Bills now pending in Congress to repeal the estate tax, may make a big difference for farm and ranch families. As it stands now, the estate tax makes it difficult for many to pass the family business down to the next generation.
An article in Farm Bureau, “Estate Tax Repeal Bills Would Help Family Farmers,” says that rather than spending money on life insurance to cover the cost of the estate tax, many farmers would be able to boost their businesses by upgrading buildings, purchasing needed equipment and adding livestock.
More significantly, when a family member dies, the family would be able to keep farming or ranching without having to sell land, livestock or equipment in order to pay the tax. While the current laws help people involved in agriculture, the estate taxes are still a big issue.
Current law provides for an estate tax exemption of $5 million indexed for inflation, allows portability between spouses and includes stepped-up basis.
Family-owned farm and ranch assets typically are tied to illiquid assets like farm and ranch land, buildings and equipment. When estate taxes on an agricultural business are greater than cash and other liquid assets, surviving family partners have few options but to sell off their assets, which jeopardizes the viability of their business.
The bipartisan Death Tax Repeal Act of 2017 (H.R. 631 and S. 205) was introduced in the House by Representatives Kristi Noem (R-S.D.) and Sanford Bishop (D-Ga.) and in the by Senate John Thune (R-S.D.).
While large “industrial” farms may be profitable, smaller family farms make up a large part of the American food supply. A back-to-the-land movement in certain parts of the country has added to the number of family-owned agribusinesses, and the passage of this bill will be welcome by the newcomers as well.
Reference: Farm Bureau (January 26, 2017) “Estate Tax Repeal Bills Would Help Family Farmers”