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New Bill Promotes Easing of Federal Estate Tax Burden for Ranchers and Farmers

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The bipartisan, Preserving Family Farms Act of 2019, introduced last week and co-sponsored by U.S. Reps. Jimmy Panetta, D-Salinas, and Jackie Walorski, R-Ind., aims to help farm and ranch families continue their businesses after the death of a loved one. The bill proposes to modernize the special use valuation provision of the federal estate tax.

The bill looks to broaden IRS Code Section 2032A to let more ranchers and farmers take advantage of the special use valuation and protect family-owned businesses from the potentially devastating impact of the estate tax, according to Ag Alert’s article, “Legislation would ease potential estate tax burden.”

Josh Rolph, manager of federal policy for the California Farm Bureau Federation, said Democrats on the House Ways and Means Committee examined the issue earlier this year. They wanted to extend the credits or deductions that had expired in the 2017 Tax Cuts and Jobs Act. The caucus elected to use the estate tax exemption to pay for these tax extenders. However, doing this impacts agriculture.

“When the committee was looking at extending the tax credits, they thought, ‘Well, how will we pay for these?’ And the way that they did it was by basically raiding the estate tax, so we want to make sure that people support the Preserving Family Farms Act,” Rolph said.

If the code section is expanded, the special use valuation would permit property to be appraised as farmland rather than its development value, when calculating estate taxes. Increasing the amount of farmland that can be valued at agricultural value rather than development value would improve family-owned farming businesses, by assessing estate taxes on the actual value of the businesses they’ve spent decades building.

“The overall issue is trying to keep family farms in the family and not allow high land values to dictate how family farms are passed from generation to generation,” said Norm Groot, executive director of the Monterey County Farm Bureau. “This legislation offers an opportunity for those of us in areas of extremely high land values to make sure that the family farm stays in the family.”

“This bill will increase the amount available for exemption so that it matches more closely what is provided to other sectors of our economy,” Groot commented.

In endorsing the Preserving Family Farms Act, American Farm Bureau Federation President Zippy Duvall said, “Farm families should be able to pay based on how their land is actually used, rather than its potential value as commercial property, such as a shopping center.”

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Reference: Ag Alert (November 27, 2019) “Legislation would ease potential estate tax burden”

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