Pa. Family Farms Freed from Death Taxes

Family farms in Pennsylvania are now exempt from the state’s “death tax,” or a tax on transfer of assets from a deceased owner to a child or relative

By Melissa Daniels | PA Independent

HARRISBURG — Jay Grove’s grandfather built Gro-Lan Farms in 1905, the Franklin County dairy farmer said proudly.

More than a century later, Grove and his brother, Jeff, grow grain to feed their dairy cows on 425 acres and produce some 10,000 8-ounce glasses of milk a day.

Not all family farms experience this success. Grove tells a story of a neighboring farmer who sold his 130 acres to a developer who built more than 130 houses there.

“Family farms have struggled over the years just to stay alive,” he said.

But Grove said Pennsylvania took a step in the right direction to help keep farms in the family.

The state repealed the inheritance tax, or “death tax,” as it applies to family-owned farms, a passage celebrated at a news conference at Gro-Lan Farms in early August.

The death tax for family farms provides only a sliver of the overall death tax revenue. This past fiscal year, the state collected $827.7 million in overall death tax revenue. Without taxing farms, the state expects to lose between $2 million and $3 million in revenue next year.

By 2015, the overall death tax revenue will decrease by $5 million without the family farm revenue. Other sources for inheritance tax revenue include shared bank account assets, stocks and bonds, mortgages and other real estate.

For a family farm, the death tax was 4.5 percent for the child of a decedent, and 12 percent for a sibling. It applied to the total value of the farm, including equipment.

For example, if a farmer’s daughter was to inherit a farm worth $500,000 from her parent, the tax would be $22,500, paid within nine months.

The Legislature wrote the exemption into the Pennsylvania Tax Code, which passed with the fiscal 2012-2013 budget.

The new exemption applies to farm property that generates an annual income of $2,000 or more through family-run agricultural operations.

Mark O’Neill, media relations director with the Pennsylvania Farm Bureau, which represents more than 55,000 farmers in the state, said the agency has been fighting to repeal the tax for years.

When it comes to farmers, the adage is sometimes true that they can be “land rich, and cash poor,” O’Neill said.

“Profit margins in farming are very tight to begin with,” he said. “There isn’t this cash lying around to pay this tax.”

Often, those who inherit the land would sell a portion of the farm to pay the tax or take out a loan. Other times, they would get out of farming and sell the entire whole farm, he said.

Kevin Shivers, executive director for Pennsylvania’s chapter of National Federation of Independent Businesses, a small business advocacy group, said removing the inheritance tax is in line with the state’s open space preservation programs. It could keep portions of farms from getting sold to developers, he said.

“In the southeast, where they are really concerned about sprawl, you have family farms where the property was passed on from the parent to the children,” he said. “They couldn’t afford to the pay the taxes to keep the land and the family farming. Ultimately, they sell the land to a developer.”

State Rep. Stephen Bloom, R-Cumberland, who sponsored the death tax repeal measure, said taxing family farms that could render them out of business made no sense, especially while the state spends $200 million annually in the agriculture industry.

“Obviously it was important to eliminate the death tax for family-farm properties but, to me, that is the beginning of a long sustained process we need to pursue to completely eliminate the Pennsylvania death tax,” Bloom said.

Speaking at a news conference at Gro-Lan Farms to a members of the Grove family and Pennsylvania Future Farmers of America, Gov. Tom Corbett said he supports phasing out the death tax altogether.

“At some point I hope I get to do this with other taxes in Pennsylvania,” he said.

Willet Thomas August 19, 2012 at 12:26 PM
Boy you won't see this article in the main stream PA press. They only seem to publish negative articles about the gov. Good news for the farmers.
brian August 19, 2012 at 02:12 PM
Why is it limited to farmers? Why is there a death tax for anybody? You work your whole life, paying taxes on your income. Any money that you save and invest for your future is taxed a second time through capital gains. If you were successful with your investments, you get taxed a third time with the death tax. All on the same money you originally got through income. Triple taxation. And the state says " we expect to lose between $2 million and $3 million in revenue next year", as if it is already their money.
louis kootsares August 19, 2012 at 04:40 PM
good one of many things to be straightened out.. its government for the people.. but at times looks like its for self serving politicians
slyfox August 20, 2012 at 04:15 PM
I agree with Brian - the MAJORITY of citizens pay too much tax on little money we scrimp and save for that rainy day. The farmers need a break & I can understand that but THIS? We will all lose now, for non-farmers will have to make up the deficit. Farmers get plenty of breaks - plenty. Some more than others I am sure but I am a little tired of those that stand on the soapbox of a "farmer" when all they do it take from the earth and use toxins and other poisons. Some days in the early spring and fall you cannot leave your home without a mask on for the smell of the chemicals is overwhelming. This tax break will not prevent the selling of farms oft to the highest bidder anyway.
farmerjoe August 20, 2012 at 07:26 PM
Wow, I think Slyfox needs to move to the city then. It's great how this area of farm land is now being taken over by those who want to live in the country but have a problem with the way we 'farmers' make a living! If you don't like it, move! You are very wrong in believing there is "plenty" of breaks for farmers in this state. maybe for big time farmers, but not the little guys. (Little meaning 300 or less acres) Remember your mentality on farmers the next time you put food in your mouth! If this law had been in effect in 2006 my grandfather who was 5th generation of his family farm would have been able to keep the farm in our family. Instead my great grandfather died and with that left an $800,000 inheritance tax for my grandfather to pay over a 3 year period. He was a farmer!! Trust me farmers don't have that kind of money sitting around. Now that 200 acre farm is a condominium & town home community. I agree with Brian too, he had a valid point, we all pay too much, he is obviously well educated! I think it is limited to farmers at this time because of the need for preserving farm land. But I agree about the triple taxation, it is overwhelming and should be more limited.


More »
Got a question? Something on your mind? Talk to your community, directly.
Note Article
Just a short thought to get the word out quickly about anything in your neighborhood.
Share something with your neighbors.What's on your mind?What's on your mind?Make an announcement, speak your mind, or sell somethingPost something
See more »