Thune Questions Lew on Yet Another Obama Death Tax Proposal that Could Devastate South Dakota Family Farms

“…most farms…would not have the liquid assets to deal with that large of a tax bill, meaning the only way they would be able to pay Uncle Sam would be to break up the family farm and sell off portions of it…”

WASHINGTON, D.C.—U.S. Sen. John Thune (R-S.D.) today at a hearing before the Senate Finance Committee questioned U.S. Department of Treasury Secretary Jack Lew about the Obama administration’s proposal to institute a second death tax on South Dakota family farms and businesses. Thune offered an example of how the administration’s capital gains proposal will negatively impact family farms in South Dakota and called on the secretary to explain the intent behind their capital gains proposal.

Impact on South Dakota Farmers and Ranchers:

“[The administration’s] proposal, if enacted, would have a devastating impact on family farms and small businesses in my state of South Dakota. I want to give you an example… if you take a typical family farm that bought…640 acres back in 2000 for $640,000, which…in South Dakota that would be considered a small farm. Today that same farmland is probably worth somewhere between $3.5 million and $4.5 million, depending on where it’s located.

“So under the current estate tax law, which excludes assets up to $5.43 million, the family farm isn’t taxed when it passes from one generation to the next. Now under the administration’s proposal, this family farm would be hit with a significant tax when the family farm is transferred to the next generation of family members. …so in that example this South Dakota family would suddenly find themselves facing a tax bill of $1 million or more.”

Administration’s Intent Behind Capital Gains Proposal:

“…most farms of this size would not have the liquid assets to deal with that large of a tax bill, meaning the only way they would be able to pay Uncle Sam would be to break up the family farm and sell off portions of it…What is the administration’s intent with regard to this tax? If it is to break up family farms, obviously it is going to have that effect, or is it simply an unintended consequence of your interest in imposing yet another layer of taxation at death?”

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Thune, Brown Introduce Bipartisan Bill to Simplify Income Tax Collection for Individuals Working in Multiple States

-Bill would ease reporting burdens for employees and employers-

WASHINGTON, D.C. –U.S. Sens. John Thune (R-S.D.) and Sherrod Brown (D-Ohio), members of the tax-writing Senate Finance Committee, today introduced the Mobile Workforce State Income Tax Simplification Act, legislation that would simplify and standardize state income tax collection for employees who travel outside of their home state for temporary work assignments. The bill would also help employers who must file withholdings and reporting requirements. Currently, individuals and employers face up to 41 different state income tax reporting requirements that vary based on length of stay, income earned, or both.

“Our increasingly mobile workforce has created opportunities for businesses to grow and expand throughout the nation, but complex state tax reporting requirements place costly and time-consuming burdens on businesses with employees that work in multiple states,” said Thune. “Our legislation would establish a clear 30-day threshold test for state income tax purposes, preventing individuals from having to sort through complicated tax reporting burdens from the multiple states where they travel for work. This legislation will greatly simplify state income tax filings, is fairer to those residents in states without an income tax, and should help to encourage tax compliance.”

“This common-sense legislation will help simplify and standardize tax filing for employees and employers that conduct business in multiple states,” Brown said. “This is a great example of government working to reduce burdensome and confusing barriers to help ease the cost of doing business for employers and their workers.”

“Retailers welcome the introduction of this bill,” said National Retail Federation Vice President and Tax Counsel Rachelle Bernstein. “The current morass of state laws dealing with state income tax burdens for workers on business travel outside their home states creates confusion and undue compliance burdens for both employees and employers. This burden can be particularly onerous for the retail industry. Buyers for both large and small retailers frequently travel out of state to visit vendors or attend trade or fashion shows. Federal law to provide uniform rules for when these employees must file income tax returns in another state would greatly simplify this burden.”

“The current system is especially harmful to residents of states like South Dakota with no personal income tax, as these workers are forced to pay an out-of-pocket tax with no ability to obtain a home state credit or offset,” said Laura Coome, Executive Director of the South Dakota CPA Society. “This legislation would enhance compliance with state personal income tax laws and greatly simplify the onerous burdens placed on employees who travel outside of their resident states for temporary periods and on employers who have corresponding withholding and reporting requirements.”

“CPAs are extremely grateful to Senator Brown and Senator Thune for introducing Mobile Workforce legislation again in this Congress,” said Scott D. Wiley, CAE, president and CEO, The Ohio Society of CPAs. “It provides much-needed relief to businesses across the United States from the current web of inconsistent state income tax and withholding rules weighing down our nation’s employers and employees. This bill is an important step forward and extends the benefits businesses will see through a similar municipal income tax reform legislation passed in Ohio.”

While some states require state income tax filing for as little as one day of work in the state, the Mobile Workforce State Income Tax Simplification Act would establish a common-sense, 30-day threshold to help ensure that an equitable tax is paid to the state and local jurisdiction where the work is being performed while alleviating employees and employers from burdensome tax requirements.

The Mobile Workforce State Income Tax Simplification Act is supported by over 250 organizations and business groups.

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