Ranch and farm estate tax would die with legislation

Eureka Times Standard

New legislation recently introduced in the U.S. House of Representatives could eliminate the estate tax for farm and ranch owners whose families want to keep the land in agricultural production.

The estate tax has long presented a major hurdle for passing ranch and farm land on to heirs, and in many cases has forced families to sell off and divide property for other uses.

A new bill by Democratic Reps. Mike Thompson of St. Helena and John Salazar of Colorado looks to exempt agricultural landowners from the tax -- as long as the land remains in ranching or farming. That may be of particular importance to Humboldt County ranch and farm owners whose children want to keep the family farm operating, but can't afford to pay down the estate tax.

Thompson said that the estate tax as it's currently written is an unfair burden to family farmers, and runs against the effort to preserve agricultural lands and open space for the next generation.

”When farms pass from generation to generation, too often families have to sell the farm to developers in order to pay the estate taxes,” Thompson said.

The bill so far has the support of farm groups and two major environmental groups, the Land Trust Alliance and the Environmental Defense Fund.

A tax bill is expected to be introduced at the end of the year, and this bill could be a part of it. The Family Farm Preservation Estate Tax Act would exempt estate taxes for heirs who want to keep farming, but that tax would apply if the land is sold for other purposes in the future. Land enrolled in a conservation easement would also be exempted from the tax.

Joe Russ, a fourth-generation Humboldt County rancher, said the ranches in his family were essentially bought after each preceding owner died, at higher prices.

”It's almost like you're buying your ranch back again,” Russ said.

In Humboldt County, he said, many ranches had timber that could be logged to help pay the estate taxes. But not all of them had timber, and timber fluctuates in value.

Russ said that it's difficult as an up-and-coming rancher to make an agricultural operation pencil out when estate taxes put a drain on cash flow, force him into debt or prompt the sale of part of the property, making it less productive.

Katherine Ziemer with the Humboldt County Farm Bureau said that her group has been working with farmers and ranchers to more thoroughly plan for estate transition. But that doesn't always prevent the sale of property or the need to log to pay for the tax, she said.

”Even with planning, the estate tax can just devastate the plans they make,” Ziemer said.

North Coast Regional Land Trust Executive Director Lindsay Magnuson said that her organization is frequently approached by landowners facing the threat of subdividing their land to cope with estate taxes. It can be virtually impossible for a landowner to pay those taxes, she said, because the value of land has become so high. The general public often believes that the open spaces in an area like Humboldt County will always be there, Magnuson said, but the estate tax can be a threat to it.

”A lot of people take for granted that ranch land will stay ranch land,” Magnuson said.