Families who own and operate farms and ranches could face a devastating impact if recently proposed changes to taxes on inherited property come to fruition, a study confirms.
This week, Republican leaders of the agriculture committees in Congress underscored a new study from the Ag and Food Policy Center (AFPC) at Texas A&M University that analyzes two pieces of legislation introduced in the Senate that would change the tax liabilities of family members when farm and ranch estates are passed from generation to the next.
The study confirms what Texas Corn Producers Association (TCPA), alongside fellow agricultural organizations, suspected when the legislation was first introduced.
AFPC maintains a database of 94 representative farms across 30 states. The study utilizes that data with a farm-level policy simulation model to analyze the impact of policy changes on farms and ranches nationwide.
AFPC’s study indicates that if both the Sensible Taxation and Equity Promotion (STEP) Act and the 99.5% Act were simultaneously implemented, 92 of the 94 representative farms would be negatively impacted. Additional tax liabilities incurred average $1.43 million per farm across these 92 representative farms.
“Family farms are staying in business on slim margins,” David Gibson, the executive vice president of TCPA, says. “It could be detrimental for the family farm to stay in business if they’re faced with these steep tax obligations to simply pass the farm to the younger generation.”
The STEP Act proposes to eliminate stepped-up basis upon death of the owner. If it were implemented, while the 99.5% Act would decrease the estate tax exemption.
TCPA is keeping a close watch on the progress of proposed tax reform policy. In its recent virtual Hill visits with legislative staff, TCPA advocated for support of the bipartisan bill H.R. 2370, “Preserving Family Farms Act,” which is sponsored by Rep. Jimmy Panetta (D-CA-20), and co-sponsored by Rep. Jodey Arrington (R-TX-19), Rep. Henry Cuellar (D-TX-28), and Rep. Jackie Walorski (R-IN-2).
Access AFPC’s complete study HERE.
