,i  #aae? ,,congress  #a/ ,session  ,h4 
,r4 #caei  ,,9 ,,! ,,h\se ,,(           
,,repres5tatives  ,june #bi1 #bjag,mr4  
,?ompson ( ,cali=nia introduc$ ! foll[+ 
bill2 :i* 0 ref]r$ to ! ,committee on   
,ways & ,means  ,a ,,bill  ,to am5d !   
,int]nal ,rev5ue ,code ( #aihf to r$uce 
! taxable e/ate by ! value ( c]ta9      
family-own$ bus9ess int]e/s4  #a4 ,%ort 
title ,?is ,act may be cit$ z ! ,family 
,bus9ess ,pres]vation ,e/ate ,tax ,act4 
#b4 ,taxable e/ate r$uc$ by value (     
c]ta9 family-own$ bus9ess int]e/s  7a7  
,9 g5]al ,"p ,,iv ( sub*apt] ,a ( *apt] 
#aa ( ! ,int]nal ,rev5ue ,code ( #aihf  
is am5d$ by ins]t+ aft] section #bjef;,a
 ! foll[+ new section3  #bjeg4          
,family-own$ bus9ess int]e/s  7a7 ,g5]al
 rule  7#a7 ,all[ance ( d$uction ,=     
purposes ( ! tax impos$ by section      
#bjja1 9 ! case ( an e/ate ( a dec$5t to
 :i* ?is section applies1 ! value ( !   
taxable e/ate %all be det]m9$ by d$uct+ 
f ! value ( ! gross e/ate ! adju/$ value
 ( ! qualifi$ family-own$ bus9ess       

int]e/s ( ! dec$5t :i* are describ$ 9   
subsection 7b77#b74  7#b7 ,maximum      
d$uction ,! d$uction all[$ by ?is       
section %all n exce$ ! great] (-- 7,a7 !
 basic exclusion am\nt 9 effect "u      
section #bjaj7;c77#c7 = ! cal5d> ye> :i*
 includes ! date ( ! dea? ( ! dec$5t1 or
  7,b7 ! value ( any qualifi$ f>ml& :i* 
con/itutes ! qualifi$ family-own$       
bus9ess int]e/ 79 ! case ( an entity    
describ$ 9 subsection 7e77#a77;,b71     
qualifi$ f>ml& held by su* entity %all  
be treat$ z con/itut+ a qualifi$        
family-own$ bus9ess int]e/ 9 ! same     
proportion z ! dec$5t's own]%ip int]e/ 9
 su* entity74  7#c7 ,qualifi$ f>ml& ,=  
purposes ( p>agraph 7#b77;,b71 ! t]m    
qualifi$ f>ml& means qualifi$ real      
prop]ty z def9$ 9 section #bjcb;,a7b7   
appli$ )\t reg>d to p>agraph 7#b77;,b7  
!re(4  7b7 ,e/ates to :i* section       
applies  7#a7 ,9 g5]al ,?is section %all
 apply to an e/ate if-- 7,a7 ! dec$5t 0 
7at ! date ( ! dec$5t's dea?7 a citiz5  
or resid5t ( ! ,unit$ ,/ates1  7,b7 !   

executor elects ! application ( ?is     
section & files ! agreem5t ref]r$ to 9  
subsection 7h71  7,c7 ! sum (-- 7i7 !   
adju/$ value ( ! qualifi$ family-own$   
bus9ess int]e/s describ$ 9 p>agraph     
7#b71 plus  7ii7 ! am\nt ( ! gifts ( su*
 int]e/s det]m9$ "u p>agraph 7#c71      
exce$s #ej p]c5t ( ! adju/$ gross e/ate1
 &  7,d7 dur+ ! #h-ye> p]iod end+ on !  
date ( ! dec$5t's dea? !re h be5 p]iods 
aggregat+ #e ye>s or m dur+ :i*--  7i7  
su* int]e/s 7 own$ by ! dec$5t or a     
memb] ( ! dec$5t's family1 &  7ii7 !re 0
 mat]ial p>ticipation 7)9 ! mean+ (     
section #bjcb;,a7e77#f77 by ! dec$5t or 
a memb] ( ! dec$5t's family 9 ! op]ation
 ( ! bus9ess to :i* su* int]e/s relate4 
7#b7 ,includible qualifi$ family-own$   
bus9ess int]e/s ,! qualifi$ family-own$ 
bus9ess int]e/s describ$ 9 ?is p>agraph 
are ! int]e/s :i*-- 7,a7 are includ$ 9  
det]m9+ ! value ( ! gross e/ate1 &  7,b7
 are acquir$ by any qualifi$ heir f1 or 
pass$ to any qualifi$ heir f1 ! dec$5t  
7)9 ! mean+ ( section #bjcb;,a7e77#i774 

7#c7 ,includible gifts ( int]e/s ,!     
am\nt ( ! gifts ( qualifi$ family-own$  
bus9ess int]e/s det]m9$ "u ?is p>agraph 
is ! sum (--  7,a7 ! am\nt ( su* gifts f
 ! dec$5t to memb]s ( ! dec$5t's family 
tak5 into acc\nt "u section             
#bjja7;b77#a77;,b71 plus  7,b7 ! am\nt (
 su* gifts o!rwise exclud$ "u section   
#bejc7;b71  to ! ext5t su* int]e/s are  
cont9u\sly held by memb]s ( su* family  
7o!r ?an ! dec$5t's sp\se7 betwe5 ! date
 ( ! gift & ! date ( ! dec$5t's dea?4   
7c7 ,adju/$ gross e/ate ,= purposes (   
?is section1 ! t]m adju/$ gross e/ate   
means ! value ( ! gross e/ate--  7#a7   
r$uc$ by any am\nt d$uctible "u p>agraph
 7#c7 or 7#d7 ( section #bjec7;a71 &    
7#b7 increas$ by ! excess (--  7,a7 !   
sum (-- 7i7 ! am\nt ( gifts det]m9$ "u  
subsection 7b77#c71 plus  7ii7 ! am\nt  
7if m ?an de m9imis7 ( o!r transf]s f ! 
dec$5t to ! dec$5t's sp\se 7at ! "t ( ! 
transf]7 )9 #aj ye>s ( ! date ( !       
dec$5t's dea?1 plus  7iii7 ! am\nt ( o!r
 gifts 7n includ$ "u clause 7i7 or 7ii77

 f ! dec$5t )9 #c ye>s ( su* date1 o!r  
?an gifts to memb]s ( ! dec$5t's family 
o!rwise exclud$ "u section #bejc7;b71   
ov]  7,b7 ! sum ( ! am\nts describ$ 9   
clauses 7i71 7ii71 & 7iii7 ( subp>agraph
 7,a7 :i* are o!rwise includible 9 !    
gross e/ate4  ,= purposes ( ! prec$+    
s5t5ce1 ! ,secret>y may provide t de    
m9imis gifts to p]sons o!r ?an memb]s ( 
! dec$5t's family %all n be tak5 into   
acc\nt4  7d7 ,adju/$ value ( ! qualifi$ 
family-,own$ bus9ess int]e/s ,= purposes
 ( ?is section1 ! adju/$ value ( any    
qualifi$ family-own$ bus9ess int]e/ is !
 value ( su* int]e/ = purposes ( ?is    
*apt] 7det]m9$ )\t reg>d to ?is         
section71 r$uc$ by ! excess (--  7#a7   
any am\nt d$uctible "u p>agraph 7#c7 or 
7#d7 ( section #bjec7;a71 ov]  7#b7 !   
sum (--  7,a7 any indebt$ness on any    
qualifi$ resid5ce ( ! dec$5t ! int]e/ on
 :i* is d$uctible "u section            
#afc7;h77#c71 plus  7,b7 any indebt$ness
 to ! ext5t ! taxpay] e/abli%es t !     
proce$s ( su* indebt$ness 7 us$ = !     

paym5t ( educational & m$ical exp5ses ( 
! dec$5t1 ! dec$5t's sp\se1 or !        
dec$5t's dep5d5ts 7)9 ! mean+ ( section 
#aeb1 det]m9$ )\t reg>d to subsections  
7b77#a71 7b77#b71 & 7d77#a77;,b7 !re(71 
plus  7,c7 any indebt$ness n describ$ 9 
subp>agraph 7,a7 or 7,b71 to ! ext5t su*
 indebt$ness does n exce$ #aj1jjj4  7e7 
,qualifi$ family-,own$ bus9ess int]e/   
7#a7 ,9 g5]al ,= purposes ( ?is section1
 ! t]m qualifi$ family-own$ bus9ess     
int]e/ means-- 7,a7 an int]e/ z a       
proprietor 9 a trade or bus9ess c>ri$ on
 z a proprietor%ip1 or  7,b7 an int]e/ 9
 an entity c>ry+ on a trade or bus9ess1 
if-- 7i7 at lea/--  7,i7 #ej p]c5t ( su*
 entity is own$ 7directly or indirectly7
 by ! dec$5t & memb]s ( ! dec$5t's      
family1  7,,ii7 #gj p]c5t ( su* entity  
is s own$ by memb]s ( #b families1 or   
7,,iii7 #ij p]c5t ( su* entity is s own$
 by memb]s ( #c families1 &  7ii7 =     
purposes ( subclause 7,,ii7 or 7,,iii7 (
 clause 7i71 at lea/ #cj p]c5t ( su*    
entity is s own$ by ! dec$5t & memb]s ( 

! dec$5t's family4  ,= purposes ( !     
prec$+ s5t5ce1 a dec$5t %all be treat$ z
 engag$ 9 a trade or bus9ess if any     
memb] ( ! dec$5t's family is engag$ 9   
su* trade or bus9ess4  7#b7 ,limitation 
,su* t]m %all n include-- 7,a7 any      
int]e/ 9 a trade or bus9ess ! pr9cipal  
place ( bus9ess ( :i* is n locat$ 9 !   
,unit$ ,/ates1  7,b7 any int]e/ 9 an    
entity1 if ! /ock or debt ( su* entity  
or a controll$ gr\p 7z def9$ 9 section  
#bfg7;f77#a77 ( :i* su* entity 0 a memb]
 0 readily tradable on an e/abli%$      
securities m>ket or second>y m>ket 7z   
def9$ by ! ,secret>y7 at any "t )9 #c   
ye>s ( ! date ( ! dec$5t's dea?1  7,c7  
any int]e/ 9 a trade or bus9ess n       
describ$ 9 section #edb7;c77#b71 if m   
?an #ce p]c5t ( ! adju/$ ord9>y gross   
income ( su* trade or bus9ess = !       
taxable ye> :i* includes ! date ( !     
dec$5t's dea? w\ld qualify z p]sonal    
hold+ company income 7z def9$ 9 section 
#edc7;a7 )\t reg>d to p>agraph 7#b77;,b7
 !re(7 if su* trade or bus9ess 7 a      

corporation1 &  7,d7 t portion ( an     
int]e/ 9 a trade or bus9ess t is        
attributable to-- 7i7 ca% or m>ketable  
securities1 or bo?1 9 excess ( !        
reasonably expect$ day-to-day work+     
capital ne$s ( su* trade or bus9ess1 &  
7ii7 any o!r assets ( ! trade or bus9ess
 7o!r ?an assets us$ 9 ! active conduct 
( a trade or bus9ess describ$ 9 section 
#edb7;c77#b771 :i* produce1 or are held 
= ! production (1 p]sonal hold+ company 
income 7z def9$ 9 subp>agraph 7,c77 or  
income describ$ 9 section #ied7;c77#a7  
7det]m9$ )\t reg>d to subp>agraph 7,a7  
!re( & by sub/itut+ trade or bus9ess =  
controll$ =eign corporation74  ,9 ! case
 ( a lease ( prop]ty on a net ca% basis 
by ! dec$5t to a memb] ( ! dec$5t's     
family1 income f su* lease %all n be    
treat$ z p]sonal hold+ company income = 
purposes ( subp>agraph 7,c71 & su*      
prop]ty %all n be treat$ z an asset     
describ$ 9 subp>agraph 7,d77ii71 if su* 
income & prop]ty w\ld n be s treat$ if !
 lessor _h engag$ directly 9 !          

activities engag$ 9 by ! lessee )       
respect to su* prop]ty4  7#c7 ,rules    
reg>d+ own]%ip  7,a7 ,own]%ip ( entities
 ,= purposes ( p>agraph 7#a77;,b7-- 7i7 
,corporations ,own]%ip ( a corporation  
%all be det]m9$ by ! hold+ ( /ock       
possess+ ! appropriate p]c5tage ( !     
total comb9$ vot+ p[] ( all classes (   
/ock entitl$ to vote & ! appropriate    
p]c5tage ( ! total value ( %>es ( all   
classes ( /ock4  7ii7 ,p>tn]%ips        
,own]%ip ( a p>tn]%ip %all be det]m9$ by
 ! own+ ( ! appropriate p]c5tage ( !    
capital int]e/ 9 su* p>tn]%ip4  7,b7    
,own]%ip ( ti]$ entities ,= purposes (  
?is section1 if by reason ( hold+ an    
int]e/ 9 a trade or bus9ess1 a dec$5t1  
any memb] ( ! dec$5t's family1 any      
qualifi$ heir1 or any memb] ( any       
qualifi$ heir's family is treat$ z hold+
 an int]e/ 9 any o!r trade or bus9ess-- 
7i7 su* own]%ip int]e/ 9 ! o!r trade or 
bus9ess %all be disreg>d$ 9 det]m9+ if !
 own]%ip int]e/ 9 ! fir/ trade or       
bus9ess is a qualifi$ family-own$       

bus9ess int]e/1 &  7ii7 ?is section %all
 be appli$ sep>ately 9 det]m9+ if su*   
int]e/ 9 any o!r trade or bus9ess is a  
qualifi$ family-own$ bus9ess int]e/4    
7,c7 ,individual own]%ip rules ,=       
purposes ( ?is section1 an int]e/ own$1 
directly or indirectly1 by or = an      
entity describ$ 9 p>agraph 7#a77;,b7    
%all be consid]$ z be+ own$             
proportionately by or = ! entity's      
%>ehold]s1 p>tn]s1 or b5efici>ies4 ,a   
p]son %all be treat$ z a b5efici>y ( any
 tru/ only if su* p]son has a pres5t    
int]e/ 9 su* tru/4  7f7 ,tax treatm5t ( 
failure ,to mat]ially p>ticipate 9      
bus9ess or dispositions ( int]e/s  7#a7 
,9 g5]al ,!re is impos$ an additional   
e/ate tax if1 )9 #aj ye>s aft] ! date ( 
! dec$5t's dea? & be=e ! date ( !       
qualifi$ heir's dea?--  7,a7 ! mat]ial  
p>ticipation requirem5ts describ$ 9     
section #bjcb;,a7c77#f77;,b7 are n met )
 respect to ! qualifi$ family-own$      
bus9ess int]e/ :i* 0 acquir$ 7or pass$7 
f ! dec$5t1  7,b7 ! qualifi$ heir       

disposes ( any portion ( a qualifi$     
family-own$ bus9ess int]e/ 7o!r ?an by a
 disposition to a memb] ( ! qualifi$    
heir's family or ?r\gh a qualifi$       
cons]vation contribution "u section     
#agj7;h771  7,c7 ! qualifi$ heir loses  
,unit$ ,/ates citiz5%ip 7)9 ! mean+ (   
section #hgg7 or ) respect to :om an    
ev5t describ$ 9 section #hgg7;e77#a7    
occurs1 & su* heir does n comply ) !    
requirem5ts ( subsection 7g71 or  7,d7 !
 pr9cipal place ( bus9ess ( a trade or  
bus9ess ( ! qualifi$ family-own$ bus9ess
 int]e/ ceases to be locat$ 9 ! ,unit$  
,/ates4  7#b7 ,additional e/ate tax     
7,a7 ,9 g5]al ,! am\nt ( ! additional   
e/ate tax impos$ by p>agraph 7#a7 %all  
be equal to-- 7i7 ! applicable p]c5tage 
( ! adju/$ tax diff]5ce attributable to 
! qualifi$ family-own$ bus9ess int]e/1  
plus  7ii7 int]e/ on ! am\nt det]m9$ "u 
clause 7i7 at ! und]paym5t rate e/abli%$
 "u section #ffba = ! p]iod beg9n+ on ! 
date ! e/ate tax liability 0 due "u ?is 
*apt] & end+ on ! date su* additional   

e/ate tax is due4  7,b7 ,applicable     
p]c5tage ,= purposes ( ?is p>agraph1 !  
applicable p]c5tage %all be det]m9$ "u !
 foll[+ table3 ,if ! ev5t describ$ 9    
p>agraph 7#a7 occurs 9 !  foll[+ ye> (  
mat]ial  p>ticipation3,! applicable     
p]c5tage is3#a ?r\gh #fajjghjhfjidjajbj4
  7,c7 ,adju/$ tax diff]5ce ,= purposes 
( subp>agraph 7,a7-- 7i7 ,9 g5]al ,!    
adju/$ tax diff]5ce attributable to a   
qualifi$ family-own$ bus9ess int]e/ is !
 am\nt :i* be>s ! same ratio to ! adju/$
 tax diff]5ce ) respect to ! e/ate      
7det]m9$ "u clause 7ii77 z ! value ( su*
 int]e/ be>s to ! value ( all qualifi$  
family-own$ bus9ess int]e/s describ$ 9  
subsection 7b77#b74  7ii7 ,adju/$ tax   
diff]5ce ) respect to ! e/ate ,=        
purposes ( clause 7i71 ! t]m adju/$ tax 
diff]5ce ) respect to ! e/ate means !   
excess ( :at w\ld h be5 ! e/ate tax     
liability b = ! election "u ?is section 
ov] ! e/ate tax liability4 ,= purposes (
 ?is clause1 ! t]m e/ate tax liability  
means ! tax impos$ by section #bjja     

r$uc$ by ! cr$its all[able aga9/ su*    
tax4  7#c7 ,use 9 trade or bus9ess by   
family memb]s ,a qualifi$ heir %all n be
 treat$ z dispos+ ( an int]e/ describ$ 9
 subsection 7e77#a77;,a7 by reason (    
ceas+ to be engag$ 9 a trade or bus9ess 
s long z ! prop]ty to :i* su* int]e/    
relates is us$ 9 a trade or bus9ess by  
any memb] ( su* individual's family4    
7g7 ,security requirem5ts = noncitiz5   
qualifi$ heirs  7#a7 ,9 g5]al ,except ^u
 ! application ( subp>agraph 7,f7 (     
subsection 7i77#c71 if a qualifi$ heir  
is n a citiz5 ( ! ,unit$ ,/ates1 any    
int]e/ "u ?is section pass+ to or       
acquir$ by su* heir 7includ+ any int]e/ 
held by su* heir at a "t describ$ 9     
subsection 7f77#a77;,c77 %all be treat$ 
z a qualifi$ family-own$ bus9ess int]e/ 
only if ! int]e/ passes or is acquir$   
7or is held7 9 a qualifi$ tru/4  7#b7   
,qualifi$ tru/ ,! t]m qualifi$ tru/     
means a tru/-- 7,a7 :i* is organiz$ "u1 
& gov]n$ by1 ! laws ( ! ,unit$ ,/ates or
 a ,/ate1 &  7,b7 except z o!rwise      

provid$ 9 regulations1 ) respect to :i* 
! tru/ in/rum5t requires t at lea/ #a   
tru/ee ( ! tru/ be an individual citiz5 
( ! ,unit$ ,/ates or a dome/ic          
corporation4  7h7 ,agreem5t ,! agreem5t 
ref]r$ to 9 ?is subsection is a writt5  
agreem5t sign$ by ea* p]son 9 be+ :o has
 an int]e/ 7:e!r or n 9 possession7 9   
any prop]ty designat$ 9 su* agreem5t    
cons5t+ to ! application ( subsection   
7f7 ) respect to su* prop]ty4  7i7 ,o!r 
def9itions & applicable rules ,=        
purposes ( ?is section-- 7#a7 ,qualifi$ 
heir ,! t]m qualifi$ heir--  7,a7 has ! 
mean+ giv5 to su* t]m by section        
#bjcb;,a7e77#a71 &  7,b7 includes any   
active employee ( ! trade or bus9ess to 
:i* ! qualifi$ family-own$ bus9ess      
int]e/ relates if su* employee has be5  
employ$ by su* trade or bus9ess = a     
p]iod ( at lea/ #aj ye>s be=e ! date ( !
 dec$5t's dea?4  7#b7 ,memb] ( ! family 
,! t]m memb] ( ! family has ! mean+ giv5
 to su* t]m by section #bjcb;,a7e77#b74 
7#c7 ,applicable rules ,rules simil> to 

! foll[+ rules %all apply3  7,a7        
,section #bjcb;,a7b77#d7 7relat+ to     
dec$5ts :o are retir$ or disabl$74  7,b7
 ,section #bjcb;,a7b77#e7 7relat+ to    
special rules = surviv+ sp\ses74  7,c7  
,section #bjcb;,a7c77#b77;,d7 7relat+ to
 p>tial dispositions74  7,d7 ,section   
#bjcb;,a7c77#c7 7relat+ to only #a      
additional tax impos$ ) respect to any  
#a portion74  7,e7 ,section             
#bjcb;,a7c77#d7 7relat+ to due date74   
7,f7 ,section #bjcb;,a7c77#e7 7relat+ to
 liability = tax2 furni%+ ( bond74  7,g7
 ,section #bjcb;,a7c77#g7 7relat+ to no 
tax if use beg9s )9 #b ye>s2 active     
managem5t by eligible qualifi$ heir     
treat$ z mat]ial p>ticipation74  7,h7   
,section #bjcb;,a7d7 7relat+ to         
election2 agreem5t74  7,i7 ,section     
#bjcb;,a7e77#aj7 7relat+ to community   
prop]ty74  7,j7 ,section                
#bjcb;,a7e77#ad7 7relat+ to treatm5t (  
replacem5t prop]ty acquir$ 9 section    
#ajca or #ajcc transactions74  7,k7     
,section #bjcb;,a7f7 7relat+ to /atute (

 limitations74  7,l7 ,section           
#bjcb;,a7g7 7relat+ to application to   
int]e/s 9 p>tn]%ips1 corporations1 &    
tru/s74  7,m7 ,subsections 7h7 & 7i7 (  
section #bjcb;,a4  7,n7 ,section        
#faff7;b77#c7 7relat+ to f>mh\ses &     
c]ta9 o!r /ructures tak5 into acc\nt74  
7,o7 ,subp>agraphs 7,b71 7,c71 & 7,d7 ( 
section #faff7;g77#a7 7relat+ to        
accel]ation ( paym5t74  7,p7 ,section   
#fcbd;,b 7relat+ to special li5 =       
additional e/ate tax74  4  7b7 ,con=m+  
am5dm5ts  7#a7 ,section #bjca7;c77#aj7 (
 su* ,code is am5d$ by /rik+ 7z 9 effect
 be=e its repeal74  7#b7 ,! table (     
sections = "p ,,iv ( sub*apt] ,a ( *apt]
 #aa ( su* ,code is am5d$ by ins]t+ aft]
 ! item relat+ to section #bjef;,a !    
foll[+ new item3  ,sec4 #bjeg4          
,family-own$ bus9ess int]e/s4  4  7c7   
,effective date ,! am5dm5ts made by ?is 
section %all apply to ! e/ates ( dec$5ts
 dy+ aft] ! date ( ! enactm5t ( ?is     
,act4