By MICHELE F. MIHALJEVICH
Indiana Correspondent

WASHINGTON, D.C. — Farmers are concerned about the repercussions of a return of the estate tax, officials with various agricultural organizations said.

But that concern may turn to anger next year when they see how it directly affects them, said Colin Woodall, vice president of government affairs for the National Cattlemen’s Beef Assoc. (NCBA).

“I have a feeling when people start seeing what their tax liability will be, they will be absolutely livid,” he said. “They’ll be thinking about losing their businesses, losing their family history. People are just going to be irate. This will threaten their livelihoods and daily lives.”

While there is no federal estate tax this year, if Congress doesn’t act, the tax will return on Jan. 1, 2011, with an exemption of $1 million and a tax rate of 55 percent. From 2001 to last year, the exemption for estate taxes increased gradually from $675,000 to $3.5 million.

“This is really a big issue,” Woodall noted. “We’re going to continue to beat the drum. For a lot of people, there’s a pending doom. You don’t have to be a big operation to have assets of $1 million.”

The NCBA supports an amendment introduced earlier this month by senators Blanche Lincoln (D-Ark.) and Jon Kyl (R-Ariz.) that would permanently set the tax rate at 35 percent, with a $5 million exemption phased in over 10 years and indexed for inflation. The proposal would require the Senate Finance Committee to amend H.R. 5297, the small business lending bill.

The organization supports the proposal in part because of the exemption amount and the provision on stepped-up basis, Woodall said. Under stepped-up basis, the tax basis of securities left to heirs is determined by the market value at the time of death rather than by the original cost.

“We’d love to have a full repeal of the estate tax or a complete exemption for agriculture,” he explained. “But we know we can’t get that full repeal. We know it’s off the table. But it’s about passing operations on to the next generation and having the ability to making a living off the land.”

The NCBA, which has 140,000 affiliated members, has had support from its membership, Woodall said. Members have been trying to get the word out about the issue and have contacted their Congressional representatives.

“We’ve had great grassroots outreach and that’s what’s going to get this across the finish line. They’re contacting us and asking what can I do, how do I do it?” he added.

Callers have contacted the Indiana Farm Bureau (IFB) seeking advice, said Kent Yeager, director of IFB’s public policy team. “They’re wondering what they should do. We’re telling them they need to address this by the end of the year, but we’re also telling them to give it a little time to resolve itself. If it’s (estate tax) actually changing back, I don’t think most of their plans were designed for this,” he said.

IFB’s official membership is slightly more than 281,000, including associate members. The voting membership, or farmer members, totals slightly more than 80,000.

The Farm Bureau also supports the Lincoln-Kyl amendment because of the higher exemption that would be indexed for inflation and the provision for stepped-up basis, Yeager explained.

“We’d like to have the estate tax eliminated or at least eliminated for as many people as possible,” he said. “But the big thing is to get something permanent so people know how to plan. They don’t even know what their plan needs to be.”

IFB would also like to see a plan that allows for the tax-free transfer of an estate between spouses, he noted. “With farmland values and equipment, it doesn’t take a lot to get to $1 million. The $5 million exemption would be an elimination for a lot of people. But it’s not a perfect solution.”

If nothing is done to repeal the estate tax, or at least raise the exemption, farmers will be hurt, said Anthony Bush, vice president of the Ohio Corn Growers Assoc. (OCGA).

“It’s going to be devastating to any family operation moving to the next generation,” he said. “The $1 million exemption really doesn’t amount to much, whether you’re a farmer or run a mom-and-pop grocery store.”

The OCGA represents 25,000 corn and wheat farmers in the state. Bush is also chairman of the National Corn Growers public policy action team. The Lincoln-Kyl amendment meets most of OCGA’s goals, he noted, adding the organization would prefer a repeal of the estate tax altogether.

“That’s our policy first and foremost, but if not that, then we want to see the highest exemption possible and some stepped-up basis, plus an index for inflation. I think this (Lincoln-Kyl) is the best shot we’ve had in a long time. There’s definitely a growing sentiment something needs to be done,” he said.

While OCGA hasn’t received a lot of calls from its membership, Bush said the estate tax is among the top five issues for farmers.

“Our members expect us to be on top of this, and we are most definitely working on this. It is of the utmost importance to us. All ag groups need to get behind it and support it.”