HR 6271 IHCommentsClose CommentsPermalink

112th CONGRESSCommentsClose CommentsPermalink

2d SessionCommentsClose CommentsPermalink

H. R. 6271CommentsClose CommentsPermalink

To amend the Internal Revenue Code of 1986 to exclude certain farmland and family-owned business interests from the value of the gross estate of decedents.CommentsClose CommentsPermalink

IN THE HOUSE OF REPRESENTATIVESCommentsClose CommentsPermalink

August 1, 2012CommentsClose CommentsPermalink

Mr. TIPTON introduced the following bill; which was referred to the Committee on Ways and MeansCommentsClose CommentsPermalink

A BILLCommentsClose CommentsPermalink

To amend the Internal Revenue Code of 1986 to exclude certain farmland and family-owned business interests from the value of the gross estate of decedents.CommentsClose CommentsPermalink

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,CommentsClose CommentsPermalink

SECTION 1. SHORT TITLE.

This Act may be cited as the ‘Family Farm and Small Business Tax Relief Act of 2012’.CommentsClose CommentsPermalink

SEC. 2. EXCLUSION FROM GROSS ESTATE OF CERTAIN FARMLAND AND FAMILY-OWNED BUSINESS INTERESTS.

(a) In General- Part III of subchapter A of chapter 11 of the Internal Revenue Code of 1986 (relating to gross estate) is amended by inserting after section 2033 the following new section:CommentsClose CommentsPermalink

‘SEC. 2033A. CERTAIN FARMLAND AND FAMILY-OWNED BUSINESS INTERESTS.

‘(a) In General- In the case of an estate of a decedent to which this section applies, the value of the gross estate shall not include the adjusted value of--CommentsClose CommentsPermalink





‘(1) qualified farmland, andCommentsClose CommentsPermalink





‘(2) the qualified family-owned business interests,CommentsClose CommentsPermalink





of the decedent otherwise includible in the estate.CommentsClose CommentsPermalink





‘(b) Estates to Which Section Applies- This section shall apply to an estate if--CommentsClose CommentsPermalink





‘(1) the decedent was (at the date of the decedent’s death) a citizen or resident of the United States,CommentsClose CommentsPermalink





‘(2) the executor elects the application of this section and files the agreement referred to in subsection (h),CommentsClose CommentsPermalink





‘(3) during the 8-year period ending on the date of the decedent’s death there have been periods aggregating 5 years or more during which--CommentsClose CommentsPermalink





‘(A) the qualified farmland or the qualified family-owned business interest, or both, as the case may be, was owned by the decedent or a member of the decedent’s family, andCommentsClose CommentsPermalink





‘(B) there was material participation (within the meaning of section 2032A(e)(6)) by the decedent or a member of the decedent’s family in the operation of the qualified farmland or the business to which such interest relates.CommentsClose CommentsPermalink





‘(c) Qualified Family-Owned Business Interests- For purposes of this section--CommentsClose CommentsPermalink





‘(1) ADJUSTED VALUE- The adjusted value of any qualified family-owned business interest is the value of such interest for purposes of this chapter (determined without regard to this section), reduced by the excess of--CommentsClose CommentsPermalink





‘(A) any amount deductible under paragraph (3) or (4) of section 2053(a), overCommentsClose CommentsPermalink





‘(B) the sum of--CommentsClose CommentsPermalink





‘(i) any indebtedness on any qualified residence of the decedent the interest on which is deductible under section 163(h)(3), plusCommentsClose CommentsPermalink





‘(ii) any indebtedness to the extent the taxpayer establishes that the proceeds of such indebtedness were used for the payment of educational and medical expenses of the decedent, the decedent’s spouse, or the decedent’s dependents (within the meaning of section 152), plusCommentsClose CommentsPermalink





‘(iii) any indebtedness not described in subparagraph (A) or (B), to the extent such indebtedness does not exceed $10,000.CommentsClose CommentsPermalink





‘(2) QUALIFIED FAMILY-OWNED BUSINESS INTEREST DEFINED- The term ‘qualified family-owned business interest’ has the meaning given such term by section 2057(e).CommentsClose CommentsPermalink





‘(d) Qualified Farmland- For purposes of this section, the term ‘qualified farmland’ means any real property--CommentsClose CommentsPermalink





‘(1) which is located in the United States,CommentsClose CommentsPermalink





‘(2) which is used as a farm for farming purposes (as defined in section 2032A(e)), andCommentsClose CommentsPermalink





‘(3) which was acquired from or passed from the decedent to a qualified heir of the decedent which, on the date of the decedent’s death, was being so used by the decedent or a member of the decedent’s family.CommentsClose CommentsPermalink





‘(e) Tax Treatment of Failure to Materially Participate in Business or Dispositions of Interests-CommentsClose CommentsPermalink





‘(1) IN GENERAL- There is imposed an additional estate tax if, within 10 years after the date of the decedent’s death and before the date of the qualified heir’s death--CommentsClose CommentsPermalink





‘(A) in the case of a qualified family-owned business interest--CommentsClose CommentsPermalink





‘(i) the material participation requirements of subsection (b)(3)(B) are not met with respect to the qualified family-owned business interest which was acquired (or passed) from the decedent,CommentsClose CommentsPermalink





‘(ii) the principal place of business of a trade or business of the qualified family-owned business interest ceases to be located in the United States, orCommentsClose CommentsPermalink





‘(iii) the qualified heir disposes of any interest in the qualified family-owned business interest, other than by a disposition to a member of the qualified heir’s family,CommentsClose CommentsPermalink





‘(B) in the case of qualified farmland--CommentsClose CommentsPermalink





‘(i) the qualified heir ceases to use the real property which was acquired (or passed) from the decedent as a farm for farming purposes, orCommentsClose CommentsPermalink





‘(ii) the qualified heir disposes of any interest in qualified farmland, other than by a disposition to a member of the qualified heir’s family, orCommentsClose CommentsPermalink





‘(C)(i) the qualified heir loses United States citizenship (within the meaning of section 877) or with respect to whom an event described in subparagraph (A) or (B) of section 877(e)(1) occurs, andCommentsClose CommentsPermalink





‘(ii) such heir does not comply with the rules similar to the rules of section 2057(g) (relating to security requirements for noncitizen qualified heirs).CommentsClose CommentsPermalink





‘(2) ADDITIONAL ESTATE TAX-CommentsClose CommentsPermalink





‘(A) IN GENERAL- The amount of the additional estate tax imposed by paragraph (1) shall be equal to--CommentsClose CommentsPermalink





‘(i) the applicable percentage of the adjusted tax difference attributable to the qualified family-owned business interest (as determined under rules similar to the rules of section 2032A(c)(2)(B)), plusCommentsClose CommentsPermalink





‘(ii) interest on the amount determined under clause (i) at the underpayment rate established under section 6621 for the period beginning on the date the estate tax liability was due under this chapter and ending on the date such additional estate tax is due.CommentsClose CommentsPermalink





‘(B) APPLICABLE PERCENTAGE- For purposes of this paragraph, the applicable percentage shall be determined under the following table:CommentsClose CommentsPermalink

‘If the event described in paragraph (1) occurs in the following year of material participation:CommentsClose CommentsPermalink

The applicable percentage is:CommentsClose CommentsPermalink

1 through 6CommentsClose CommentsPermalink

--100CommentsClose CommentsPermalink

7CommentsClose CommentsPermalink

--80CommentsClose CommentsPermalink

8CommentsClose CommentsPermalink

--60CommentsClose CommentsPermalink

9CommentsClose CommentsPermalink

--40CommentsClose CommentsPermalink

10CommentsClose CommentsPermalink

--20.CommentsClose CommentsPermalink

‘(C) ADJUSTED TAX DIFFERENCE- For purposes of subparagraph (A)--CommentsClose CommentsPermalink





‘(i) IN GENERAL- The adjusted tax difference attributable to a qualified family-owned business interest is the amount which bears the same ratio to the adjusted tax difference with respect to the estate (determined under clause (ii)) as the value of such interest bears to the value of all qualified family-owned business interests described in subsection (b)(2).CommentsClose CommentsPermalink





‘(ii) ADJUSTED TAX DIFFERENCE WITH RESPECT TO THE ESTATE- For purposes of clause (i), the term ‘adjusted tax difference with respect to the estate’ means the excess of what would have been the estate tax liability but for the election under this section over the estate tax liability. For purposes of this clause, the term ‘estate tax liability’ means the tax imposed by section 2001 reduced by the credits allowable against such tax.CommentsClose CommentsPermalink





‘(f) Other Definitions and Applicable Rules- For purposes of this section--CommentsClose CommentsPermalink





‘(1) QUALIFIED HEIR- The term ‘qualified heir’--CommentsClose CommentsPermalink





‘(A) has the meaning given to such term by section 2032A(e)(1), andCommentsClose CommentsPermalink





‘(B) includes any active employee of the trade or business to which the qualified family-owned business interest relates if such employee has been employed by such trade or business for a period of at least 10 years before the date of the decedent’s death.CommentsClose CommentsPermalink





‘(2) MEMBER OF THE FAMILY- The term ‘member of the family’ has the meaning given to such term by section 2032A(e)(2).CommentsClose CommentsPermalink





‘(3) MATERIAL PARTICIPATION- The term ‘material participation’ has the meaning given to such term by section 2032A(e)(6).CommentsClose CommentsPermalink





‘(4) APPLICABLE RULES- Rules similar to the following rules shall apply:CommentsClose CommentsPermalink





‘(A) Section 2032A(b)(4) (relating to decedents who are retired or disabled).CommentsClose CommentsPermalink





‘(B) Section 2032A(b)(5) (relating to special rules for surviving spouses).CommentsClose CommentsPermalink





‘(C) Section 2032A(c)(2)(D) (relating to partial dispositions).CommentsClose CommentsPermalink





‘(D) Section 2032A(c)(3) (relating to only 1 additional tax imposed with respect to any 1 portion).CommentsClose CommentsPermalink





‘(E) Section 2032A(c)(4) (relating to due date).CommentsClose CommentsPermalink





‘(F) Section 2032A(c)(5) (relating to liability for tax; furnishing of bond).CommentsClose CommentsPermalink





‘(G) Section 2032A(c)(6) (relating to cessation of qualified use).CommentsClose CommentsPermalink





‘(H) Section 2032A(c)(7) (relating to no tax if use begins within 2 years; active management by eligible qualified heir treated as material participation).CommentsClose CommentsPermalink





‘(I) Section 2032A(c)(8) (relating to qualified conservation contribution is not a disposition).CommentsClose CommentsPermalink





‘(J) Paragraphs (1) and (3) of section 2032A(d) (relating to election; agreement).CommentsClose CommentsPermalink





‘(K) Section 2032A(e)(10) (relating to community property).CommentsClose CommentsPermalink





‘(L) Section 2032A(e)(14) (relating to treatment of replacement property acquired in section 1031 or 1033 transactions).CommentsClose CommentsPermalink





‘(M) Section 2032A(f) (relating to statute of limitations).CommentsClose CommentsPermalink





‘(N) Section 2032A(g) (relating to application of this section and section 6324B to interests in partnerships, corporations, and trusts).CommentsClose CommentsPermalink





‘(O) Section 2032A(h) (relating to special rules for involuntary conversions of qualified real property).CommentsClose CommentsPermalink





‘(P) Section 2032A(i) (relating to exchanges of qualified real property).CommentsClose CommentsPermalink





‘(Q) Section 6166(b)(3) (relating to farmhouses and certain other structures taken into account).CommentsClose CommentsPermalink





‘(R) Subparagraphs (B), (C), and (D) of section 6166(g)(1) (relating to acceleration of payment).CommentsClose CommentsPermalink





‘(S) Section 6324B (relating to special lien for additional estate tax).’.CommentsClose CommentsPermalink





(b) Conforming Amendment- Section 2032A of such Code is amended by adding at the end the following:CommentsClose CommentsPermalink





‘(e) Termination- This section shall not apply with respect to decedents dying after December 31, 2012.’.CommentsClose CommentsPermalink





(c) Clerical Amendment- The table of sections for part III of subchapter A of chapter 11 of such Code is amended by inserting after the item relating to section 2033 the following new item:CommentsClose CommentsPermalink





‘Sec. 2033A. Family-owned business exclusion.’.CommentsClose CommentsPermalink





(d) Effective Date- The amendments made by this section shall apply to estates of decedents dying after December 31, 2012.CommentsClose CommentsPermalink

SEC. 3. ESTATE TAX MADE PERMANENT.

(a) In General- Title III of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 is amended by striking section 304.CommentsClose CommentsPermalink





(b) Conforming Amendment- Section 901 of the Economic Growth and Tax Relief Reconciliation Act of 2001 shall not apply to title V of such Act.CommentsClose CommentsPermalink





(c) Effective Date- The amendment made by subsection (a) shall apply to estates of decedents dying, gifts made, and generation skipping transfers after December 31, 2012.CommentsClose CommentsPermalink