Under present law, in any case of an estate where an executor could elect the special valuation for farm or other property under federal law, without regard to the federal law provisions relative to material participation in the operation of the farm or other business by the decedent or members of the decedent's family, such special valuation is also available to the executor for Tennessee inheritance tax valuation purposes. This bill provides that the value of qualified farmland resulting from electing to use the special valuation will be excluded from the gross estate for state inheritance tax valuation purposes. This bill defines "qualified farmland" as any real property that is located in this state, is used for farming purposes, was acquired from or passed down from the decedent to a qualified heir of the decedent and that, on the date of the decedent's death, was being so used by the decedent or a member of the decedent's family, and is property designated in the agreement required under federal law for the application of certain provisions regarding tax treatment of dispositions and failures to use for qualified use.
Present law requires the commissioner to prescribe procedures to provide that, in any case in which the personal representative makes a timely election under the above-described provisions and substantially complies with the federal regulations pertaining to the election but the notice of election as filed does not contain all required information, or the signatures of one or more necessary persons are not included on the agreement provided for in present law, or the agreement does not contain all required information, the personal representative is to have reasonable time, not exceeding 90 days, after notification of such failure or other deficiency, in which to provide such information or signatures. This bill replaces "personal representative" with "executor" in this provision.
This bill adds that for any disposition or severance of standing timber on a qualified woodland that is made pursuant to a forest stewardship plan developed under the federal Cooperative Forestry Assistance Act of 1978, or an equivalent plan approved by the state forester, section 2032A(c)(2)(E) of the Internal Revenue Code (which deals with special provisions for the disposition of timber) will not apply for Tennessee inheritance tax valuation purposes. This provision would not apply if, during the 10-year period provided for under federal law, the qualified heir fails to comply with the applicable forest stewardship plan or equivalent plan.
This bill further adds that for Tennessee inheritance tax valuation purposes, the sale of a qualified conservation easement to a qualified organization will not be deemed a disposition under federal law. Under federal law there is imposed an additional estate tax, if, within 10 years after the decedent's death and before the death of the qualified heir:
(1) The qualified heir disposes of any interest in qualified real property (other than by a disposition to a member of his family); or
(2) The qualified heir ceases to use for the qualified use the qualified real property which was acquired (or passed) from the decedent.
Under this bill, in any case of an estate where an executor could elect the exclusion under federal law relative to the value of land subject to a qualified conservation easement, the exclusion would also be available to the executor for Tennessee inheritance tax valuation purposes; provided, however, that for such purposes, the exclusion limitation under federal law will be $5 million and the applicable percentage under federal law means 50 percent reduced, but not below zero, by 2.5 percentage points for each percentage point, or fraction thereof, by which the value of the qualified conservation easement is less than 30 percent of the value of the land, determined without regard to the value of the easement and reduced by the value of any retained development right as defined in federal law. The values taken into account under this provision must be such values as of the date of the contribution referred to in federal law.