Rep. Scott Tipton (R-CO) introduced legislation today to provide relief from the punitive estate tax that threatens the very existence of family farms and small businesses as they are passed on from one generation to the next.
The Family Farm and Small Business Tax Relief Act of 2012 (H.R. 6271) will provide relief from the estate tax for family farms and small businesses that intend to continue operating as such. Often called the "death tax', the estate tax is a graduated tax that imposes a considerable obstruction to continued business success when a business is transferred to the next generation upon the passing of a family member. The Family Farm and Small Business Tax Relief Act of 2012 is the result of many meetings with constituents, farmers and ranchers, and other small business owners in the Third District that have expressed concerns with the economic consequences of the tax on small operations already operating on tight margins. Text of the full bill is available here.
"In most cases, the value of a family farm is tied to land, and when a farm is passed from one generation to the next following the passing of a family member, it is extremely difficult for many family farms to come up with the capital to pay punitive estate taxes while also trying to continue operations and paying employees," Tipton said. "It's my belief that families intending to maintain the family business following the passing of the former owner shouldn't be routed by the crippling effects of the estate tax. My bill prevents the federal government from taxing family farms and small businesses when those assets are transferred from decedents to heirs at death, provided those assets continue to operate as farms or small businesses, protecting valuable jobs and encouraging economic growth."
By modifying the tax burden, the Family Farm and Small Business Tax Relief Act encourages families to continue farming or operating the family business and provides relief from the current "death tax' so that farming operations can continue to move forward, providing valuable jobs.
Specifically, H.R. 6271:
* Excludes from the gross estate of the deceased the adjusted value of a farm and family owned business interests, provided the farm or family business was operated as such by the decedent in his last years of life and that the farm or business continues to be used in that way.
* Requires that there was material participation by the decedent or a member of the decedent's family in the operation of the farmland or the family business.
* Applies to farms located in the United States, which is used as a farm or small business, and which was acquired from or passed from the decedent to a qualified heir of the decedent.
* Outlines the resulting tax burden if during the ten years following the decedent's death the material participation requirements are not met by a qualified heir, or if the principal location of the business ceases to be located in the United States, or if the qualified heir disposes of their ownership stake in the business to a party other than another qualified heir. These qualifications ensure that the legislation relieves the onerous tax burden currently placed on family farms and small businesses and does not exceed the scope of this goal.