Federation Backs Bills To Reform Federal Estate Tax Laws
The Alabama Farmers Federation supports pending legislation in Congress that would help protect America’s farm and ranch families from potentially crippling blows of the federal estate tax following a farm owner’s death.
“Farming is a capital-intensive industry,” said Federation National Legislative Programs Director Mitt Walker. “The majority of assets owned by a typical farm family are in the form of land and equipment. When a farm is transferred to the next generation and there isn’t enough cash on hand to cover the taxes owed, surviving family members may be forced to sell off a substantial portion of the farm to pay the taxes. There is just something wrong with that scenario.”
The Senate bill, the Death Tax Repeal Permanency Act of 2012 (S. 2242), was introduced by Sen. John Thune (R-S.D.). The bill is similar to another bill, H.R. 1259, introduced in the House by U.S. Rep. Kevin Brady (R-Texas). The House bill now has more than 200 co-sponsors.
Members of the Alabama congressional delegation who have co-sponsored the bill in their respective chambers include U.S. Sen. Jeff Sessions and U.S. Reps. Spencer Bachus, Robert Aderholt, Jo Bonner, Martha Roby and Mo Brooks, all Republicans.
The Unemployment Insurance Reauthorization and Job Creation Act of 2010 set the estate tax exemption at $5 million per person, with a top tax rate of 35 percent for 2011 and 2012. That legislation also put in place a new provision for 2011 and 2012 that allows the unused portion of a spouse’s exemption to be used by a surviving spouse, and it permanently reinstates stepped-up basis in regard to tax treatment.
The new legislation is necessary because without congressional action, in 2013, the estate tax exemption will shrink to $1 million per person with no spousal transfer, and the top rate will increase to 55 percent.
This will strike a blow to farm and ranch operations trying to transition from one generation to the next, Walker said.
“A $1 million exemption is not high enough to protect a typical farm or ranch able to support a family and, when coupled with a top tax rate of 55 percent, can be especially difficult for farm and ranch businesses,” he said.
Although estate tax planning may protect some family farms and ranches from devastating estate taxes, planning tools are costly and take money needed to operate and expand businesses.