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Friday, January 20, 2012

Saving the family farm

ANNAPOLIS -- Tony Pinto has worked on his family's farm in Princess Anne for as long as he can remember; and before that, his father, Tom Pinto, farmed the land alongside his father, Robert Pinto.
The family, which grows wheat, corn and soybeans, as well as poultry, has worked the land and produced food since the early 1900s.
When the time came time to legally transfer the farm's ownership, Tom Pinto bought the farm from his father. Tony Pinto says someday he hopes to have the opportunity to buy the farm from his father and continue the family farming tradition.
When that time comes, he will likely have to pay an estate tax on the value of the farm -- something Sen. Ronald Young, D-3-Frederick, hopes will not break the family's bank.
This week, Young plans to change how the estate tax applies to farms throughout Maryland by introducing legislation in the Maryland General Assembly.
"The goal is to keep people in farming both for the sake of farming and for protecting the land from development," Young said. "We don't want someone forced out of farming because they can't pay the bill."
When a farm is sold to the next generation or to another farmer, the Maryland estate tax exempts the first $1 million value and taxes the new farmer 16 percent of the estate's value above that.
Because the tax bill is due nine months after a farm is sold, farm families throughout Maryland often face tough decisions, which are directly tied to the size of their estate tax bill.
"We have found over the years many times (farmers) just sell the farm into development to pay the tax bill," said Valerie Connelly, director of government relations for the Maryland Farm Bureau. "The problem is when a farm passes from one generation to the next, the value is in the land, the machinery and the livestock; there isn't a lot of cash."
Connelly also said because of the value of property throughout Maryland and the development potential farms possess, they are often valued well over $1 million.
The proposed legislation would reduce, and in some cases eliminate, the tax bill by increasing the exempt amount to $5 million and reducing the taxable percentage over that to 5 percent.
If approved, the legislation would bring Maryland's law closer to the federal estate tax law as it relates to farms, which provides for an exemption up to $5 million.
The legislation includes a provision farmers would have to sign in order to receive the tax break, expressing a legal commitment to continue to farm the land. If the new owner were to stop farming the land, they would have to pay the estate tax that would have been due when they bought the farm.
A similar provision exists within the federal estate tax law, requiring anyone receiving the tax break to keep the farm active for 10 years. If they do not, the government is able to recapture the estate tax that would have been due.
The bill proposed by Young is virtually identical to one he proposed last year to accomplish the same goal. While last year Gov. Martin O'Malley testified in favor of the legislation, Young said Senate President Mike Miller is expected to support the legislation this year as well.
Sen. Jim Mathias, D-38-Worcester, who has signed on as a co-sponsor of the bill, said the bill is "designed to keep family farms in production for generations to come by reducing or removing the estate tax on the farm."
Mathias went on to say the proposed bill is a good way to help family farms throughout Maryland

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