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NCBA Tax & Credit Committee

Speakers address changes to federal estate tax laws and ramifications of postponing adoption of a new farm bill.

by Troy Smith for Angus Journal

 

TAMPA, Fla. (Feb. 8, 2013) — California cattleman Kevin Kester has experienced firsthand, the difficulties that can accompany the settling of a farm or ranch estate. Kester chairs the National Cattlemen’s Beef Association (NCBA) Tax & Credit Committee. During the 2013 Cattle Industry Convention in Tampa, Fla., federal estate taxes and estate planning were among the issues discussed.

 

Guest speakers included Florida-based attorney Michael Minton, who said passage of the American Taxpayer Relief Act in late 2012 locked in Bush-era tax cuts. The plan raised tax rates on capital gains and dividends, but only for households with income greater than $450,000, and it reinstated some limits on exemptions and deductions for households with more than $300,000 in income.

 

The act kept the estate tax exemption level at $5 million, but increased the rate at which amounts exceeding that amount are taxed from 35% to 40%.

 

“Passage of the act also means portability is here to stay,” added Minton, explaining that portability is a way to reduce tax obligations for married couples. Prior to 2010, when a person with a taxable estate died without proper estate planning and left the estate outright to a surviving spouse, the survivor typically lost the ability to shelter property from estate taxes upon his or her death. Portability allows for an unlimited marital deduction exempting property left to a surviving spouse.

 

 “The act changes the dynamics of estate planning, especially with regard to estate planning,” added Minton, “because the survivor gets carryover, meaning if one spouse dies without using up his or her federal estate tax exemption, the unused portion may be transferred to the surviving spouse.”

 

However, Minton believes the Obama administration and allies in Congress are still looking for ways to raise revenue by making more income taxable.

 

“They want to limit the duration of some trusts and are going after valuation discounts,” he said. “It makes me very nervous.”

 

Also addressing committee members was Ed Elfmann, senior legislative representative for the American Bankers Association. He lamented policymakers’ failure to pass a five-year farm bill and overregulation of banking.

 

“No ag policy means no certainty,” said Elfmann, adding that regulators unfamiliar with farming and ranching require substantial collateral for nearly all mortgage loans. Consequently, few are made.”

 

“Community banks are being wrecked because they can’t make many loans,” stated Elfmann. “They don’t even want much money deposited because they have no place to go with it. Unfortunately, there’s not much worthwhile change in sight, due to congressional gridlock.”

 

For the same reason, NCBA Director of Legislative Affairs Kent Bacus sees little hope of comprehensive tax reform. He also warned cattle producers to beware of the administration’s expected push for increased regulations on several fronts, including proposed rules for the Commodity Futures Trading Commission (CFTC) that could have negative impacts on cattle producers.