Legislation would protect against ‘death tax’
The Preserving Family Farms Act of 2021 was introduced recently. This bipartisan legislation to expand IRS Code Section 2032A would allow cattle producers to take advantage of the special use valuation and protect family-owned businesses from the devastating impact of the federal estate tax.
“America’s farmers and ranchers deserve certainty in the tax code overall and they need certainty, especially when it comes to the estate tax. Without it, transition planning for the next generation of producers is nearly impossible,” said NCBA President Jerry Bohn of Wichita.
In the Tax Reform Act of 1976, Congress recognized the disproportionate burden of the estate tax on agricultural producers and created Section 2032A to help them keep their farms. However, the benefits of special use valuations have been stymied over the years as the cap on deductions has failed to keep pace with the rising value of farmland.
While the current 2032A reduction is 55% higher than the value established two decades ago, USDA estimates cropland values have increased by 223% and agricultural land values, including on-farm buildings, have risen by 241%. Due to this rapid inflation, the 2032A deduction no longer aligns with the needs of modern agriculture, nor does it accomplish Congress’ intended goal of providing meaningful protection to those most vulnerable to the estate tax.
The Preserving Family Farms Act of 2021 would increase the maximum amount allowed under the Section 2032A exemption from $750,000 to $11 million. If enacted, this legislation would provide a permanent solution to an issue that long has plagued U.S. cattle producers.
