Virginia Farm Bureau: Virginia's 'Death tax' finally killed

Contact Herzberg, 804-290-1017
Virginia Farm Bureau

RICHMOND In a major victory for family farms and businesses throughout the commonwealth, the General Assembly on Aug. 28 approved Gov. Tim Kaine's revisions to legislation repealing the estate, or "death," tax.

The state tax, paid posthumously on estates by surviving members of the deceased property owner, has long been a thorn in the side of farmers and business owners who possess large tracts of land or valuable assets. Opponents of the tax, including the Virginia Farm Bureau Federation, have asserted for years that the estate tax forces families to sell property they have owned for generations.

The tax on inherited estates posed a huge burden to farmers and family businesses. Having already paid taxes on salaries, profits and dividends for years, the businesses often were forced to ante up again, raising the risk of taking on a crippling load of debt or selling the land or enterprise outright.

The repeal goes into effect on July 1, 2007.

"The repeal will help relieve the financial burden placed on Virginia's farming community," pointed out Brock Herzberg, VFBF assistant director of governmental relations. "Ninety-eight percent of Virginia's farms are family-owned, totaling 48,000 farms whose assets are tied to the land they harvest. Expensive tax and business planning efforts further deplete agricultural assets. This bill relieves pressure on an already-burdened industry."

The House of Delegates voted 91-0 to repeal the tax, while the Senate voted 31-2.

"The nonpartisan Tax Foundation ranked Virginia 41st among the 50 states in state and local individual tax burden," Kaine said. "Virginia's business tax burden was cited as the nation's lowest by the Council on State Taxation. And the U.S. Chamber of Commerce designated Virginia as one of the five top states for overall legal fairness.

"We have worked together to repeal the estate tax and reform the land preservation tax credit program," he continued. "I applaud lawmakers for repealing Virginia's estate tax. This action protects family-owned small businesses and farms, and helps keep the commonwealth competitive with more than two dozen other states that have already taken this action."

"Repealing unfair taxes and improving our regulatory framework are precisely the kind of positive state tax and regulatory actions enacted over the past decade and more that enabled our commonwealth to garner this latest accolade," said House Speaker William Howell, R-Stafford.

Within the same legislation, the General Assembly agreed to cap tax credits the state allows for conservation easements at $100 million; they also placed limits on credits for land outside of the Chesapeake Bay watershed in Southwest and Southside Virginia. Generally, the governor's amendments established a higher cap, increased accountability within the tax credit program and removed a regional disparity in how those credits are applied.

"The conservation tax credit program helps us preserve natural resources and improve air and water quality," Kaine said. "I am pleased that the General Assembly accepted our amendments so that incentives are only granted for the preservation of environmentally meaningful land. In addition, for budgeting purposes, it is important that the program's fiscal impact be predictable. The legislation adopted by lawmakers today balances these goals."

Herzberg said the credit is a plus for farmers, noting that it "is quickly becoming an effective way for farmers to protect their land and stay in business.

"While we feel this program is working in its current form, the governor's amendments will help the program continue and move this important piece of legislation forward," he said.

The legislative action complements recent federal legislation, as new land conservation tax benefits for family farmers and ranchers were included in pension reform legislation that passed in August. The new law extends the carry-forward period for tax deductions for voluntary conservation agreements from five to 15 years and raises the cap on those deductions from 30 percent of a donor's adjusted gross income to 50 percent, and to 100 percent for qualifying farmers and ranchers.

Contact Herzberg at 804-290-1017.