The Death Tax and Other Tax Issues

Paying local, state, and federal taxes is part of being a responsible business owner and citizen. But should you be taxed after you die? More importantly, should your family have to sell your business to pay a Death Tax?

America's international auto dealers are constantly in danger of losing their family businesses as a result of the federal estate tax, more appropriately called the Death Tax. Not only does the Death Tax tax earnings twice – once while living and once upon death – it penalizes entrepreneurs for establishing a successful business and discourages others from ever establishing businesses that would bolster local economies. The 107th Congress passed and President Bush signed the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of 2001. EGTRRA included a repeal of the federal death tax. As a result, the law phased out the federal death tax until it was completely repealed in 2010.

Unfortunately, the repeal expired on January 1st, 2011. During the 112th Congress, members of the House and Senate introduced pieces of legislation permanently repealing the Death Tax. The bills never made it out of committee and onto the Chamber floors for a vote.

When Congress returns after the 2012 election, they must address a series of tax cuts that are due to expire at the end of the year. The Death Tax will likely become a bargaining chip during the remaining of the 112th lame duck session. The expiring tax cuts include the Bush tax cuts on marginal income tax rates, the Death Tax, and capital gains and dividends rates.

AIADA tackles the Death Tax and other serious tax issues every year in Washington. We are dedicated to ensuring that dealers are given an opportunity to grow their businesses, strengthen their communities, and, one day, pass their legacy on to the next generation. Small businesses keep the American economy running. Taxing them into bankruptcy hurts us all.

Read more on AIADA's position.

Dealers on the Death Tax

BrewerJeanne Brewer
Dealer Principal, Acura of Glendale

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"The Death Tax places local, family owned businesses like mine at Acura of Glendale in a very precarious position – liquidating 55 percent of my small business is not a viable option."

Dever_2006Mike Dever
Dealer Principal , Performance Automotive

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"Without permanent repeal of the Death Tax, I'm going to have to give more than half of my business to the IRS. That is downright confiscatory. My 500 employees should not be out of a job because I die."

Fast Facts on the Death Tax

  • The Death Tax is the leading cause of termination for most small businesses. 70 percent never make it past the first generation.
  • While the individual income tax brings in $829 billion annually, the arduous Death Tax brings in only $24 billion, or 1.1 percent of total federal revenue.
  • The majority of automobile dealerships are family-owned businesses, some of which have been in the family for generations. An auto dealership is a full service operation with all parts of the business integrated. Contractual arrangements with automakers can require franchised dealers to provide new cars, services, equipment, parts, etc. For those inheriting a dealership, there are few assets of significant value that can be sold without adversely impacting the dealership as a whole - and paying the Death Tax by selling off dealership assets can mean the death of the dealership.
  • Small businesses spend on average $9,000 on estate planning and $28,000 a year on life insurance premiums to prepare for the tax. Some AIADA members spend over $100,000 a year on estate tax planning.
  • According to the Heritage Foundation, unnecessary spending on the Death Tax undermines job creation and wage growth and is responsible for the loss of between 170,000 and 250,000 potential jobs each year.
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