February 27, 2024

Legislation filed to change farm estate tax

Dave Koehler

BLOOMINGTON, Ill. — State legislators from both sides of the aisle joined together to announce an effort to protect farm families and their land by updating the estate tax code.

The proposed legislation, the Family Farm Preservation Act, was unveiled at an Illinois Farm Bureau news conference on Jan. 31 with state House and Senate lawmakers in attendance.

Currently, any estate in Illinois with a gross value of $4 million after inclusion of taxable gifts, is taxed in its entirety using a complex formula and is subject to a graduated state estate tax.

If either SB 2921 or HB 4600 is passed, it would reform the current state tax for farm estates only, by changing the tax exclusion to a true exemption, and raising the threshold from $4 million to $6 million. Only dollars over $6 million will be taxed under the exemption.

In addition, the measures tie the new $6 million exemption level to inflation and will be adjusted each year according to the increase in the Consumer Price Index.

The proposed bill would also allow portability between spouses at the state level, a benefit allowed under the federal estate tax — meaning a surviving spouse can use the unused estate tax exemption of a deceased spouse plus their own exemption when they die.

The legislation is limited to agriculture, by coupling the changes to only those estates that are eligible for agricultural special use valuation under federal Internal Revenue Service rules.

Sen. Dave Koehler, D-Peoria, and Rep. Sharon Chung, D-Bloomington, introduced the act in their respective chambers.

Others who attended the press conference to show support for the proposal were Sen. Tom Bennett, R-Gibson City; Rep. Jason Bunting, R-Emington; Rep. Norine Hammond, R-Macomb; Sen. Patrick Joyce, D-Essex; Rep. Charlie Meier, R-Okawville; and Sen. Sue Rezin, R-Morris.

“If you take a family that has say 350 acres and somebody dies and they have to pay the estate tax, what happens in a farm of say just over 300 to 350 acres may produce $25,000, $30,000 of income. That’s not a lot. But you know what, the estate tax on that is. It’s going to be almost $5 million, I mean that’s what the value is. And so that’s going to be taxed. This bill changes that and it changes that in a way that it should have changed long ago,” Koehler said.

“I’ve met a lot of farmers in my time on the (McLean) County Board and especially this past year being a freshman legislator,” Chung said.

“A lot of the farmers I spoke with were young farmers, and they spoke to me about how they’re so proud to be farming this land that has been in their family for generations. But the issue here of how the estate tax has been set up makes it really difficult for them to see how the farm will look in the future for their family.”

“Passing on the family farm is not just about continuing the business — it’s about preserving family heritage and a way of life,” said IFB President Brian Duncan.

“Yet the current Illinois estate tax often forces families to break up the farm by selling land, livestock or even equipment every time the business passes on to the next generation. A death of a loved one should not be a death sentence for the family farm.”

“The Family Farm Preservation Act is a crucial step forward in protecting the backbone of our communities — our local farmers,” Joyce said.

“With this, we are ensuring that these hardworking individuals and families can continue their legacy without the burden of excessive taxation, leaving a thriving agricultural community for generations to come.”

“For far too long, Illinois’ estate tax system has threatened family farms — like mine and my neighbors — with the prospect of having to sell the farm if there is a death in the family,” Bunting said.

“Families going through a difficult time should not have to make the tough decision about whether or not to sell the farm. This legislation moves us toward a better system which will help keep farms in the family hands which have worked for generations.”

“Our state’s economy rests firmly upon the bedrock of our agricultural industry. Yet, this foundation faces a perpetual threat from our state’s estate tax system. Far too often, small-to-mid-sized family farms are forced to sell land that has been in their family for generations just to merely settle their estate taxes. Through this bipartisan proposal, we can help ensure that more family farms remain within their families,” Rezin noted.

“The estate tax has devastated family farms for decades as these farms are often sold to pay the inheritance tax,” said Meier, who is also House Agriculture and Conservation Committee Republican spokesperson.

“Improving estate tax exemptions for farmers will help save family farms when the farm is passed down to each generation. Family farms treat their farmland like family as it helps provide for their family and produces the crops that help feed the world. Our country has the lowest food costs in the world, thanks to family farms.”

“Illinois’ estate tax hurts our farm families. House Republicans have consistently fought to increase the exclusion amount to account for rising farmland values. House Bill 4600 is a bipartisan agreement that will help family farmers pass their farmland on to the next generation, protecting our family farms from being sold off to large corporate or foreign interests,” Hammond noted.

“I’m proud to stand with the Illinois Farm Bureau and my colleagues in support of this critically needed change to our tax laws.”

Tom Doran

Tom C. Doran

Field Editor