WHITESIDE COUNTY, Ill. – Illinois Farm Bureau (IFB) President Brian Duncan testified recently before the Illinois House Revenue and Finance Committee in support of the Family Farm Preservation Act, a bill before the Illinois General Assembly that addresses undue estate tax burdens on family farm transitions.

Multi-generational farmers like Jeff Brooks, of Whiteside County, hope that lawmakers embrace Duncan’s plea to support the legislation.

“Farmers don’t earn a huge income, and it can be difficult for many of us to be able to pay Illinois estate taxes,” he said. “The largest share of the estate tax paid in Illinois comes from stock holdings and mutual fund holdings. If you have 10,000 shares of Apple stock and have to sell 1,000 of them to pay the estate tax, your remaining stock can still earn and work for you.

“If you’re a farmer you’ve got land and equipment; if you sell the equipment you can’t farm, and if you sell the farm you can’t use the equipment,” said Brooks, who raises cattle, corn, soybeans and seed corn with his wife and daughters on their 3rd-generation farm in northwestern Illinois. Brooks’ father, Arnold, had farmed the land since joining forces with Jeff’s grandfather, Lyle, after Arnold’s graduation from the University of Illinois in 1963. In 1989, Jeff Brooks followed in his father’s tractor treads by returning to the farm after also graduating from the U of I.

“Another thing to consider about the Illinois estate tax and farming is that urban and suburban people facing the state tax can move to Wisconsin or Indiana or Florida where there is no state estate tax. You can’t pick up your farm and move it, and every generation you’re going to have to face the Illinois estate tax,” Brooks noted.

Arnold Brooks was stricken by a form of Parkinson’s Disease that shortened his time on earth. His family didn’t have a lot of time to consider the tax ramifications of an estate transition until the cold reality hit: major expenses associated with the transition from father to son were on the horizon.

“We had always thought about the estate tax in terms of the federal code, and it wasn’t until a year or so before dad’s passing that we came to understand the state’s estate tax, which is much more onerous than the federal tax code,” Brooks said. “There’s not a whole lot of planning you can do to plan around (the Illinois tax code), to tell you the truth.”

Brooks also shared his story during a committee hearing on the bill. After his father died in 2023, Brooks and his family spent more than $64,000 in professional fees to have an accurate estate tax return filed. Additionally, assets resulting from years of hard work still may have to be sold.

“We found out that not every accountant and attorney in Illinois can handle the complex state estate tax, so we had to hire specialists to do it. My sister and I spent quite a lot of time working with them gathering all of the information they needed. The people who are qualified to do this have plenty of work, so it is very costly to do,” said Brooks, adding that machinery and other asset appraisals also cost them a lot of money.

Without a change in the current Illinois estate tax, Brooks and his family will go through this process again when his mother passes. Unfortunately, the current Illinois estate tax often forces families to sell part of their business with every generation. If passed, the Family Farm Preservation Act (Illinois SB 2921 and HB 4600), which enjoys IFB and bipartisan political support, has a huge potential to alleviate some of this burden for farm families.

“We haven’t had to sell off any assets as of yet, but we don’t know the final outcome or have the final bill. It will be substantial, and I guess we’ll have to see when the time comes how we will manage it,” Brooks said. “There are some different options including selling some farm assets or taking out mortgages. We’ve got a little bit of a time to figure that out, but we know the bill from the state will be significant.”

The bill was introduced in the Illinois Senate by David Koehler (D-Peoria) and in the House by Rep. Sharon Chung (D-Bloomington). The act addresses the discrepancy between escalating farm estate evaluations and annual farm income by raising the state’s estate tax exemption from $4 million to $6 million.

As Farm World reported in February, during an IFB press event rolling out the bill, Koehler stated that a common public misconception holds that Illinois farmers are disproportionately wealthy. He said the typical 1,300-acre farm produces revenue of around $90,000 to $100,000, more in line with a mid-range income. Meanwhile, a farm just one-fourth of that size can be valued at as much as $5 million upon transfer of ownership, while producing only around $25,000 in revenue.

“The threshold is now at $4 million, but that’s a little deceiving. If you have a farm that is valued at $3,999,999, you don’t pay any estate taxes. If it’s valued at ($2 more), you pay the estate taxes on the whole amount. What we’re doing is raising the threshold to $6 million, but we are saying that is going to be a true exemption; you don’t pay any tax until you reach $6,000,001,” Koehler said.

Also as previously reported, the exemption would be indexed for inflation, mirroring federal guidelines. On the federal level, the 2017 Tax Cuts and Jobs Act nearly doubled the lifetime estate and gift tax exemption from $5.6 million to $11.18 million for individuals, indexed for inflation after 2018. The indexed exemption rose to $12.92 million ($25.84 million for married couples) in 2023, but barring congressional action, the exemption is expected to return to $6 to $7 million ($14 million for married couples) in 2026. This would put Illinois in line with federal estate tax exemption amounts by 2026 if the bill is passed.

“Passing on a farm to heirs takes a lot of time, money and planning,” Chung said. “We’re hoping this (bill) brings a lot of relief to family farms and helps ensure family farms stay within families. Threshold in this state is quite low, and this law will bring Illinois in line with federal standards within the next two years.”

The legislation has 23 sponsors in the Illinois House and 20 in the Senate.