Bill Positions

Bill Number: SB 165

Bill Title: Maryland Estate Tax - Exclusion for Family Farm or Family-Owned Business

Bill Sponsor(s): Sen. Haines

Subject: Budget & Taxation

Committee: B&T

Bill Summary: Excludes from the value of assets that are subject to the Maryland estate tax up to $1,000,000 of the value of real estate contained in the estate of an owner of certain family farms and other family businesses. The real estate must have been used in the family farm or family business and must be passed on to a member of the decedent's family, in accordance with the rules of a valuation exemption contained in the federal estate tax in Internal Revenue Code section 2032A.

History: This proposal is new and more limited, although there have been several proposals in recent years to increase the amount of assets that is exempt from the Maryland estate tax or to repeal the tax altogether.

Chamber Position: Support

Position Summary:

The estate tax is perceived by many as a tax that only applies to the wealthy. But given the explosion in real estate values in the last decade and the trend toward self-directed retirement savings like 401(k) plans, more and more "middle class" people have assets that are being subjected to the tax. Farmers and small businesses are especially hard hit. Because their taxable value is generally tied up in real estate and equipment, there is often insufficient cash to pay the estate tax when the owner dies. Therefore, the family members who inherit the business are forced to sell the business or at least a portion of its assets in order to generate the cash to pay the tax.

Maryland is a small business state. The impact of SB 165 on the estate tax revenues should be small because of the limited nature of the exemption it provides- $1,000,000 of asset value, for real estate, which was used in a family farm or family business, and was passed from the decedent to family heirs. But the importance of the exemption to the family farms and other family businesses is huge. The state will benefit in the long run by helping keep these family businesses going rather than liquidating because they have to pay a tax that was not designed to impact them in the first place.

On behalf of the family farms and other family businesses that will be helped by this small exemption, we urge a favorable report of SB 165.

Position Statement: Coming Soon

Chamber Staff: Karen Syrylo

General Assembly: Click here to view the bill on the Maryland General Assembly's website.