Bill would Eliminate ‘Death Tax’ for PA Farmers

A measure to end the financial burden of Pennsylvania’s inheritance tax on surviving farm family members has become part of the 2012-13 state budget package, which was sent to the governor tonight, said Rep. Stephen Bloom (R-Cumberland).

Bloom’s original bill, House Bill 1864, would exempt transfers of agricultural assets from the Pennsylvania inheritance tax when the receiving heir is a sibling or child of the deceased farmer. The exemption was incorporated into the omnibus Pennsylvania Tax Code bill (House Bill 761) by the Senate this week and passed finally by the House today.

“This measure will prevent the state from continuing to penalize farm families in Pennsylvania during a time when they are most economically vulnerable,” said Bloom. “By eliminating the death tax on transfers of ag assets, we can help farm families keep farming successfully in future generations.”

In addition, Bloom’s initiative would extend the new inheritance tax exemption to farm commodities, such as livestock and crops. It would also exempt from the death tax forest reserves that are passed along from a parent to a child or the parent’s brother or sister.

“This measure is a huge win for Pennsylvania farm families,” said Bloom. “Too many family farms have been divided up and sold when a loved one dies, because surviving family members are unable to pay the burdensome inheritance tax on their farm property.”

The House originally approved Bloom’s measure in December, on a 190-1 bipartisan vote. Companion legislation introduced by Sen. Dominic Pileggi (R-Chester/Delaware) was also amended into the Pennsylvania Tax Code, which was sent to the governor as part of the 2012-13 budget package tonight.

“This was a team effort and I want to commend Senator Pileggi, who spearheaded the death tax relief legislation in the Senate, as well as my colleagues in both chambers and the governor for their leadership on this key issue for Pennsylvania agriculture,” said Bloom.

Under current Pennsylvania law, children who inherit farmland from their parents must pay a 4.5 percent inheritance tax. If the farmland is left to a sibling, the inheritor must pay a 12 percent inheritance tax in Pennsylvania.

“Representative Bloom’s leadership on advancing the inheritance tax exemption for Pennsylvania’s farm families is greatly appreciated by Pennsylvania Farm Bureau. This is a landmark achievement that will go far in helping to preserve the future of production agriculture as a leading generator of economic activity in the state,” said Joel Rotz, director of state governmental relations for the Pennsylvania Farm Bureau.

REALTY TRANSFER TAX INFO

Legislation authored by Rep. Bryan Cutler (R-Peach Bottom) that would exempt transfers of family farms for corporate liability reasons from the realty transfer tax is on its way to Gov. Tom Corbett’s desk, after the Senate gives final approval.

“Applying the realty transfer tax to family farm transactions which are performed for corporate liability reasons is exactly the kind of policy driving family farms out of Pennsylvania,” said Cutler. “Agriculture is Pennsylvania’s No. 1 industry. As we are looking for ways to preserve farms and farmers, we must do away with tax policies that unfairly target agriculture.”

House Bill 761 reverses a policy change enacted during the Rendell administration which allows the state to collect taxes from a farm owner who reorganizes his or her agricultural business for corporate liability reasons. Cutler’s legislation would exempt the transfer of real estate devoted to agriculture from the realty transfer tax if it is for the purpose of business reorganization.

A 2000 court decision established the principle that a conveyance of realty owned by a general partnership to a “succeeding” limited partnership would not be considered a “transfer of realty” if the partners and proportionate share of ownership interests among the partners remains the same.

“The courts in 2000 set the precedent that these types of conveyances should not be subject to the realty transfer tax,” said Cutler. “This is not just about protecting farms and farmers, but it is mainly about applying Pennsylvania’s tax standards fairly across the board.”

House Bill 761 would exclude from the realty transfer tax the transmission of real estate devoted to agriculture if the transfer is to a family farm, general, limited or limited-liability partnership by a member of the same family and the family directly owns at least 75 percent of the interests in the partnership. It also would exempt a transfer between members of the same family of an ownership interest in a real estate company, family farm corporation, general, limited or limited-liability partnership which owns real estate.

The legislation, which was amended in the Senate to include several other tax reform proposals, will now go back to the Senate before being presented to the governor for his signature.