House Dems drop changes to stepped-up basis in reconciliation package
While ag groups were happy to see the House Democrats drop the elimination of stepped-up basis within its initial text in their package of tax hikes on corporations in the reconciliation spending bill, they are still concerned over the provisions on the estate tax in the House Ways and Means Committee' draft that could impact family farms.
Policy experts say the committee may have nixed the measure due to concerns about family owned farms. Brownfield Ag News reported that lawmakers on both sides of the aisle say it would have devastated farms.
Ag Secretary Vilsack told Brownfield 98% of farms would not have been impacted, “Because either the farm is going to be owned and operated by a family member going forward OR if a portion of the farm is being sold, it’s being sold at a gain that’s less than the exemptions that are currently in the bill.”
Vilsack admitted the issue is complicated and there is a lot of misunderstanding about it. Having a lack of trust at this early stage in the process, he said, was “fair.”
Currently, heirs may delay taxes on inherited gains until they sell the property. They also receive a tax provision, the so-called step-up in basis, adjusting the asset’s purchase price to the value on the date of death, saving taxpayers $41 billion per year, according to an estimate from the Joint Committee on Taxation.
Farmers and ranchers across the country flooded lawmakers with letters and emails urging members of Congress to leave important tax policies in place as they draft legislation implementing President Biden's "Build Back Better" agenda.
Those messages to elected officials hit on four key tax provisions that make it possible for farmers and ranchers to survive and pass their businesses on to the next generation: estate taxes, stepped-up basis, 199A small business deduction and like-kind exchanges.
“The policies Congress enacts now will determine agricultural producers’ ability to secure affordable land to start or expand their operations,” the letter states. “Regardless of whether a business has already been passed down through multiple generations or is just starting out, the key to their longevity is a continued ability to transition when a family member or business partner dies. For this reason, we firmly believe the current federal estate tax code provisions must be maintained.”
National Corn Growers Association President John Linder said the overwhelming response from growers reinforced concerns from farmers that the proposals to repeal the stepped-up basis on capital gains taxes would have devastating effects on family farms, small businesses and rural communities across the nation.
“We are very pleased to see that the House Committee did not include the elimination of stepped-up basis within its initial text. However, we are concerned with the provisions on the estate tax in the Committee draft that could impact family farms," he said, referring to the estate tax in the current tax code help protect family farms that are passed down from generation to generation.
He said his group will work aggressively to preserve stepped-up basis and the current estate tax exemption as the process moves forward.