- I recently had the opportunity to speak with Congressman Tim Bishop
who represents New York's First Congressional District which spans the eastern end of Long Island from Smithtown to Montauk Point.
The subject of our discussion was H.R.1593, a bill introduced to Congress by Congressman Bishop and co-sponsor Congressman Richard Hanna
of the 24th Congressional District in up-state New York.
Congressman, what is the purpose of this bill and what motivated you to introduce it?
I, my wife Kathryn
and our daughters Molly
, are among the 12th generation of Bishops to have lived in Southampton. Last year we welcomed our first grandchild, Nathan
. The purpose of this bill is to preserve a heritage, a way of life that I enjoyed growing up picking potatoes on our family farm in Sagaponack. That property has since been developed. The preservation of open space, which this bill addresses, is a way to protect that heritage.
How does this bill help achieve that, Congressman?
It utilizes the Federal Tax Code to defer the payment of transfer taxes by a decedent's estate on properties that have agricultural and/or conservation value as defined within the Tax Codes. It is voluntary, and can only be elected at time of death, gift, or other occasion that triggers a transfer tax. It is also irrevocable. A Transfer Tax Exclusion is included in the usual transfer tax return. The Internal Revenue Service has a lien against the property that runs with the land. As long as the land is used consistent with the recorded covenant, no transfer tax is due. That applies to successors of interest as well. Fundamentally, it provides the owners and successors of interest with a way to keep farmland and land of conservation value intact in the face of onerous Federal estate and other transfer taxes.
Congressman, please distinguish, for purposes of this bill, the difference between "highest and best use" and "current use."
It is a very important distinction. As you are aware, highest and best use refers to the most profitable use to which the property can be put, typically residential or commercial purposes. Current use refers to the value of the property based on its actual use at the time the transfer tax is triggered. It's current use or purpose could include a farm, wildlife habitat, or historic open space. The Tax Code taxes on the highest and best use."
In other words, Congressman, the owner is being taxed based on a benefit he is not receiving.
That is correct. This has caused the conversion of highly appreciated farmland and other land of conservation value to residential and commercial development. This bill recognizes that essential difference and addresses it.
It seems self-evident, Congressmen, that the preservation aspects of this legislation have much broader application. Would you please articulate what you see some of those to be?.
Absolutely! At a time when transportation costs climb, the importance of regional food production, watershed areas and recreational opportunities near major metropolitan areas could not be greater. This bill would transform Federal estate tax policy from a cause of land conversions to a land-based incentive program for conservation.
What do you see as the prospects for this bill making it through the congress Congressman?
This is the fifth session of Congress that I have introduced this bill, this time with Representative Richard Hanna from upstate New York. He has been a wonderful ally. In the current political environment, I am not encouraged that it will pass, but I will continue to fight for it.
Thank you, Congressman Bishop for giving so generously of your time and for your continuing efforts to help preserve our heritage.
Congressman Bishop has referenced H.R. 1593, U.S. Code S.2032A (e), and I.R.S. Code, Section 170 (h) in his discussion.
: John will be teaching a 22.5 hours Real Estate Continuing Education classes at Long Island University in Riverhead on October 10, October 12 and October 14. For information and registration contact Rosemary Malone at 631-287-8334 or by email at firstname.lastname@example.org.
John is a St. John's University graduate, licensed Real Estate broker, lecturer, teaches real estate license classes at LIU and NYU, and acts as a consultant to the real estate industry. www.johnaviteritti.com