The Biden Administration is proposing the imposition of tax increases on businesses to pay for its proposed transportation and infrastructure plan. As part of this effort, the administration wants to repeal the practice of stepping up the basis for the capital gains tax of assets transferred at death. This change would end the use of stepped-up basis and begin taxing those built-up gains at death, as though the assets had been sold. This increase to the capital gains tax could well make it financially impossible for privately-owned family businesses and farms to be passed to heirs.
Current tax law allows heirs to accept an asset on the death of a family member without sustaining a penalty for doing so. Stepping up the basis of an asset when it is transferred to an heir on its owner’s death is critical to that business surviving the loss of their loved one and business partner. Repealing the use of stepped-up basis by imposing capital gains taxes on assets transfer at death would force many family-owned businesses to liquidate assets or lay off employees to cover their tax burden. This new tax would be imposed on top of any existing estate tax liability, exacerbating the financial effect of the death and effectively creating an additional tax at death.
PIA opposes this effort to raise taxes on family-owned businesses and supports the continuation of the use of stepped-up basis. This week, we joined over 100 business groups from a variety of sectors to urge the Republican and Democratic tax-writing committee leaders to protect family-owned businesses from exorbitant tax increases by defending stepped-up basis and opposing changes to current law.
PIA has also joined a new coalition, America’s Job Creators for a Strong Recovery, to push back on proposals to raise taxes on businesses. This coalition of associations represents individual and family-owned businesses and corporations and opposes using tax increases to move the economy past the COVID-19 pandemic.