It’s official – the Treasury Department today released a new report announcing they will withdraw the family business valuation rules that had threatened the family business community for more than a year!  Today’s announcement is a big win that will be celebrated by family businesses nationwide.

The report released today was in response to an earlier Executive Order instructing Treasury to identify and address regulations issued by the Department in 2016 that were harmful and/or exceeded Treasury’s authority.  In other words, the 2704 rules.  You can read the whole report here.  The portion addressing the valuation rules reads like this:

After reviewing these comments, Treasury and the IRS now believe that the proposed regulations’ approach to the problem of artificial valuation discounts is unworkable. In particular, Treasury and the IRS currently agree with commenters that taxpayers, their advisors, the IRS, and the courts would not, as a practical matter, be able to determine the value of an entity interest based on the fanciful assumption of a world where no legal authority exists. Given that uncertainty, it is unclear whether the valuation rules of the proposed regulations would have even succeeded in curtailing artificial valuation discounts. Moreover, merely to reach the conclusion that an entity interest should be valued as if restrictions did not exist, the proposed regulations would have compelled taxpayers to master lengthy and difficult rules on family control and the rights of interest holders. The burden of compliance with the proposed regulations would have been excessive, given the uncertainty of any policy gains. Finally, the proposed regulations could have affected valuation discounts even where discount factors, such as lack of control or lack of a market, were not created artificially as a value-depressing device.

In light of these concerns, Treasury and the IRS currently believe that these proposed regulations should be withdrawn in their entirety. Treasury and the IRS plan to publish a withdrawal of the proposed regulations shortly in the Federal Register.

Today’s report marks the successful culmination of more than a year of advocacy on the part of the S Corporation Association and its allies in the business community.  To fight these rules, we have drafted official comments, testified, organized coalitions, educated policymakers, and sponsored reports.

While all this analysis may be moot now, the successful outcome it engendered represents a fundamental reality that the family business community is an effective and powerful voice when it comes to tax and economic policy.  Something to keep in mind as Congress debates tax reform.  The corporate sector may be grabbing all the headlines, but it will be the support of families and Main Street businesses that gets tax reform over the finish line.