A major hurdle for farmers who wish to pass their farms on to their children will disappear in 2016. Reforming the inheritance tax has been a Farm Bureau priority issue for many years and that hard work is finally paying off as legislation made its way through the process to end Tennessee’s inheritance tax.
In January, Gov. Bill Haslam announced that his budget included raising the inheritance tax exemption level from $1 million to $1.25 million and he planned to eventually raise the exemption level to match the federal inheritance tax exemption of $5 million. Senate Finance, Ways and Means Committee Chairman Randy McNally sponsored the Senate version while House Finance, Ways and Means Committee Chairman Charles Sargent was the House sponsor. Thanks to leadership from both chairmen, an agreement was reached with the administration to go further. After final passage last week in the senate, the legislation now waits for the signature of the governor. It increases the exemption level to $1.25 million in 2013, $2 million in 2014, $5 million in 2015 and eliminates the tax in 2016.
After the final vote in the senate chambers Tennessee Farm Bureau President Lacy Upchurch said, “The Tennessee Farm Bureau Federation is extremely pleased with the work of the Tennessee Legislature in repealing the death tax on the state level. This has been an issue for us for a number of years and our leadership has put in a lot of hours working to get the federal and state death tax repealed. That hard work led to the exemption we now have at the federal level of up to $5 million dollars, and we are extremely pleased with the state legislature and their wisdom to repeal it completely on the state level.
“The general public is beginning to realize the importance of agriculture and food production in this country and how important it is to keep farm families on the farm working to produce that food. In many cases, farmers were forced to sell part of their land in order to pay the death tax, and the elimination of it allows farmers to stay on their land.
“We would also like to thank Governor Haslam, who, in his State of the State address started the process of eliminating this tax. Through the leadership of Senator McNally and Representative Sargent as sponsors, we worked with the legislature in a bi-partisan effort and they agreed to try and push for total elimination. The legislature, the governor and we think it will add jobs to Tennessee and certainly relieve a lot of our farm families of the necessity of paying taxes on land they’ve already been paying taxes on for years.”
The full repeal of the inheritance tax is a significant tax reform for farmers and other agribusinesses. When farm owners pass away and their land and business are transferred to their children, heirs are required to pay taxes on the transaction. Since many farmers hold their investments in land and equipment rather than large amounts of cash, farms are often split and sold to pay the tax. Not only is this double-taxing earnings by the farmer, this all comes at a time when the family is grieving the loss of a loved one.