Rep. Jim Costa (D–Fresno) has introduced legislation that seeks to protect people from having to pay an inheritance tax.
Costa teamed up with a bipartisan group of representatives to introduce a bill in support of preserving the stepped-up basis provision in the tax code.
Why it matters: The stepped-up provision allows Americans to inherit assets – such as land, equipment and buildings – and adjust their cost basis to reflect the fair market value, which protects them from capital gains taxes.
- The U.S. Department of Agriculture’s Economic Research Service reported that two-thirds of all mid-sized farms would see an increased tax liability if the stepped-up basis was eliminated.
What we’re watching: President Donald Trump’s Tax Cuts and Jobs Act of 2017 is set to expire at the end of this year.
- While Congress debates renewing the bill, Trump has floated eliminating the federal estate tax altogether.
- In response, Congress could look to have the capital gains tax replace the estate tax, potentially putting the stepped-up basis at risk. Without the stepped-up basis, people would have to pay capital gains on the prior appreciation of assets.
- Costa’s bill, formally called H. Res. 206, states that the House supports the preservation of the stepped-up provision, opposes any efforts to impose new taxes on family farms or small businesses and recognizes the importance of generational transfers of farm and family-owned business operations.
What we’re watching: “Over 90% of farms nationwide are family-owned, and in the San Joaquin Valley, these family farms are the heart of our economy,” Costa said. “Preserving the stepped-up basis will help ensure that family farms and small businesses can continue to thrive and be passed down to future generations.”
- Rep. Tracey Mann (R–KS) noted that 98% of farms and 90% of businesses are family-owned and operated, all of which would face capital gains taxes without the stepped-up basis when they are inherited.
- “Eliminating stepped-up basis and imposing this farm killer tax will destroy the livelihoods of producers and small business owners in Kansas and across the country,” Mann said. “Our farmers, ranchers, agricultural producers, and small business owners are the backbone of America, and Congress must support their efforts, not crush them with devastating capital gains taxes.”
