Tax Code changes would devastate family farms

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New Texas A&M Agriculture and Food Policy Center (PSAC) to study US Senate legislation calling for capital gains and inheritance tax changes would take a heavy toll on family farms.

The PSAC maintains a database of 94 representative farms in 30 states. This data, coupled with a farm-level policy simulation model, enabled PSAC to analyze policy changes on farms across the country.

The analysis examined the impact of the Fair Taxation and Promotion of Fairness Act (STEP Act) on the elimination of the grossed-up basis in the event of the death of the farm owner.

The study also looked at the impact of the “For the 99.5% Law (99.5% Law)” introduced by Senator Bernie Sanders (I-VT) – calling for a decrease in the exemption estate tax of $ 7 million to $ 3.5 million, among other things.

The results? Devastating would be an understatement.

Under current law, when the owner of a farm dies, the estate is subject to federal inheritance tax. As of 2021, $ 11.7 million per person and $ 23.4 million per asset couple are exempt from inheritance tax, effectively protecting most farms from inheritance tax.

Additionally, when a deceased leaves farm assets to an heir, the heir can take the fair market value of the property (i.e. a grossed-up basis), thus avoiding capital gains tax. .

Only 2 of the 94 representative farms of the AFPC database would be impacted by an event triggering a generational transfer under the current law.

“In contrast, under the STEP Act, 92 of 94 representative farms would be affected, with additional tax obligations incurred on average $ 726,104 per farm,” the study said. “Under the 99.5% law, 41 of 92 representative farms would be affected, with additional tax obligations incurred averaging $ 2.17 million per farm.”

According to the study, if the STEP law and the 99.5% law were implemented simultaneously, 92 of the 94 representative farms would be affected, with additional tax obligations incurred on average of $ 1.43 million per farm in the 92 representative farms.

“Michigan farmers are already facing uncertainty – from weather to markets and a lack of manpower,” said John Kran, national legislative counsel for the Michigan Farm Bureau.

“We urge Congress to refrain from making capital gains changes and to step up bases that will negatively impact farmers and other business owners in the rural community. This study by Texas A&M does not is just another example of how Washington’s proposals would hurt farms of all sizes if implemented. “


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