Family businesses, including farms and ranches, need resolution now because at the end of 2010 the estate tax rate will revert back to the pre-2001 level of 55% and the exemption amount will fall to $1 million, the coalition emphasized in the letter. Allowing the estate tax to revert back to the 55% level would essentially represent passing a death sentence to family-owned operations, said Steve Foglesong, NCBA president.
“Taxing family farmers and ranchers out of business will have serious impacts on all Americans, not just in our rural communities,” Foglesong said. “This is not a tax on the ‘wealthy elite.’ The wealthy can afford accountants and estate planners to help them evade the tax. This is a death warrant for small-to-medium sized family businesses. Farmers and ranchers are often forced to sell land, equipment, or the even the entire ranch just to pay off tax liabilities. This is money that could otherwise be reinvested to grow the family business and hand it down to future generations.”
The coalition’s goal has always been full repeal of the estate tax. However, coalition members expressed strong support of an amendment by Senators Blanche Lincoln (D-Ark.) and Jon Kyl (R-Ariz.) to bring meaningful and permanent reform to the estate tax. The group also issued support for a similar bill (H.R. 3905) in the House introduced by US Representatives Shelley Berkley (D-Nev.) and Bob Brady (D-Penn.).
These bipartisan proposals increase the exemption level to $5 million and reduce the rate to 35%. These proposals also ensure that any relief related to the exemption is tied to inflation and that stepped-up basis is included. The coalition stated that the higher exemption level and reduced rate will lessen the burden of the estate tax and provide family businesses and farms with more capital to create much needed jobs and invest in their business.
“For far too long, farmers and ranchers have faced uncertainty when it comes to planning ahead for the future of their estates,” Foglesong said. “Congress must act when they get back to Washington for the lame-duck. If not, this Congress must be held responsible for the ruin of many family operations and officially preventing young people from taking over the family farm.”
The estate tax disproportionately hits agriculture, Foglesong charged. According to the US Department of Agriculture, 98% of American farms and ranches are owned and operated by families, and the tax is considered one of the leading causes of the breakup of multigenerational family farms and ranches. Farm and ranch estates are five to 20 times more likely to incur estate taxes than other estates. One in 10 farm estates (farms with sales of $250,000 or more annually) were likely to owe estate taxes in 2009, according to the USDA Economic Research Service.