In the waning days of the Obama administration, the Treasury Department released proposed regulations under Section 2704 that could have a profound impact on the valuation and therefore taxation of family businesses. The regulations as written would institute back-door “family attribution,” a standard that has been rejected by the courts for decades, and that would jeopardize traditional discounts for minority ownership stakes, inflating tax bases by as much as 40 percent. As the regulations were not finalized by the time President Obama left office, there is no effective date, but the rule remains pending. Last week Associated Builders and Contractors along with several other trade groups released a new study on the impact these pending Section 2704 regulations would have on family businesses and their employees. Titled " An Economic Analysis of Proposals to Limit the Recognition of Valuation Discounts for Transfers of Interests in Large Family Businesses ," the study by Dr. Robert Shapiro finds that the proposed rule would hinder the ability of these companies to grow and hire. According to the study: · Limiting valuation discounts under the proposed rule would increase estate taxes for large family businesses by $633.3 billion in present discounted dollars over the next 46 years. · To prepare for this additional burden, these businesses would divert resources, equivalent to the additional tax they will owe, from their normal business investments. · The projected reductions in their investments in equipment and machinery would reduce GDP growth, in 2016 dollars, by $2,476 billion from 2016 to 2062. · This slower growth also would reduce job creation over the next decade by 105,990 jobs. The study was sponsored by Associated Builders and Contractors and several other groups, including the Real Estate Roundtable, the S-Corp Association and the Independent Community Bankers of America, with the aim of highlighting the threat the proposed regulations present to family businesses and their employees. With the Trump Administration actively seeking ideas on how Treasury can reduce red tape and encourage investment and growth, withdrawing the Section 2704 rules should be job one. ABC and its stakeholder allies will continue to work with the administration to rescind these regulations and protect family firms.