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.
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 ‘‘National Family En-
terprise Preservation Act of 1995’’.
SEC. 2. INCREASE IN UNIFIED ESTATE AND GIFT TAX CRED-
ITS FOR FAMILY ENTERPRISES.
(a) ESTATE TAX.—Section 2010 of the Internal Rev-
enue Code of 1986 (relating to unified credit against es-
tate 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 ENTER-
PRISES.—The amount of the credit allowable under sub-
section (a) shall be increased by an amount equal to the
value of any family enterprise property (as defined in sec-
tion 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 redesig-
nating subsections (b) and (c) as subsections (c) and (d),
respectively, and by inserting after subsection (a) the fol-
lowing new subsection:
‘‘(b) ADDITIONAL CREDIT
FOR FAMILY ENTER-
PRISES.—The amount of the credit allowable under sub-
section (a) for each calendar year shall be increased by
an amount equal to—
‘‘(1) the value of taxable gifts of family enter-
prise 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 De-
cember 31, 1995.
SEC. 3. INCREASE IN ANNUAL GIFT TAX EXCLUSION.
(a) IN GENERAL.—Section 2503 of the Internal Rev-
enue 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 chap-
ter 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 enter-
prise 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 prop-
erty, or
‘‘(B) $1,000,000.
‘‘(b) FAMILY ENTERPRISE PROPERTY.—
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the term ‘family enterprise property’ means
any interest in real or personal property which is de-
voted 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 in-
terests 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
EX-
CLUDED.—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 FAIL-
URE TO USE FOR QUALIFYING USE.—
‘‘(1) IMPOSITION
OF
ADDITIONAL
ESTATE
TAX.—With respect to family enterprise property ac-
quired from or passed from the decedent to an indi-
vidual, if within 10 years after the decedent’s death
and before the death of such individual—
‘‘(A) such individual disposes of any inter-
est in such property (other than by a disposi-
tion 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, re-
duced 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 indi-
vidual described in paragraph (1) or a member
of the individual’s family participated in the ac-
tive 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 busi-
ness 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 PROP-
ERTY.
(a) IN GENERAL.—Section 2032A(a)(2) of the Inter-
nal Revenue Code of 1986 (relating to limitation on aggre-
gate reduction in fair market value) is amended by strik-
ing ‘‘$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.
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