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Bill seeks to exempt farmland from estate tax
AREA — Estate taxes are driving Maine's large family farms out of business, according to Rep. Jeffrey Timberlake (R-Turner), who has introduced a bill to address the issue.
"It's the greatest way in the world to put, especially the small family farms, out of business," said Timberlake.
Right now, if a farmer dies while owning a family farm valued at more than $1 million, Timberlake says that the estate will be hit with a $200,000 tax bill, even if the farmer seeks only to pass the farm on to children.
"It's really hitting the family farm very hard," said Timberlake, whose family owns Ricker Hill Orchards.
Timberlake's bill would exempt farms from Maine's estate taxes as long as they are passed down within the family.
Timberlake says that the amount of the estate tax makes it cost-prohibitive.
"It's 20 percent," he said. "It's a big number. It's a big number."
Timberlake says that his own farm, which includes over 1,000 acres, has been in his family for eight generations.
"My dad's still with us, thank God, but I'm looking to pass it to my daughter and my grandchildren," said Timberlake.
Timberlake says that his family has been relatively lucky.
"When my grandfather died, we didn't get hit with it bad," said Timberlake. "We, as apple growers, have had a couple-three good years, and we're doing better than some of the dairy boys."
Others have not been so fortunate.
"One of the Varney family in town, they actually lost their farm when their father died," said Timberlake. "The bank would not loan them any money to cover what it was going to cost for the estate tax."
Timberlake says that the bill enjoys bipartisan support.
"It don't make any difference if you're a Republican or a Democrat; everyone's been very much in favor of our bill," he said.
The bill has several cosponsors, including Rep. Andrew O'Brien (D-Lincolnville).
Farms and estate taxes
Farmland has often been used as a "poster child" to make arguments against federal estate taxes, but the reality is that very few farms are subject to such taxes.
Ten years ago, in 2001, the first $675,000 of farmland value was exempt from federal estate taxes. That number has grown dramatically over the last decade. Today, the first $5 million worth of farmland is exempt.
According to a report from the Urban Institute-Brookings Institution Tax Policy Center, fewer than 110 small-farm estates in the entire nation are subject to a 2011 federal estate tax.
In Oxford County, only a handful of farms have operations that include over 1,000 acres. According to an agricultural census from 2007, average farm sales were only about $76,000.
But Timberlake says that he sees farms in Minot, Hebron, and West Paris that would all be affected, as he is.
"I can't afford to hand my farm down, because I can't pay taxes on it," he said.
Timberlake says that family farms have a difficult time coming up with cash to pay for annual expenses, and that an estate tax can act as a death sentence.
"Farmers don't have any bank accounts. It's all in their land," said Timberlake. "Farmers in the state of Maine do well to break even for the last few years."
Timberlake says that his bill is less dramatic than one proposed by Rep. Gary Knight (R-Livermore Falls), which would exempt all farmland, valued at up to $5 million, from estate taxes. This would mirror the established threshold for federal farmland estate taxes.
Timberlake says that Governor Paul LePage is generally supportive of efforts to lessen estate taxes.
"The governor is willing to work with us on the estate tax because he sees the importance of it," said Timberlake.
Despite the support of LePage and members of both parties, Timberlake says that his bill is likely to be severely tested when it comes time to fund it.
According to Timberlake, most bills fail to get past the appropriations table "even though the House and the Senate has approved it, and the Governor is willing to sign it."
A lack of funding has killed many a good idea, says Timberlake.
"Appropriations goes through it, and what happens with about every bill that gets passed is, they say 'we can't afford it so we don't approve it.'"
Timberlake says that he and Knight are working together in an effort to address the issue in a manner that will allow it to survive the appropriations process "to see if we can get them to agree to at least something."
Timberlake says that the presence of farmland in a community benefits all who live there.
"At Ricker Hill Orchards, we've got over a thousand acres here," he said. "That's open land that we let people come in to hunt and fish and snowmobile and do whatever on, at no charge."
Timberlake says that keeping the farmland in the family, and available to the public, should be rewarded, not punished.
"That's kind of our payment," he said. "If I was to off and sell it, then I should have to pay the estate tax. But as long as we're handing it down from one generation to the next generation, then we're keeping it as good viable farmland, which is good for the community."
The bill was referred to the Committee on Taxation on February 10.