The Department of the Treasury has released the Treasury Green Book for Fiscal Year 2017, which provides explanations of the President’s budget proposals. One such proposal (remember…these are just proposals, not actual changes in the law) that may affect your estate planning, if passed, is found on page 185 of the Green Book and is re-printed here for your convenience:
EXTEND THE LIEN ON ESTATE TAX DEFERRALS WHERE ESTATE CONSISTS LARGELY OF INTEREST IN CLOSELY HELD BUSINESS
Section 6166 allows the deferral of estate tax on certain closely held business interests for up to fourteen years from the (unextended) due date of the estate tax payment (up to fourteen years and nine months from date of death). This provision was enacted to reduce the possibility that the payment of the estate tax liability could force the sale or failure of the business. Section 6324(a)(1) imposes a lien on estate assets generally for the ten-year period immediately following the decedent’s death to secure the full payment of the estate tax. Thus, the estate tax lien under section 6324(a)(1) expires almost five years before the due date of the final payment of the deferred estate tax under section 6166.
Reasons for Change
In many cases, the IRS has had difficulty collecting the deferred estate tax, often because of business failures during that tax deferral period. The IRS sometimes requires either an additional lien or some form of security, but these security interests generally are prohibitively expensive and damaging to the day-to-day conduct and financing of the business. In addition, unless these other security measures are put in place toward the beginning of the deferral period, there is a risk that other creditors could have a higher priority interest than the Government.
This proposal would extend the estate tax lien under section 6324(a)(1) throughout the section 6166 deferral period. The proposal would be effective for the estates of all decedents dying on or after the date of enactment, as well as for all estates of decedents dying before the date of enactment as to which the section 6324(a)(1) lien has not then expired.
Last year’s Green Book Proposal on the same topic can be read here.