National Family Enterprise Preservation Act of 1995

Summary: National Family Enterprise Preservation Act of 1995 - Amends the Internal Revenue Code to increase the estate tax credit and the gift tax credit by amounts equal to the value of any family enterprise property, with limitations. 
Increases the gift tax exclusion by the value of gifts of family enterprise property, with limitations. 
Establishes a formula for determining the value of family enterprise property. 
Increases the limitation on the aggregate reduction in fair market value of certain farm property and other real property.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``National Family Enterprise 
Preservation Act of 1995''.

SEC. 2. INCREASE IN UNIFIED ESTATE AND GIFT TAX CREDITS FOR FAMILY 
              ENTERPRISES.

    (a) Estate Tax.--Section 2010 of the Internal Revenue Code of 1986 
(relating to unified credit against estate tax) is amended by 
redesignating subsections (b) and (c) as subsections (c) and (d), 
respectively, by inserting after subsection (a) the following new 
subsection:
    ``(b) Additional Credit for Family Enterprises.--The amount of the 
credit allowable under subsection (a) shall be increased by an amount 
equal to the value of any family enterprise property (as defined in 
section 2032B(b)) included in the decedent's gross estate, to the 
extent the additional credit does not exceed $121,800.''
    (b) Gift Tax.--Section 2505 of such Code (relating to unified 
credit against gift tax) is amended by redesignating subsections (b) 
and (c) as subsections (c) and (d), respectively, and by inserting 
after subsection (a) the following new subsection:
    ``(b) Additional Credit for Family Enterprises.--The amount of the 
credit allowable under subsection (a) for each calendar year shall be 
increased by an amount equal to--
            ``(1) the value of taxable gifts of family enterprise 
        property (as defined in section 2032B(b)), to the extent the 
        additional credit does not exceed $121,800, reduced by
            ``(2) the sum of the amounts allowable as a credit to the 
        individual under this subsection for all preceding calendar 
        periods.''
    (c) Effective Dates.--
            (1) Estate tax credit.--The amendments made by subsection 
        (a) shall apply to the estates of decedents dying after 
        December 31, 1995.
            (2) Gift tax credit.--The amendments made by subsection (b) 
        shall apply to gifts made after December 31, 1995.

SEC. 3. INCREASE IN ANNUAL GIFT TAX EXCLUSION.

    (a) In General.--Section 2503 of the Internal Revenue Code of 1986 
(relating to taxable gifts) is amended by redesignating subsection (c) 
as subsection (d) and by inserting after subsection (b) the following 
new subsection:
    ``(c) Additional Exclusion From Gifts.--The amount of the exclusion 
allowable under subsection (b) during a calendar year shall be 
increased by an amount equal to the value of gifts of family enterprise 
property (as defined in section 2032B(b)) made during such year, to the 
extent such value does not exceed $10,000.''
    (b) Effective Date.--The amendments made by this section shall 
apply to gifts made after December 31, 1995.

SEC. 4. FAMILY ENTERPRISE INTERESTS.

    (a) In General.--Part III of subchapter A of chapter 11 of the 
Internal Revenue Code of 1986 (relating to gross estate) is amended by 
inserting after section 2032A the following new section:

``SEC. 2032B. FAMILY ENTERPRISE PROPERTY.

    ``(a) General Rule.--The value of family enterprise property 
included in the gross estate of a decedent who is a citizen or resident 
of the United States shall be--
            ``(1) the value of such property, reduced by
            ``(2) the lesser of--
                    ``(A) 50 percent of the value of such property, or
                    ``(B) $1,000,000.
    ``(b) Family Enterprise Property.--
            ``(1) In general.--For purposes of this section, the term 
        `family enterprise property' means any interest in real or 
        personal property which is devoted to use as a farm or used for 
        farming purposes (within the meaning of paragraphs (4) and (5) 
        of section 2032A(e)) or is used in any other trade or business, 
        if at least 80 percent of the ownership interests in such farm 
        or other trade or business is held--
                    ``(A) by 5 or fewer individuals, or
                    ``(B) by individuals who are members of the same 
                family within the meaning of section 2032A(e)(2)).
            ``(2) Limited partnership interest excluded.--An interest 
        in a limited partnership, other than a family limited 
        partnership, shall in no event be treated as family enterprise 
        property.
    ``(c) Tax Treatment of Dispositions and Failure To Use for 
Qualifying Use.--
            ``(1) Imposition of additional estate tax.--With respect to 
        family enterprise property acquired from or passed from the 
        decedent to an individual, if within 10 years after the 
        decedent's death and before the death of such individual--
                    ``(A) such individual disposes of any interest in 
                such property (other than by a disposition to a member 
                of the individual's family), or
                    ``(B) such individual or a member of the 
                individual's family ceases to participate in the active 
                management of such property,
        then there is hereby imposed an additional estate tax.
            ``(2) Amount of additional tax.--The amount of the 
        additional tax imposed by paragraph (1) with respect to any 
        interest in family enterprise property shall be--
                    ``(A) the amount determined under section 
                2032A(c)(2) with respect to such interest, reduced by
                    ``(B) 5 percent of the amount described in 
                subparagraph (A) for each year following the date of 
                the decedent's death in which the individual described 
                in paragraph (1) or a member of the individual's family 
                participated in the active management of such family 
                enterprise property.
        Rules similar to the rules of paragraphs (3), (4), and (5) of 
        section 2032A(c) shall apply to such tax.
            ``(3) Active management.--For purposes of this subsection, 
        the term `active management' means the making of the management 
        decisions of a business other than the daily operating 
        decisions.''
    (b) Clerical Amendment.--The table of sections for part III of 
subchapter A of chapter 11 of such Code is amended by inserting after 
the item relating to section 2032A the following new item:

                              ``Sec. 2032B. Family enterprise 
                                        property.''
    (c) Effective Date.--The amendments made by this section shall 
apply to the estates of decedents dying after December 31, 1995.

SEC. 5. VALUATION OF CERTAIN FARM, ETC., REAL PROPERTY.

    (a) In General.--Section 2032A(a)(2) of the Internal Revenue Code 
of 1986 (relating to limitation on aggregate reduction in fair market 
value) is amended by striking ``$750,000'' and inserting 
``$1,000,000''.
    (b) Effective Date.--The amendment made by this section shall apply 
to the estates of decedents dying after December 31, 1995.