After months of negotiations, the U.S. Senate is set to begin debating a bill to reform the federal estate tax.
An amendment to House Bill 5297 was introduced by Sens. Blanche Lincoln, D-Ark., and Jon Kyl, R-Ariz. It would permanently set the federal estate tax rate at 35 percent of a deceased person’s assets with a $5 million exemption phased in over a decade, and with the exemption indexed to rise or fall with inflation.
"We’re urging our senators to support the Lincoln/Kyl amendment and move this bill forward," said Lindsay Reames, assistant director of governmental relations for the Virginia Farm Bureau Federation.
"While the measure doesn’t give farmers all we’d like in this legislation, time is quickly running out. Farmers need to know what the law is immediately in order to make their financial and inheritance plans before the current 100 percent exemption expires Dec. 31. The uncertainty is what’s really hard for farm families. Right now, no one knows how to plan their estates, especially if they want to be able to pass on the farm to their children or relatives."
Northumberland County grain grower Robert Hall is one of many Virginia farmers who’ve struggled with federal estate taxes. His family had to pay a $600,000 tax bill, plus legal fees and capital gains taxes, when an aunt died in 1991.
"We had to sell my aunt’s investments, just about all of them, to get the money to pay the estate tax. We were hoping that money could possibly be used to restore … the family homeplace," said Hall, who also serves on the VFBF board of directors. "It hasn’t been occupied since 1959, but in 1991 it was still in pretty good shape and it would have taken about the amount of money we had to pay the government to restore this house.
"As far as I was concerned, (the tax) was theft and grave-robbing. I just still cannot believe it."
If Congress and the president do not pass and sign an estate tax bill before Dec. 31, the federal estate tax reverts to a 55 percent tax rate with a personal exemption of only $1 million. That would be crippling for all of America’s economy, Reames said, since it would affect virtually every small business or farm in the nation.
"Anyone who owns property or has extensive equipment assets would be hit very hard, especially small businesses," she said. "It’s in the best interests of everyone, farmers and non-farmers, to settle this estate tax question as quickly as possible."