Karen Madonia, next generation wholesaler and member of Heating, Cooling and Refrigeration Distributors International (HARDI), testified last week before a congressional committee, asking for a repeal of the estate tax because it places an unfair financial burden on family businesses.
At a May 31 hearing, Madonia, chief financial officer of Aurora, Ill.-based Illco Inc., (illco.com) and co-chair of HARDI’s (hardinet.org) government and trade relations committee, urged the House Small Business Subcommittee on Economic Growth, Tax and Capital Access to repeal the estate tax and, failing to do that, at least to develop a consistent policy rather than continue the inconsistent approach that the government has used since 1983.
Madonia opened her testimony describing the modest beginnings her father had in starting a business in the heating, cooling and refrigeration industry (HVACR) with seven employees in 1973. Today, the business has eight branches in three states, 92 employees and almost $40 million in revenue. In blunt testimony, she told the committee that the family could have to sell parts of the company to pay an estate tax bill. “That would likely mean shutting down branches, laying off workers or liquidating inventory just to be able to pay a tax bill that only occurred because an owner died,” Madonia said. “Even worse, our company might have to be sold outright.”
Madonia said that an estate tax only serves as a disincentive for small businesses that employ more than half of the country’s work force. “It seems counterintuitive to do anything to discourage the entrepreneurial spirit,” she said.“The estate tax and the constant changing of the formula for determining its rate places an undue burden on businesses in our industry and small businesses everywhere,” says Talbot Gee, executive vice president and COO of HARDI, the trade organization that represents distributors in the HVACR industry. “A significant portion of our members are family businesses, and they generate an estimated 80 percent of the dollar value of HVACR products sold through distribution. There has to be some clarity about the estate tax and some consistency regarding the rate if it isn’t repealed.”
Madonia agrees. She noted that from 2008 through 2012, the tax rules changed each year. “My dad has spent countless hours and entirely too much money trying to navigate the estate planning waters,” she said. “Instead of focusing on growing his business so he can open more branches and employ more people, he has had to strategize about how to pass his company to his kids without having to dismantle it.”
On June 4 and 5, HARDI is conducting its annual Congressional Fly-In. Its members meet with members of Congress and their staff in an effort to highlight the opinions and concerns related to issues facing the HVACR industry.