Amendments to family farm inheritance tax exemption to assist families in future management of the farm:


Enactment of Act 85 of 2012, which provided the family farm exemption from inheritance tax, was a huge step in freeing Pennsylvania's farm families from crippling tax obligations when transferring their farms to succeeding generations. However, recent interpretations of Act 85's statutory provisions have shown that the exemption itself is substantially limited in scope. It only applies to: (i) transfers of real property, not transfers of ownership of the family farm business enterprise; (ii) those transfers in which both the giver and receiver of farm property are "natural persons." Act 85, for example, does not exempt from inheritance tax transfers of a farm from a deceased individual to an entity such as family farm corporation, limited liability partnership or family farm trust, even though the "owners" of that business are members of the same family as that individual. And Act 85 does not exempt from inheritance tax transfers among family members of "ownership" shares in a family farm corporation of a family farm trust that manages operation of the family's farm. The limitation in scope of inheritance tax exemption provided in Act 85 limits the estate planning options that farm families can use to reasonably control tax obligations that could seriously jeopardize the family's financial ability to maintain the farm long-term.


SB 580, introduced by Senator John Gordner, expands the family farm exemption from inheritance tax to include transfers of farm property to a family farm business or family farm trust created by the deceased individual or the individual's family to continue operation of the family farm, and transfers of the deceased individual's share of ownership in the family's farm business or farm trust to succeeding family members.


PFB is urging Senators and Representatives, especially those in the Senate and House Finance Committees, to support and promptly pass SB 580 to expand the family farm inheritance tax exemption to include transfers of farm property and shares of business ownership to legal entities and trusts created by the farm family to facilitate the family's continued operation of the farm.