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Serving: United States
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Congress takes new look at estate tax changes

Bill expands IRS Code to allow more ranchers and farmers to take advantage of special use valuation provision of estate tax.

In the Tax Reform Act of 1976, Congress recognized the disproportionate burden of the death tax on agricultural producers and created Section 2032A as a way to help farmers keep their farms. However, the benefits of Section 2032A have been stymied over the years as the cap on deductions has failed to keep pace with the rising value of farmland.

A new bill introduced in the House -- the Preserving Family Farms Act of 2019 -- increases the maximum amount allowed under the exemption from $750,000 to $11 million (indexed for inflation), thus reviving a critically important tool in the toolbox for farm and ranch families across the U.S. Introduced by Reps. Jimmy Panetta (D., Cal.) and Jackie Walorski (R., Ind.), this bipartisan legislation would expand IRS Code Section 2032A to allow more ranchers and farmers to take advantage of the special use valuation and protect family-owned businesses from the devastating impact of the death tax.

National Cattlemen’s Beef Assn. (NCBA) president Jennifer Houston said ranchers and farmers are very appreciative of the death tax relief that was passed as part of the Tax Cuts & Jobs Act of 2017 (TCJA), but many cattle producers are either still vulnerable to the death tax or will be vulnerable when the TCJA exemption limits revert back in 2026.

“America’s beef producers should never be forced to sell any of their family’s farm, ranch or business due to a death of a family member,” Houston said. “NCBA is committed to the fight to defend family ranches and farms and has long advocated for sound policies that will preserve family-owned beef operations for generations to come. I applaud Reps. Panetta and Walorski for their leadership and dedication to protecting future generations of agricultural producers who seek to preserve a multigenerational legacy by maintaining a family-owned business.”

If enacted, this legislation will provide a permanent solution to an issue that has long plagued the nation’s cattle producers, NCBA said.

The American Farm Bureau Federation (AFBF) also supports the bill.

“Farm and ranch families often face a significant financial burden when they have to pay estate taxes,” AFBF president Zippy Duvall said. “Farm families should be able to pay based on how their land is actually used rather than its potential value as commercial property such as a shopping center. AFBF commends Reps. Panetta and Warlorski for introducing the Preserving Family Farms Act of 2019, which will give more families hope they can hold on to the farm when a loved one passes. We strongly urge House members to co-sponsor this important bill.”

The legislation modernizes the special use valuation provision of the estate tax. This valuation allows property to be appraised as farmland rather than its development value when determining estate taxes. Increasing the amount of farmland or ranchland that can be appraised at agricultural value rather than development value would help protect family-owned farm and ranch businesses by assessing estate taxes on the actual value of the businesses they have spent decades building.

“Allowing more farmland to qualify for special use valuation would elevate this provision of the tax code to its proper place as a helpful estate planning tool,” Duvall said.

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