[Congressional Record Volume 156, Number 112 (Wednesday, July 28, 2010)]
[Senate]
[Pages S6440-S6441]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mrs. FEINSTEIN (for herself, Mr. Crapo, Mr. Udall of Colorado, 
        Mr. Bennet, and Mrs. Boxer):
  S. 3664. A bill to amend the Internal Revenue Code of 1986 to exempt 
certain farmland from the estate tax, and for other purposes; to the 
Committee on Finance.
  Mrs. FEINSTEIN. Mr. President, I rise today on behalf of myself and 
Senators Crapo, Udall of Colorado, Bennet of Colorado, and Boxer, to 
introduce legislation that will help preserve the great tradition of 
the American family farm.
  Our legislation is called the Family Farm Estate Tax Deferral Act.
  It is designed to prevent the unintended consequences of the estate 
tax's disproportionate impact on family farms, by providing relief to 
families who want to continue their family farming and ranching 
operations.
  This is especially important in California, where high unemployment 
has devastated many of our state's agricultural communities.
  Specifically, this legislation would allow qualifying family operated 
farms and ranches to defer estate taxes if the farm-related income of 
the decedent in the three years prior to death does not exceed $750,000 
annually, and the non-farm related income does not exceed $500,000 per 
year; the farm is passed down to a family member who has been 
materially engaged in its management and operations for at least 5 
years; the farm generated more than 50 percent of the farm owner's 
income, or comprised more than 50 percent of the farm owner's estate at 
the time of death; the farm was owned by the decedent for at least 5 
years and is located within the United States.
  The family member inheriting the estate continues to use the land for 
farming purposes; and, at the time of his or her death, the decedent 
associated with the estate was a U.S. citizen or legal resident of the 
United States.
  The bill also includes a ``recapture'' provision, to ensure that farm 
heirs are subject to strict oversight and must pay taxes if at any time 
they sell the land or cease to use the property for farming.
  The bill would also encourage the preservation of land and protect 
millions of acres of open space and wildlife habitat. It does so by 
incorporating legislation introduced in the House by Representative 
Earl Blumenauer to increase the limitation on the estate tax exclusion 
for conservation easements to $5 million, up from $500,000.
  Farm and ranch estates are estimated to be up to 20 times more likely 
to face an estate tax burden than other estates.
  Roughly one in 10 family farms and ranches confronted estate tax 
bills last year, according to data from the U.S. Department of 
Agriculture Economic Research Service.
  Let me explain why this is cause for concern, and why our legislation 
is so important.
  Most of the financial value of a family farm or ranch operation lies 
in its land. Assets such as specialized equipment and production tools 
have limited resale value and are not likely to quickly generate 
sufficient liquidity.
  It is land--not securities or other more-liquid assets--that 
comprises the lion's share of many farmers' assets. So, many farmers 
are quite literally land rich, and cash poor.
  The property value of fertile farmland can appreciate greatly over 
time.
  For example, in 1997 the average farm real estate value was $926 per 
acre; today it is $2160 per acre, according to the Land Trust Alliance. 
This represents a 133 percent increase in the value of farmland in just 
over a decade.
  As this farmland appreciates, the potential estate tax bill grows.
  When a farm estate is passed on to an heir, portions of the land are 
sometimes fragmented, or even sold to developers in order to manage the 
tax consequences.
  The result is that some farms are rendered inoperable, and heirs face 
difficult choices in these tough economic times.
  Let me share the story of a constituent, Hannah Tangeman-Cheney, 
whose story illustrates the problem.
  Hannah's ranch in Susanville, California, has been owned by her 
family since 1862, and run by women since 1914.
  After her mother passed away, Hannah had to deal with the IRS, 
attorneys, and appraisers, during this difficult period in her life. 
Her mother had a will and a trust, but there was still a significant 
tax burden that Hannah and her sister had to deal with.
  It took 2 years for Hannah and the IRS to reach agreement on the 
value of her ranch since their appraisers came up with different 
numbers.
  Eventually, she reached agreement with the IRS to pay the taxes off 
over a ten-year period.
  Facing these difficult circumstances, Hannah and her sister made the 
painful decision to harvest thousands of trees.
  In all, 13,157 trees were cut--far more than they would have ever 
dreamed of harvesting under any other circumstances.
  Some of the trees took more than 100 years to grow, and the property 
had not been harvested since the 1950's.
  Eventually, she was able to pay off the taxes, but this was a very 
emotional experience for Hannah and her sister.
  They are both environmentally conscious, and their ranch was even 
certified as part of the ``Green Building'' program with the Forest 
Stewardship Council.
  Our legislation is designed to prevent these unintended consequences, 
and provide relief to families wishing to keep their farms in 
operation.
  By mandating a $750,000 cap on income in order to qualify, we can 
ensure that this relief goes to those farmers who need it most, not to 
major agribusinesses.
  To be clear, many Americans have suffered tremendously during this 
very difficult economic downturn.
  But, some agricultural communities have been hit especially hard.
  Family farms in many of California's most productive agricultural 
areas are currently struggling just to make ends meet.
  I come from the largest agricultural state in the country.
  California has suffered a crippling three-year drought, and many 
growers have had to fallow their fields to cut their losses.
  Many have had to lay off employees, and some have left the business 
entirely.
  These hardships can be seen, and I have witnessed them firsthand, in 
Fresno County where the unemployment rate is 16 percent.
  In Kings County unemployment is 15.9 percent. Tulare County 
unemployment is 15.8 percent.
  Imperial County is suffering under unemployment which has reached 
27.6

[[Page S6441]]

percent. Within these counties, unemployment in some agricultural 
communities has touched 40 percent.
  Farms and ranches are an important source of jobs in these 
communities.
  This legislation aims to protect family farms that intend to hire, 
while providing more certainty to thousands of workers across the 
State.
  In 2006, I warned that difficult decisions would be required before 
the estate tax expired in 2010.
  Well, 2010 is here and the picture of our nation's fiscal health is 
not a pretty one.
  We are facing a record $1.3 trillion budget deficit.
  The national debt has reached a new high at roughly $13 trillion.
  The parameters of the estate tax debate have shifted for most, by 
necessity.
  Full estate tax repeal is out of the question, and our number one 
priority for allocating federal resources has rightly been shifted to 
job creation and economic recovery.
  But, absent Congressional action, the estate tax will return with 
ferocity next year at a 55 percent rate with an exemption level of $1 
million.
  I don't think this is something that many in this body would like to 
see.
  So, any estate tax reform must be well-targeted and balanced to 
ensure it is fiscally responsible.
  As we work to develop comprehensive, permanent, and fiscally-
responsible estate tax reform this year, I urge my colleagues to 
remember that the estate tax was never intended to prevent family farms 
from being passed from generation to generation.
  Our legislation resolves this issue for once and for all, and by 
safeguarding against loopholes for rich farming conglomerates and 
agribusinesses, it does so at minimal cost.
  Moreover, we take steps forward to protect our precious environment 
and preserve open space and agricultural lands.
  There is no doubt that many family farmers are under financial 
pressure during these difficult times.
  We must take steps to bring relief to the very family farmers and 
ranchers who have devoted their lives to helping feed and sustain this 
great nation.
  This legislation is a fiscally responsible and targeted effort to 
ensure that we preserve this tradition for legitimate working farms.
  Estate tax reform must be addressed soon, and this issue can no 
longer be delayed.
  I urge my colleagues to support this effort and to enact this 
legislation as quickly as possible.

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