On July 10th, the Pa Department of Revenue published Inheritance Tax Bulletin 2012-01 setting forth inheritance taxation and valuation standards for OGM rights. Absent a bona fide sale, an appraisal or other credible evidence to the contrary, there are four valuation criteria. If the rights are leased and in production, they are to be valued in an amount equal to the royalties for the 12 months prior to owner’s death multiplied by two. If the properties are leased, but not in production, interests shall be valued at -0- unless at death, the properties generated fixed future payments in which case the fixed future payments are reduced to present value using IRS published actuarial values. Lastly, if the properties are non-leased and not in production, the value for death purposes shall be reported as -0-. I’ve abbreviated some of the bulletin, but all of it can be seen at www.revenue.state.pa.us
This isn’t the valuation method for gifts, but for an estimation of value and for estate planning it is long awaited guidance from Pa Revenue.
The week of July 9, 2012 Governor Corbett signed a bill into law that states upon death, farmer can pass the family farm down to children free of Pa Inheritance tax. This law will help keep the family farm together and allow the next generation to continue owning the farmland without having to pay out cash or borrow to pay Pa Inheritance Tax. Again, details can be found at www.revenue.state.pa.us. Note, however, that some family farmers should still engage in proper estate planning, particularly those with significant acreage in the various shale gas plays in Pennsylvania who may benefit from federal estate and tax planning.