Family businesses warn looming estate‑tax changes could force sales or restructuring

Accountants and owners who work with family businesses and farms told the House Ways and Means Committee the impending reduction of the federal estate tax exemption would create severe liquidity and succession problems for capital‑intensive family firms.

Michelle Gallagher said farmers and family business owners “may appear wealthy on paper, but almost always lack the cash or liquidity to pay estate taxes,” and that she has “seen this lead to family businesses closing or being gobbled up by multinational corporations.” She also cited a Tax Foundation estimate — as discussed in her testimony — that compliance costs tied to estate tax administration are large relative to the revenue collected.

Members and witnesses described typical mitigation steps — creating trusts, limited partnerships, buying insurance, or restructuring ownership — and said these steps impose significant professional and appraisal costs. Several members asked whether those costs and liquidity problems mean that small family businesses will sell or convert entity structure if exemptions fall, reducing community‑level charitable and sponsorship support and sometimes moving jobs out of the area.

Witnesses urged Congress to consider permanence or other reforms to avoid forced sales or onerous transition costs for multigenerational firms. Committee staff were asked to prepare estimates of exposure by district and sector; there were no committee votes at the hearing.