To amend the Internal Revenue Code of 1986 to exclude from estate taxes the value of farmland so long as the farmland use continues and to repeal the dollar limitation on the estate tax exclusion for land subject to a qualified conservation easement.

July 28, 2005

Mr. BISHOP of New York introduced the following bill; which was referred to the Committee on Ways and Means

To amend the Internal Revenue Code of 1986 to exclude from estate taxes the value of farmland so long as the farmland use continues and to repeal the dollar limitation on the estate tax exclusion for land subject to a qualified conservation easement.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Estate Tax Deferral for Working Farms and Land Conservation Act of 2005'.

SEC. 2. EXCLUSION FROM GROSS ESTATE OF CERTAIN FARMLAND SO LONG AS FARMLAND USE CONTINUES.

(a) In General- Part III of subchapter A of chapter 11 of the Internal Revenue Code of 1986 (relating to gross estate) is amended by inserting after section 2033 the following new section:

`SEC. 2033A. EXCLUSION OF CERTAIN FARMLAND SO LONG AS USE AS FARMLAND CONTINUES.

`(a) In General- In the case of an estate of a decedent to which this section applies, the value of the gross estate shall not include the adjusted value of qualified farmland included in the estate.

`(b) Estates to Which Section Applies- This section shall apply to an estate if--

`(1) the decedent was (at the date of the decedent's death) a citizen or resident of the United States,

`(2) during the 8-year period ending on the date of the decedent's death there have been periods aggregating 5 years or more during which--

`(A) the qualified farmland was owned by the decedent or a member of the decedent's family, and

`(B) there was material participation (within the meaning of section 2032A(e)(6)) by the decedent or a member of the decedent's family in the operation of such farmland.

Rules similar to the rules of paragraphs (4) and (5) of section 2032A(b) shall apply for purposes of subparagraph (B).

`(c) Definitions- For purposes of this section--

`(1) QUALIFIED FARMLAND- The term `qualified farmland' means any real property--

`(A) which is located in the United States,

`(B) which is used as a farm for farming purposes (within the meaning of section 2032A(e)), and

`(C) which was acquired from or passed from the decedent to a qualified heir of the decedent and which, on the date of the decedent's death, was being so used by the decedent or a member of the decedent's family.

`(2) ADJUSTED VALUE- The term `adjusted value' means the value of farmland for purposes of this chapter (determined without regard to this section), reduced by the amount deductible under paragraph (3) or (4) of section 2053(a).

`(d) Tax Treatment of Dispositions and Failures to Use for Farming Purposes-

`(1) IMPOSITION OF ADDITIONAL ESTATE TAX- If, at any time after the decedent's death and before the death of the qualified heir--

`(A) the qualified heir disposes of any interest in qualified farmland (other than by a disposition to a member of his family), or

`(B) the qualified heir ceases to use the real property which was acquired (or passed) from the decedent as a farm for farming purposes, then, there is hereby imposed an additional estate tax.

`(2) AMOUNT OF ADDITIONAL TAX- Rules similar to the rules of section 2032A(e) shall apply for purposes of this subsection.'

(b) Clerical Amendment- The table of sections for part III of subchapter A of chapter 11 of such Code is amended by inserting after the item relating to section 2033 the following new item:

`Sec. 2033A. Exclusion of certain farmland so long as use as farmland continues.'.

(c) Effective Date- The amendments made by this section shall apply to estates of decedents dying after the date of the enactment of this Act.

SEC. 3. REPEAL OF DOLLAR LIMITATION ON ESTATE TAX EXCLUSION FOR LAND SUBJECT TO QUALIFIED CONSERVATION EASEMENT.

(a) In General- Subsection (c) of section 2031 of the Internal Revenue Code of 1986 (relating to Estate tax with respect to land subject to a qualified conservation easement) is amended by striking paragraph (3) and by redesignating the succeeding paragraphs accordingly.

(b) Conforming Amendment- Paragraph (1) of section 2031(c) of such Code is by striking `the lesser of' at all that follows and inserting `the applicable percentage of the value of land subject to a qualified conservation easement, reduced by the amount of any deduction under section 2055(f) with respect to such land.'

(c) Effective Date- The amendments made by this section shall apply to estates of decedents dying after the date of the enactment of this Act.

END