by James DeChene
Recently, the Internal Revenue Service proposed new estate tax regulations that would make transferring interests in family-owned businesses more onerous and costly than under current guidelines. Proposed Estate Tax Changes Under current law: Because of the estate and gift tax, many family owned, closely held business owners are challenged in how they can pass on their business interests to their heirs. If a business owner waits to transfer their business at death, the business interest is subject to the estate tax at full fair market value, less the exemption amount. A popular technique is to gift small ownership pieces over time, such as 10% of a business in one year. That interest is a “minority interest.” The value for tax purposes is also discounted relative to fair market value because control remains with the older generation. With multiple transfers over time, the entire business can be “gifted” at a minority interest discount. The total amount subject to tax is substantially less than if the entire interest were taxed at death at fair market value. IRS Proposal: The Section 2704 regulations would eliminate the discount applied to these “minority” gift transfers for closely held, family owned businesses. This is causing a significant amount of concern for family-owned businesses throughout the country, and many are trying to plan around this consequence before the regulations become final. This is one more example of a major regulatory change, like the recently proposed Treasury Section 385 regulations, that are being attempted at being finalized before the calendar year end and a new administration comes in. We will continue to monitor and provide further updates as they happen.
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by James DeChene
Legislators returned to Dover this week working to finalize the remaining bits of business, including the budget, prior to adjourning at the end of the month. Congratulations are in order for Representative Debbie Hudson (R-Fairthorne) and Senator Brian Bushweller (D-Dover) for winning this year’s Small Business Guardian award presented at the State Chamber’s End of Legislative Session Brunch. Of note this week, was an economic development bill (HB 396) that would streamline the permitting process for any industrial or office project (but not residential or commercial) that did not require a rezoning and would be greater than a certain size (75,000 square feet or would create at least 60 permanent jobs). A special expedited review process would be made available for a fee that would guarantee review and comments from the County within 2 weeks from the initial plan submission, and review and comments within 2 weeks from final plan submission. There would still need to be a Planning Board hearing, and review by State agencies through PLUS (Preliminary Land Use Service), and this new, expedited process would signal a real commitment by the counties to work with major new employers and demonstrate that the State is serious about economic development and putting an end to what is perceived as an interminable review process that does not compare favorably with surrounding jurisdictions. The State Chamber testified in support of the bill, which seeks to replicate successes Middletown has seen with companies like Amazon and Johnson Controls, which now goes the House floor for a vote. by James DeChene Last week was the 2nd Annual Small Business in Dover day hosted by the State Chamber’s Small Business Alliance. Over 50 employers came to Legislative Hall, first to attend a Small Business Caucus meeting, and then to meet with legislators prior to the start of the day’s legislative session. Attendees heard from Small Business Caucus co-chairs Representatives Daniel Short (R-Seaford) and Quinn Johnson (D-Middletown) about upcoming legislation impacting the business community. In addition they heard from other attending legislators including Ruth Briggs-King (R-Georgetown), Rich Collins (R-Millsboro), Paul Baumbach (D-Newark), Bryon Short (D-Highland Woods), Jeff Spiegelman (R-Clayton), Mike Ramone (R-Middle Run Valley) about the best ways to interact with their legislators. Feedback included favoring personal outreach through either telephone calls or email, and Representatives urged the business community to be vocal about the issues important to them adding that it is important to contact legislators representing both your business and residential addresses. The most important voice in the legislature is yours. After the Small Business Caucus meeting business representatives had the opportunity to meet with their legislators to make that personal contact and to share stories about their companies. Afterwards attendees were able to watch both the House and Senate go about their legislative business of the day. If you missed Small Business Day, join us on June 7th for our Small Business Conference & End-of-Session Legislative Brunch. Attended by members of the General Assembly, this is another opportunity to showcase your business and tell the story of how pending legislation will impact your business. For more details visit our website. Good morning, my name is James DeChene, Government Affairs Director for the Delaware State Chamber of Commerce. On behalf of the state of Delaware’s largest coalition of businesses we stand opposed to Senate Bill 39.
The Chamber does not reach this conclusion lightly, especially as Delaware’s economy continues to struggle in the aftermath of the Great Recession. While our unemployment rate remains below the national average, overall wages have not risen to where they were prior to 2009, and unfortunately, SB 39 does nothing to alleviate that problem, and in many ways does more to exacerbate the situation. We believe that there are examples of the seriousness, and the aftermath, of proposals such as SB 39 that should serve as warnings to Delaware. Numerous articles have been written on the number of small businesses, especially restaurants, which have been forced to close their doors as a result of significant increases in the minimum wage. Areas such as Seattle and Los Angeles have seen such closures, as well as employers forced to roll back benefits, such as matching 401(k) contributions, in order to cover the costs of higher wages. In addition, close to home in Philadelphia, nonprofits that contract with the city say they can’t afford the new $12 per hour wage scale without help from the city. They want more money from the city or an exemption to allow them to pay less than $12 an hour. This was also the case in Los Angeles, where the very unions that pushed for an increase in the minimum wage then petitioned City Council for an exemption for their members to be paid lower. On the employee side, articles have also been written about employees choosing to work part time in order to maintain their state benefits, even when full time work is offered. What remains is clear, and has been evidenced by actions national level retailers have taken in recent months, is as the labor market continues to strengthen, the demand for workers will increase, and there will be a natural, market driven increase in wages. Special consideration should be taken as to what this will do for our younger workers, currently the highest percentage of minimum wage earners in the state, as well as those with developmental disabilities. A marked increase in the minimum wage could serve as a barrier for those looking for first time employment, traditionally in areas such as food service, where these workers start to learn the soft and hard skills necessary to move up in the workplace. Impediments to youth employment, especially in our cities, will cause additional problems to be addressed. Speaking directly to those with disabilities, organizations like Waggies by Maggie, whose entire workforce is comprised of workers with intellectual disabilities will be forced to close their doors if faced with an increase in the minimum wage. I would urge the members of this committee to consider an alternative measure aimed at low income workers, without suffering the employment losses that raises to the minimum wage are proven to have, which is to increase the Earned Income Tax Credit. It matches at the first earned dollar, and phases out as a worker hits an income threshold. The goals are the same, with positive outcomes. by James DeChene
The second half of the 148th Legislative Session convened on January 12th, with a full docket of legislation carried over from last year to parse through, along with new legislation requiring action. Right out of the gate, the House faced a Suspension of Rules vote, brought by Rep. Kowalko, to override Governor Markell’s veto of HB 50, the “Opt Out” bill the State Chamber has opposed. That vote failed 13-26, but the bill has been placed on the Ready List, meaning it can be brought up for a similar vote at any time. In good news for Delaware business and overall economic development policy for the state, HB235, the Delaware Competes Act, passed the house last week with an overwhelming majority 36-2 with two not voting. The bill changes how corporate income tax is calculated in Delaware, changing from a multi-factor to a single sales factor calculation. Delaware is currently only one of nine states still using the multi-factor assessment, and the only one east of the Mississippi. This bill will ease the tax burden on companies looking to expand personnel and investments in property and infrastructure in Delaware, and has been endorsed by the State Chamber. The bill has its Senate hearing this Wednesday with a full floor vote on Thursday. It is expected to pass handily, and will be signed by the Governor. Also this week will be a hearing on SB 39, a bill to increase Delaware’s minimum wage by $.50 a year between 2016 and 2019, and then by $1.20 a year until 2023, where it will be $15.05 an hour. The State Chamber stands in opposition to this bill for a variety of reasons, including the impact on small businesses and potential loss of full time jobs, as seen in locales such as Seattle and Los Angeles. The bill is expected to clear the Senate Labor Relations Committee, where it will be brought to the Senate floor for a vote, as soon as Thursday. Plenty more to come in the coming months, so stay tuned. Our Superstars in Business awards application deadline is about a month away and we would like to open the application process to a wider variety of businesses across the state. Marvin S. Gilman Superstars in Business Awards program, now in its 17th year. As the Chamber’s most visible and important tribute to small business, the Superstars in Business program is seeking outstanding small businesses to award. The application form is now available and can be completed online at ssb.dscc.com. Printed copies are also available by emailing Kelly Wetzel at kwetzel@dscc.com or calling (302) 576-6564. Winners will be judged in four different categories: companies with 1-24 employees, 25-59 employees, 60-150 employees and nonprofit organizations. Awards of excellence will also be given to deserving companies. The Delaware State Chamber of Commerce launched the Marvin S. Gilman Superstars in Business Awards program in 1998 to recognize extraordinary small businesses and nonprofit organizations in the state. The winning Superstars in Business companies have been heralded as models of small business excellence, commended for their first-rate performance in such areas as strategic marketing, customer service, quality control and financial performance. They also excel as good stewards of the community, giving back and paying forward through leadership and employee involvement. This year’s winners will be awarded during a luncheon ceremony on November 10th at the Hotel du Pont’s Gold Ballroom. The keynote speaker will be Hal Real, a seasoned entrepreneur with a passion for new ideas and a history of transforming those ideas into successful businesses. In October 2004, Hal delivered the first installment of that promise by opening World Cafe Live, a nationally-acclaimed live music venue, restaurant and events complex in Philadelphia. In 2011, Hal and his WCL team opened World Cafe Live at the Queen Theater in Wilmington, Delaware. By James DeChene
Louisiana Senator David Vitter, Chairman of the U.S. Senate Committee on Small Business and Entrepreneurship will be introducing this week legislation aimed at assisting the Small Business Community. Contained in the legislation are a variety of tax reform measures, and as a precursor to introducing the bill, Senator Vitter reached out to the Delaware State Chamber of Commerce, and its Tax Committee, for feedback. While the Committee agreed with the bulk of the legislation, there were a few technical corrections and other suggestions regarding tax filing dates, extensions and other nuanced submissions to help make the legislation stronger. This type of exercise is not new to Tax Committee Chairman Jordon Rosen, or to other members of the Committee. They regularly are asked for feedback from Rep. Carney and other state and municipal leaders for their thoughts on tax reform proposals. For more information, or if you have an interest in serving on the Tax Committee, contact James DeChene at jdechene@dscc.com |
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