Section 2032A Special Use Valuation is a tool to help farm and ranch families preserve their businesses and manage their estate tax liability. The provision allows farmers and ranchers to pay estate taxes on the value of farmland based on agricultural use rather than what it would be worth if it were sold for development.
But current tax law has not kept pace with the skyrocketing value of cropland.
The bipartisan Preserving Family Farms Act of 2023 was reintroduced by U.S. Reps. Jimmy Panetta (D-Calif.) and Mike Kelly (R-Pa.) to address the estate tax burden placed on family-owned farms and ranches after a family member passes away.
“Farm and ranch families who hope to stay in business following the death of a family member should be able to pay estate taxes on the value of their current business, not what their land might be worth if it were sold for another use,” said Zippy Duvall, President of the American Farm Bureau Federation.
“America’s cattle producers deserve certainty in the tax code, especially when it comes to succession planning. NCBA is committed to fighting for common sense tax solutions, including the expansion of IRS Code Section 2032A Special Use Valuation, to allow more producers to secure greater relief from the estate tax and preserve family-owned cattle operations for generations to come,” said National Cattlemen’s Beef Association President Todd Wilkinson.
In the Tax Reform Act of 1976, Congress recognized the disproportionate burden of the Death Tax on agricultural producers and created Section 2032A as a way to help farmers keep their farms. However, the benefits of Special Use Valuations have been hampered over the years as the cap on deductions has failed to keep pace with the rising value of farmland.
While the current 2032A reduction is 55 percent higher than the value established two decades ago, USDA estimates that cropland values have increased by 223 percent.
Agricultural land values — including on-farm buildings — have also risen dramatically, increasing by 241 percent during this period. Due to the rapid inflation of farmland values, the 2032A deduction is no longer aligned with the needs of modern agriculture – nor does it accomplish Congress’ intended goal of providing meaningful protection to producers most vulnerable to the estate tax.
