KFB President Mark Haney: Passing the Farm to the Next GenerationPosted on May 5, 2021
One of the most important issues facing the agriculture industry today is the ability to pass a farm on to the next generation either by inheritance or through selling. It sounds easy enough but often tax laws can make the process cumbersome and expensive.
We have been fortunate in Kentucky to have some specific legislation to help in the matter. The bill that created the Kentucky Selling Farmers Tax Credit (KSFTC) Program passed during the 2019 General Assembly and is a prime example of how Kentucky Farm Bureau’s advocacy efforts can payoff when working with our legislative members.
Kentucky Senate President Pro Tempore David Givens was instrumental in getting this legislation through to fruition. The KSFTC Program promotes the continued use of agricultural land for farming purposes by granting tax credits to selling farmers who agree to sell agricultural land and assets to beginning farmers.
We are thankful to Senator Givens for his devotion to agriculture and his help in getting this legislation passed.
However, there is much work that needs to be done to continue this forward progress when it comes to helping with the passing of farmland along to a new generation of farm families. All too often we see production farmland turn into to housing developments because so many young and beginning farmers just don’t have the capital to make the purchase, and an oversized tax bill only makes the situation worse.
There is currently national legislation that has been introduced in the U.S. House and Senate that would eliminate the estate, or “death” tax which would be of considerable help as it relates to this issue.
But there is also the discussion of lowering the current estate tax exemption to a level that would be detrimental to many farm families. Lowering the exemption below current levels would cause an increased tax burden on many of them looking to take over the family farm after a death.
The last thing a family needs to worry about at a time like that is how to transfer their property when losing some or all of it because of an undue tax burden. This isn’t rocket science folks. Simply put, we must have farms to eat, therefore we must do all we can to ensure existing farms can be passed on to the next generation without breaking the bank.
Another issue that has surfaced when it comes to inheriting farmland is the announcement of a new proposal to end stepped-up basis when calculating capital gains taxes on inherited income, which would include inherited farmland.
Current stepped-up basis law allows heirs to step up their cost basis in inherited property to match the value on the date of the previous owner’s death, meaning that only capital gains above that point could ever be subject to income taxes.
Removing stepped-up basis would require the heir of the property to pay tax gains based on the original purchase price of the farmland rather than the market value on the date of inheritance. Farm Bureau opposes this, and we must continue our efforts, at all levels, to ensure sound legislation is passed that would help farm families, not penalize them for wanting to continue a tradition which we all depend upon.
Mark Haney, President
Kentucky Farm Bureau