Farmers and ranchers concerned about the federal estate-tax exemption won’t be receiving peace of mind for Christmas this year.
Hopefully, they’ll get it before the New Year, at which time the current estate-tax exemption, without government intervention, will drop drastically — potentially putting “immense financial strain” on families inheriting valuable agriculture operations.
The issue, like many others, is now lumped in with “fiscal cliff” talks, Rep. Cory Gardner, R-Colo., said last week.
At the end of the 2012 — now less than a week away — the current $5.12 million federal estate tax exemption and the tax rate of 35 percent will expire, and return to a $1 million exemption with a tax rate of 55 percent, or up to 60 percent for estates valued at more than $10 million.
Farmers and ranchers in particular want Congress to intervene quickly.
Given the rapid increases in farmland values in recent years, many farming and ranching families would easily exceed the $1 million exemption.
In Weld County, irrigated farmland is valued at $5,000 per acre, or as much as $7,000-$8,000, maybe more, with good water rights.
At $5,000 per acre, only 200 acres of land amounts to $1 million in value — then there’s valuable farm equipment and other assets to be factored in.
A lot of farmers and ranchers, like other small business owners, are asset-rich but cash-poor, and many worry that without an extension of the current estate tax exemption, families inheriting farmland will be more likely to have to sell portions of their assets just to pay their estate tax bill.
The American Farm Bureau and other organizations that lobby on behalf of agricultural interests have been pressuring members of Congress to leave the estate tax at current levels.
“It’s a huge concern to many of us in agriculture,” said Frank Eckhardt, a farmer near LaSalle, who has children and grandchildren farming behind him on his ground, and who also has seen during his years multiple families lose their farms because of the high cost of inheriting land. “It can put immense financial strain on families.
“Something needs to be done. But there’s not a whole lot of time left to do it.”
This summer, the House voted to extend the $5.12 million estate tax exemption and the 35 percent tax rate, along with other Bush-era tax cuts.
The Senate’s bill regarding Bush-era tax cuts this summer did not address the federal-estate tax exemption.
President Obama has suggested raising the estate threshold to $3.5 million, with a tax above that of 45 percent.
Without action taken earlier in the year, it now hinges on the progress of the “fiscal cliff” discussions — and the deadline is rapidly approaching.