WASHINGTON, D.C. – As President Joe Biden announced last week he was seeking to increase some corporate taxes, agricultural groups voiced their concerns over the fate of gains made on the estate tax and other tax provisions in the Tax Cuts and Jobs Act (TCJA).

Biden introduced his $2 trillion American Jobs Plan March 31. The plan calls for improving infrastructure, including highways, bridges, the electrical grid and broadband. To pay for it, he has proposed changes to the corporate tax code, such as raising the corporate tax rate to 28 percent from 21 percent.

The TCJA, signed into law by then-President Donald Trump in December 2017, roughly doubled the estate tax exemption per person to $11.18 million, according to the USDA’s Economic Research Service. The exemption amount is indexed for inflation – last year, it was $11.58 million per person and $23.16 million for a married couple. The TCJA extended the new threshold through 2025. The legislation calls for the exemption amount to drop to $5 million (it will be adjusted for inflation) beginning in 2026.

The tax bill also maintained the previous law regarding stepped-up basis. It increased the maximum deduction under section 179 expensing from $500,000 to $1 million, the Internal Revenue Service said. The TCJA limited like-kind exchange (section 1031) treatment to exchanges of real property, the agency said.

Organizations such as Indiana Farm Bureau (INFB) would prefer to see a permanent repeal of the estate tax, said Bob White, INFB’s director of national government relations. At the very least, he noted, the exemption amount should be kept where it is and not revert to the pre-TCJA rate.

“At minimum, please Congress, keep it at $11 million per person,” he said. “If you allow it to fall back, that will impact almost every farmer in the U.S. Also, a lot of small businesses out there that are family run have the same concerns.”

In Indiana, about 7,500-8,000 farmers were impacted by estate taxes when the exemption amount was $5 million, White noted. At the $11 million level, about half that number was impacted.

Nationally, 65 percent of farmland could be impacted if the estate tax exemption returns to $5 million, he said. If that happens, “there will be a loud roar that comes from rural America,” White stated. “In some cases, farmers will have to sell the farm or a parcel of it just to pay the estate tax. That’s not good business when trying to pass the farm on to children.”

It’s also important to farmers to keep stepped-up basis where it is, along with sections 1031 and 179, he said. Farmers use section 1031 for such things as expanding their operations, upgrading structures and moving out of the path of urban development, White pointed out.

A new tax proposal would cause uncertainty for farmers once again, he said. “All farmers want is stability. Change every few years is not the stability we want. To bring some certainty to all of this would be a blessing. We don’t want to be on a yo-yo here.”

White said he’s not certain how all of this will play out, though he called a permanent repeal of the estate tax unlikely. He urged farmers to contact their representatives and senators. “It’s an ongoing process. Make a relationship. Make it personal. Tell them how (any tax changes) will affect your operation.”

Legislation – the Death Tax Repeal Act of 2021 – introduced in the U.S. House (H.R. 1712) and Senate (S. 617) in March seeks a permanent repeal of the estate tax. The House bill was introduced by Reps. Jason Smith (R-Mo.) and Sanford Bishop (D-Ga.); the Senate plan was introduced by Sen. John Thune (R-S.D.).

The National Cattlemen’s Beef Association (NCBA) said it supports the legislation. “The estate tax disproportionately harms cattle producers because with few options to pay off tax liabilities, many farm and ranch families are forced to make tough choices at the time of death – and in worst-case scenarios, must sell off land to meet their federal tax burden,” said Jerry Bohn, NCBA president.

More than 40 percent of farmland is expected to transition in the next two decades, Bohn said. With that in mind, Congress must prioritize policies that support land transfers to the next generation of farmers and ranchers, he said.

Zippy Duvall, president of the American Farm Bureau Federation, urged Congress to disregard proposals made by some lawmakers to tax unrealized capital gains at death and roll back the stepped-up basis on those capital gains.

“Taxing capital gains when a loved one passes away would have a devastating impact on farm and ranch families, even more so if the stepped-up basis tool is taken out of the toolbox,” he explained. “Stepped-up basis encourages families to grow their businesses and pass them onto another generation, and elimination could force those families to sell their farms just to pay the taxes. The value of many farms is tied up in land and equipment. Cash flow on most farms is much too small to pay large capital gains taxes. The taxes would cause further consolidation in agriculture with small farms more likely to be forced out of business by the tax liability.”