Changes to Tax Law Will Benefit PA Family Farms

At 402 square miles, the 46th Legislative District, which I proudly represent, is one of the largest geographic districts in all of Pennsylvania, and much of the rural land in the district is used for agricultural purposes. I’ve had the privilege to visit many of my constituents’ working farms, and have been truly impressed by the work ethic and innovation of our local farmers. As a result, I was proud to cast a vote to give real help to our family farmers by making major changes to tax provisions important to family farms in Pennsylvania.

Last December, the House of Representatives unanimously passed HB 761, which amends the Tax Reform Code to change the Realty Transfer Tax and Inheritance Tax to benefit family farms in Pennsylvania. After adding some additional tax code language in the Senate, Governor Corbett signed the bill this summer. The Realty Transfer Tax changes apply retroactively to any document made, executed, delivered, accept or presented for recording on or after July 1, 2010, while the Inheritance Tax provisions would apply to the estates of decedents dying after December 31, 2011.

Current law provides for a Realty Transfer Tax (RTT), which is a stamp tax of 1% of the value of real estate transferred. The law provides for certain exemptions from the RTT including transfers involving a family farm corporation or family farm partnership. Although there were some exemptions to the current law, HB 761 expands the definition of a “Family farm business”, defined as a corporation or association of which at least seventy-five per cent of its assets are devoted to the business of agriculture and at least seventy-five per cent of each class of stock of the corporation or interest in the association is continuously owned by members of the same family.

Under the new law, the following transfers are exempt from the RTT: a transfer of real estate devoted to the business of agriculture to a family farm business by a member of the same family which directly owns at least 75% of the interests in that family farm business; or a family farm business, which family directly owns at least 75% of the interests in that family farm business or a transfer between members of the same family of an ownership interest in a real estate company or family farm business that owns real estate.

As for the changes made to the PA Inheritance Tax, a transfer of real estate devoted to the business of agriculture between members of the same family provided that the transfer of land continues to be devoted to the business of agriculture for seven years beyond the date of the decedent’s death and the land derives a yearly gross of at least $2,000 shall now be exempt from Inheritance Tax. The law also includes numerous changes in definitions to make it easier for family farms to be transferred within families without being subject to the Inheritance Tax.

If you own a family farm in Pennsylvania, these are major changes in the law that will hopefully allow you to transfer your farm between members of your family without paying transfer or Inheritance taxes. These provisions of HB 761 give Pennsylvania farmers more freedom and flexibility not just now but for generations to come, and I’m proud to have voted for this focused, positive piece of legislation. Please feel free to contact my district office for more detailed information on these changes, which will give all of our farmers, and their families, peace of mind.

One comment