Inheritance Tax Amendments (Act 84)

Sections 45 and 47 of the Act of July 13, 2016, No. 84, (H.B. 1198), made several changes to the inheritance tax exemptions for agricultural property and family-owned businesses, sections 2111(s), (s.1) and (t), and section 2130(5), of the Tax Reform Code of 1971, 72 P.S. §§ 9111(s), (s.1), and (t), and 9130(5).  Specifically:

  • Language has been amended or added to extend the exemptions to transfers in trust for the benefit of family members.
  • To be exempt from inheritance tax, property devoted to the business of agriculture must produce a gross income of at least $2,000, both at the time of death and for seven years afterwards.
  • Property devoted to the business of agriculture, or agricultural easements or reserves, must be reported on a timely filed inheritance tax return.  (The requirement of a timely return already applied to the exemption for family-owned businesses.)
  • The exemption for family-owned businesses now refers to “members of the same family” and the definition of “qualified transferee” has been deleted.
  • In the event property ceases to be exempt, the beneficiaries of a trust that is the owner of the property are liable for any tax that may be imposed, and all liability is joint and several.
  • Expenses and debts incurred in connection with exempt property are not deductible.

These amendments to sections 2011(s) and (s.1) apply to decedents dying after December 31, 2012, while the amendments to section 2011(t) apply to the estates of decedents dying after June 30, 2013.  The amendment to section 2130(5) appears to be effective as of enactment.

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