IL House Bill 4600 raises estate tax exemption for farms to $6M to prevent forced sales upon owner's death.
October 2, 2024
IL House Bill 4600 raises estate tax exemption for farms to $6M to prevent forced sales upon owner's death.
The Family Farm Preservation Act, House Bill 4600, is a bipartisan effort in the Illinois legislature to preserve family farms and their land in the event of a family member's death. The central feature of the Act is an update to the Illinois Estate Tax code, which would protect family farmers from inflation.
This legislation would amend the Illinois Estate and Generation-Skipping Transfer Tax Act by providing a tax exemption that would apply to estates at a $6,000,000 net valuation rather than the current $4,000,000 net valuation for purposes of calculating the State Death Tax Credit. The Family Farm Preservation Act would only apply to farm estates.
As it currently stands, family farm estates with a net valuation of $4,000,000 and above may be forced to sell off some or all of the family farm to be able to pay the estate tax upon a family member's death. Many smaller family farms are unable to afford the hefty estate tax price. In some cases, this has led to family farms splitting apart and becoming unviable, which in turn destroys the economic prospects of farming that land for the rest of the family. Advocates for the proposed legislation argue that this is economically disastrous and untenable.
The bill also includes changes to the definition of "qualified heir" under the Illinois Estate and Generation-Skipping Transfer Tax Act. The updated definition would include a decedent's brother, sister, uncle, aunt, niece, nephew, or first cousin, which is a novel approach to the matter.
By law, estate taxes are administered through the office of the Illinois Attorney General. Estate taxes must be filed with the Attorney General, and all payments of Illinois estate tax, interest, and penalties are to be paid directly to the Illinois State Treasurer. The estate tax is calculated on a graduated scale up to a rate of 16%.
The legislation would also consider inflation and factor annual changes into the calculation of the exemption amount based on the Consumer Price Index. This would apply only to those estates deemed eligible under federal rules for agricultural special use valuation. According to the United States Bureau of Statistics, the Consumer Price Index measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. Various indexes are available to gauge the pricing data of things like utilities and food items, which affect family farm estates and their economic viability.
96% of farms in Illinois are family-owned, providing many generational jobs and keeping land parcels intact, not to mention feeding Illinois residents and those of the country as a whole. As the president of the Illinois Farm Bureau, Brian Duncan, has stated, "a death of a loved one should not be a death sentence for the family farm."
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