Legislation aims to keep Mass. family farms alive and well
BOSTON – The challenges Massachusetts farmers face daily are numerous - drought and temperature extremes among the most recent.
With the filing of HD 3032, state Rep. Kate Hogan, D-Stow, is among legislators intent on seeing that inheritance tax is not one of them.
The estate tax is assessed on all assets in excess of $1 million.
Because current estate tax laws allow inherited farmland to be taxed on the basis of "highest and best use," which in most cases is development, acres actively being farmed are sold off to meet the tax obligation.
Rep. Hogan's bill would determine an "agricultural" use value as well as a "highest and best use," and the person inheriting the farm would have the option of paying the lower tax bill.
The bill contains the provision that if the farmer decides to sell the property within 10 years for a purpose other than agriculture, back taxes would be assessed for the remainder of the 10-year window.
Rep. Hogan said the bill came out of a Middlesex County Farm Bureau breakfast a couple of years ago where the discussion focused on the continued loss of farmland to development.
"The ongoing story is that farmers who inherit the family farm often don't have the cash on hand to pay that tax. And the solution for many has been to sell a portion of their farmland to pay the taxes," the legislator said.
"He sat down with us to delve into the complexities of the issue and we came up with this bill that was filed last year," Rep. Hogan added.
She said, "I just want the farms in my district to be able to transfer ownership without burdensome estate taxes, keeping them family-owned and in farming."
State Sen. Anne M. Gobi, D-Spencer, Senate chair of the Joint Committee on the Environment, Natural Resources and Agriculture, said the bill had been incorporated in an omnibus agriculture bill during the past session and would be again this year.
"We're hoping it will pass both houses this session and won't face pushback if there's a revenue shortfall," the senator said.
According to the Dept. of Revenue, the financial impact of the bill had been estimated at "up to $3 million annually," she said.
"This bill represents an easy way of keeping agricultural land in active production. The current valuation method is a disincentive," the senator said.
"As land values keep increasing in Massachusetts, it's important to keep farms viable. The livestock and dairy business is particularly land-intensive and at the time of inheritance, if you can't cover the cost of the estate tax, it means having to sell land that's vital to farming," Mr. Cooper said.
He said he expects the legislation to be a "hot topic" among farmers across the state taking part in Agriculture Day April 4 at the Statehouse.
"This will be a Farm Bureau legislative priority this year," Mr. Cooper added.
John Lebeaux, commissioner of the Department of Agricultural Resources, declined to speak specifically to bill, but said, "As the protection of farmland is critical to ensuring the long-term viability of the Commonwealth's agricultural industry, the Baker-Polito Administration and the Department of Agricultural Resources remain committed to assisting families in keeping their farmland in agriculture, preserving and protecting the Commonwealth's valuable and limited agricultural land."
Brad Mitchell, deputy executive director of the Massachusetts Farm Bureau Federation, said the state has one of the lowest estate tax thresholds in the country.
"Say my dad died and left me a hundred acres of corn. Even if I wanted to continue growing corn, the state would value that the land based on its highest and best use, typically its development value."
"Typically, farmers are land-rich and cash-poor, and don't have the money for a hefty tax. In a number of cases, farmers have been forced to sell off some or all of what's been productive farmland to meet that obligation," Mr. Mitchell said.
He said he was optimistic about the bill's chances this year, citing the Chapter 61A and Agricultural Preservation Restriction programs that provide an incentive to keep farmland viable.
"Where this becomes iffy is a situation where state revenues are down. There is impetus to get this done, even among the leadership, until it becomes a matter of money and you hear something to the effect, 'We can't fund the programs we already have.' As a result, anything with a price tag gets blacklisted.
He added, "This will cost the state a little bit of money, but it's not a lot, and it will make a difference in preserving farmland."
Ken Nicewicz, owner of Nicewicz Family Farm in Bolton, said, "Kate's legislation will in fact promote agriculture and family farms within the Commonwealth."
"So many of our farms in the past were lost in order to pay estate taxes. With Kate's helpful legislation, if enacted, farms would be able to transfer ownership without burdensome estate taxes, keeping farms intact in families who would continue the long family farm tradition," Mr. Nicewicz said.
"It's not just estate taxes. There are a number of issues involved in inheriting a farm, and easing the financial burden would be welcomed. Keeping land in production is a priority for us," Mr. Carlson said.
Edward Davidian, co-owner of Davidian Bros. farm in Northboro and president of the Massachusetts Farm Bureau Federation, cited the importance in transferring farm property from one generation to the next without imposing an added tax burden.
"Far too often, heirs to farmland have to sell prime acreage to pay the tax and this legislation is critical to keeping farms viable," Mr. Davidian said.