next generation without being 
loaded up with massive estate tax debt. The 1997 bill changes estate 
taxes in two basic ways. First, the legislation increased the unified 
estate and gift tax exemption from $600,000 to $1 million over a period 
of years. Second, it provided a new exemption from estate taxes for 
qualifying family businesses, valued up to $1.3 million, that are 
passed down to the children and grandchildren who will operate the farm 
or business. This new exclusion is the result of a bipartisan effort in 
Congress to encourage business enterprise that is based on the family 
unit.
  However, Senator Durbin and I believe that the $1.3 million family 
business exclusion needs to be substantially increased, and we suspect 
that a number of our colleagues in the Senate share this view. We are 
proposing such an increase today.
  Our legislation is simple and straightforward. It doubles the dollar 
value from $1.3 million to $2.6 million of a family business that may 
be transferred to inheriting family members without an estate tax 
obligation. This will be a great help to families that want to pass 
along a small business, which might have been the family's major asset 
for decades, to the kids to operate following the death of a parent.
  Estate tax relief for family businesses is not a partisan issue. It 
is important for the survival of our nation's family businesses, and it 
should be a priority for any tax cuts that Congress enacts.
  This is not however a proposal to reduce estate taxes for every rich 
person in America. We see no need to enact a big new benefit for the 
nation's trust fund babies. It should go to where the need is greatest, 
and where the economic and social benefits will be greatest as well. 
That means small family businesses.
  In the end, we hope that some additional estate tax relief will be 
enacted to sustain family-owned businesses and farms, which make up the 
backbone of our economy. We believe that our approach takes a large 
step in that direction. We urge our colleagues to cosponsor this much-
needed legislation.
                                 ______