State Bill Seeks To Raise Estate Tax Threshold For Farmers

If all goes as expected in the New York State Legislature, local farmers who are often described as land-rich and cash-poor will soon be able to breathe a little easier.

A bill sponsored by New York State Assemblyman Fred W. Thiele Jr. will gradually raise the state estate tax threshold from $1 million to $5 million over the next four years, eliminating the estate tax threat for many of the most vulnerable East End farmers.

The bill is backed by Governor Andrew M. Cuomo and has bipartisan support in both houses, according to the local legislator.

With a 16-percent tax on any inheritance of more than $1 million, New York is one of only 17 states that still have an estate tax. Only two states have a lower exemption than $1 million.

Because property taxes are assessed at the maximum potential market value of the land, which usually means in a developed state, owners of large farm properties are often unable to keep land in the family after it is bequeathed to them.

On the East End, farming families have fallen victim to a tax on land that often will yield very little unless sold to a developer, according to Mr. Thiele and agricultural and preservationist lobbyists.

“The average value of protected farmland is $100,000 an acre,” said John v.H. Halsey, founder of the Peconic Land Trust. “If you own 100 acres, that’s an asset worth potentially $10 million. Taxed at 16 percent ... if you’re a struggling farmer, where do you find that?”

Noting that land “is worth many millions in the Hamptons,” Mr. Thiele said that when a family farm almost inevitably has to be sold to make up the cost of the tax, “most times developers offer the best price and land is lost to agriculture forever.”

The issue is not a new one, according to Mr. Halsey, who said he founded the trust 30 years ago precisely because of this issue.

“The appreciated land values, even in times of recession, are enough to force the sale of land given the imperative to pay the federal estate tax nine months after death,” Mr. Halsey, who wants to see the state mirror the federal exemption threshold level of $5.25 million, wrote several years ago in a letter to the editor of The New York Times. “On Long Island, dozens of properties have been sold since the late 1970s because of the tax, or the anticipation of it. It is one thing for a landowner to decide to sell one’s land, it is quite another thing for a landowner to be forced to sell because of [tax policy].”

In addition to Mr. Thiele’s bill, which was introduced in February, two other Assembly bills address the problem in similar ways, including one put forth by minority Republicans in the Assembly.

Mr. Thiele said that he expects all three bills to fall by the wayside when Governor Cuomo, whose office did not return a message seeking comment on Tuesday, simply addresses the estate tax issue through the budget negotiations in January.

“Most likely, the governor will submit a new program bill with the budget, which should draw bipartisan support,” the assemblyman wrote in an email exchange. “I’m very optimistic. With the support of the commission and the governor, I would say there is an excellent chance of passage this year.”

The hope for Governor Cuomo’s support comes on the heels of the New York State Tax Relief Commission, a special commission appointed by the governor, endorsing Mr. Thiele’s bill.

Also supporting the bill is the Long Island Farm Bureau.

“It is an excellent piece of legislation for the farm community and we’ll support it and lobby for it,” said Joseph Gergela, executive director of the lobbying group.

Mr. Gergela recalled a farm in Riverhead—”the Anderson family farm, a great potato and vegetable farm”—whose owners were hit with an unexpected death and subsequent estate tax.

Today, the Anderson family farm is a Target retail store.

According to the assemblyman, before long this will not be an issue only for farmers if nothing is done.

“Because the exemption amount has not been adjusted to keep pace with home values, more and more middle-income residents are finding themselves subject to the tax,” he said in a press release. “I am hopeful that the full state legislature will embrace this recommendation as part of the 2014 state budget so this inequity is finally corrected.”

Though there is confidence on all fronts, Mr. Halsey addressed the elephant in the room.

“As always with politics, you see tremendous division between the two parties over the issue,” he said. “We need to get over the ideological divide and go with what is practical.”