Dale Heagy didn’t have to pay the “death tax” when he bought his Lebanon County farm from his father two years ago.
Yet the East Hanover Township dairy farmer still cheered at the recent law eliminating the Pennsylvania inheritance tax on working farms passed on to family members.
“I have four children myself,” said Heagy, who farms 300 acres and milks 180 cows. “I would like to pass my farm on if one of them is interested in farming. This new law will benefit my kids if something happens to me.”
For years the Pennsylvania tax code required adult children who inherited the family farm to pay a state inheritance tax of 4.5 percent. Those who inherited farms from a sibling had to pay a 12 percent state inheritance tax.
Many families were forced to sell off some of the land, animals or farm assets they inherited just to pay taxes owed.
In some cases, the tax put farms out of business because it was too expensive for farmers to pass on their farms to the children, Gov. Tom Corbett said this month as he signed the legislation. State Agriculture Secretary George Greig called the inheritance tax a burden on farm families for decades.
Heagy bought his 70-acre farm from his father in 2010. He rents another 230 acres where he grows corn, alfalfa, barley and wheat.
“In agriculture, all of our money is tied up in assets,” Heagy said, “land, cattle and equipment. When a farmer dies and the next generation takes over, there aren’t liquid assets to pay the taxes. Now, family members who inherit farms won’t have those taxes. That could be my children.”
Mark O’Neill, Pennsylvania Farm Bureau spokesman, said that the new law will benefit every farm in Pennsylvania.
“Many farmers have a decent amount of land but not money,” he said. “This law makes it easier for farm families to continue farming.”
Greig suggested that the money farmers save in inheritance tax can be reinvested on the farm.
Pennsylvania State Grange members have been seeking a repeal of the inheritance tax on farms since 1973, said Betsy Huber, Grange legislative liaison.
“We are so happy that it is finally accomplished,” she said. “We don’t know how many acres of farmland could still be producing food today if the heirs had not been forced to sell some of the land to pay the death tax. Our fertile farmland is one of Pennsylvania’s greatest resources. This is one way of preserving it for future generations.”
Pennsylvania has more than 63,000 farm families and 7.65 million acres of farmland, generating $5.7 billion in cash receipts, according to the state Department of Agriculture.