Sangamon Sun

House Republicans have been working to reduce or eliminate the estate tax, often referred to as the "Death Tax," with over six bills introduced since the Spring 2023 legislative session. Despite Governor JB Pritzker expressing that reducing the estate tax is among his "shared priorities," Democrats have not yet addressed any legislation aimed at protecting family farms.

The estate tax, also known as an inheritance tax in some states, is levied on a deceased person's estate after all private sector debts are settled. In Illinois, this tax is part of the probate process. The Illinois Estate Tax applies a sliding-scale rate and excludes certain amounts from taxation. Since January 1, 2013, the exclusion amount has been set at $4 million.

In contrast, the federal exclusion amount is adjusted for inflation and was $12.06 million in 2022, increasing to $12.92 million in 2023. Without changes to federal law, this exclusion will be halved in 2026 due to a sunset provision. Currently, only 17 states impose an estate or inheritance tax; Iowa plans to phase out its inheritance tax by 2025.

Approximately 70,000 families own and operate most of Illinois' farms and face challenges regarding succession planning due to the estate tax's impact. The potential consequences may force families into strategies like gifting or leasing.

The risk of family farms and small businesses closing or relocating due to this tax is significant. Neighboring states such as Indiana, Missouri, and Wisconsin do not impose an estate or inheritance tax; Iowa's will soon be eliminated.

Research shows that annually Illinois farmers must sell land and business owners must liquidate assets when faced with disability or death-related situations. The concern remains that these entities could be lost because of the estate tax burden.