Regular Session 2015-2016 House Bill 1254 P.N. 1646

PRINTER'S NO. 1646

THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

No.

1254

Session of

2015

INTRODUCED BY MASSER, MUSTIO, DUNBAR, MILLARD, THOMAS, MURT,

PICKETT, CUTLER, WATSON, MACKENZIE, IRVIN, GODSHALL, BAKER,

BARRAR, V. BROWN, GIBBONS, DUSH, BLOOM, HAHN, SAINATO,

MARSICO, HARHART, LONGIETTI, HEFFLEY, A. HARRIS, LAWRENCE,

SONNEY, ZIMMERMAN, WARD, GILLEN AND DEAN, MAY 28, 2015

REFERRED TO COMMITTEE ON FINANCE, MAY 28, 2015

AN ACT

Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An

act relating to tax reform and State taxation by codifying

and enumerating certain subjects of taxation and imposing

taxes thereon; providing procedures for the payment,

collection, administration and enforcement thereof; providing

for tax credits in certain cases; conferring powers and

imposing duties upon the Department of Revenue, certain

employers, fiduciaries, individuals, persons, corporations

and other entities; prescribing crimes, offenses and

penalties," in inheritance tax, further providing for

definitions and for transfers not subject to tax.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1. The definition of "business of agriculture" in

section 2102 of the act of March 4, 1971 (P.L.6, No.2), known as

the Tax Reform Code of 1971, added July 2, 2012 (P.L.751,

No.85), is amended and the section is amended by adding

definitions to read:

Section 2102. Definitions.--The following words, terms and

phrases, when used in this article, shall have the meanings

ascribed to them in this section, except where the context

clearly indicates a different meaning:

* * *

"Business of agriculture." The term shall include the

leasing to members of the same family or the leasing to a

[corporation or association] family farm business or family farm

trust owned by members of the same family of property which is

directly and principally used for agricultural purposes. The

business of agriculture shall not be deemed to include:

(1) recreational activities such as, but not limited to,

hunting, fishing, camping, skiing, show competition or racing;

(2) the raising, breeding or training of game animals or

game birds, fish, cats, dogs or pets or animals intended for use

in sporting or recreational activities;

(3) fur farming;

(4) stockyard and slaughterhouse operations; or

(5) manufacturing or processing operations of any kind.

* * *

"Family farm business." As defined in section 1101-C.

"Family farm trust." A trust in which at least seventy-five

per cent of its assets are devoted to the business of

agriculture and in which at least seventy-five per cent of the

trust's beneficiary interests that are current interests are

continuously held by members of the same family.

* * *

Section 2. Section 2111(s) of the act, added July 2, 2012

(P.L.751, No.85), is amended and the section is amended by

adding a subsection to read:

Section 2111. Transfers Not Subject to Tax.--* * *

(s) A transfer of an interest in real estate devoted to the

business of agriculture between members of the same family or

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the decedent and a family farm business or family farm trust in

which at least seventy-five per cent of the ownership or

beneficial ownership is held by members of the same family as

the decedent, provided that after the transfer the real estate

continues to be devoted to the business of agriculture for a

period of seven years beyond the transferor's date of death and

the real estate derives a yearly gross income of at least two

thousand dollars ($2,000), provided that:

(1) Any tract of land under this article which is no longer

devoted to the business of agriculture within seven years beyond

the transferor's date of death shall be subject to inheritance

tax due the Commonwealth under section 2107, in the amount that

would have been paid or payable on the basis of valuation

authorized under section 2121 for nonexempt transfers of

property, plus interest thereon accruing as of the transferor's

date of death, at the rate established in section 2143.

(2) Any tax imposed under section 2107 shall be a lien in

favor of the Commonwealth upon the property no longer being

devoted to agricultural use, collectible in the manner provided

for by law for the collection of delinquent real estate taxes,

as well as the personal obligation of the owner of the property

at the time of the change of use.

(3) Every owner of real estate exempt under this subsection

shall certify to the department on an annual basis that the land

qualifies for this exemption and shall notify the department

within thirty days of any transaction or occurrence causing the

real estate to fail to qualify for the exemption. Each year the

department shall inform all owners of their obligation to

provide an annual certification under this subclause. This

certification and notification shall be completed in the form

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and manner as provided by the department.

* * *

(s.2) (1) A transfer of a qualified interest in a family

farm business or a family farm trust to one or more qualified

farm transferees is exempt from inheritance tax if the qualified

interest:

(i) continues to be owned by a qualified transferee for a

minimum of seven years after the decedent's date of death; and

(ii) is reported on a timely filed inheritance tax return.

(2) A qualified interest in a family farm business or family

farm trust exempted under this subsection that is no longer

owned by a qualified transferee at any time within seven years

after the decedent's date of death shall be subject to

inheritance tax owed to the Commonwealth under section 2107 in

an amount equal to the inheritance tax that would have been paid

or payable on the value of the family farm business or family

farm trust interest using the valuation authorized under section

2121 for nonexempt transfers of property. Interest shall accrue

from the payment date established under section 2142 at the rate

established under section 2143.

(3) Inheritance tax due under section 2107 as a result of a

disqualification under paragraph (2) or (4), plus interest on

the inheritance tax, shall be a lien in favor of the

Commonwealth on the real and personal property of the owner of

the qualified family farm business or family farm trust at the

time of the transaction or occurrence that disqualified the

interest from the exemption under this subsection. The

inheritance tax due and the interest shall be collectible in the

manner provided for by law for the collection of delinquent

taxes and shall be the personal obligation of the owner of the

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qualified interest at the time of the transaction or occurrence

that disqualified the qualified interest from the exemption

under this subsection. The lien shall remain until the

inheritance tax and accrued interest are paid in full.

(4) Each owner of a qualified interest in a family farm

business or family farm trust exempted from inheritance tax

under this subsection shall certify to the department, on an

annual basis for seven years after the decedent's date of death,

that the qualified interest continues to be owned by a qualified

transferee and shall notify the department within thirty days of

any transaction or occurrence causing the qualified interest to

fail to qualify for the exemption. Each year, the department

shall inform all owners of a qualified interest exempted from

inheritance tax under this subsection of the obligation to

provide an annual certification under this paragraph. The

certification and notification shall be completed in the form

and manner as provided by the department. An owner's failure to

comply with the certification or notification requirements shall

result in the loss of the exemption and the qualified interest

shall be subject to inheritance tax due the Commonwealth under

section 2107 in an amount equal to the inheritance tax that

would have been paid or payable on the value of the qualified

interest using the valuation authorized under section 2121 for

nonexempt transfers of property. Interest shall accrue from the

payment date established in section 2142 at the rate established

in section 2143.

(5) The following words and phrases when used in this

section shall have the meanings given to them in this subsection

unless the context clearly indicates otherwise:

(i) "Qualified farm transferee." Includes any of the

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following:

(A) A member of the same family as the decedent.

(B) One or more trusts or series of trusts in which the

beneficiary interests that are current interests are held by

members of the same family as the decedent.

in which the ownership interests are held by members of the same

family as the decedent.

(ii) "Qualified interest in a family farm business or family

farm trust." An ownership, beneficiary or other interest in a

family farm business or family farm trust engaged in the

business of agriculture, if:

(A) the entity has fewer than fifty full-time equivalent

employees as of the date of the decedent's death; and

(B) the entity has a net book value of assets totaling less

than five million dollars ($5,000,000) as of the date of the

decedent's death.

* * *

Section 3. The amendment of sections 2102 and 2111 of the

act shall apply to taxes filed on or after July 1, 2013.

Section 4. This act shall take effect in 60 days.

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