S. 3664 – Reading Mode

111th CONGRESS

2d Session

S. 3664

IN THE SENATE OF THE UNITED STATES

July 28, 2010

Mrs. Feinstein (for herself, Mr. Crapo, Mr. Udall of Colorado, Mr. Bennet, and Mrs. Boxer) introduced the following bill; which was read twice and referred to the Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 to exempt certain farmland from the estate tax, and for other purposes.

Short title

This Act may be cited as the Family Farm Estate Tax Deferral Act of 2010.

Exclusion from gross estate of certain farmland so long as farmland use continues

(a)

In general

Part III of subchapter A of chapter 11 of the Internal Revenue Code of 1986 (relating to gross estate) is amended by inserting after section 2033 the following new section:

2033A.

Exclusion of certain farmland so long as use as farmland continues

(a)

In general

In the case of an estate of a decedent to which this section applies, the value of the gross estate shall not include the adjusted value of qualified farmland included in the estate.

(b)

Estates to which section applies

This section shall apply to an estate if—

(1)

the executor elects the application of this section and files an agreement referred to in section 2032A(d)(2),

(2)

the decedent was (at the date of the decedent’s death) a citizen or resident of the United States,

(3)

the decedent for the 3-taxable-year period (10-taxable-year period in the case of any qualified farmland which is qualified woodland described in section 2032A(c)(2)(F)(i)) preceding the date of the decedent's death had an average adjusted gross income not exceeding the average adjusted gross income limitation applicable under subparagraphs (A) and (B) of section 1001D(b)(1) of the Food Security Act of 1985 (7 U.S.C. 1308–3a(b)(1)) (as in effect on such date),

(4)

50 percent or more of the adjusted value of the gross estate at the date of the decedent's death consists of real or personal property which is used as a farm for farming purposes (within the meaning of section 2032A(e)),

(5)

25 percent or more of the adjusted value of the gross estate consists of the adjusted value of qualified farmland which is real property, and

(6)

during the 8-year period ending on the date of the decedent’s death there have been periods aggregating 5 years or more during which—

(A)

the qualified farmland which is such real property was owned by the decedent or a member of the decedent’s family, and

(B)

there was material participation (within the meaning of section 2032A(e)(6)) by the decedent or a member of the decedent’s family in the operation of such farmland.

Rules similar to the rules of paragraphs (4) and (5) of section 2032A(b) shall apply for purposes of subparagraph (B).

(c)

Definitions

For purposes of this section—

(1)

Qualified farmland

The term qualified farmland means any real property which—

(A)

is located in the United States,

(B)

is used as a farm for farming purposes (within the meaning of section 2032A(e)),

(C)

was acquired from or passed from the decedent to a qualified heir of the decedent and which, on the date of the decedent’s death, was being so used by the decedent or a member of the decedent’s family, and

(D)

is property designated in the agreement filed under subsection (b)(1).

(2)

Adjusted value

The term adjusted value means the value of farmland for purposes of this chapter (determined without regard to this section), reduced by any amounts allowable as a deduction in respect to such farmland under paragraph (3) or (4) of section 2053(a).

(3)

Other terms

Any other term used in this section which is also used in section 2032A shall have the same meaning given such term by section 2032A.

(d)

Tax treatment of dispositions and failures To use for farming purposes

(1)

Imposition of recapture tax

If, at any time after the decedent’s death and before the death of the qualified heir—

(A)

the qualified heir disposes of any interest in qualified farmland (other than by a disposition to a member of his family), or

(B)

the qualified heir ceases to use the real property which was acquired (or passed) from the decedent as a farm for farming purposes,

then, there is hereby imposed a recapture tax.

(2)

Amount of recapture tax, etc

(A)

In general

Except as provided in subparagraph (B), rules similar to the rules of section 2032A(c) (other than paragraphs (1) and (2)(E) thereof) with respect to the additional estate tax shall apply for purposes of this subsection with respect to the recapture tax.

(B)

Adjustment of recapture tax to reflect increase in value of farmland

The amount of the recapture tax otherwise determined under rules described in subparagraph (A) shall be increased by the percentage (if any) by which the value of the interest in the qualified farmland at the time of the imposition of such tax is greater than the adjusted value of such farmland included in the estate.

(e)

Application of other rules

Rules similar to the rules of subsections (d), (e) (other than paragraph (13) thereof), (f), (g), (h), and (i) of section 2032A shall apply for purposes of this section.

(b)

Application of lien

Section 6324B of the Internal Revenue Code of 1986 (relating to special lien for additional estate tax attributable to farm, etc., valuation) is amended by adding at the end the following new subsection:

(e)

Application to qualified farmland

(1)

In general

In the case of any interest in qualified farmland (within the meaning of section 2033A(c)(1)), this section shall apply in the same manner as such section applies to qualified real property.

(2)

Form and content

In addition to any form and content otherwise required by the Secretary with respect to a notice of lien filed against qualified farmland, such notice shall include a statement that such lien is imposed solely for purposes of the estate tax exclusion granted with respect to such qualified farmland under section 2033A.

(c)

Woodlands subject to management plan

Paragraph (2) of section 2032A(c) of the Internal Revenue Code of 1986 is amended by adding at the end the following new subparagraph:

(F)

Exception for woodlands subject to forest stewardship plan

(i)

In general

Subparagraph (E) shall not apply to any disposition or severance of standing timber on a qualified woodland that is made pursuant to a forest stewardship plan developed under the Cooperative Forestry Assistance Act of 1978 (16 U.S.C. 2103a) or an equivalent plan approved by the State Forester.

(ii)

Compliance with forest stewardship plan

Clause (i) shall not apply if, during the 10-year period under paragraph (1), the qualified heir fails to comply with such forest stewardship plan or equivalent plan.

(d)

Certain conservation transactions not treated as dispositions

Paragraph (8) of section 2032A(c) of the Internal Revenue Code of 1986 is amended to read as follows:

(8)

Certain conservation transactions not treated as dispositions

(A)

Qualified conservation contributions

A qualified conservation contribution by gift or otherwise shall not be deemed a disposition under subsection (c)(1)(A).

(B)

Qualified conservation easement sold to qualified organization

A sale of a qualified conservation easement to a qualified organization shall not be deemed a disposition under subsection (c)(1)(A).

(C)

Definitions

For purposes of this paragraph—

(i)

the terms qualified conservation contribution and qualified organization have the meanings given such terms by section 170(h), and

(ii)

the term qualified conservation easement has the meaning given such term by section 2031(c)(8).

(e)

Clerical amendment

The table of sections for part III of subchapter A of chapter 11 of the Internal Revenue Code of 1986 is amended by inserting after the item relating to section 2033 the following new item:

Sec. 2033A. Exclusion of certain farmland so long as use as farmland continues.

(f)

Effective date

The amendments made by this section shall apply to estates of decedents dying after the date of the enactment of this Act.

Increase in limitations on the amount excluded from the gross estate with respect to land subject to a qualified conservation easement

(a)

Increase in dollar limitation on exclusion

Paragraph (3) of section 2031(c) of the Internal Revenue Code of 1986 (relating to exclusion limitation) is amended by striking the exclusion limitation is and all that follows and inserting the exclusion limitation is $5,000,000..

(b)

Increase in percentage of value of land which is excludable

Paragraph (2) of section 2031(c) of the Internal Revenue Code of 1986 (relating to applicable percentage) is amended—

(1)

by striking 40 percent and inserting 50 percent, and

(2)

by striking 2 percentage points and inserting 2.5 percentage points.

(c)

Effective date

The amendments made by this section shall apply to the estates of decedents dying after the date of the enactment of this Act.