WASHINGTON, D.C. — In a recent letter sent to House Democratic leadership, U.S. Representative Abigail Spanberger — a Member of the U.S. House Agriculture Committee — urged the exemption of family-owned farms in Central Virginia and across the country from any potential changes to the stepped-up basis for capital gains in tax law.
In their letter sent to key House Democrats, Spanberger and her colleagues raised concerns about the potential devastating impact that changes to capital gains taxes could have on family-owned farms. The changes would require immediate taxation of the property’s increase in value, which would force unaffordable tax burdens on longtime family farm operators — many of whom have farms that have been handed down over multiple generations.
“While the ability to simply sell a small part of an asset may work for those with shares of stocks, [a change] would force farmers to break up land that may have been in their family for decades and seriously impact their ability to remain economically viable,” wrote Spanberger and her colleagues. “Farms, ranches, and some family businesses require strong protections from this tax change to ensure they are not forced to be liquidated or sold off for parts, and that need is even stronger for those farms that have been held for generations.”
The Members continued, “As representatives for districts that would be directly impacted by that change, we hope you will see us as a resource as we work to make that exemption a reality… We would ask that you work closely with representatives of rural districts like us to ensure those protections are well executed.”
“Virginia Farm Bureau supports the continuation of stepped-up basis. Eliminating the stepped-up basis for farmers would lead to more consolidation as family-owned farms would be forced out of business because of the tax liability,” said Wayne F. Pryor, President, Virginia Farm Bureau. “We commend Congresswoman Spanberger for her advocacy on this important issue.”
The letter was led by U.S. Representatives Cindy Axne (IA-03) and Jim Costa (CA-14). Additionally, the letter was signed by U.S. Representatives Julia Brownley (D-CA-26), Cheri Bustos (D-IL-17), Salud Carbajal (D-CA-24), Angie Craig (D-MN-02), Antonio Delgado (D-NY-19), John Garamendi (D-CA-03), Josh Harder (D-CA-10), Kurt Schrader (D-OR-05), Tom O’Halleran (D-AZ-01), and Kim Schrier (D-WA-08).
Click here to read the letter, and the full letter text is below.
Speaker Pelosi, Leader Hoyer, and Chairman Neal,
As you work to develop a comprehensive infrastructure package that prepares the American economy to grow and thrive over the coming years and decades, and expands support for American families, we write to express concern over the impact that certain tax changes enacted to pay for this package could have on our family farms and local economies. The repeal of stepped-up basis for capital gains and immediate taxation could especially hurt family farms, some of which have been in families for generations; therefore, we strongly urge you to provide full exemptions for these family farms and small businesses that are critical to our communities.
We support many of the concepts outlined in recent weeks in the American Jobs Plan and American Family Plan, including ensuring that the wealthiest Americans pay their fair share. And while the clear intention of making changes to stepped-up basis is to ensure vast fortunes worth tens or even hundreds of billions are not passed on without any income taxes paid at any point, we are concerned about the unintended burden this could place on farms and family businesses. We appreciate the President’s reference to this burden and the need to address it in the outline of the American Family Plan; and as representatives for districts that would be directly impacted by that change, we hope you will see us as a resource as we work to make that exemption a reality.
The requirement to recognize capital gains at death runs the risk of forcing farms and ranches to sell part, or all, of a farm that may have been passed down for several generations in order to pay the tax burden. While the ability to simply sell a small part of an asset may work for those with shares of stocks, it would force farmers to break up land that may have been in their family for decades and seriously impact their ability to remain economically viable. Additionally, eliminating stepped-up basis without an exemption for our farmers presents administrative difficulties. For example, shares of stock or many other assets are relatively simple to value, and taxing other assets when they’re sold gives a clear reference price for valuation, so capital gains taxes have thus far been relatively simple to administer. However, since farms, machinery, and some small businesses may be illiquid or difficult to value, the administrative difficulty is increased.
We look forward to working with you as we develop a full infrastructure package, and we again urge you to take additional care in considering changes to stepped-up basis for capital gains taxes. Farms, ranches, and some family businesses require strong protections from this tax change to ensure they are not forced to be liquidated or sold off for parts, and that need is even stronger for those farms that have been held for generations. We would ask that you work closely with representatives of rural districts like us to ensure those protections are well executed.
Many of our constituents started working on their family’s farm when they were children, or built their farm with the intention of passing it on to their relatives, and we must ensure that their kids or grandkids are able to continue working that land for future generations. Thank you for your attention to this important matter.