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Legislation would ease potential estate tax burden

Issue Date: November 27, 2019
By Christine Souza

Newly introduced federal legislation is intended to help farm families continue their livelihoods after the death of a loved one.

The bipartisan Preserving Family Farms Act of 2019, introduced last week and cosponsored by U.S. Reps. Jimmy Panetta, D-Salinas, and Jackie Walorski, R-Ind., would modernize the special use valuation provision of the federal estate tax. The legislation would expand IRS Code Section 2032A to allow more ranchers and farmers to take advantage of the special use valuation and protect family-owned businesses from the potentially devastating impact of the estate tax.

Josh Rolph, manager of federal policy for the California Farm Bureau Federation, said Democrats on the House Ways and Means Committee looked earlier this year at extending the credits or deductions that had expired in the 2017 Tax Cuts and Jobs Act. They decided to use the estate tax exemption to pay for these tax extenders, and doing that, he said, affects 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.

By expanding the IRS Code, the special use valuation would allow property to be appraised as farmland rather than its development value when determining estate taxes. Increasing the amount of farmland that can be valued at agricultural value rather than development value, Rolph said, would improve family-owned farming businesses by assessing estate taxes on the actual value of the businesses they have 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."

In locations with high land values such as Monterey County, Groot said, many times the estates of family farms have exceeded the federal limits on inheritance tax.

"This bill will increase the amount available for exemption so that it matches more closely what is provided to other sectors of our economy," he said.

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."

"Allowing more farmland to qualify for special use valuation would elevate this provision of the tax code to its proper place as a helpful estate planning tool," Duvall said.

Rolph said farmers and ranchers appreciate the estate tax relief included as part of the Tax Cuts and Jobs Act of 2017, but he said without the fix offered by the new legislation, many farmers and ranchers would be more vulnerable to the estate tax .

Before 2017, a taxpayer could exempt $5.5 million per person or $11 million per couple from an estate. In 2017, that changed that so now a taxpayer can exempt $11.4 million per person or up to $22.8 million per couple.

(Christine Souza is an assistant editor of Ag Alert. She may be contacted at

Permission for use is granted, however, credit must be made to the California Farm Bureau Federation when reprinting this item.

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