House
File
511
-
Introduced
HOUSE
FILE
511
BY
COMMITTEE
ON
AGRICULTURE
(SUCCESSOR
TO
HSB
166)
A
BILL
FOR
An
Act
exempting
certain
farm
real
estate
from
the
inheritance
1
tax,
and
including
applicability
provisions.
2
BE
IT
ENACTED
BY
THE
GENERAL
ASSEMBLY
OF
THE
STATE
OF
IOWA:
3
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1880HV
(1)
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da/sc
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511
Section
1.
Section
450.1,
subsection
1,
paragraph
d,
Code
1
2013,
is
amended
to
read
as
follows:
2
d.
“Real
estate
or
real
“Real
estate”
or
“real
property”
for
3
the
purpose
of
appraisal
under
this
chapter
means
real
estate
4
which
is
the
land
and
appurtenances,
including
structures
5
affixed
thereto.
6
Sec.
2.
Section
450.1,
subsection
1,
Code
2013,
is
amended
7
by
adding
the
following
new
paragraphs:
8
NEW
PARAGRAPH
.
0a.
“Farming
operation”
means
the
use
of
9
farm
real
estate
to
produce
a
crop
as
defined
in
section
717.1
10
or
to
produce
livestock
as
defined
in
section
717.1.
11
NEW
PARAGRAPH
.
00a.
(1)
“Farm
real
estate”
means
real
12
estate
that
is
all
of
the
following:
13
(a)
Ten
acres
or
more
that
are
not
laid
off
into
lots
14
of
less
than
ten
acres
or
divided
by
streets
or
alleys
into
15
parcels
of
less
than
ten
acres.
16
(b)
Used
for
a
farming
operation.
17
(2)
“Farm
real
estate”
includes
a
residence
and
associated
18
garage
or
shed
constructed
on
the
real
estate
and
any
structure
19
located
on
the
real
estate
that
is
constructed
for
use
as
part
20
of
a
farming
operation
as
described
in
subparagraph
(1).
21
Sec.
3.
Section
450.7,
Code
2013,
is
amended
by
adding
the
22
following
new
subsection:
23
NEW
SUBSECTION
.
4.
This
section
does
not
apply
to
family
24
farm
property
subject
to
a
qualified
exemption
and
qualified
25
lien
as
provided
in
sections
450.9A
and
450.9B.
26
Sec.
4.
Section
450.9,
Code
2013,
is
amended
to
read
as
27
follows:
28
450.9
Individual
exemptions.
29
In
computing
the
tax
on
the
net
estate,
the
entire
amount
of
30
property,
all
of
the
following
applies:
31
1.
The
interest
in
property,
and
income
passing
32
to
the
surviving
spouse,
and
parents,
grandparents,
33
great-grandparents,
and
other
lineal
ascendants,
children
34
including
legally
adopted
children
and
biological
children
35
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511
entitled
to
inherit
under
the
laws
of
this
state,
stepchildren,
1
and
grandchildren,
great-grandchildren,
and
other
lineal
2
descendants
are
exempt
from
tax.
3
2.
Family
farm
property
is
exempt
from
tax
as
provided
in
4
section
450.9A.
5
Sec.
5.
NEW
SECTION
.
450.9A
Family
farm
property
——
6
qualified
exemption.
7
The
tax
on
real
property
and
personal
tangible
property
8
as
provided
in
section
450.2
shall
not
be
imposed
on
family
9
farm
property
located
in
this
state
if
a
qualified
exemption
10
is
elected
by
a
person
who
is
passed
such
property
under
this
11
chapter.
In
order
to
make
the
election,
all
of
the
following
12
must
apply:
13
1.
The
family
farm
property
is
limited
to
the
following:
14
a.
Farm
real
estate.
However,
more
than
half
the
total
15
acres
of
the
farm
real
estate
must
have
been
devoted
to
a
16
farming
operation
at
any
time
in
the
last
three
years
prior
to
17
the
year
of
the
decedent’s
death.
18
b.
Farm
machinery
and
equipment
used
in
the
farming
19
operation
and
passed
as
part
of
the
same
bequest
or
devise
as
20
the
farm
real
estate
described
in
paragraph
“a”
.
21
2.
The
family
farm
property
is
passed
to
any
of
the
22
following:
23
a.
A
qualified
individual.
The
qualified
individual
must
24
be
related
to
the
decedent
within
the
second,
third,
or
fourth
25
degree
of
consanguinity
or
affinity,
excluding
any
individual
26
who
is
exempt
from
tax
as
provided
in
another
provision
of
this
27
chapter.
The
family
farm
property
may
pass
to
more
than
one
28
qualified
individual
to
the
extent
that
the
interest
is
shared
29
by
all
qualified
individuals.
30
b.
A
partnership
in
which
all
partners
are
qualified
31
individuals
as
described
in
paragraph
“a”
.
32
c.
A
family
farm
corporation
or
family
farm
limited
33
liability
company
as
defined
in
section
9H.1.
However,
the
34
shareholders
of
the
family
farm
corporation
or
members
of
the
35
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family
farm
limited
liability
company
must
all
be
related
to
1
the
decedent
as
qualified
individuals
as
provided
in
paragraph
2
“a”
.
3
3.
The
interest
in
the
farm
real
estate
passes
in
fee
4
simple,
notwithstanding
any
debt,
lien,
or
other
encumbrance
5
against
the
farm
real
estate.
6
4.
An
appraisal
prepared
pursuant
to
section
450.24
is
filed
7
with
the
clerk
of
court
and
the
director
of
revenue
pursuant
8
to
section
450.29.
9
5.
An
inheritance
tax
qualified
exemption
statement
is
10
filed
with
the
department
of
revenue
on
a
form
prescribed
by
11
the
department.
12
a.
The
statement
shall
include
the
amount
of
the
tax
due
as
13
if
an
election
were
not
made
under
this
section.
14
b.
The
statement
must
be
filed
in
the
office
of
the
county
15
recorder
of
the
county
where
the
estate
is
probated,
and
of
the
16
county
where
the
farm
real
estate
is
located.
The
statement
17
must
be
filed
for
recording
prior
to
filing
the
statement
with
18
the
department.
The
statement
shall
be
filed
in
the
manner
19
provided
in
section
558.66.
The
statement
shall
be
indexed
as
20
provided
in
sections
558.49
and
558.52.
21
c.
The
statement
must
be
filed
with
the
department
on
or
22
before
the
date
that
the
tax
is
required
to
be
paid
under
23
section
450.6.
24
6.
a.
For
ten
years
from
the
date
of
the
decedent’s
25
death,
a
person
eligible
to
make
an
election
as
provided
in
26
this
section
who
conveys
the
farm
real
estate
to
a
person
27
not
eligible
to
make
such
an
election
is
liable
for
the
tax
28
otherwise
imposed
upon
the
family
farm
property
as
provided
in
29
this
chapter.
A
person
is
not
liable
for
the
tax
so
long
as
30
the
person
being
conveyed
the
farm
real
estate
would
have
been
31
eligible
to
make
the
election
if
the
decedent
had
died
on
the
32
date
the
conveyance
was
made.
33
b.
The
department
shall
assess
interest
on
the
amount
due
as
34
if
the
tax
was
delinquent
beginning
on
the
date
of
conveyance
35
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at
the
rate
in
effect
under
section
421.7.
1
Sec.
6.
NEW
SECTION
.
450.9B
Family
farm
property
——
2
qualified
lien.
3
1.
A
qualified
lien
is
created
on
farm
real
estate
that
4
is
subject
to
a
family
farm
property
qualified
exemption
as
5
provided
in
section
450.9A.
The
amount
of
the
qualified
lien
6
equals
the
amount
of
the
person’s
tax
liability
and
interest
as
7
provided
in
that
section.
The
lien
does
not
apply
to
the
farm
8
real
estate
if
the
lien
provided
in
section
450.7,
subsection
9
1,
would
also
have
not
applied
to
the
farm
real
estate.
10
2.
The
qualified
lien
expires
on
the
date
that
a
person
11
eligible
to
make
an
election
under
section
450.9A
is
no
longer
12
liable
for
the
tax.
13
3.
Notwithstanding
the
requirement
that
the
inheritance
tax
14
qualified
exemption
statement
be
filed
with
a
county
recorder
15
as
provided
in
section
450.9A,
a
notice
of
the
qualified
lien
16
created
in
this
section
is
not
required
to
be
recorded
in
order
17
to
preserve
the
rights
of
the
department
as
a
lien
holder.
18
4.
The
rights
of
the
department
under
the
qualified
lien
19
created
in
this
section
have
priority
over
all
subsequent
20
mortgages,
purchases,
or
judgment
creditors.
A
conveyance
21
after
the
decedent’s
death
of
the
farm
real
estate
does
not
22
discharge
the
qualified
lien.
However,
if
any
additional
tax
23
is
determined
to
be
owing
under
this
chapter
or
chapter
451
24
after
the
qualified
lien
has
been
released
under
subsection
25
5,
paragraph
“a”
,
subparagraph
(1)
or
(2),
the
qualified
lien
26
does
not
have
priority
over
subsequent
mortgages,
purchases,
27
or
judgment
creditors
unless
notice
of
the
qualified
lien
28
is
recorded
in
the
office
of
the
county
recorder
in
the
29
same
counties
where
the
inheritance
tax
qualified
exemption
30
statement
is
required
to
be
filed
pursuant
to
section
450.9A.
31
5.
a.
The
department
of
revenue
may
release
the
qualified
32
lien
by
filing
in
the
office
of
the
clerk
of
the
court
in
33
the
county
where
the
farm
real
estate
is
located,
where
the
34
decedent
owner
died,
or
where
the
estate
is
pending
or
was
35
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administered,
one
of
the
following:
1
(1)
A
receipt
in
full
payment
of
the
tax.
2
(2)
A
certificate
of
nonliability
for
the
tax
as
to
the
farm
3
real
estate
reported
in
the
estate.
4
(3)
A
waiver
of
the
qualified
lien
as
to
all
or
any
5
part
of
the
farm
real
estate
reported
in
the
estate,
which
6
shall
release
the
qualified
lien
as
to
the
farm
real
estate
7
designated
in
the
waiver.
8
b.
Upon
request,
the
department
shall
provide
a
person
with
9
a
copy
of
the
receipt,
certificate,
or
waiver.
10
Sec.
7.
Section
450.10,
subsection
6,
Code
2013,
is
amended
11
to
read
as
follows:
12
6.
a.
Property,
interest
in
property,
or
income
13
passing
to
the
surviving
spouse,
and
parents,
grandparents,
14
great-grandparents,
and
other
lineal
ascendants,
children
15
including
legally
adopted
children
and
biological
children
16
entitled
to
inherit
under
the
laws
of
this
state,
stepchildren,
17
and
grandchildren,
great-grandchildren,
and
other
lineal
18
descendants,
is
not
taxable
under
this
section
.
19
b.
Family
farm
property
is
exempt
from
tax
as
provided
in
20
section
450.9A.
21
EXPLANATION
22
BACKGROUND
——
INHERITANCE
TAX.
Code
chapter
450
imposes
an
23
inheritance
tax
on
real
estate
and
tangible
personal
property
24
located
in
this
state.
25
BACKGROUND
——
CONSANGUINITY
AND
AFFINITY.
Generally,
an
26
inheritance
tax
is
assessed
differently
upon
family
members
27
of
the
decedent.
An
individual’s
familial
relationship
is
28
classified
according
to
an
assigned
number
(degree)
that
29
separates
the
individual
from
an
ancestor
(consanguinity)
or
30
from
a
spouse’s
ancestor
(affinity).
In
either
case,
the
31
relationship
is
measured
lineally
where
one
person
is
ascending
32
from
an
ancestor
(father,
grandfather,
great-grandfather,
and
33
so
on)
or
descending
from
that
ancestor
(child,
grandchild,
34
great-grandchild,
and
so
on).
Alternatively,
the
relationship
35
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may
be
measured
collaterally
where
two
individuals
share
a
1
common
ancestor
but
not
by
linear
ascent
or
descent
(e.g.,
a
2
brother,
sister,
uncle,
or
cousin).
3
For
consanguinity,
the
first
degree
includes
a
parent
or
4
child;
the
second
degree
includes
a
grandparent,
sibling,
or
5
grandchild;
the
third
degree
includes
a
great-grandparent,
6
aunt
or
uncle,
niece
or
nephew,
or
great-grandchild;
and
7
the
fourth
degree
includes
a
great-niece
or
great-nephew,
8
great-aunt
or
great-uncle,
or
first
cousin.
For
affinity,
9
family
relationships
are
measured
on
the
spouse’s
side
in
the
10
same
manner.
11
CURRENT
INHERITANCE
TAX
——
RATES.
The
amount
of
inheritance
12
tax
assessed
on
property
in
Iowa
depends
upon
the
status
of
13
the
inheriting
person
and,
if
the
person
is
an
individual,
the
14
amount
of
that
individual’s
inheritance
share.
For
example,
15
for
property
passing
to
a
second
degree
family
member
(brother
16
or
sister,
or
son-in-law
or
daughter-in-law)
the
bottom
rate
17
is
5
percent
on
an
amount
up
to
$12,500
and
the
top
rate
is
18
10
percent
on
an
amount
in
excess
of
$150,000.
For
all
other
19
individuals,
the
bottom
rate
is
10
percent
on
an
amount
up
to
20
$50,000
and
the
top
rate
is
15
percent
on
an
amount
in
excess
of
21
$100,000.
A
for-profit
corporation
is
assessed
a
single
rate
22
of
15
percent.
23
CURRENT
INHERITANCE
TAX
——
EXEMPTIONS
FOR
INDIVIDUALS.
24
Currently,
an
individual
is
exempt
from
inheritance
tax
if
the
25
individual
is
related
to
the
decedent
as
a
spouse
or
stepchild;
26
as
a
lineal
ascendant
beginning
with
a
parent
(first
degree),
27
and
then
grandparent
(second
degree),
great-grandparent
(third
28
degree),
great-great-grandparent
(fourth
degree)
and
so
on;
or
29
as
a
lineal
descendant
beginning
with
child
(first
degree),
30
and
then
grandchild
(second
degree),
great-grandchild
(third
31
degree),
great-great-grandchild
(fourth
degree),
and
so
on.
32
BILL
——
PROPOSED
INHERITANCE
TAX
ON
FARM
REAL
ESTATE.
The
33
bill
exempts
(1)
a
person
inheriting
family
farm
property
34
within
the
second,
third,
or
fourth
degree
of
consanguinity
35
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or
affinity,
(2)
more
than
one
individual
where
the
divided
1
interest
is
shared
by
individuals
related
within
that
degree,
2
(3)
a
partnership
where
all
partners
are
related
within
that
3
degree,
or
(4)
a
family
farm
corporation
or
family
farm
limited
4
liability
company
(Code
chapter
9H)
where
equity
holders
are
so
5
related.
Family
farm
property
includes
farm
real
estate
of
10
6
acres
or
more
where
a
farming
operation
is
located
and
any
farm
7
machinery
and
equipment
used
in
the
farming
operation.
The
8
interest
in
the
farm
real
estate
must
pass
in
fee
simple.
9
BILL
——
SPECIAL
CLAW-BACK
PROVISION.
The
bill
requires
a
10
qualified
exemption
statement
to
be
filed
in
the
office
of
the
11
county
recorder
of
the
county
in
which
the
farm
real
estate
12
is
located,
with
a
copy
of
the
statement
delivered
to
the
13
department
in
lieu
of
the
tax
payment.
A
person
who
is
passed
14
the
family
farm
property
is
liable
for
the
inheritance
tax
if
15
the
person
conveys
the
farm
real
estate
to
a
person
who
is
not
16
related
within
the
fourth
degree
of
consanguinity
or
affinity
17
to
the
decedent
within
10
years
after
the
decedent’s
death.
18
The
department
is
required
to
assess
interest
on
the
amount
due
19
as
if
the
tax
was
delinquent.
20
BILL
——
QUALIFIED
LIEN.
The
bill
creates
a
qualified
21
lien
on
the
farm
real
estate
that
is
subject
to
the
family
22
farm
property
qualified
tax
exemption.
The
department
of
23
revenue
is
the
lienholder.
The
amount
of
the
qualified
lien
24
equals
the
amount
of
the
person’s
tax
liability
and
interest.
25
The
qualified
lien
is
based
on
a
current
lien
used
by
the
26
department
of
revenue
(Code
section
450.7).
The
qualified
27
lien
expires
after
a
person
eligible
to
make
an
election
for
a
28
qualified
exemption
is
no
longer
liable
for
the
tax.
29
BILL
——
APPLICABILITY.
This
Act
applies
to
estates
of
30
decedents
dying
on
or
after
July
1,
2013.
31
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