I

104TH CONGRESS

1ST SESSION H. R. 1212

To amend the Internal Revenue Code of 1986 to revise the estate and

gift taxes in order to preserve American family enterprise, and for

other purposes.

IN THE HOUSE OF REPRESENTATIVES

MARCH 10, 1995

Mrs. SMITH of Washington (for herself, Ms. DUNN of Washington, Mr.

HERGER, and Mr. COLLINS of Georgia) introduced the following bill;

which was referred to the Committee on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to revise

the estate and gift taxes in order to preserve American

family enterprise, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘National Family En5 terprise Preservation Act of 1995’’.

6 SEC. 2. INCREASE IN UNIFIED ESTATE AND GIFT TAX CRED7 ITS FOR FAMILY ENTERPRISES.

8 (a) ESTATE TAX.—Section 2010 of the Internal Rev9 enue Code of 1986 (relating to unified credit against es-
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1 tate tax) is amended by redesignating subsections (b) and

2 (c) as subsections (c) and (d), respectively, by inserting

3 after subsection (a) the following new subsection:

4 ‘‘(b) ADDITIONAL CREDIT FOR FAMILY ENTER5 PRISES.—The amount of the credit allowable under sub6 section (a) shall be increased by an amount equal to the

7 value of any family enterprise property (as defined in sec8 tion 2032B(b)) included in the decedent’s gross estate, to

9 the extent the additional credit does not exceed

10 $121,800.’’

11 (b) GIFT TAX.—Section 2505 of such Code (relating

12 to unified credit against gift tax) is amended by redesig13 nating subsections (b) and (c) as subsections (c) and (d),

14 respectively, and by inserting after subsection (a) the fol15 lowing new subsection:

16 ‘‘(b) ADDITIONAL CREDIT FOR FAMILY ENTER17 PRISES.—The amount of the credit allowable under sub18 section (a) for each calendar year shall be increased by

19 an amount equal to—

20 ‘‘(1) the value of taxable gifts of family enter21 prise property (as defined in section 2032B(b)), to

22 the extent the additional credit does not exceed

23 $121,800, reduced by
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1 ‘‘(2) the sum of the amounts allowable as a

2 credit to the individual under this subsection for all

3 preceding calendar periods.’’

4 (c) EFFECTIVE DATES.—

5 (1) ESTATE TAX CREDIT.—The amendments

6 made by subsection (a) shall apply to the estates of

7 decedents dying after December 31, 1995.

8 (2) GIFT TAX CREDIT.—The amendments made

9 by subsection (b) shall apply to gifts made after De10 cember 31, 1995.

11 SEC. 3. INCREASE IN ANNUAL GIFT TAX EXCLUSION.

12 (a) IN GENERAL.—Section 2503 of the Internal Rev13 enue Code of 1986 (relating to taxable gifts) is amended

14 by redesignating subsection (c) as subsection (d) and by

15 inserting after subsection (b) the following new subsection:

16 ‘‘(c) ADDITIONAL EXCLUSION FROM GIFTS.—The

17 amount of the exclusion allowable under subsection (b)

18 during a calendar year shall be increased by an amount

19 equal to the value of gifts of family enterprise property

20 (as defined in section 2032B(b)) made during such year,

21 to the extent such value does not exceed $10,000.’’

22 (b) EFFECTIVE DATE.—The amendments made by

23 this section shall apply to gifts made after December 31,

24 1995.
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1 SEC. 4. FAMILY ENTERPRISE INTERESTS.

2 (a) IN GENERAL.—Part III of subchapter A of chap3 ter 11 of the Internal Revenue Code of 1986 (relating to

4 gross estate) is amended by inserting after section 2032A

5 the following new section:

6 ‘‘SEC. 2032B. FAMILY ENTERPRISE PROPERTY.

7 ‘‘(a) GENERAL RULE.—The value of family enter8 prise property included in the gross estate of a decedent

9 who is a citizen or resident of the United States shall be—

10 ‘‘(1) the value of such property, reduced by

11 ‘‘(2) the lesser of—

12 ‘‘(A) 50 percent of the value of such prop13 erty, or

14 ‘‘(B) $1,000,000.

15 ‘‘(b) FAMILY ENTERPRISE PROPERTY.—

16 ‘‘(1) IN GENERAL.—For purposes of this sec17 tion, the term ‘family enterprise property’ means

18 any interest in real or personal property which is de19 voted to use as a farm or used for farming purposes

20 (within the meaning of paragraphs (4) and (5) of

21 section 2032A(e)) or is used in any other trade or

22 business, if at least 80 percent of the ownership in23 terests in such farm or other trade or business is

24 held—

25 ‘‘(A) by 5 or fewer individuals, or
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1 ‘‘(B) by individuals who are members of

2 the same family within the meaning of section

3 2032A(e)(2)).

4 ‘‘(2) LIMITED PARTNERSHIP INTEREST EX5 CLUDED.—An interest in a limited partnership,

6 other than a family limited partnership, shall in no

7 event be treated as family enterprise property.

8 ‘‘(c) TAX TREATMENT OF DISPOSITIONS AND FAIL9 URE TO USE FOR QUALIFYING USE.—

10 ‘‘(1) IMPOSITION OF ADDITIONAL ESTATE

11 TAX.—With respect to family enterprise property ac12 quired from or passed from the decedent to an indi13 vidual, if within 10 years after the decedent’s death

14 and before the death of such individual—

15 ‘‘(A) such individual disposes of any inter16 est in such property (other than by a disposi17 tion to a member of the individual’s family), or

18 ‘‘(B) such individual or a member of the

19 individual’s family ceases to participate in the

20 active management of such property,

21 then there is hereby imposed an additional estate

22 tax.

23 ‘‘(2) AMOUNT OF ADDITIONAL TAX.—The

24 amount of the additional tax imposed by paragraph
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1 (1) with respect to any interest in family enterprise

2 property shall be—

3 ‘‘(A) the amount determined under section

4 2032A(c)(2) with respect to such interest, re5 duced by

6 ‘‘(B) 5 percent of the amount described in

7 subparagraph (A) for each year following the

8 date of the decedent’s death in which the indi9 vidual described in paragraph (1) or a member

10 of the individual’s family participated in the ac11 tive management of such family enterprise

12 property.

13 Rules similar to the rules of paragraphs (3), (4),

14 and (5) of section 2032A(c) shall apply to such tax.

15 ‘‘(3) ACTIVE MANAGEMENT.—For purposes of

16 this subsection, the term ‘active management’ means

17 the making of the management decisions of a busi18 ness other than the daily operating decisions.’’

19 (b) CLERICAL AMENDMENT.—The table of sections

20 for part III of subchapter A of chapter 11 of such Code

21 is amended by inserting after the item relating to section

22 2032A the following new item:

‘‘Sec. 2032B. Family enterprise property.’’

23 (c) EFFECTIVE DATE.—The amendments made by

24 this section shall apply to the estates of decedents dying

25 after December 31, 1995.
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1 SEC. 5. VALUATION OF CERTAIN FARM, ETC., REAL PROP2 ERTY.

3 (a) IN GENERAL.—Section 2032A(a)(2) of the Inter4 nal Revenue Code of 1986 (relating to limitation on aggre5 gate reduction in fair market value) is amended by strik6 ing ‘‘$750,000’’ and inserting ‘‘$1,000,000’’.

7 (b) EFFECTIVE DATE.—The amendment made by

8 this section shall apply to the estates of decedents dying

9 after December 31, 1995.

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