Family Farms Exempted from PA Inheritance Tax

On July 2, 2012, Governor Tom Corbett signed legislation that, effective after June 30, 2012, exempts working farms and some related agricultural commodities from Pennsylvania Inheritance Tax.  

The Governor's Press Release was posted by PR Newswire under the title Pennsylvania Governor Tom Corbett Ends Burden for Farmers by Eliminating Inheritance Tax (07/01/12):

Pennsylvania farmers can now pass their farms on to their heirs without worrying they will have to pay steep "death taxes" to keep them in the family.

"The death tax has forced too many families to sell their legacy, their land and their way of life," said Governor Corbett. "This tax has put too many farms out of business because it was too expensive for farmers to pass them down to their children. This will happen no more. We intend to save our farms."

Previously when a landowner died, heirs to their farm property had to pay an inheritance tax of 4.5 percent if they were adult children and 12 percent if they were siblings of the deceased.

"The inheritance tax has been a burden on farm families for decades," said Agriculture Secretary George Greig. "By eliminating this tax, Governor Corbett solidified his commitment to Pennsylvania farm families, and to keeping farmers farming for generations. This law provides farmers the opportunity to save thousands of dollars in inheritance tax, allowing them to reinvest in their agricultural operations." * * *

There was some confusion whether the bill was signed into law on June 30th, when first announced, or later as a part of the budget bill signed by the Governor on July 2nd.  A Press Release by the Governor's Office issued on July 3, 2012, confirms that the relevant bill was signed on July 2nd.  However, the provisions related to this new exemption "shall apply to the estates of decedents dying after June 30, 2012."

The tax relief originally was introduced in the House as House Bill 1864, PN 2401, by Representative Stephen Bloom, of Cumberland County, PA, as sponsored by many other representatives.  That bill provided, simply:

Section 2111.  Transfers Not Subject to Tax.‑‑* * *

(s)  A transfer of an agricultural commodity, agricultural conservation easement, agricultural reserve, agricultural use property or a forest reserve, as those terms are defined in section 2122(a), to lineal descendants or siblings is exempt from inheritance tax.

The objectives of HB 1864 were supported by the Pennsylvania Farm Bureau, which provided testimony on October 17, 2011 to the PA House Finance Committee in support of Inheritance Tax reduction or elimination, including the proposed exemptions provided in HB 1864.  See: Testimony (PDF, 6 pages).

That Bill's objectives became incorporated into the omnibus budget bill, HB 761, PN 3894.  

This lineage was described by the House Republican Caucus in a posted article, Inheritance Tax Relief Measure Heads to Governor’s Desk (06/30/12):

A measure to end the financial burden of Pennsylvania’s inheritance tax on surviving farm family members has become part of the 2012-13 state budget package, which was sent to the governor tonight, said Rep. Stephen Bloom (R-Cumberland).

Bloom’s original bill, House Bill 1864, would exempt transfers of agricultural assets from the Pennsylvania inheritance tax when the receiving heir is a sibling or child of the deceased farmer. The exemption was incorporated into the omnibus Pennsylvania Tax Code bill (House Bill 761) by the Senate this week and passed finally by the House today.

“This measure will prevent the state from continuing to penalize farm families in Pennsylvania during a time when they are most economically vulnerable,” said Bloom. “By eliminating the death tax on transfers of ag assets, we can help farm families keep farming successfully in future generations.”

In addition, Bloom’s initiative would extend the new inheritance tax exemption to farm commodities, such as livestock and crops. It would also exempt from the death tax forest reserves that are passed along from a parent to a child or the parent’s brother or sister.

“This measure is a huge win for Pennsylvania farm families,” said Bloom. “Too many family farms have been divided up and sold when a loved one dies, because surviving family members are unable to pay the burdensome inheritance tax on their farm property.”

The House originally approved Bloom’s measure in December, on a 190-1 bipartisan vote. Companion legislation introduced by Sen. Dominic Pileggi (R-Chester/Delaware) was also amended into the Pennsylvania Tax Code, which was sent to the governor as part of the 2012-13 budget package tonight. * * *

Section 23 of HB 761, PN 3894, which became Act No. 85 of 2012, effective as of June 30, 2012, now provides, in part:

Section 2111 of the act is amended by adding subsections to read:

Section 2111.  Transfers Not Subject to Tax.‑‑* * *

(s)  A transfer of real estate devoted to the business of agriculture between members of the same family, provided that after the transfer the real estate continues to be devoted to the business of agriculture for a period of seven years beyond the transferor's date of death and the real estate derives a yearly gross income of at least two thousand dollars ($2,000), provided that:

(1)  Any tract of land under this article which is no longer devoted to the business of agriculture within seven years beyond the transferor's date of death shall be subject to inheritance tax due the Commonwealth under section 2107, in the amount that would have been paid or payable on the basis of valuation authorized under section 2121 for nonexempt transfers of property, plus interest thereon accruing as of the transferor's date of death, at the rate established in section 2143.

(2)  Any tax imposed under section 2107 shall be a lien in favor of the Commonwealth upon the property no longer being devoted to agricultural use, collectible in the manner provided for by law for the collection of delinquent real estate taxes, as well as the personal obligation of the owner of the property at the time of the change of use.

(3)  Every owner of real estate exempt under this subsection shall certify to the department on an annual basis that the land qualifies for this exemption and shall notify the department within thirty days of any transaction or occurrence causing the real estate to fail to qualify for the exemption. Each year the department shall inform all owners of their obligation to provide an annual certification under this subclause. This certification and notification shall be completed in the form and manner as provided by the department.

(s.1)  A transfer of an agricultural commodity, agricultural conservation easement, agricultural reserve, agricultural use property or a forest reserve, as those terms are defined in section 2122(a), to lineal descendants or siblings is exempt from inheritance tax. [Emphasis added.]

Act 85 includes some new definitions relevant to the exemptions:

Section 2102.  Definitions.‑‑The following words, terms and phrases, when used in this article, shall have the meanings ascribed to them in this section, except where the context clearly indicates a different meaning:

* * *

"Business of agriculture."  The term shall include the leasing to members of the same family or the leasing to a corporation or association owned by members of the same family of property which is directly and principally used for agricultural purposes. The business of agriculture shall not be deemed to include:

(1)  recreational activities such as, but not limited to, hunting, fishing, camping, skiing, show competition or racing;

(2)  the raising, breeding or training of game animals or game birds, fish, cats, dogs or pets or animals intended for use in sporting or recreational activities;

(3)  fur farming;

(4)  stockyard and slaughterhouse operations; or

(5)  manufacturing or processing operations of any kind.

* * *

"Members of the same family."  Any individual, such individual's brothers and sisters, the brothers and sisters of such individual's parents and grandparents, the ancestors and lineal descendents of any of the foregoing, a spouse of any of the foregoing and the estate of any of the foregoing. Individuals related by the half blood or legal adoption shall be treated as if they were related by the whole blood.

The effective date of the act is stated as follows in Section 30 (7) of the Act:  "The amendment or addition of sections 2102 and 2111(s) and (s.1) of the act shall apply to the estates of decedents dying after June 30, 2012."

Note: Thanks to Kathleen B. Murren, Esq., Professor, Legal Studies Chair, Legal Studies Department, Harrisburg Area Community College, for providing an initial inquiry to me, which led to my blog posting.

Dec. 31 Deadline for PA Tax Rebate Applications

This is a year-end message: December 31, 2010 is the deadline to file Property Tax/Rent Rebate claim forms (PA-1000) for those who are eligible to receive a rebate from the PA Department of Revenue based upon income and status. 

The Program is described at www.PaPropertyTaxRelief.com.  An application form can be downloaded from the PA Department of Revenue website.  Again, completed applications must be postmarked by Friday, December 31st to be considered.

For some Pennsylvania seniors, this is an important tax relief benefit, but one that must be sought through an application.  The Pennsylvania Property Tax / Rent Relief Program provides rebates up to $975 for PA homeowners, and up to $650 for PA renters, who meet its criteria.

The Property Tax/Rent Rebate program benefits eligible Pennsylvanians age 65 and older; widows and widowers age 50 and older; and people with disabilities age 18 and older.

The program expansion increased the income limit from $15,000 to $35,000 (which excludes half of Social Security income) for homeowners and raises the maximum rebate for both homeowners and renters from $500 to $650. The income limit for renters is $15,000.

The Program's recent expansion provides additional benefits to certain residents:

The program expansion also provides for supplemental property tax rebates of up to $325 – on top of the standard rebates – to homeowners in Philadelphia, Pittsburgh and Scranton; and to those in other parts of the state who pay more than 15 percent of income on property taxes. The Revenue Department automatically calculates supplemental rebates for qualifying homeowners.

The Program is described in a brochure available online.

On December 8, 2010, Governor Ed Rendell issued a Press Release entitled Governor Rendell Reminds Residents Of Dec. 31 Property Tax/rent Rebate Deadline, Free Application Assistance Available, urging those qualified for the rebates to apply by the deadline.  

The Press Release subtitle noted "Nearly 88,000 Eligible Older Adults, People with Disabilities Have Not Yet Applied."

“Nearly 619,000 seniors already applied for rebates this year, but we know there are about 88,000 more people who qualify but have not yet applied,” Governor Rendell said. “I encourage all Pennsylvanians to review the program’s criteria to consider if anyone they know may qualify for a rebate, and help those loved ones apply before the Dec. 31 deadline.”

In response to recent inquiries and complaints regarding fee-based Property Tax/Rent Rebate program application filing services offered privately, Governor Rendell reminded residents that free assistance is available at hundreds of locations across the state.

“It’s unfortunate that some companies charge fees to provide a service that the government and other agencies provide for free. Application forms and assistance are available at no cost from Department of Revenue district offices, local Area Agencies on Aging, senior centers and state legislators’ offices.”

Pennsylvania is providing a total of $772.5 million in property tax relief this year, including expanded rebates from the state’s Property Tax/Rent Rebate program for seniors and residents with disabilities and general property tax relief for all homeowners that was distributed through school districts this past summer.

“So far, these rebates helped to eliminate school property taxes for about 120,000 residents this year,” said Governor Rendell. “I don’t want any eligible person to miss out on this help to pay property taxes or rent.” * * *

The provided forms relate to the tax year 2009.  If past operations of the Department of Revenue predict the future, forms for the tax year 2010 will be mailed during the first quarter of 2011.  See: When will the 2009 Property Tax/Rent Rebate form be available? (Updated 09/15/2010), posted by the PA Department of Revenue.

An answer posted by the Department to another question -- Can I file a Property Tax/Rent Rebate for previous years? (Updated 09/15/2010) -- emphasizes the firmness of the coming deadline: "No. Once the deadline for filing has passed, you cannot file for a Property Tax/Rent Rebate for that year."

New PA Judicial Center Open for Occupancy

The newly-constructed Pennsylvania Judicial Center, located in the Capitol complex in Harrisburg, finally is receiving its new occupants.

According to a news report entitled "Judicial Center in Harrisburg built to last a lifetime" by Jan Murphy, published in The Patriot-News on December 27, 2008, the PJC was expected to be completed by April, 2009, after nearly three years in construction.

Construction began in 2006 on the 425,000-square-foot complex. It connects a five-story building at the west end that houses courtrooms and judges' chambers, with a nine-story office structure on the east.

The 15 employees who work for the judicial conduct board are expected to be the first to move into the building in June. Others will take up occupancy over the subsequent three months, he said. The Commonwealth Court will hold its first sessions there in September.

The center is built to accommodate more than 500 employees. It will bring together staff that are spread over a dozen locations in and outside the Capitol complex.

I watched weekly over the past few years as the PJC grew from skeleton to shell to shelter to shrine. I noted its construction progress twice in prior blog postings. See: PA EE&F Law Blog postings "PA Judicial Center Under Construction" (10/31/08) and "New PA Judicial Center Under Construction" (05/09/07).

A month ago, I saw its interior lights lit during business hours, and, while walking by, I peeked inside. For two views of its interior, see pictures of its lobby and courtroom posted by a contractor, McClure Company. For views of its exterior, see the PJC web page of the Pennsylvania Department of General Services.

Since mid-June, the PJC has been receiving occupants in staged moves. Today, I received notice that "the Commonwealth Court of Pennsylvania will move to the Pennsylvania Judicial Center" effective August 3, 2009. "Filings should be directed to the Court's new address" after that date, at its new address, 601 Commonwealth Avenue.

The moving schedule for court offices, boards, and agencies was posted on the web in a list of Pennsylvania Judicial Center Occupants (PDF, 2 pages), which listed the occupant, main office telephone, relocation date/timeframe, and new mailing address:

Continuing Legal Education Board
717-231-3250
Thursday, June 11 - Friday, June 12
Pennsylvania Judicial Center
601 Commonwealth Ave., Suite 3400
PO Box 62495
Harrisburg, PA 17106-2495

Court of Judicial Discipline
717-772-3771
Tuesday, June 16
Pennsylvania Judicial Center
601 Commonwealth Ave., Suite 5500
PO Box 62595
Harrisburg, PA 17106-2595

Client Security
717-231-9510
Thursday, July 9
Pennsylvania Judicial Center
601 Commonwealth Ave., Suite 5400
PO Box 62585
Harrisburg, PA 17106-2585

Administrative Office of Pennsylvania Courts
717-231-3300
Thursday, July 9 - Friday, July 10
Pennsylvania Judicial Center
601 Commonwealth Ave., Suite 1500
PO Box 61260
Harrisburg, PA 17106-1260

Commonwealth Court of Pennsylvania
717-255-1600
Monday, July 20 - Friday, August 14
Pennsylvania Judicial Center
601 Commonwealth Ave.
Harrisburg, PA 17120-0901

Board of Law Examiners
717-231-3350
Tuesday, September 15 - Wednesday, September 16
Pennsylvania Judicial Center
601 Commonwealth Ave., Suite 3600
PO Box 62535
Harrisburg, PA 17106-2535

Thrilled as I am, as a lawyer and local resident, about such a consolidation of court functions in a new, state-of-the-art building in the Capitol City, there is one aspect of sadness regarding the center's opening.

In October, 2003, when Governor Edward Rendell considered releasing funds for construction of the PJC, his action was urged by the vision of the new Supreme Court Chief Justice, Ralph J. Cappy, who had advocated, among others, for such a center. See: "Pennsylvania's newest Chief Justice to take on modernization of state courts" by Marylynne Pitz, published October 05, 2003, by the Pittsburgh Post-Gazette.

Consolidating the state courts' functions could happen if Gov. Ed Rendell releases the funds that would pay for the design and construction of a $123 million judicial center in Harrisburg. The money was set aside in the 2001-2002 budget. The state judicial center would have about 400,000 square feet and house about 400 employees. Vitteta, a Philadelphia-based architectural firm, was chosen for the project in January by the state Department of General Services.

The state judicial center would consolidate numerous court offices spread out over the state, allowing for the termination of office leases. * * *

Sadly, after retiring from the Pennsylvania Supreme Court in January, 2008, Ralph J. Cappy died unexpectedly at his Green Tree home on May 1, 2009 at age 65. See: "Ralph J. Cappy, Former Pennsylvania Supreme Court Chief Justice, dies at 65" (05/09), posted by Tributes.com; "Retired Supreme Court Justice Cappy dead at 65" (05/02/09) published by the Pittsburgh Tribune-Review; and "Obituary: Ralph J. Cappy / Retired Pennsylvania chief justice" (05/03/09) published by the Pittsburgh Post-Gazette.

He died one month before the new state occupants began arriving in the PJC.

When I enter that building sometime in the future, I will look for his name to be listed, among others, on a plaque prominently displayed in its foyer, as a testament to their vision.

Proposed Expansion of PA Medicaid Recovery

On Friday, May 1, 2009, Katherine Pearson (Professor of Law, Penn State Dickinson School of Law), as Chair of the Pennsylvania Bar Association's Elder Law Section, sent an email message alerting section members that, "[a]s part of a plan to implement Governor Rendell's proposed budget for the Commonwealth, legislation was introduced on April 28 that would significantly affect Medical Assistance (MA) Estate Recovery."

This legislative proposal would create far-reaching changes in the law -- not only for Medicaid recovery, but also for estate planning, real estate ownership & transfer, creditors' rights & lien priority, and fiduciary liability in estate & trust administrations. I hope that it is not reviewed lightly or superficially given these potential effects.

With her permission, I repost her alert.

In the key bill, House Bill 1351, at Section 1412 [See: Footnote 1, below], the proposal expands the ability of the Commonwealth to seek reimbursement of MA monies paid to/for a person 55 or older by giving the Commonwealth the right to make a claim against all real property, personal property and other assets in the deceased's probate estate, including any such property in which the deceased had "any legal title or interest at the time of death . . . including such assets conveyed to a survivor, heir, or assign of the deceased individual through joint tenancy, tenancy by the entireties, tenancy in common, survivorship, life estate, living trust or other arrangement.

Section 1412 further creates a lien on the property, that follows the property into any surviving party's hands, and establishes the Commonwealth's priority rights of repayment, with the potential for penalties on executors or administrators who fail to protect the lien.

Section 1412, subsection 10, seeks to restrict attorneys fees payable from an estate that is subject to the Commonwealth's lien.

HB 1351 also has provisions that affect calculations of eligibility for Medical Assistance because of payment of prior or "other" medical expenses, and that create new definitions.

This bill is likely to come to the floor of both houses very soon as part of the Governor's Omnibus Budget proposal, and will certainly be voted on before the end of the session, June 30.

* * *

Footnote 1:

This is the language of Sections 1412 and 1417 of the bill (HB 1351):

Section 1412. Repayment from Estates.—

(a) Notwithstanding any other provision of this act or any other law, the department shall establish and implement an estate recovery program to recover medical assistance paid with respect to individuals who were fifty-five years of age or older at the time that assistance was received. Under this program, the department shall recover from the estate of an individual the amount of medical assistance paid for all services provided to the individual. For purposes of this section, an individual's estate shall include all of the following:

(1) All real and personal property and other assets subject to inclusion within the deceased individual's estate under 20 Pa.C.S. (relating to decedents, estates and fiduciaries).

(2) Any other real and personal property and other assets in which the deceased individual had any legal title or interest at the time of death, to the extent of such interest, including such assets conveyed to a survivor, heir, or assign, of the deceased individual through joint tenancy, tenancy by the entireties, tenancy in common, survivorship, life estate, living trust or other arrangement.

(a.1) Liability for debt shall be as follows:

(1) If property subject to the department's claim is transferred without the department's claim being satisfied, then the executor or administrator transferring such property, if there is one, shall become liable to pay the department's claim.

(2) If property subject to the department's claim is transferred to the extent that the transfer is made without valuable and adequate consideration in money or something worth money at the time of the transfer and without the department's claim being satisfied, then the executor or administrator transferring such property, if there is one, and the person receiving such property shall become liable to pay the department's claim.

(3) If property subject to the department's claim is held by a person, including a cotenant, remainderman, or trustee, then the person holding such property is liable to pay the department's claim.

(b) The executor or administrator of the estate of a decedent who attained fifty-five years of age shall ascertain whether the decedent received medical assistance during the five years preceding death and, if so, shall give notice to the department to secure from the department a statement of the department's claim for medical assistance consistent with 20 Pa.C.S. § 3392(3) and (6) (relating to classification and order of payment). The department must submit its claim to the executor or administrator within forty-five days of receipt of notice or the claim shall be forfeited.

(c) This section shall apply notwithstanding the provisions of section 447.

(d) The department may administratively assess liability under this section. Any final order of the department determining liability under this section:

(1) Shall be a lien on the real and personal property of the individual in the manner provided by section 1401 of the act of April 9, 1929 (P.L.343, No.176), known as "The Fiscal Code."

(2) May be entered by the department in the manner provided by section 1404 of "The Fiscal Code."

(3) Shall continue and retain priority in the manner provided in section 1404.1 of "The Fiscal Code."

Note that the legislation places personal liability on any person, including a trustee, holding any interest that the Department of Welfare determines is subject to estate recovery. “If property subject to the department's claim is held by a person, including a cotenant, remainderman, or trustee, then the person holding such property is liable to pay the department's claim.” Under the legislation this liability is set by the Department of Public Welfare administratively rather than by a court. This could allow the Department to effectively limit the payment of personal representative, trustee, and attorneys fees payable from a decedent’s estate or trust.

Another section of the Bill also attempts to limit attorneys fees.

Section 1417. Limit on claim reduction.

In any action, claim, or settlement where the department is required to reduce its claim, on account of attorney fees incurred by a recipient in obtaining a recovery of cash or medical assistance for the department, the reduction shall not exceed twenty-five percent of the department's recovery.

Real Estate Tax: Reassessments Needed More Often

On April 29, 2009, the Pennsylvania Supreme Court unanimously held, in a Majority Opinion written by Chief Justice Castille in Clifton, et al. v. Allegheny County, Nos. 20 & 21 WAP 2007 (PDF, 53 pages), that "the base year method of property valuation, as applied in Allegheny County [PA], violates the Uniformity Clause. We therefore agree that a countywide reassessment is required."

A Concurring Opinion was filed by Justice Baer.

The Majority Opinion framed the issue on its first page:

The present appeals call for us to consider the constitutionality of Pennsylvania’s property assessment laws.1

Presently, the assessment laws of the Commonwealth neither require nor do they prohibit periodic property reassessments, and thus they permit real estate taxes to be levied on property values that are based upon a stagnant “base year market value” for an indefinite period of time. Allegheny County has adopted such a base year system.

In a thorough opinion and order, the Court of Common Pleas of Allegheny County, per the Honorable R. Stanton Wettick, Jr., found that, because a base year assessment method that does not require periodic reassessments inherently causes significant disparities in the ratio of assessed value to fair market value, the Commonwealth’s property assessment laws were facially unconstitutional as they violate the Uniformity Clause of the Pennsylvania Constitution, A.CONST. art. VIII, § 1, which requires equality of taxation. * * *

[Footnote 1: When referring generally to “assessment laws,” we are referring to the General County Assessment Law, 72 P.S. §§ 5020-1 to -602, the First Class County Assessment Law, 72 P.S. §§ 5341.1-5341.21, the Second Class County Assessment Law, 72 P.S. §§ 5452.1-5452.20, the Second Class A and Third Class County Assessment Law, 72 P.S. §§ 5342-5350k, and the Fourth to Eighth Class County Assessment Law, 72 P.S. §§ 5453.101-5453.107]

The Pennsylvania Supreme Court agreed with the trial court as to the unconstitutionality of an indefinitely-applied base year concept as proven in Allegheny County, but did not require, as did the trial judge, annual market reassessments of real estate for taxation purposes, instead leaving the crafting of a constitutionally-acceptable, countywide real estate tax assessment mechanism to the legislature.

[T]he Allegheny County scheme, which permits a single base-year assessment to be used indefinitely, has resulted in significant disparities in the ratio of assessed value to current actual value in Allegheny County.

The disparity is most often to the disadvantage of owners of properties in lower-value neighborhoods where property values often appreciate at a lower rate than in higher-value neighborhoods, if they appreciate at all. * * *

In beginning its examination of Pennsylvania's real estate tax assessment system, the Court reached all the way back to "ancient Egypt, Babylon, and Persia", through medieval England, and up to colonial America.

The Court examined the post-1982 real estate assessment system in Pennsylvania, when "the assessment laws governing the different counties were amended so as to allow counties to utilize either a current market value method or to adopt a base year market value method in arriving at the assessed value of each property in the county."

The ruling was reported on April 30, 2009, in an article entitled "Court orders county reassessment -- Justices say taxation system is 'broken'" by Karamagi Rujumba, published by the Pittsburgh Post-Gazette.

The court cited examples of what has happened to property taxes in the Woodland Hills School District since the county implemented its base-year system. Between 2002 and 2005, for example, the court showed that property values in Braddock declined by 16 percent while they went up by 35 percent in Edgewood.

Justice Max Bear wrote a concurring opinion as the court returned the case back to Common Pleas Court where it asked "the trial court to determine Allegheny County's progress in executing a county wide reassessment and to set a realistic time frame for its completion."

As a result, the justices wrote, "Allegheny County is currently left with a broken system of property taxation." * * *

"We find no ineluctable constitutional deficiency with the use of a base year system: it is only through the passage of time that a base year assessment will become stale, and thus unconstitutional," said the court.

The article noted that, "[s]o far, this ruling has no effect on any other county that has a base-year assessment system.

The Supreme Court nudged the Commonwealth's General Assembly for real estate tax reassessment reform:

It is not our charge to determine what may be the best system of assessment. Nor is this Court capable of fixing a point in time at which a base year automatically becomes unconstitutionally non-uniform.

As the trial court noted, the General Assembly is the appropriate place in the first instance to fashion a more comprehensive and soundly constitutional scheme. To that end, the trial court has provided a useful survey of the property assessment methods of our sister states, which shows that twenty-two of our sister states require annual reassessments, while twenty-six permit reassessments to be conducted at intervals over one year, though they still require periodic reassessment.

Pennsylvania is the only state where legislation allows the use of a base year indefinitely. * * *

The Court then issued its ruling:

Ultimately, our task is decisional, and Allegheny County is currently left with a broken system of property taxation.

In its effort to fashion a remedy, the trial court directed the Chief Assessment Officer of Allegheny County to conduct a reassessment no later than March 31, 2009, for use in the 2010 tax year, even if this Court had not yet issued a final order.

We agree that reassessment is required. However, recognizing that the passage of time may require adjustment by the trial court, we will remand this matter to the trial court to determine Allegheny County’s progress in executing a countywide reassessment and to set a realistic timeframe for its completion.

This case should nudge the Legislature to amend the assessment laws for reasonable, periodic countywide reassessments of property values used for real estate taxation.

New Attempts to Abolish PA Inheritance Tax

Pennsylvania's "death" taxes are again targeted for phase-out by some mid-state legislators. But given the grim economy both nationwide and statewide, their chances for success appear dim.

On February 28, 2009, the York [PA] Daily Record & Sunday News reported, in its article entitled 'Death tax' targeted by mid-state lawmakers, by Richard Fellinger, that "a] group of midstate House Republicans are trying to kill the so-called death tax -- or at least cripple it."

Rep. Will Tallman, R-Hanover, has sponsored a bill to eliminate the state inheritance tax this year. The tax is levied on taxable assets that change hands after someone's death.

Meanwhile, Rep. RoseMarie Swanger, R-Lebanon, is preparing to re-introduce a bill that would phase out the tax over the next several years. And Rep. Dan Moul, R-Adams, is pushing a bill that would exclude heirs from paying the tax on estates worth less than $250,000.

Tallman said the tax has to go because it puts a heavy burden on the families of farmers and small business owners after an owner dies.

"What is happening is we are really impairing the ability of businesses or farms to be transitioned to family members," Tallman said. * * * [Links added.]

Not mentioned in the article are other House and Senate bills also introduced in the 2009-2010 Legislative Session with similar long-term phase-out and repeal effects.

The Pennsylvania Farm Bureau lists "Reduction or Elimination of State Inheritance Tax on Farms " as one of its ten key legislative concerns affecting farmers in the Commonwealth.

Pennsylvania’s inheritance tax imposes significant burdens on the ability of farm families to financially manage the transition of farms between generations.

Unlike federal estate tax, state inheritance tax laws essentially impose tax on the first dollar of value of an estate passing from a deceased family member to another family member.

Children who receive a $500,000 farm through death of the parent will be required to pay $22,500 in inheritance taxes.

Payment of the tax is required to be made in cash. If the farm business does not have available cash, the farm family will need to sell off farm assets to pay the tax, with no guarantees that the family will receive a price from the sales of assets that equals what these assets are truly worth.

If land needs to be sold to pay for the tax, succeeding generations will receive farms that are less productive and are less likely to be viable in the future. * * *

That calculation ignores availability of the special rules applying to the valuation of farmland, which are described on page 9 in the Instructions to Schedule A of the REV-1500 (PA Inheritance Tax Return for a Resident Decedent) regarding "Special Farm Use Valuation."

Under Section 9122 of the Inheritance and Estate Tax Act of 1991, land devoted to agricultural use, agriculture reserve or forest reserve may be eligible for preferential assessment measured by particular use, rather than by fair market value. assessments.

If you elect to use this method of valuation, the special use valuation under the Pennsylvania Farmland and Forest Land Assessment Act of 1974, 72 P.S. §5490.1, et. seq. must be reported. You will also be required to submit fair market value appraisals of the residential property, farm outbuildings and agricultural property so that a proper valuation may be made if the special use is discontinued or if the property does not meet all requirements. * * *

Pennsylvania's "Special Farm Use Valuation" provisions differ from the special valuation rules for farms under the Federal Estate Tax. See: Pamphlet, The Pennsylvania Inheritance Tax in Comparison with the Federal Estate Tax (PDF, 2 pages) published & posted by the Pennsylvania Institute of Certified Public Accountants.

But this already-available valuation advantage is not the reason why termination of the Pennsylvania Inheritance Tax likely will not occur any time soon. State budget concerns likely will rule instead, as in the past. See: PA EE&F Law Blog postings "House Passes Bill Abolishing PA Death Taxes" (01/18/08) and "Repeal PA Inheritance Tax?" (11/16/06).

This continuing reality was noted in the recent York Daily article:

As unpopular as the tax is with some conservatives, eliminating it will be a challenge with state revenues on the decline. Gov. Ed Rendell has predicted a $2.3 billion budget shortfall this year.

Last year the inheritance tax brought in $828 million for the state, and this year it was projected to raise $849 million, but collections are down.

As of Jan. 31, the state collected $450 million from the inheritance tax, which is $46.9 million below estimate, according to the Revenue Department.

Swanger introduced her bill to phase out the tax last term, but it languished. She acknowledged it's a longshot this year with the state facing revenue problems.

"But it's something my constituents want done away with, so I'm willing to introduce it," she said. * * *

These are the presently pending House or Senate bills that would affect application of the Pennsylvania Inheritance Tax and the Pennsylvania Estate Tax:

• Senate Bill 80, introduced by Senator ALLOWAY

• House Bill 175, introduced by Representative MOUL

• House Bill 374, introduced by Representative TALLMAN

• House Bill 423, introduced by Representative PETRI

• House Bill 635, introduced by Representative SWANGER

Also noteworthy is House Bill 577, introduced by Representative ADOLPH , which would exempt certain disabled persons from payment of PA Inheritance Tax.

Stealing Houses by Words and Deeds

On December 8, 2008, the new Uniform Municipal Deed Registration Act took effect in Pennsylvania, providing a more timely process for recording deeds in counties and also for registering deeds in local municipalities.

Its purpose is to counteract land fraud by requiring prompt public recording of land transfer documents and by allowing municipalities to set additional local requirements in a uniform manner.

The PA UMDRA was signed into law on October 9, 2008 as Act 110 of 2008 (formerly H.B. 1634, P.N. 4003). It establishes uniform procedures for a local municipality to provide a registry for deeds or conveyances in addition to the recording of documents with a county recorder of deeds. A municipality cannot require a county to effect a parallel municipal registration of such documents, but a municipality and a county's recorder of deeds may enter into an agreement whereby the county will share information regarding conveyances of property.

The Intelligencer (Philadelphia, PA) published an article on December 24, 2008, entitled "New law helps limit deed fraud" by Amanda Cregan, who quoted the Montgomery County Recorder of Deeds as to the new law's effect:

Montgomery County Recorder of Deeds Nancy J. Becker says the new law not only streamlines the process among municipalities and counties, but also protects the new homeowner.

“We're really delighted because, if for any reason, if there is a delay in recording a deed, the possibility of fraud being committed against that property increases,” said Becker, in her fifth year in office. “If people aren't paying attention and deeds aren't being recorded in a timely fashion, then things can happen.”

In the gap between when a homeowner purchases a home and when the deed is recorded, a thief can obtain a copy of that deed and have it transferred fraudulently. * * *

Land fraud, based on bogus conveyancing documents, can occur. See: "Scam Alert: Bad Deeds" by Sid Kirchheimer, published in the AARP Bulletin (Dec., 2008), as reposted online by the Montgomery County Recorder of Deeds Office.

Retransfer of The Empire State Building, in New York City, took only ninety minutes, as reported by The New York Daily News in "It took 90 minutes for Daily News to 'steal' the Empire State Building" (12/02/08) by William Sherman.

In one of the biggest heists in American history, the Daily News "stole" the $2 billion Empire State Building.

And it wasn't that hard.

The News swiped the 102-story Art Deco skyscraper by drawing up a batch of bogus documents, making a fake notary stamp and filing paperwork with the city to transfer the deed to the property. * * *

The massive ripoff illustrates a gaping loophole in the city's system for recording deeds, mortgages and other transactions.

The loophole: The system -- run by the office of the city register -- doesn't require clerks to verify the information. * * *

"Crooks go where the money is. That's why Willie Sutton robbed banks, and this is the new bank robbery," said Brooklyn Assistant District Attorney Richard Farrell, who is prosecuting several deed fraud cases. * * *

One Pennsylvania city, Philadelphia, experienced so many land fraud cases, its Council and Mayor acted to curb abuse. According to "Philadelphia City Council Amends Deed Recording Standards " (08/08/08) posted by the PA Notary Blog, hosted by the Pennsylvania Association of Notaries, "as of April 2008, Philadelphia had received 454 reports of suspected land fraud since 2000."

Philadelphia City Council unanimously passed a bill that amends Title 2 of the Philadelphia Code.

The amendment adds a new chapter providing that prior to the recording of any deed, a check of record ownership must be conducted by the Department of Records.

Appropriate documentation must be submitted to the Department with certain deeds for the delivery of deeds to the Department of Records must meet certain requirements. Finally, the record owner must be notified prior to the recording of any deed. * * *

Mayor Michael Nutter signed the bill on Aug. 14, and the ordinance will go into effect on Nov. 3 [, 2008]. * * *

See also: "Philadelphia Changes Deed Recording Requirements" (11/04/08) posted on the notaries' blog.

PA's new Act was noted by The Home Equity Theft Reporter in a posting on December 28, 2008, entitled "New Pennsylvania Law To Make It Tougher For Deed Theft Scammers To Heist Homes."

For consumers or fiduciaries, however, the new law should be transparent in effect, according to The Intelligencer's article:

Homeowners shouldn't worry about the new changes, said Bucks County Recorder of Deeds Edward R. Gudknecht.

“Most of the time your title companies and the attorneys that deal in real estate will make sure this is followed through,” he said.

PA Judicial Center Under Construction

On the redesigned website of the Pennsylvania Unified Judiciary, one web page is dedicated to the Pennsylvania Judicial Center presently under construction at 601 Commonwealth Avenue, in Harrisburg, PA.

According to the PA Department of General Services, the Pennsylvania courts' new centralizing facility will open in Summer, 2009. I previously noted its construction when the steel was being installed. See: PA EE&F Law Blog posting "New PA Judicial Center Under Construction" (05/09/07).

The PA Unified Judiciary's website describes the facility as follows:

The Pennsylvania Judicial Center, located in Harrisburg's historical Capitol Complex, will serve as the administrative center for Pennsylvania's Unified Judicial System. It will contain office space for more than 500 employees, three Commonwealth Court courtrooms and a conference and training center.

Occupants of the judicial center will include the Supreme Court Middle District prothonotary, the executive administrator of the Supreme Court, the Superior Court Middle District prothonotary, the Commonwealth Court, the AOPC and various Supreme Court boards and committees. The Judicial Conduct Board and the Court of Judicial Discipline will also have offices in the center.

Construction on the project began in 2006. The center is expected to open in mid-2009.

The center was designed by the Philadelphia architectural and engineering firm Vitetta.

According to the website of JBC Associates, Inc., which is involved in managing construction, the facility will have three major areas:

The new 423,600 SF state judicial center has three major areas planned including

• a 9 story tower which will house office and conference rooms for judges and their staff,
  
• a 5 story wing which will house three courtrooms, judges’ chambers and other administrative space and
  
• an additional information support area with underground parking.

The exterior façade will be wrapped in limestone and glass that will open onto 7th Street. * * *

The facility will become home to the Administrative Office of Pennsylvania Courts, which anticipates the move, as noted in a description on its website:

The Administrative Office of Pennsylvania Courts, often referred to by its acronym as AOPC, is the administrative arm of the Pennsylvania Supreme Court. This office was established in 1969 to assist the court in operating the Pennsylvania court system.

The AOPC is headed by the Court Administrator of Pennsylvania. Its departments include Policy and Research, Judicial Services, Judicial Education, Judicial Programs, Judicial Automation, Judicial Security, Legal, Finance, Human Resources, and Communications and Legislative Affairs.

The AOPC has offices in Mechanicsburg and Philadelphia, but soon will be based in the new state Judicial Center on Capitol Hill in Harrisburg. [Emphasis added.]

For more photos of the PA Judicial Center during its construction progress, see:

• PA Department of General Services' webpage on the Judicial Center

• Chris Bucher's Photostream on Flickr, with photos taken 04/05/08
  

* * *
"We shape our buildings; thereafter they shape us."

-- Winston Churchill

Update: 07/10/09:

The Pennsylvania Judicial Center is open for occupancy. See: PA EE&F Law Blog post "New PA Judicial Center Open for Occupancy" (07/10/09).

Slump's Serious Repercussions for Seniors

On October 1, 2008, the Urban Institute issued a Press Release entitled "How Is the Economic Turmoil Affecting Older Americans?" announcing a "Fact Sheet" of the same name prepared by Richard W. Johnson, Mauricio Soto, & Sheila R. Zedlewski.

In the "Fact Sheet: How Is the Economic Turmoil Affecting Older Americans?"(PDF, 12 pages), the authors examined the impact of recent economic woes on seniors, as summarized in the Report's Introduction:

The slumping stock market, falling housing prices, and weakening economy have serious repercussions for the 94 million Americans age 50 and older who are approaching retirement or already retired.

Retirement accounts lost about 18 percent of their value over the past 12 months, and between January 2007 and May 2008, housing prices fell from 4 to 20 percent depending on where seniors live.

Older Americans have little time to recoup the values of their homes, 401(k) plans, and individual retirement accounts — all important parts of their retirement nest eggs. More and more older Americans are working to bolster their retirement incomes, but the rising unemployment rate, now 6.1 percent, limits their prospects.

This fact sheet examines the impact of the ongoing economic turmoil on retirement savings, home values, and retirement decisions. * * *

The Fact Sheet noted the serious repercussions of the steep decline in stock market values that occurred during the past year, which accelerated during the past month, because most retirements accounts contain many stocks, now far lower in value:

The stock market lost 27 percent of its value between September 30, 2007 and September 30, 2008, a roughly $7 trillion drop.

The loss has reduced the retirement savings of many Americans, particularly older adults. * * *

• Forty-nine percent of households ages 50 and older own retirement accounts. Seventy-nine percent of these accounts include stock holdings.
• The typical retirement account of households ages 50 and older invests 50 percent of its assets in stocks. However, households ages 70 and older hold much less in stocks, reducing their exposure to market fluctuations. * * *
  

The authors considered aspects of the decline in investments that supported seniors' retirement plans, with statistics:

• How Much Have Retirement Accounts Fallen?
• How Are Different Age Groups Affected?
• How Much Do Households Hold in a Typical Retirement Account?

Then the authors considered how the simultaneous decline in home prices will affect seniors' retirement plans, by addressing these questions:

• Does home equity represent a large share of older adults’ wealth?
• How has housing wealth changed for older adults?
• What is the importance of home equity in retirement?
• Are reverse annuity mortgages a good way to shore up retirement incomes?

Finally, the authors turned to employment of older workers as a means of shoring up retirement plans:

The plummeting value of retirement assets –– housing, pensions, and other savings –– could force more older adults to delay retirement and remain at work and could encourage some retirees to return to work.

At the same time, contracting credit markets could weaken the labor market, limiting employment opportunities for older adults. * * *

These are their specific questions about employment:

• How will the financial crisis affect retirement decisions?
• How will the credit crunch affect jobs?
• Are older workers likely to lose their jobs?
• Will older adults find new jobs?
• How does unemployment at older ages affect retirement income security?

The Urban Institute's conclusions are reflected in personal stories reported recently by various publications, including:

• "Baby Boomers Scramble to Reassess Future: What to do when your retirement disappears before your eyes" (10/20/08), by Mark Huffman posted by Consumer Affairs.

• "Savings Hit Hard by Economic Meltdown, Elderly Wait and Worry" (10/16/08) by Rebecca Spence posted on The Jewish Daily Forward.
  

• "Seniors Hit Hard by Financial Crisis: Collapsing home prices, tight credit, dwindling investment income a lethal brew" (09/21/08) by James R. Hood posted by Consumer Affairs.

AARP, based in Philadelphia, PA, also has posted excellent articles about seniors facing an economic downturn.

• "A Matter of Life and Debt" (Oct. 2007) by Carole Fleck October 2007 posted in the AARP Bulletin Today

• "Bear Market Makes Boomers Wary as Retirement Draws Near" (07/15/08) by Gail Marks Jarvis, reposted from The Baltimore Sun
  

• "Top Questions Members Are Asking AARP About the Current Financial Crisis" (10/20/08) by Carole Fleck posted in the AARP Bulletin Today

Probably the best article that I've read on the subject appeared in The New York Times on September 22, 2008, entitled "Retirees Filling the Front Line in Market Fears" by John Leland & Louis Uchitelle, who note that "Older Americans with investments are among the hardest hit by the turmoil in the financial markets and have the least opportunity to recover."

This is pretty depressing news. It must be met with personal tenacity and a will to survive.

“Tenacity is a pretty fair substitute for bravery,
and the best form of tenacity I know
is expressed in a Danish fur trapper's principle,
'The next mile is the only one a person really has to make.'”

-- Eric Sevareid (American Journalist, 1912-1992)

New Online Senior Housing Locator

On July 21, 2008, the National Association of Area Agencies on Aging (n4a) introduced a new "online navigational tool to help older adults search for senior housing, no matter where they live." The resource was described in n4a's Press Release, entitled "National Association of Area Agencies on Aging rolls out nationwide senior housing resource during annual meeting in Nashville."

Powered by SNAPforSeniors®, the Senior Housing Locator makes objective, nationwide information available 24-hours a day, seven days a week through the convenience of the Internet.

Consumers and professionals alike will now have access to the n4a Senior Housing Locator through a link on n4a.org.

The tool allows users to search a database of more than 60,000 senior housing listings, including all licensed senior housing in the nation.

Member Area Agencies on Aging (AAAs) and Title VI Native American Aging Programs will be invited to add a link to the tool or use a version co-branded for their own website.* * *

The Press Release explained how the Senior Housing Locator is similar to the existing Real Estate Multi-Listing Service maintained by Realtors®, but is targeted towards the specific needs of senior citizens as residents, and Aging Agencies as facilitators searching for appropriate facilities.

It is a free service "developed by SNAPforSeniors, representing another example of cooperative relationships among the aging network and private sector organizations." It is devoid of advertising, however, which suggests a more trustworthy service.

The Senior Housing Locator is similar to the real estate industry’s Multiple Listing Service, and functions much like a traditional search engine.

Users can search a database of assisted living communities, nursing homes, residential care facilities, continuing care retirement communities and a growing list of independent living communities, all at the click of a mouse.

Many listings provide information about care services, lifestyle amenities, payment options and more, with some including photo galleries and virtual tours. * * *

Eve Stern, RN, MS, president of SNAPforSeniors, [said] * * * “[T]he fact that all licensed communities are included eliminates the bias that referral services and advertising-based listing services exhibit.”

The varieties of licenced housing available to senior citizens in the various states make searching confusing, and the new search resource attempts to sort out the facility types:

There are 247 different senior housing license types in the United States. According to SNAPforSeniors, the inconsistency from state-to-state is a common source of confusion when it comes to finding housing in another area.

To help remedy this, the n4a Senior Housing Locator provides definitions for all 247 license types. Medicare certified facility listings also include a link directly to that facility’s quality report on Nursing Home Compare.* * *

About a week later, the new senior housing online search resource was promoted in a Press Release entitled "Society of Certified Senior Advisors introduces comprehensive online resource to clients in need of senior housing" (07/29/08) issued by the Society of Certified Senior Advisors®, of Denver, CO, the world’s largest membership organization educating and certifying professionals who serve seniors.

Its immediate involvement is an example of the "co-branding" offered and sought by n4a.

Through the Alliance Network Program, SNAPforSeniors licenses and private-labels its database and search tools to the websites of leading trusted sources, including the Alzheimer's Association and the Case Management Society of America. * * *

For more information about SNAPforSeniors, read its "Frequently Asked Questions" online. It is listed in Google's online "Senior Living Directories and Helps" that offers additional online resources.