Capitol Hill

As Benjamin Franklin said in 1789: "In this world, nothing can be said to be certain except death and taxes." Sadly, his words hold true 226 years later as the federal government continues to tax estates after death.

For many family-owned businesses, the estate tax is a real and heavy burden, causing families to spend thousands of dollars on estate planners, accountants and life insurance policies to protect their businesses for future generations or stockpile profits to soften the blow when the federal government comes calling. This leads to more money being left on the sidelines rather than being reinvested in growing a business or creating new jobs.

Given that most of the value in construction businesses is tied to illiquid assets such as land, buildings and equipment, it is difficult for many businesses to pay the taxes outright. As such, new owners often are forced to sell these assets or the business itself to pay the tax.

A fight to repeal

NRCA has been a member of the Family Business Estate Tax Coalition for a number of years. The coalition's goal is to ultimately repeal the estate tax. Currently, businesses are taxed at 40 percent after a $5 million exemption per spouse indexed for inflation. For 2015, that equals $5.43 million per spouse.

Recently, legislation was introduced in the House and Senate that would fully repeal the estate tax. In the House, Congressmen Kevin Brady (R-Texas) and Stanford Bishop (D-Ga.) are championing the bill, while Senator John Thune (R-S.D.) is leading the charge in the Senate.

In March, a House Ways and Means subcommittee held a hearing on this issue and heard testimony from family farmers and business owners about the effects the estate tax has had on them. They spoke about the constant fear that a loved one would pass away and that they would be faced with a huge tax bill on top of coping with their loss and keeping the business running.

Full repeal of the estate tax is almost universally supported by Republicans. Even some Democrats acknowledge the need to protect small businesses, but most are more concerned with protecting only family farms and insist the "rich pay their fair share."

The coalition argues family businesses already pay a number of taxes, including income, sales, payroll and property taxes. Yet Democrats believe the government can allocate dollars better than a business owner trying to operate a family business.

President Obama repeatedly has attempted to change the estate tax. In his fiscal year 2016 budget, he called for a return to the 2009 estate tax levels of a $3.5 million exemption, not indexed for inflation, and a 40 percent tax rate.

Before that, as part of his tax reform proposal, he called on Congress to "close the trust fund loophole" by changing the tax treatment of certain inherited assets by requiring capital gains taxes to be paid on a "carry-over basis" rather than a "stepped-up basis." The stepped-up basis for inherited assets refers to the fact that capital gains on assets held until death are taxed only on gains incurred after the property has been received.

Slow progress

Sadly, Washington, D.C., has been crippled by partisan gridlock for a number of years because of political gamesmanship. The last time the House voted to repeal the death tax was 2005. The bill overwhelmingly was supported in the House, but it failed to reach the Senate floor for a vote. Since 2005, a number of new pro-business members of Congress have prompted a groundswell of support to bring this legislation up for a vote this Congress.

During the Senate budget debate earlier this year, Thune offered a nonbinding amendment that tested senators' support on whether to repeal the estate tax. The amendment passed 54-46, with one Republican voting against the measure and only one Democrat supporting it. This still falls six votes shy of the threshold needed to move forward in the Senate. However, a vote would likely pass the House of Representatives. It is expected President Obama would veto any repeal legislation that made it to his desk.

While efforts to pass the legislation as a standalone bill continue, there still is the overall goal to reform the nation's tax code. In comments submitted to the two tax-writing committees, NRCA has advocated any proposal should include fully repealing the estate tax.

Although real tax reform is not likely to happen during this Congress given the philosophical differences in tax policy between Democrats and Republicans, it is incredibly important NRCA continue to actively engage with lawmakers to highlight specific concerns the roofing industry has with any proposal that may be used as a blueprint in future legislation.

Andrew Felz is NRCA's manager of federal affairs.