Stressing the multiple benefits of maintaining family farms and ranches, a coalition of California farm organizations has endorsed tax-reform legislation that would exclude farm assets from the federal estate tax.
The Family Farm Preservation Estate Tax Act, H.R. 3524, would exempt farm and ranch assets from estate taxes as long as the property remains as a family agricultural operation. Introduced by Rep. Mike Thompson, D-Napa, and Rep. John Salazar, D-Colo., the bill would also exclude land enrolled in a qualified conservation easement from the estate tax.
"The estate tax has penalized farmers and ranchers for decades," the California agricultural organizations said in announcing support for the bill. "When deaths occur within a family, it is usually impossible to continue the farming operation without re-mortgaging the property or selling some or all of it to satisfy the tax settlement."
That's because for most family farmers and ranchers, the value of an estate is made up mainly of land—and nowhere more so than in California. The farm groups noted that land values here are higher than in other parts of the country, especially in farming areas near city boundaries. Therefore, estates that include agricultural land routinely exceed current tax exemptions based on the value of an estate.
The farm groups said they favor maintaining those exemptions at the highest possible levels, but that in addition "it is essential that Congress deal with the unique problems that farmers face with generational family transition." Farmers cannot sell stock or other paper assets to satisfy the estate tax. Instead, they often must sell land or other property without which the family farm will no longer be viable.
In addition to ensuring food security for the nation, "there are multiple benefits when farmlands and closely related agricultural operations remain within the family," the farm groups said, "including the preservation of open space and a strong conservation ethic." Allowing farmland and ranchland to stay within family ownership, they said, retains the knowledge of the land's soil, water, wildlife habitat and other resources that assure continuity of stewardship practices.
Tax-reform legislation approved in 2001 will phase out the estate tax entirely in 2010, but will expire in 2011, when estate-tax rates would return to their pre-2001 level. Farm organizations say that would severely damage a farmer's ability to pass a farm or ranch to the next generation.