By now, most BV experts have heard of the so-called Pomeroy Bill or the “Certain Estate Tax Relief Act of 2009,” H.R. 436, introduced to congress by North Dakota democratic congressional representative Earl Pomeroy on January 9, 2009. According to an interesting assessment of H.R. 436 from Grant Thornton, the bill would “freeze the estate tax regime currently in place for 2009 and make it permanent. The legislation would also “make permanent the current $3.5 million estate tax applicable exclusion amount and the maximum estate tax rate of 45 percent.” The provision would be effective for estates of decedents dying, and gifts made, after Dec. 31, 2009. For gift and estate tax purposes, the bill would also disallow lack-of-marketability discounts for non-business assets when there is a transfer of an interest in an entity that is not publicly traded. A non-business asset is defined as an asset that is not used in the conduct of a trade or business. Specifically, the bill would require that non-business assets be treated as if the transfer of such assets had occurred between the buyer and the seller outside the transfer of the interest in the entity. The interest in the entity would then be valued as if the non-business assets had been included in the entity.”
Members of the BV profession are on notice. In the March 2009 issue of the Business Valuation Update™, William Frazier—vice-chairman of the American Society of Appraisers’ Government Relations Committee—writes, “The valuation of fractional interests in family owned investment entities is threatened with extinction. Valuation requirements for family owned operating businesses would also be reduced. If the Pomeroy Bill becomes law, many people who depend upon such appraisals for their livelihoods will be out of work. All professionals who perform these types of assignments as part of their overall practice will see their revenues decline. This is not limited to appraisers. Attorneys, accountants, financial planners and other financial service providers will be affected as well.” You can access a Free Download of the article, Appraisals for Tax Purposes: Collateral Damage of the ‘Pomeroy Bill’ for Frazier’s must-read perspective on H.R. 436.
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