I 
109TH CONGRESS 
1ST SESSION H. R. 1624 
To amend the Internal Revenue Code of 1986 to provide for the immediate 
and permanent repeal of the estate tax on family-owned businesses and 
farms, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
APRIL 13, 2005 
Mr. THOMPSON of California (for himself, Mr. BOSWELL, Mr. SALAZAR, Mr. 
CRAMER, Mr. BISHOP of Georgia, Ms. HERSETH, Mr. CHANDLER, Mrs. 
TAUSCHER, Mr. COSTA, Mr. ISRAEL, Mr. CARDOZA, Mr. BERRY, Mrs. 
MCCARTHY, and Ms. HOOLEY) 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 provide 
for the immediate and permanent repeal of the estate 
tax on family-owned businesses and farms, and for other 
purposes. 
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 ‘‘Estate Tax Repeal for 
Family-Owned Farms and Businesses Act of 2005’’.
SEC. 2. REPEAL OF ESTATE TAX ON FAMILY-OWNED FARMS 
AND BUSINESSES. 
(a) REPEAL OF QUALIFIED FAMILY-OWNED BUSI-
NESS INTEREST.—Part IV of subchapter A of chapter 11 
of the Internal Revenue Code of 1986 (relating to taxable 
estate) is amended by striking section 2057. 
(b) EXCLUSION
FOR QUALIFIED FAMILY-OWNED 
BUSINESS INTERESTS.—Part IV of subchapter A of chap-
ter 11 of the Internal Revenue Code of 1986 (relating to 
taxable estate) is amended by inserting after section 2058 
the following new section: 
‘‘SEC. 2059. EXCLUSION FOR QUALIFIED FAMILY-OWNED 
BUSINESS INTERESTS. 
‘‘(a) GENERAL RULES.— 
‘‘(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) 
APPLICATION
OF
CARRYOVER
BASIS 
RULES.—With respect to the adjusted value of the 
qualified family-owned business interests of the dece-
dent which are described in subsection (b)(2), the 
rules of section 1023 shall apply. 
‘‘(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 under rules similar to the rules of 
paragraphs (1) and (3) of section 2032A(d) and 
files the agreement referred to in subsection (e), 
and 
‘‘(C) during the 8-year period ending on 
the date of the decedent’s death there have 
been periods aggregating 5 years or more dur-
ing which— 
‘‘(i) the qualified family-owned busi-
ness interests described in paragraph (2) 
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, a member 
of the decedent’s family, or a qualified heir
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 (other than qualified spousal 
property with respect to which an aggregate 
spousal property basis increase is allocated 
under section 1023(c)), 
‘‘(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)), and 
‘‘(C) are subject to the election under 
paragraph (1)(B). 
‘‘(3) RULES REGARDING MATERIAL PARTICIPA-
TION.—For purposes of paragraph (1)(C)(ii)— 
‘‘(A) in the case a surviving spouse, mate-
rial participation by such spouse may be satis-
fied under rules similar to the rules under sec-
tion 2032A(b)(5), 
‘‘(B) in the case of a qualified family- 
owned business interest in an entity carrying on
multiple trades or businesses, material partici-
pation in each trade or business is satisfied by 
material participation in the entity or in 1 or 
more of the multiple trades or businesses, and 
‘‘(C) in the case of a lending and finance 
business 
(as 
defined 
in 
section 
6166(b)(10)(B)(ii)), material participation is 
satisfied under the rules under subclause (I) or 
(II) of section 6166(b)(10)(B)(i). 
‘‘(c) ADJUSTED VALUE OF THE QUALIFIED FAMILY- 
OWNED BUSINESS INTERESTS.—For purposes of this sec-
tion— 
‘‘(1) IN GENERAL.—The adjusted value of any 
qualified family-owned business interest is the value 
of such interest for purposes of this chapter (deter-
mined without regard to this section), as adjusted 
under paragraph (2). 
‘‘(2) ADJUSTMENT
FOR
PREVIOUS
TRANS-
FERS.—The Secretary may increase the value of any 
qualified family-owned business interest by that por-
tion of those assets transferred from such qualified 
family-owned business interest to the decedent’s tax-
able estate within 3 years before the date of the de-
cedent’s death.
‘‘(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, or 
‘‘(B) an interest in an entity carrying on 
a trade or business, if— 
‘‘(i) at least— 
‘‘(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 decedent 
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) LENDING AND FINANCE BUSINESS.—For 
purposes of this section, any asset used in a lending 
and finance business (as defined in section 
6166(b)(10)(B)(ii)) shall be treated as an asset 
which is used in carrying on a trade or business. 
‘‘(3) 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-
ty was a member was readily tradable on an es-
tablished securities market or secondary market 
(as defined by the Secretary) at any time, 
‘‘(C) that portion of an interest in an enti-
ty transferred by gift to such entity within 3 
years before the date of the decedent’s death, 
and 
‘‘(D) that portion of an interest in an enti-
ty which is attributable to cash or marketable 
securities, or both, in any amount in excess of
the reasonably anticipated business needs of 
such entity. 
In any proceeding before the United States Tax 
Court involving a notice of deficiency based in whole 
or in part on the allegation that cash or marketable 
securities, or both, are accumulated in an amount in 
excess of the reasonably anticipated business needs 
of such entity, the burden of proof with respect to 
such allegation shall be on the Secretary to the ex-
tent such cash or marketable securities are less than 
35 percent of the value of the interest in such entity. 
‘‘(4) 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 
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, 
directly or indirectly, by or for an entity de-
scribed in paragraph (1)(B) shall be considered 
as being owned proportionately by or for the en-
tity’s shareholders, partners, or beneficiaries. A 
person shall be treated as a beneficiary of any
trust only if such person has a present interest 
in such trust. 
‘‘(e) AGREEMENT.—The agreement referred to in 
this subsection is a written agreement signed by each per-
son in being who has an interest (whether or not in posses-
sion) in any property designated in such agreement con-
senting to the application of this section with respect to 
such property. 
‘‘(f) 
OTHER
DEFINITIONS
AND
APPLICABLE 
RULES.—For purposes of this section— 
‘‘(1) QUALIFIED
HEIR.—The term ‘qualified 
heir’ means a United States citizen who is— 
‘‘(A) described in section 2032A(e)(1), or 
‘‘(B) an active employee of the trade or 
business to which the qualified family-owned 
business interest relates if such employee has 
been employed by such trade or business for a 
period of at least 10 years before the date of 
the decedent’s death. 
‘‘(2) MEMBER
OF
THE
FAMILY.—The term 
‘member of the family’ has the meaning given to 
such term by section 2032A(e)(2). 
‘‘(3) APPLICABLE RULES.—Rules similar to the 
following rules shall apply:
‘‘(A) Section 2032A(b)(4) (relating to de-
cedents who are retired or disabled). 
‘‘(B) Section 2032A(e)(10) (relating to 
community property). 
‘‘(C) Section 2032A(e)(14) (relating to 
treatment of replacement property acquired in 
section 1031 or 1033 transactions). 
‘‘(D) Section 2032A(g) (relating to appli-
cation to interests in partnerships, corporations, 
and trusts). 
‘‘(4) SAFE
HARBOR
FOR
ACTIVE
ENTITIES 
HELD BY ENTITY CARRYING ON A TRADE OR BUSI-
NESS.—For purposes of this section, if— 
‘‘(A) an entity carrying on a trade or busi-
ness owns 20 percent or more in value of the 
voting interests of another entity, or such other 
entity has 15 or fewer owners, and 
‘‘(B) 80 percent or more of the value of 
the assets of each such entity is attributable to 
assets used in an active business operation, 
then 
the 
requirements 
under 
subsections 
(b)(1)(C)(ii) and (d)(3)(D) shall be met with respect 
to an interest in such an entity.’’. 
(c) MODIFICATION OF TREATMENT OF MARITAL DE-
DUCTION; LIMITATION ON STEP-UP IN BASIS.—Section
2056 of the Internal Revenue Code of 1986 (relating to 
bequests, etc., to surviving spouses) is amended by adding 
at the end the following new subsection: 
‘‘(e) APPLICATION OF CARRYOVER BASIS RULES.— 
With respect to the value of the interests of the decedent 
which are described in subsection (a), the rules of section 
1023 shall apply.’’. 
(d) CARRYOVER BASIS RULES FOR QUALIFIED FAM-
ILY-OWNED BUSINESS INTERESTS AND SPOUSAL PROP-
ERTY.—Part II of subchapter O of chapter 1 of the Inter-
nal Revenue Code of 1986 (relating to basis rules of gen-
eral application) is amended by redesignating section 1023 
as section 1024 and inserting after section 1022 the fol-
lowing new section: 
‘‘SEC. 1023. TREATMENT OF QUALIFIED FAMILY-OWNED 
BUSINESS INTERESTS AND SPOUSAL PROP-
ERTY. 
‘‘(a) IN GENERAL.—Except as otherwise provided in 
this section— 
‘‘(1) qualified property acquired from a dece-
dent shall be treated for purposes of this subtitle as 
transferred by gift, and 
‘‘(2) the basis of the person acquiring qualified 
property from such a decedent shall be the lesser 
of—