Sen. Dianne Feinstein (Calif.) this week introduced legislation designed to provide relief from estate taxes for family owned farms and ranches. The legislation was co-sponsored by Mike Crapo (Idaho), Mark Udall (Colo.), Michael Bennet (Colo.) and Barbara Boxer (Calif.).
"This legislation defers the payment of estate taxes for small family farms until those farms are no longer operated by the family or until they are sold or used for other purposes," Feinstein said. "It is simply a deferral. It is fair and responsible."
The estate tax was never intended to put family farms and ranches out of business or to prevent a legitimate family farmer or rancher from passing the business on to their children, ensuring that it remains in the family. This legislation would recognize that important principle by exempting family-owned and operated farms and ranches that stay in the family from the estate tax.
To qualify for a deferment under the Family Farm Estate Tax Relief Act, several criteria would need to be met: the deceased must have had an annual farm-related income below $750,000 in the three years prior to death; the farm must have generated more than 50 percent of the farm owner's estate; it must be passed down to a family member who's been involved in the operation for at least five years; and that family member must continue to use the land for farming purposes.
Additionally, to ensure that farming families do not abuse the exemption, the legislation would institute a "recapture tax," which would go into effect if the farm or ranch was sold or transferred outside the family or was no longer used for farming or ranching.
To further encourage the preservation of land and to protect millions of acres of open space and wildlife habitat, the bill includes language to increase the limitation on the estate tax exclusion for conservation easements from $500,000 to $5 million.