The recent ruling in the case of Connelly v. United States of America at the U.S. Supreme Court has left small businesses feeling disappointed, as the Court upheld a decision by the Court of Appeals that makes it more challenging for them to transfer their closely held businesses after the death of a small business owner. NFIB had filed an amicus brief with the U.S. Chamber Litigation Center in this case, highlighting the importance of redemption agreements for Main Street businesses, but their efforts were not enough to change the outcome.
The ruling allows the IRS to continue taxing small businesses based on an inflated assessment of their worth after the death of the owner, which is a major concern for these businesses. They are now uncertain about how to best prepare for such situations and having long-term succession plans in place can be crucial for small businesses to ensure a smooth transition to the next generation and avoid closing down entirely.
The case specifically focused on whether life insurance proceeds taken out by a closely held company on behalf of shareholders should be considered assets when calculating their shares for federal estate tax purposes. The ruling in this case has significant implications for how small businesses handle their finances and plan for their future, making it even more important for NFIB to continue its advocacy efforts on behalf of these businesses.
NFIB’s Small Business Legal Center works tirelessly to protect the rights of small business owners in court cases across the country, currently involved in over 40 cases in federal and state courts including the U.S. Supreme Court. Through its advocacy efforts, NFIB aims to support small businesses and ensure they have access to resources and information needed to navigate legal challenges and succeed in today’s competitive marketplace.
