Representatives Jimmy Panetta (CA) and Mike Kelly (PA) recently introduced legislation that would update IRS Code Section 2032A—making things a lot better for farmers faced with paying estate taxes.
If passed, the Preserving Family Farms Act would modify the current tax law and allow farmers and ranchers to pay estate taxes based on the land’s value for agricultural use.
“Outdated provisions in our tax laws are punishing family farms and causing them to split up or sell the land upon which they have spent generations working and building up,” Panetta says. “My Preserving Family Farms Act would ease the burden on these operations, by ensuring that farms are appraised by the value of their business, rather than for development.”
Background Information:
In the Tax Reform Act of 1976, Congress recognized the burden of the Death Tax on agricultural producers and therefore created Section 2032A as a way to help farmers keep their family farms. But over the years, the benefits of Special-Use Valuations have been crippled as the cap on deductions has failed to keep pace with the rising value of farmland.
Although the current 2032A reduction is 55% higher than the value established two decades ago, the USDA estimates that cropland values have increased by 223%. Similarly, agricultural land values – including on-farm buildings – have also risen dramatically, increasing by 241% during this same period. Due to the rapid inflation of farmland values, the 2032A deduction is no longer aligned with the needs of modern agriculture – nor does it accomplish Congress’ intended goal of providing protection to producers who are most vulnerable to the estate tax.
The Preserving Family Farms Bill has already been endorsed by the American Farm Bureau Federation, the National Cattlemen’s Beef Association, and multiple state-level groups. Though a similar bill introduced in the last congressional session died in the Ways and Means Committee, supporters are hoping for a different outcome.
“California’s farms and ranches are overwhelmingly family operations, and protecting family agricultural traditions requires an estate tax structure that supports family farm succession,” said California Farm Bureau President Jamie Johansson. “The Special Use Valuation that farm families can use to reduce estate taxes needs to be adjusted to reflect the rising values of agricultural properties. Let’s protect our family farms from being lost to burdensome taxes and keep our agricultural lands in production.”
About Jimmy Panetta
James Varni Panetta is an American lawyer, politician, and former Navy intelligence officer from the state of California. A member of the Democratic Party, he is the U.S. representative for California's 19th congressional district. Formerly his district was numbered the 20th congressional district.
Read his entire bio here!
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