Crapo, Udall Bill Would Provide Estate Tax Relief for Farmers, Ranchers who Preserve Land through Conservation Easements
Updates Tax Code to Support Family Farms and Encourage Private Conservation Efforts
Washington, D.C. - Today, U.S. Senators Mike Crapo (ID) and Mark Udall (CO) announced that they have introduced bipartisan legislation designed to offer estate tax relief and encourage farmers and ranchers and others who choose to protect the rural character of their land when they pass it on to their children.
The goal of the bipartisan American Family Farm and Ranchland Protection Act is to preserve family farms and the heritage of our rural communities by helping families avoid the pressure to sell, break up or develop their property when it's handed down from one generation to the next. While there is no estate tax this year, it is set to revert back to 2001 levels next year, increasing the pressure on families to develop their land. The Senators' bill updates a 1997 provision in the tax code, enabling families to exclude up to 50 percent of the value of their land from the taxable estate if they protect its natural and historic value with a permanent conservation easement.
"Congress first saw fit, more than a decade ago, to provide this important incentive to farmers and ranchers to ensure that not only would their lands be protected for future generations of their families, but that these lands and waters would be protected for future generations of plants and wildlife as well," Senator Crapo said. "This important bipartisan legislation will ensure that, as we move forward with needed efforts to more broadly address estate tax policy, the value of this incentive for conservation will not be diminished."
"This bill is about helping families preserve their history and protect our lands and waters," Senator Udall said. "Almost 15 years after Congress created the conservation easement exemption, it's outdated - and the development pressure is too strong to help many families who want to preserve their farms or the land and water they love. While this is just a small piece of the estate tax puzzle, it's an important one - a simple update to our tax code will help us encourage greater conservation efforts and support family farmers and ranchers."
A conservation easement is a voluntary agreement between a landowner and the government that permanently restricts certain development and future uses of the land. It often prevents future commercialization, while still permitting historic farming and ranching operations to continue in the family.
The tax code currently allows landowners to exclude up to 40 percent of the value of their property from their taxable estate when that land is preserved by a permanent conservation easement that protects important natural and historic values. However, that exclusion is capped at $500,000 and is further reduced if the easement lowers a property's fair market value by less than 30 percent. At the time it was passed by Congress, the value made sense, but in the last 13 years, average farm real estate values have more than doubled - and the average farm has grown in size - meaning the old cap is simply no longer much of an incentive.
The American Family Farm and Ranchland Protection Act raises the exemption for land under a conservation easement to 50 percent, with up to a maximum exclusion of $5 million. It also encourages more robust conservation easements: less protective easements will receive a proportionally lower exemption rate.
The legislation is supported by a wide array of stakeholders, including the Land Trust Alliance, the Nature Conservancy, the American Farmland Trust, the U.S. Cattlemen's Association, and the Environmental Defense Fund.