(The Center Square) – High inheritance taxes are forcing Illinois farm families to sell their farms in order to pay the taxes. Some are looking to change that.
State Sen. Sue Rezin, R-Morris, said the $4 million estate tax threshold is hurting farm families who want to pass farms on to the next generation.
“Farmers’ money is tied up in land. They are not cash rich. They are land rich,” Rezin said.
Under the present tax law, the gross value of a farm must be under $4 million for it to qualify for the inheritance tax exemption. The Farm Family Preservation Act, sponsored in the state Senate by Sen. Dave Koehler, D-Peoria, and an identical bill in the House that is sponsored by state Rep. Sharon Chung, D-Bloomington, would raise the threshold to $6 million.
In a recent paper, economist Gary Schnitkey gave the example of 325 acres of farmland that generates $25,000 a year in income. If the farmer dies, the tax liability would be $250,000. Inflation has pushed the value of farmland out of proportion to the income that the farm generates.
The inheritance tax has been a huge issue for smaller farmers who want to continue to farm but cannot afford the inheritance tax, Rezin said.
If someone in their family passes away, the children who inherit the farm will be taxed on a farm that is valued at $5 million.
“It is forcing families to sell the family farm,” she said.
At the roundtables Rezin holds in her district, constituents have complained for years about Illinois’ low inheritance tax threshold. This year she is hopeful that legislators can finally get something done to raise it.
“We have to explain to our colleagues in Chicago why it is incredibly important to raise the threshold so that farmers who are not cash-rich are able to afford the inheritance tax,” she said.
Rezin said that momentum is finally on the side of change. She commends Koehler and Chung for building a bipartisan coalition of support for their bills.
State Rep. Charlie Meier, R-Okawville, said the goal of the Family Farm Preservation Act is to give future generations the ability to keep farming.
“That’s not farmland to us, that’s a member of our family. That member of our family has taken care of our family for generations,” Meier said.
Under the terms of the proposed legislation, the farm must make up at least 50% of the gross estate. The family must have farmed the land for five of the previous eight years before the farm owner’s death. Survivors must continue to farm the land for 10 years after the death.
