SENATE AMENDED

THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

INTRODUCED BY CUTLER, MIRABITO, BAKER, BOYD, CLYMER, COX, DENLINGER, FLECK, FREEMAN, GILLEN, GINGRICH, GODSHALL, GRELL, HARHART, HENNESSEY, HICKERNELL, HUTCHINSON, KAUFFMAN, KORTZ, LAWRENCE, LONGIETTI, MARSHALL, METZGAR, MILLER, MOUL, PICKETT, PYLE, REICHLEY, ROAE, ROSS, STERN, SWANGER, TOEPEL, VULAKOVICH, WATSON, QUINN, FARRY, BEAR, ROCK, CALTAGIRONE, SAINATO AND MILLARD, FEBRUARY 23, 2011

SENATOR BRUBAKER, FINANCE, IN SENATE, AS AMENDED, APRIL 3, 2012   

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 realty transfer tax, further providing for

definitions, for excluded transactions and for acquired

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company, for documents relating to associations or

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corporations and members, partners, stockholders or

shareholders thereof and for acquired company; and, in

inheritance tax, further providing for transfers not subject

to tax.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  The definitions of "association," "corporation,"

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"family farm corporation" and "family farm partnership" in

section 1101-C of the act of March 4, 1971 (P.L.6, No.2), known

as the Tax Reform Code of 1971, amended July 2, 1986 (P.L.318,

No.77) and April 23, 1998 (P.L.239, No.45), are amended to read:

Section 1101-C.  Definitions.--The following words when used

in this article shall have the meanings ascribed to them in this

section:

"Association."  A partnership, limited partnership, limited

liability partnership or any other form of unincorporated

enterprise, owned or conducted by two or more persons other than

a private trust or decedent's estate.

"Corporation."  A corporation, limited liability company, 

joint-stock association, business trust or banking institution

which is organized under the laws of this Commonwealth, the

United States, or any other state, territory, or foreign

country, or dependency.

* * *

"Family farm [corporation.] business."  A corporation or

association of which at least seventy-five per cent of its

assets are devoted to the business of agriculture and at least

seventy-five per cent of each class of stock of the corporation 

or interest in the association is continuously owned by members

of the same family.  The business of agriculture shall include

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

corporation or association 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 partnership."  A  partnership of which at least

seventy-five per cent of its assets are devoted to the business

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

interests in the  partnership are continuously owned by members

of the same family. The business of agriculture shall include

the leasing to 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.]

* * *

Section 2.   sections 1102-C.3(19), (19.1) and (20) and 1102-

c.5 of the act, amended or added July 2, 1986 (P.L.318, No.77)

and June 16, 1994 (P.L.279, No.48), are amended to read:

Section 1102-C.3.  Excluded Transactions.--The tax imposed by

section 1102-C shall not be imposed upon:

* * *

(19)  A transfer of real estate devoted to the business of

agriculture to a family farm [corporation] business by a member

of the same family which directly owns at least seventy-five per

cent of each class of the stock thereof or interest therein.

[(19.1)  A transfer of real estate devoted to the business of

agriculture to a family farm partnership by a member of the same

family, which family directly owns at least seventy-five per

cent of the interests in the partnership.]

(20)  A transfer between members of the same family of an

ownership interest in a real estate company[,] or family farm

[corporation or family farm partnership which] business that 

owns real estate.

* * *

Section 1102-C.5.  Acquired Company.--(a)  A real estate

company is an acquired company upon a change in the ownership

interest in the company, however effected, if the change:

(1)  does not affect the continuity of the company; and

(2)  of itself or together with prior changes has the effect

of transferring, directly or indirectly, ninety per cent or more

of the total ownership interest in the company within a period

of three years.

(b)  [With respect to real estate acquired after February 16,

1986, a family farm corporation is an acquired company when,

because of voluntary or involuntary dissolution, it ceases to be

a family farm corporation or when, because of issuance or

transfer of stock or because of acquisition or transfer of

assets that are devoted to the business of agriculture, it fails

to meet the minimum requirements of a family farm corporation

under this act.

(b.1)  A family farm partnership  is an acquired company

when, because of voluntary or involuntary dissolution, it ceases

to be a family farm partnership  or when, because of transfer of

partnership  interests or because of acquisition or transfer of

assets that are devoted to the business of agriculture, it fails

to meet the minimum requirements of a family farm partnership

 under this act.] A family farm business is an acquired

company when, because of voluntary or involuntary dissolution,

it ceases to be a family farm business, or when, because of the

issuance or transfer of stock in the corporation or transfer of

interests in the association or because of an acquisition or

transfer of assets that are devoted to the business of

agriculture, it fails to meet the minimum requirements of a

family farm business under this act.

(c)  Within thirty days after becoming an acquired company,

the company shall present a declaration of acquisition with the

recorder of each county in which it holds real estate for the

affixation of documentary stamps and recording. Such declaration

shall set forth the value of real estate holdings of the

acquired company in such county.

Section  3.  This act shall apply retroactively to

transactions occurring after December 31, 2008.

Section  4.  The provisions of 61 Pa. Code 91.222 (relating

to family farm corporation) are abrogated.

Section  5.  This act shall take effect immediately.

Section 1.  The definitions of "association," "family farm

<--

corporation" and "family farm partnership" in section 1101-C of

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

Code of 1971, amended July 2, 1986 (P.L.318, No.77) and April

23, 1998 (P.L.239, No.45), are amended and the section is

amended by adding a definition to read:

Section 1101-C.  Definitions.--The following words when used

in this article shall have the meanings ascribed to them in this

section:

"Association."  A general partnership, limited partnership,

limited liability partnership or any other form of

unincorporated enterprise, owned or conducted by two or more

persons other than a private trust or decedent's estate.

* * *

["Family farm corporation."  A corporation of which at least

seventy-five per cent of its assets are devoted to the business

of agriculture and at least seventy-five per cent of each class

of stock of the corporation is continuously owned by members of

the same family. The business of agriculture shall include the

leasing to 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 partnership."  A partnership of which at least

seventy-five per cent of its assets are devoted to the business

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

interests in the partnership are continuously owned by members

of the same family. The business of agriculture shall include

the leasing to 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."  A corporation or association of

which at least seventy-five per cent of its assets are devoted

to the business of agriculture and at least seventy-five per

cent of each class of stock of the corporation or the interests

in the association is continuously owned by members of the same

family. The business of agriculture shall include the leasing to

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

association 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.

* * *

Section 2.  Section 1102-C.3(19), (19.1) and (20) of the act,

amended or added July 2, 1986 (P.L.318, No.77) and June 16, 1994

(P.L.279, No.48), are amended to read:

Section 1102-C.3.  Excluded Transactions.--The tax imposed by

section 1102-C shall not be imposed upon:

* * *

(19)  A transfer of real estate devoted to the business of

agriculture to a family farm [corporation] business by:

(i)  a member of the same family which directly owns at least

seventy-five per cent of [each class of the stock thereof] the

interests in that family farm business; or

(ii)  a family farm business, which family directly owns at

least seventy-five per cent of the interests in that family farm

business.

[(19.1)  A transfer of real estate devoted to the business of

agriculture to a family farm partnership by a member of the same

family, which family directly owns at least seventy-five per

cent of the interests in the partnership.]

(20)  A transfer between members of the same family of an

ownership interest in a real estate company[,] or family farm

[corporation or family farm partnership which] business that 

owns real estate.

* * *

Section 3.  Section 1102-C.4 of the act, added July 2, 1986

(P.L.318, No.77), is amended to read:

Section 1102-C.4.  Documents Relating to Associations or

Corporations and Members, Partners, Stockholders or Shareholders

Thereof.--Except as otherwise provided in [section] sections 

1102-C.3 and 1102-C.5, documents which make, confirm or evidence

any transfer or devise of title to real estate between

associations or corporations and the members, partners,

shareholders or stockholders thereof are fully taxable. For the

purposes of this article, corporations and associations are

entities separate from their members, partners, stockholders or

shareholders.

Section 4.  Section 1102-C.5 of the act, amended or added

July 2, 1986 (P.L.318, No.77) and June 16, 1994 (P.L.279,

No.48), is amended to read:

Section 1102-C.5.  Acquired Company.--(a)  A real estate

company is an acquired company upon a change in the ownership

interest in the company, however effected, if the change:

(1)  does not affect the continuity of the company; and

(2)  of itself or together with prior changes has the effect

of transferring, directly or indirectly, ninety per cent or more

of the total ownership interest in the company within a period

of three years.

[(b)  With respect to real estate acquired after February 16,

1986, a family farm corporation is an acquired company when,

because of voluntary or involuntary dissolution, it ceases to be

a family farm corporation or when, because of issuance or

transfer of stock or because of acquisition or transfer of

assets that are devoted to the business of agriculture, it fails

to meet the minimum requirements of a family farm corporation

under this act.

(b.1)  A family farm partnership is an acquired company when,

because of voluntary or involuntary dissolution, it ceases to be

a family farm partnership or when, because of transfer of

partnership interests or because of acquisition or transfer of

assets that are devoted to the business of agriculture, it fails

to meet the minimum requirements of a family farm partnership 

under this act.]

(b.2)  A family farm business is an acquired company when,

because of voluntary or involuntary dissolution, it ceases to be

a family farm business or when, because of the issuance or

transfer of stock in the corporation or transfer of interests in

the association or because of acquisition or transfer of assets

that are devoted to the business of agriculture, it fails to

meet the minimum requirements of a family farm business under

this article.

(b.3)  The conveyance of assets held by one family farm

business to another family farm business shall not be considered

a transfer of assets under this article if the same individuals

hold at least fifty per cent of the ownership interest in each

family farm business.

(c)  Within thirty days after becoming an acquired company,

the company shall present a declaration of acquisition with the

recorder of each county in which it holds real estate for the

affixation of documentary stamps and recording. Such declaration

shall set forth the value of real estate holdings of the

acquired company in such county.

Section 5.  Section 2102 of the act 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 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.

* * *

"Members of the same family."  Any individual, such

individual's brothers and sisters, the brothers and sisters of

such individual's parents and grandparents, the ancestors and

lineal descendents of any of the foregoing, a spouse of any of

the foregoing and the estate of any of the foregoing.

Individuals related by the half blood or legal adoption shall be

treated as if they were related by the whole blood.

* * *

Section 6.  Section 2111 of the act is amended by adding a

subsection to read:

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

(s)  A transfer of real estate devoted to the business of

agriculture between members of the same family, 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

and manner as provided by the department.

Section 7.  A reference in any law to the former definition

of "family farm corporation" or "family farm partnership" in

section 1101-C of the act shall be deemed to be references to a

"family farm business" under section 1101-C of the act.

Section 8.  The amendment of Article XXI of the act shall

apply to the estates of decedents dying after December 31, 2011.

Section 9.  The amendment of Article XI-C of the act shall be

retroactive to any document made, executed, delivered, accepted

or presented for recording on or after July 1, 2010.

Section 10.  The provisions of 61 Pa. Code § 91.222 (relating

to acquired family farm partnership) are abrogated.

Section 11.  This act shall take effect immediately.