WASHINGTON – Congress is being called upon by the National Cattlemen’s Beef Association (N.C.B.A.) and the Public Lands Council (P.L.C.) to support H.R. 5475, the Family Farm Estate Tax Relief Act of 2010.
The bill, created by Rep. Mike Thompson (D-Calif.), would exempt family farms and ranches from the estate tax as long as the estate continues in farming or ranching.
“Preserving the legacy of American agriculture for future generations should not be a political issue; it’s the right thing to do,” said Steve Foglesong, N.C.B.A. president. “Allowing family farms and ranches to be taxed out of business will put our national food security and global competitiveness at serious risk.”
On Jan. 1, the estate tax temporarily zeroed out for the year 2010. However, unless Congress takes action by the end of the year, the tax will come back in 2011 at its pre-2001 levels — meaning farm estates worth only $1 million would be taxed at a rate of 55%.
“If Congress fails to act before the end of the year, it will be a death sentence to many family-owned operations,” Mr. Foglesong said. “The Thompson bill would help hardworking farmers and ranchers keep their land and operations intact for future generations.”
The death tax is considered one of the leading causes of the breakup of multi-generation family farms and ranches, according to critics of the tax. Because farm and ranch assets consist mainly of land, buildings, and specialized equipment, these estates may look wealthy on paper, but they include few saleable assets and little liquidity to pay estate taxes, critics say.
“Without specific agriculture relief, we’ll see family-owned ranches torn apart and converted into ‘ranchettes’ and subdivisions,” said Skye Krebs, P.L.C. president. “Instead, the Thompson bill would allow these lands to stay in production agriculture, supporting both healthy rural economies and the preservation of open space and wildlife habitat.”
H.R. 5475 would defer the estate tax for as long as the operation remains in agriculture. If the owner were to either stop farming or sell the property, a recapture tax would be imposed. The bill would also allow farmers and ranchers to qualify for a more generous tax deduction for land donated to a conservation easement.
Agriculture is disproportionately hit by the death tax, both groups claim. Farm estates are five to 20 times more likely to incur estate taxes than other estates, and it is estimated that one in 10 farm estates (farms with sales of $250,000 or more annually) are likely to owe estate taxes in 2009, according to the U.S.D.A. Economic Research Service.