‘‘(A) the value of the qualified family-
owned business interests which are included in
determining the gross estate and which are ac-
quired from or passed from the decedent to a
qualified heir of the decedent, and
‘‘(B) the amount (taken into account
under subsection 2001(b)(1)(B)) of the ad-
justed taxable gifts of such interests to mem-
bers of the decedent’s family,
exceeds 50 percent of the adjusted gross estate, and
‘‘(3) during the 8-year period ending on the
date of the decedent’s death there have been periods
aggregating 5 years or more during which—
‘‘(A) such interests were owned by the de-
cedent or a member of the decedent’s family,
and
‘‘(B) there was material participation by
the decedent or a member of the decedent’s
family in the operation of the business to which
such interests relate.
‘‘(c) APPLICABLE RATE.—For purposes of this sec-
tion, the applicable rate is—
‘‘(1) 15 percent if the requirement of subsection
(b)(3)(B) is met by a member of the decedent’s fam-
ily, and
‘‘(2) 20 percent in any other case.
‘‘(d) 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;
‘‘(B) an interest as a partner in a partner-
ship carrying on a trade or business, if such
partnership had 15 or fewer partners; or
‘‘(C) stock in a corporation carrying on a
trade or business if such corporation had not
more than the number of shareholders specified
in section 1361(b)(1)(A).
Such term shall not include any interest which is
readily tradable on an established securities market
or otherwise.
‘‘(2) RULES FOR APPLYING PARAGRAPH (1).—
For purposes of paragraph (1), rules similar to the
rules of paragraphs (2), (3), (4), and (6) of section
6166(b) shall apply.
‘‘(e) RECAPTURE OF TAX BENEFIT IF INTERESTS
NOT HELD FOR 10 YEARS.—
‘‘(1) IN GENERAL.—If—
‘‘(A) during the 10-year period beginning
on the date of death of the decedent—
‘‘(i)(I) any portion of a qualified fam-
ily-owned business interest is distributed,
sold, exchanged, or otherwise disposed of,
or
‘‘(II) money and other property at-
tributable to such an interest is withdrawn
from such trade or business, and
‘‘(B) the aggregate of such distributions,
sales, exchanges, or other dispositions and with-
drawals equals or exceeds 20 percent of the
value of such interest, or
there is hereby imposed an additional estate tax.
‘‘(2) ADDITIONAL ESTATE TAX.—
‘‘(A) IN
GENERAL.—The amount of the
additional estate tax imposed by paragraph (1)
shall be the applicable percentage of the excess
of what would have been the estate tax liability
but for subsection (a) over the adjusted estate
tax liability.
‘‘(B) 
APPLICABLE
PERCENTAGE.—For
purposes of subparagraph (A), the term ‘appli-
cable percentage’ means 100 percent reduced
(but not below zero) by the product of—
‘‘(i) 10 percentage points, and
‘‘(ii) the number of years (if any)
after the date of the decedent’s death
which the year during which the additional
estate tax is imposed by paragraph (1) is
after the 1st year after the date of the de-
cedent’s death.
‘‘(C) ADJUSTED ESTATE TAX LIABILITY.—
For purposes of subparagraph (A), the term
‘adjusted estate tax liability’ means the estate
tax liability increased by the amount (if any) of
any prior additional estate tax imposed by sub-
section (f).
‘‘(D) ESTATE TAX LIABILITY.—For pur-
poses of this paragraph, the term ‘estate tax li-
ability’ means the tax imposed by section 2001
reduced by the credits allowable against such
tax.
‘‘(3) CERTAIN RULES TO APPLY.—For purposes
of this subsection, rules similar to the rules of sub-
paragraphs (B), (C), and (D) of section 6166(g)(1)
shall apply.
‘‘(f) RECAPTURE OF PORTION OF TAX BENEFIT IF
HEIRS CEASE TO MATERIALLY PARTICIPATE DURING 10
YEARS AFTER DEATH.—