Pennsylvania Agriculture Affected by Changes to State Tax Code

On July 13, 2016, Pennsylvania Governor Tom Wolf signed into law Act 84 which amends the Pennsylvania Tax Reform Code of 1971 and includes three changes relevant to agriculture. First, Act 84 amends the inheritance tax exemption available to family farms engaged in the business of agriculture. Previously, if certain conditions were met, Pennsylvania exempted from state inheritance tax the "transfer of real estate devoted to the business of agriculture between members of the same family" (emphasis added). Significantly, on November 20, 2014, the Pennsylvania Department of Revenue issued an information notice stating that the department interpreted the language of the agricultural inheritance tax exemption to "apply specifically to transfers between individuals" and that the exemption did "not extend to real estate held in business entities." Under Act 84, providing certain conditions are met, Pennsylvania now exempts from state inheritance tax the "transfer of real estate devoted to the business of agriculture to or for the benefit of members of the same family" (emphasis added). Second, Act 84 provides that the sale and transfer of agricultural conservation easements are now exempt from Pennsylvania realty transfer taxes. Third, Act 84 provides that timbering operations (defined as primarily engaging in the business of harvesting trees) are now exempt from paying sales and use taxes on property and services purchased and used directly for timbering operations.