I 
115TH CONGRESS 
1ST SESSION H. R. 3159 
To amend the Internal Revenue Code of 1986 to reduce the taxable estate 
by the value of certain family-owned business interests. 
IN THE HOUSE OF REPRESENTATIVES 
JUNE 29, 2017 
Mr. THOMPSON of California 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 reduce 
the taxable estate by the value of certain family-owned 
business interests. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Family Business Pres-
ervation Estate Tax Act’’. 
SEC. 2. TAXABLE ESTATE REDUCED BY VALUE OF CERTAIN 
FAMILY-OWNED BUSINESS INTERESTS. 
(a) IN GENERAL.—Part IV of subchapter A of chap-
ter 11 of the Internal Revenue Code of 1986 is amended 
by inserting after section 2056A the following new section: 
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‘‘SEC. 2057. FAMILY-OWNED BUSINESS INTERESTS. 
‘‘(a) GENERAL RULE.— 
‘‘(1) ALLOWANCE
OF
DEDUCTION.—For pur-
poses of the tax imposed by section 2001, in the 
case of an estate of a decedent to which this section 
applies, the value of the taxable estate shall be de-
termined by deducting from the value of the gross 
estate the adjusted value of the qualified family- 
owned business interests of the decedent which are 
described in subsection (b)(2). 
‘‘(2) MAXIMUM DEDUCTION.—The deduction al-
lowed by this section shall not exceed the greater 
of— 
‘‘(A) the basic exclusion amount in effect 
under section 2010(c)(3) for the calendar year 
which includes the date of the death of the de-
cedent, or 
‘‘(B) the value of any qualified farmland 
which constitutes the qualified family-owned 
business interest (in the case of an entity de-
scribed in subsection (e)(1)(B), qualified farm-
land held by such entity shall be treated as con-
stituting a qualified family-owned business in-
terest in the same proportion as the decedent’s 
ownership interest in such entity). 
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‘‘(3) QUALIFIED FARMLAND.—For purposes of 
paragraph (2)(B), the term ‘qualified farmland’ 
means qualified real property as defined in section 
2032A(b) applied without regard to paragraph 
(2)(B) thereof. 
‘‘(b) ESTATES TO WHICH SECTION APPLIES.— 
‘‘(1) IN GENERAL.—This section shall apply to 
an estate if— 
‘‘(A) the decedent was (at the date of the 
decedent’s death) a citizen or resident of the 
United States, 
‘‘(B) the executor elects the application of 
this section and files the agreement referred to 
in subsection (h), 
‘‘(C) the sum of— 
‘‘(i) the adjusted value of the qualified 
family-owned business interests described 
in paragraph (2), plus 
‘‘(ii) the amount of the gifts of such 
interests determined under paragraph (3), 
exceeds 50 percent of the adjusted gross estate, 
and 
‘‘(D) during the 8-year period ending on 
the date of the decedent’s death there have 
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been periods aggregating 5 years or more dur-
ing which— 
‘‘(i) such interests were owned by the 
decedent or a member of the decedent’s 
family, and 
‘‘(ii) there was material participation 
(within 
the 
meaning 
of 
section 
2032A(e)(6)) by the decedent or a member 
of the decedent’s family in the operation of 
the business to which such interests relate. 
‘‘(2) INCLUDIBLE
QUALIFIED
FAMILY-OWNED 
BUSINESS INTERESTS.—The qualified family-owned 
business interests described in this paragraph are 
the interests which— 
‘‘(A) are included in determining the value 
of the gross estate, and 
‘‘(B) are acquired by any qualified heir 
from, or passed to any qualified heir from, the 
decedent (within the meaning of section 
2032A(e)(9)). 
‘‘(3) INCLUDIBLE GIFTS OF INTERESTS.—The 
amount of the gifts of qualified family-owned busi-
ness interests determined under this paragraph is 
the sum of— 
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‘‘(A) the amount of such gifts from the de-
cedent to members of the decedent’s family 
taken 
into 
account 
under 
section 
2001(b)(1)(B), plus 
‘‘(B) the amount of such gifts otherwise 
excluded under section 2503(b), 
to the extent such interests are continuously held by 
members of such family (other than the decedent’s 
spouse) between the date of the gift and the date of 
the decedent’s death. 
‘‘(c) ADJUSTED GROSS ESTATE.—For purposes of 
this section, the term ‘adjusted gross estate’ means the 
value of the gross estate— 
‘‘(1) reduced by any amount deductible under 
paragraph (3) or (4) of section 2053(a), and 
‘‘(2) increased by the excess of— 
‘‘(A) the sum of— 
‘‘(i) the amount of gifts determined 
under subsection (b)(3), plus 
‘‘(ii) the amount (if more than de 
minimis) of other transfers from the dece-
dent to the decedent’s spouse (at the time 
of the transfer) within 10 years of the date 
of the decedent’s death, plus 
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‘‘(iii) the amount of other gifts (not 
included under clause (i) or (ii)) from the 
decedent within 3 years of such date, other 
than gifts to members of the decedent’s 
family otherwise excluded under section 
2503(b), over 
‘‘(B) the sum of the amounts described in 
clauses (i), (ii), and (iii) of subparagraph (A) 
which are otherwise includible in the gross es-
tate. 
For purposes of the preceding sentence, the Sec-
retary may provide that de minimis gifts to persons 
other than members of the decedent’s family shall 
not be taken into account. 
‘‘(d) ADJUSTED VALUE OF THE QUALIFIED FAMILY- 
OWNED BUSINESS INTERESTS.—For purposes of this sec-
tion, the adjusted value of any qualified family-owned 
business interest is the value of such interest for purposes 
of this chapter (determined without regard to this sec-
tion), reduced by the excess of— 
‘‘(1) any amount deductible under paragraph 
(3) or (4) of section 2053(a), over 
‘‘(2) the sum of— 
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‘‘(A) any indebtedness on any qualified 
residence of the decedent the interest on which 
is deductible under section 163(h)(3), plus 
‘‘(B) any indebtedness to the extent the 
taxpayer establishes that the proceeds of such 
indebtedness were used for the payment of edu-
cational and medical expenses of the decedent, 
the decedent’s spouse, or the decedent’s depend-
ents (within the meaning of section 152, deter-
mined without regard to subsections (b)(1), 
(b)(2), and (d)(1)(B) thereof), plus 
‘‘(C) any indebtedness not described in 
subparagraph (A) or (B), to the extent such in-
debtedness does not exceed $10,000. 
‘‘(e) QUALIFIED FAMILY-OWNED BUSINESS INTER-
EST.— 
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the term ‘qualified family-owned business inter-
est’ means— 
‘‘(A) an interest as a proprietor in a trade 
or business carried on as a proprietorship, or 
‘‘(B) an interest in an entity carrying on 
a trade or business, if— 
‘‘(i) at least— 
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‘‘(I) 50 percent of such entity is 
owned (directly or indirectly) by the 
decedent and members of the dece-
dent’s family, 
‘‘(II) 70 percent of such entity is 
so owned by members of 2 families, or 
‘‘(III) 90 percent of such entity 
is so owned by members of 3 families, 
and 
‘‘(ii) for purposes of subclause (II) or 
(III) of clause (i), at least 30 percent of 
such entity is so owned by the decedent 
and members of the decedent’s family. 
For purposes of the preceding sentence, a dece-
dent shall be treated as engaged in a trade or 
business if any member of the decedent’s family 
is engaged in such trade or business. 
‘‘(2) LIMITATION.—Such term shall not in-
clude— 
‘‘(A) any interest in a trade or business 
the principal place of business of which is not 
located in the United States, 
‘‘(B) any interest in an entity, if the stock 
or debt of such entity or a controlled group (as 
defined in section 267(f)(1)) of which such enti-
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ty was a member was readily tradable on an es-
tablished securities market or secondary market 
(as defined by the Secretary) at any time within 
3 years of the date of the decedent’s death, 
‘‘(C) any interest in a trade or business 
not described in section 542(c)(2), if more than 
35 percent of the adjusted ordinary gross in-
come of such trade or business for the taxable 
year which includes the date of the decedent’s 
death would qualify as personal holding com-
pany income (as defined in section 543(a) with-
out regard to paragraph (2)(B) thereof) if such 
trade or business were a corporation, and 
‘‘(D) that portion of an interest in a trade 
or business that is attributable to— 
‘‘(i) cash or marketable securities, or 
both, in excess of the reasonably expected 
day-to-day working capital needs of such 
trade or business, and 
‘‘(ii) any other assets of the trade or 
business (other than assets used in the ac-
tive conduct of a trade or business de-
scribed 
in 
section 
542(c)(2)), 
which 
produce, or are held for the production of, 
personal holding company income (as de-
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fined in subparagraph (C)) or income de-
scribed in section 954(c)(1) (determined 
without regard to subparagraph (A) there-
of and by substituting ‘trade or business’ 
for ‘controlled foreign corporation’). 
In the case of a lease of property on a net cash 
basis by the decedent to a member of the dece-
dent’s family, income from such lease shall not 
be treated as personal holding company income 
for purposes of subparagraph (C), and such 
property shall not be treated as an asset de-
scribed in subparagraph (D)(ii), if such income 
and property would not be so treated if the les-
sor had engaged directly in the activities en-
gaged in by the lessee with respect to such 
property. 
‘‘(3) RULES REGARDING OWNERSHIP.— 
‘‘(A) OWNERSHIP OF ENTITIES.—For pur-
poses of paragraph (1)(B)— 
‘‘(i) CORPORATIONS.—Ownership of a 
corporation shall be determined by the 
holding of stock possessing the appropriate 
percentage of the total combined voting 
power of all classes of stock entitled to vote 
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and the appropriate percentage of the total 
value of shares of all classes of stock. 
‘‘(ii) PARTNERSHIPS.—Ownership of a 
partnership shall be determined by the 
owning of the appropriate percentage of 
the capital interest in such partnership. 
‘‘(B) OWNERSHIP OF TIERED ENTITIES.— 
For purposes of this section, if by reason of 
holding an interest in a trade or business, a de-
cedent, any member of the decedent’s family, 
any qualified heir, or any member of any quali-
fied heir’s family is treated as holding an inter-
est in any other trade or business— 
‘‘(i) such ownership interest in the 
other trade or business shall be dis-
regarded in determining if the ownership 
interest in the first trade or business is a 
qualified family-owned business interest, 
and 
‘‘(ii) this section shall be applied sepa-
rately in determining if such interest in 
any other trade or business is a qualified 
family-owned business interest. 
‘‘(C) INDIVIDUAL
OWNERSHIP
RULES.— 
For purposes of this section, an interest owned, 
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