Grassley Seeks Estate Tax Relie
Grassley introduced the legislation along with Senate Majority Leader Trent Lott of Mississippi, Sen. Max Baucus of Montana and Sen. John Breaux of Louisiana. It is the first bi-partisan estate tax relief measure introduced during the 105th Congress.
"Inflation has left middle-income American families caught in the estate tax web," Grassley said. "Increasing the estate tax exemption is the right thing to do. We encourage families to build a business or farming operation. Both create jobs and add to the stability of the community. But the estate tax forces families to sell businesses and farmers just to pay Uncle Sam. In effect, the tax rips at the social fabric of our rural communities."
During the next five years, 21 percent of Iowa farmers expect to retire from farming, according to the 1996 Iowa Farm and Rural Life Poll sponsored by the Iowa State University Agriculture and Home Economics Experiment Station and Iowa State University Extension. In the survey, "only 35 percent say their children will likely take over through inheritance or purchase."
The Grassley/Baucus/Lott/Breaux reform bill would:
- Increase from 600,000 to $1 million the unified credit exemption equivalent.
- Establish a phase-in schedule of $100,000 in each of the first two years and $50,000 in each of the next four years.
- Exempt 100 percent of the first $1,500,000 of qualified family-owned business assets.
- Exempt 50 percent of the next $8,500,000 of qualified family-owned business assets.
- Extend the period for estate tax deferral installment payments from 10 years to 20 years.
- Reduce special four percent interest rate to zero in the amount of tax currently qualifying for the special four percent interest rate.
- Increase the maximum reduction in value for special use valuation from $750,000 to $1 million.
- Repair a problem with cash rents for special use valuation by allowing family members to cash rent real estate that is subject to a special use valuation agreement to a member of the family without triggering estate tax recapture.
- Provide executors with 90 days to correct failed special use valuation elections.
- Provide that gifts may not be revalued for estate tax purposes after the expiration of the statute of limitations.
- Extend the predeceased parent exception of the generation skipping transfer tax to collateral heirs, including grandnieces and grandnephews, and to distributions from trusts.
"In practice, the estate tax acts a confiscatory tax on the middle-income business owner," Grassley said. In fact, he argued that because land values in most every county in Iowa exceed $2,000 an acre, every farm of 300 acres or more is subject to the estate tax. "This doesn't even account for a farmer's other assets -- a house, buildings, livestock, and equipment. If the value of those assets is calculated, most farms of a couple of hundred acres could be subject to the estate tax," Grassley said.
Grassley serves as a member of the Senate Finance and Agriculture committees.