Legislation attempts to ease estate tax burden on Indiana farmers

Inside INdiana Business

A bill was introduced to make changes to the U.S. tax code to help farmers with the burden of estate taxes. (photo courtesy: USDA/Preston Keres)

INDIANAPOLIS (Inside INdiana Business) — Indiana farmers are encouraged by legislation that could help families dealing with estate taxes and the transfer of farmland after the death of a loved one

The Preserving Family Farms Act of 2019, co-introduced by Rep. Jackie Walorski (R-Ind.) and Rep. Jimmy Panetta (D-Calif.), would expand IRS Code Section 2032A to allow more ranchers and farmers to take advantage of a special use valuation.

As the IRS tax code is currently written, when a family member inherits farmland the asset is appraised at fair market value instead of agricultural land value.

“It essentially would allow a farmer or a rancher when they inherit land to value that asset as agricultural land as opposed to say what a developer might pay for it,” says Paul Schlegal, vice president of public affairs for the American Farm Bureau Federation

Schlegel says developers often pay more than what agricultural land is worth. The farm bureau wants the agricultural land to be assessed for what it is, not what it could be as developed land.

“If you look in western Hancock County, the developmental land valuation would be quite high compared to the eastern part of the county,” explains Bob White, Indiana Farm Bureau director of national government relations.

White says counties that surround metropolitan areas, that could be developed for commercial purposes, would have a higher assessment and a higher estate tax bill for farm families.

“The dilemma here is if farm families want to keep it in the family, and they are assessed the market development valuation, which can sometimes be five, six times more than what the farmland valuation would be, they cannot afford the estate taxes that would be impressed upon them because of the death in their family,” says White.

White says he thinks the bi-partisan bill will likely be attached to a non-controversial bill that could move through the House and Senate. He hopes action will be taken to “keep more farms in operation in allowing heirs to continue farming.”

In an interview with Inside INdiana Business, Indiana Farm Bureau’s Bob White explains the challenge with this tax code provision.

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