A Crisis is Brewing

What NACVA is Doing to Protect Our Industry

On August 4, 2016, the U.S. Treasury in lock-step with the Internal Revenue Service (IRS) published Proposed Treasury Regulation 163113-02 (hereafter, the “proposed regulations”) which intend to drastically alter the application of current Internal Revenue Code §2704, particularly as it applies to valuations of family owned businesses and family farms. The proposed Treasury regulations were long-expected and released nearly a year beyond when they were first intended to be released. However, along with the late release, the proposed regulations contain a very short fuse as they intend to put these new rules into effect as early as January 2017. In their rush to the finish line, Treasury and the IRS will hold a public hearing on December 2, 2016, in Washington, DC. Members of NACVA will attend that hearing to present our opposition to this ill-conceived proposed regulation and explain why these proposed regulations are violative of valuation fundamentals.

If you are not familiar with these proposed rule changes, please read the formal NACVA response to the IRS.  I am sure that once you do, you will not only see why this is so ill-conceived, you will be disturbed over what Treasury and the IRS are wanting to do.  This will turn to disbelief when you realize that the proposed regulation is a way to artificially increase values of family owned businesses and family farms by eliminating or greatly reducing discounts for lack of marketability and non-controlling interests.  In other words, it is a “tax grab” that will unjustly harm millions of Americans and lead to the demise of thousands of privately owned businesses.  At the same time, it will require members of NACVA to change the way we perform valuations and to learn new methodologies which are contrary to valuation fundamentals as we all know them.

They have done this too, at a strategic time when Congress is consumed with a national election, so as to slide this new regulation under our noses.  Personally, I see this cavalier action as a precursor to other actions to scrape up more tax revenues; with no thought given to the harmful consequences to the millions in the privately owned business community.

All NACVA members should be up-in-arms, and to assist you in your communications, we have a letter you can send to your Congressional representatives.  You can also send this to the IRS and Treasury, but given their strategy to ram this through, their deadline for written commentary is November 2, 2016.  We apologize for the short notice, but the IRS has only provided us with a short time frame in which to formally respond.

NACVA submitted its formal response a few days ago.  It was the result of a true team effort with hundreds of hours spent between the members of a task force whose names can be found at the bottom of the letter linked above.  All of them deserve your thanks because they are looking out for the best interest of the business community (your clients), as well as the valuation profession, which means you.

First read our formal response, and then click here to check out the sample letter we drafted for your use.  Take liberties to modify the letter as you see fit and feel free to share it with your cohorts—they can use it too.

Finally, my team has compiled some information and resources for your further research, along with the Proposed Treasury Regulation 163113-02, all of which is available here.

We need all of our members behind us on this.  Please express your concerns to anyone who you think can help us put a stop to this egregious wrong.  There is strength in numbers.

If you have comments you want to share with me, send them to: RegComments@NACVA.com.