It seems almost a common anecdote that the reason for many ranches being broken up is the structure of the estate tax.
There have been several proposals to keep the estate tax from causing the break-up, sale and/or development of family ranches and forested lands when it returns in 2011.
These proposals have recently been combined into a unified bill moving through the House that could have significant positive impact in our county. We live in a community built on ranching and ranch lands, and reliant on the scenic open lands, game animal corridors, and the visitor and tourist dollars those assets generate for our economic vitality. We also live in a county in which agriculture is still the most stable and reliable (albeit smaller) source of jobs and income. Ranches and private forested lands are the ballast in our economic boat and the foundation of our prosperity. They are under constant threat, but there is work being done to help. Yes, by politicians.
Congressman Mike Thompson (D-Calif.) recently introduced the Family Farm Estate Tax Relief Act, a new version of his estate tax deferral bill (H.R. 3524) that reduces its cost from $16.2 billion to $4.2 billion while adding the increased estate tax exclusion for lands under easement (H.R. 3050). The package includes:
• The exclusion provision, originally introduced by Reps. Earl Blumenauer (D-Ore.) and Eric Cantor (R-Va.) as H.R. 3050, would increase the IRC 2031(c) exclusion for the remainder value of land protected by a conservation easement from 40 to 50 percent, and from a maximum of $500,000 to $5 million. This provides a powerful incentive for owners of high-value agricultural and forest lands to protect these properties in perpetuity. H.R. 3050 has been endorsed by the American Farm Bureau Federation and many land conservation organizations.
• The deferral provision, similar to those previously introduced by Representatives Mike Thompson, Tim Bishop (D-N.Y.) and John Salazar (D-Colo.) as H.R. 3524, H.R. 1328 and H.R. 173 (respectively), would indefinitely defer estate taxes on working farm, ranch and forest land so long as it remains in the family. This deferral ensures that nobody has to sell the farm just to pay estate tax and it buys time for the subsequent donation or sale of a conservation easement, neither of which would be subject to recapture tax. This provision has generated a great deal of excitement from the National Cattlemen’s Beef Association and other agricultural groups.
Congress will likely try to prevent the estate tax from returning to a 55-percent rate and $1 million unified credit at the end of this year. It is thought that this leaves an opening for a relatively small conservation package that recognizes that agricultural land is different from other assets. Finding co-sponsors for H.R. 5475 will demonstrate support for including conservation provisions, and starting that conversation could help get the enhanced easement incentive (H.R. 1831) included as well.
Senate companions to H.R. 3050 and H.R. 5475 are expected to be introduced in the next few weeks.
If you are interested in how your estate taxes are affected by these changes, or how they can be minimized or eliminated simply by permanently preserving the land you already love and protect every day, attend Saving the Ranch at the East Fork Ranch on Aug. 28, from 1 to 4 p.m., and stay for the Southwest Land Alliance annual picnic.
Call the Land Alliance for details and directions at 264-7779.