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Commentary Family Owned Ranches And Farms Under Nevada Are In Peril

Politicians in Washington are proposing a new tax on the transfer of a family-owned business from one generation to the next, rather than making it easier for Nevada’s ranchers and farmers to do business.
Clint Smith, of the Big Basin Ranch in Spring Valley, herds cattle on Tuesday, Aug.
Much of the major stories regarding Nevada’s economic woes during the epidemic centered on the tremendous damage to Las Vegas — and understandably so. Elizabeth Brumley Las Vegas Review-Journal
More than 315,000 people work in the state’s tourist, gaming, and entertainment industries.
But, as our towns recover from COVID-19, there is another essential business in the Silver State that has been forgotten and unappreciated.
Ranching and farming have long been the economic backbone of rural Nevada, bringing in more than $760 million in cash revenues each year and providing much-needed tax money and jobs.
COVID produced extraordinary hardships and uncertainty for Nevada’s family-owned cattle ranching companies, many of which had proudly been in the same family for generations, just as it did for the tourism industry.
Families that raise crops and those who work in the dairy industry are in the same boat.
Yet, without the backing of our political officials, their legacy — and the employment associated with it — will be jeopardized.
Politicians in Washington are proposing a new tax on the transfer of a family-owned business from one generation to the next, rather than making it easier for Nevada’s ranchers and farmers to do business.
When President Joe Biden unveiled his $1.8 trillion American Families Plan in April, he pledged that it would be paid for entirely by raising taxes on the wealthy, with no impact on middle-class families.
Yet, Senate legislation known as the STEP Act was included as one of the tax measures.
By deleting a provision known as “stepped-up in basis,” this measure modifies the way capital gains are assessed on all inherited assets and estates, such as a family-owned ranch. This tax provision has been vital for middle-class ranchers, farmers, and small businesses that need to decrease their tax burden while passing down the family business to their children.
Consider the following scenario: a rancher purchased a $100,000 cattle ranch with a loan in 1970, and the ranch is now worth $2 million.
When the rancher dies, his children can inherit the business at its existing market value of $2 million under current legislation.
When the ranchers’ children inherit the ranch, the IRS “steps up” the cost basis so that they do not have to pay capital gains taxes on the increased worth of the ranch since 1970.
Why should they, after all?
Why should the IRS treat it as though a transaction occurred if the ranchers’ children take over the family business?
The STEP Act would end this practice by requiring inheritors to pay a retroactive capital gains tax on the deceased’s past transactions, even if they occurred decades ago.
This new tax, dubbed “the zombie tax” by some, would force the children of the rancher in the preceding scenario to pay the IRS an estimated $350,000 simply to keep their own family business.
The majority of ranch and farm enterprises require a significant amount of capital.
They may have a lot of land, but they are cash-strapped.
If the heirs of a family-owned ranch do not have enough money to pay the zombie tax, they will sell the ranch.
A new research shows how this approach would devastate America’s farmers and ranches.
The Agriculture and Food Policy Institute at Texas A&M University maintains a database of 94 representative farms in 30 states.
Only two of the 94 representative farms in their database would be touched by a generational transfer event under existing tax legislation, according to their economic models.
“By contrast, under the STEP Act, 92 of the 94 typical farms would be impacted,” the center concluded, “with increased tax liabilities accrued averaging $726,104 per farm.” President Biden’s tax policies will disproportionately affect middle-class households.
The hard-won livelihoods of Nevada’s ranches and farms should not be jeopardized in order to fund trillions of dollars in new government spending.
All Nevada companies, including farms and ranches, must be represented by the state’s congressional delegation.
In Washington, D.C., we have representatives.
— including my own, Representative
Despite being on the important House Ways and Means Committee, which has influence over tax policy, Steven Horsford has been silent on this subject. They must speak up for their citizens.
Ranchers in Nevada have poured their blood, sweat, and tears into developing enterprises that they can pass down to their children.
I’m urging our representatives of Congress to back them up.
Bevan Lister is a Lincoln County commissioner and the president of the Nevada Farm Bureau.

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