I 
112TH CONGRESS 
2D SESSION 
H. R. 6271 
To amend the Internal Revenue Code of 1986 to exclude certain farmland 
and family-owned business interests from the value of the gross estate 
of decedents. 
IN THE HOUSE OF REPRESENTATIVES 
AUGUST 1, 2012 
Mr. TIPTON introduced the following bill; which was referred to the Committee 
on Ways and Means 
A BILL 
To amend the Internal Revenue Code of 1986 to exclude 
certain farmland and family-owned business interests 
from the value of the gross estate of decedents. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Family Farm and 
Small Business Tax Relief Act of 2012’’. 
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SEC. 2. EXCLUSION FROM GROSS ESTATE OF CERTAIN 
FARMLAND AND FAMILY-OWNED BUSINESS 
INTERESTS. 
(a) IN GENERAL.—Part III of subchapter A of chap-
ter 11 of the Internal Revenue Code of 1986 (relating to 
gross estate) is amended by inserting after section 2033 
the following new section: 
‘‘SEC. 2033A. CERTAIN FARMLAND AND FAMILY-OWNED 
BUSINESS INTERESTS. 
‘‘(a) IN GENERAL.—In the case of an estate of a de-
cedent to which this section applies, the value of the gross 
estate shall not include the adjusted value of— 
‘‘(1) qualified farmland, and 
‘‘(2) the qualified family-owned business inter-
ests, 
of the decedent otherwise includible in the estate. 
‘‘(b) ESTATES TO WHICH SECTION APPLIES.—This 
section shall apply to an estate if— 
‘‘(1) the decedent was (at the date of the dece-
dent’s death) a citizen or resident of the United 
States, 
‘‘(2) the executor elects the application of this 
section and files the agreement referred to in sub-
section (h), 
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‘‘(3) during the 8-year period ending on the 
date of the decedent’s death there have been periods 
aggregating 5 years or more during which— 
‘‘(A) the qualified farmland or the quali-
fied family-owned business interest, or both, as 
the case may be, was owned by the decedent or 
a member of the decedent’s family, and 
‘‘(B) there was material participation 
(within the meaning of section 2032A(e)(6)) by 
the decedent or a member of the decedent’s 
family in the operation of the qualified farm-
land or the business to which such interest re-
lates. 
‘‘(c) QUALIFIED FAMILY-OWNED BUSINESS INTER-
ESTS.—For purposes of this section— 
‘‘(1) ADJUSTED VALUE.—The adjusted value of 
any qualified family-owned business interest is the 
value of such interest for purposes of this chapter 
(determined without regard to this section), reduced 
by the excess of— 
‘‘(A) any amount deductible under para-
graph (3) or (4) of section 2053(a), over 
‘‘(B) the sum of— 
‘‘(i) any indebtedness on any qualified 
residence of the decedent the interest on 
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which 
is 
deductible 
under 
section 
163(h)(3), plus 
‘‘(ii) any indebtedness to the extent 
the taxpayer establishes that the proceeds 
of such indebtedness were used for the 
payment of educational and medical ex-
penses of the decedent, the decedent’s 
spouse, or the decedent’s dependents (with-
in the meaning of section 152), plus 
‘‘(iii) any indebtedness not described 
in subparagraph (A) or (B), to the extent 
such 
indebtedness 
does 
not 
exceed 
$10,000. 
‘‘(2) QUALIFIED FAMILY-OWNED BUSINESS IN-
TEREST
DEFINED.—The term ‘qualified family- 
owned business interest’ has the meaning given such 
term by section 2057(e). 
‘‘(d) QUALIFIED FARMLAND.—For purposes of this 
section, the term ‘qualified farmland’ means any real 
property— 
‘‘(1) which is located in the United States, 
‘‘(2) which is used as a farm for farming pur-
poses (as defined in section 2032A(e)), and 
‘‘(3) which was acquired from or passed from 
the decedent to a qualified heir of the decedent 
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which, on the date of the decedent’s death, was 
being so used by the decedent or a member of the 
decedent’s family. 
‘‘(e) TAX TREATMENT OF FAILURE TO MATERIALLY 
PARTICIPATE IN BUSINESS OR DISPOSITIONS OF INTER-
ESTS.— 
‘‘(1) IN GENERAL.—There is imposed an addi-
tional estate tax if, within 10 years after the date 
of the decedent’s death and before the date of the 
qualified heir’s death— 
‘‘(A) in the case of a qualified family- 
owned business interest— 
‘‘(i) the material participation require-
ments of subsection (b)(3)(B) are not met 
with respect to the qualified family-owned 
business interest which was acquired (or 
passed) from the decedent, 
‘‘(ii) the principal place of business of 
a trade or business of the qualified family- 
owned business interest ceases to be lo-
cated in the United States, or 
‘‘(iii) the qualified heir disposes of any 
interest in the qualified family-owned busi-
ness interest, other than by a disposition 
to a member of the qualified heir’s family, 
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‘‘(B) in the case of qualified farmland— 
‘‘(i) the qualified heir ceases to use 
the real property which was acquired (or 
passed) from the decedent as a farm for 
farming purposes, or 
‘‘(ii) the qualified heir disposes of any 
interest in qualified farmland, other than 
by a disposition to a member of the quali-
fied heir’s family, or 
‘‘(C)(i) the qualified heir loses United 
States citizenship (within the meaning of sec-
tion 877) or with respect to whom an event de-
scribed in subparagraph (A) or (B) of section 
877(e)(1) occurs, and 
‘‘(ii) such heir does not comply with the 
rules similar to the rules of section 2057(g) (re-
lating to security requirements for noncitizen 
qualified heirs). 
‘‘(2) ADDITIONAL ESTATE TAX.— 
‘‘(A) IN
GENERAL.—The amount of the 
additional estate tax imposed by paragraph (1) 
shall be equal to— 
‘‘(i) the applicable percentage of the 
adjusted tax difference attributable to the 
qualified family-owned business interest 
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(as determined under rules similar to the 
rules of section 2032A(c)(2)(B)), plus 
‘‘(ii) interest on the amount deter-
mined under clause (i) at the under-
payment rate established under section 
6621 for the period beginning on the date 
the estate tax liability was due under this 
chapter and ending on the date such addi-
tional estate tax is due. 
‘‘(B) 
APPLICABLE
PERCENTAGE.—For 
purposes of this paragraph, the applicable per-
centage shall be determined under the following 
table: 
‘‘If the event described in 
paragraph (1) occurs in 
the following year of 
material participation: 
The applicable 
percentage is: 
1 through 6 ..................................................................................
100
7 ...................................................................................................
8 ...................................................................................................
9 ...................................................................................................
10 .................................................................................................
20. 
‘‘(C) ADJUSTED
TAX
DIFFERENCE.—For 
purposes of subparagraph (A)— 
‘‘(i) IN GENERAL.—The adjusted tax 
difference attributable to a qualified fam-
ily-owned business interest is the amount 
which bears the same ratio to the adjusted 
tax difference with respect to the estate 
(determined under clause (ii)) as the value 
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of such interest bears to the value of all 
qualified family-owned business interests 
described in subsection (b)(2). 
‘‘(ii) ADJUSTED
TAX
DIFFERENCE 
WITH
RESPECT
TO
THE
ESTATE.—For 
purposes of clause (i), the term ‘adjusted 
tax difference with respect to the estate’ 
means the excess of what would have been 
the estate tax liability but for the election 
under this section over the estate tax liabil-
ity. For purposes of this clause, the term 
‘estate tax liability’ means the tax imposed 
by section 2001 reduced by the credits al-
lowable against such tax. 
‘‘(f) 
OTHER
DEFINITIONS
AND
APPLICABLE 
RULES.—For purposes of this section— 
‘‘(1) QUALIFIED
HEIR.—The term ‘qualified 
heir’— 
‘‘(A) has the meaning given to such term 
by section 2032A(e)(1), and 
‘‘(B) includes any active employee of the 
trade or business to which the qualified family- 
owned business interest relates if such employee 
has been employed by such trade or business 
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for a period of at least 10 years before the date 
of the decedent’s death. 
‘‘(2) MEMBER
OF
THE
FAMILY.—The term 
‘member of the family’ has the meaning given to 
such term by section 2032A(e)(2). 
‘‘(3) MATERIAL
PARTICIPATION.—The term 
‘material participation’ has the meaning given to 
such term by section 2032A(e)(6). 
‘‘(4) APPLICABLE RULES.—Rules similar to the 
following rules shall apply: 
‘‘(A) Section 2032A(b)(4) (relating to de-
cedents who are retired or disabled). 
‘‘(B) Section 2032A(b)(5) (relating to spe-
cial rules for surviving spouses). 
‘‘(C) Section 2032A(c)(2)(D) (relating to 
partial dispositions). 
‘‘(D) Section 2032A(c)(3) (relating to only 
1 additional tax imposed with respect to any 1 
portion). 
‘‘(E) Section 2032A(c)(4) (relating to due 
date). 
‘‘(F) Section 2032A(c)(5) (relating to li-
ability for tax; furnishing of bond). 
‘‘(G) Section 2032A(c)(6) (relating to ces-
sation of qualified use). 
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‘‘(H) Section 2032A(c)(7) (relating to no 
tax if use begins within 2 years; active manage-
ment by eligible qualified heir treated as mate-
rial participation). 
‘‘(I) Section 2032A(c)(8) (relating to 
qualified conservation contribution is not a dis-
position). 
‘‘(J) Paragraphs (1) and (3) of section 
2032A(d) (relating to election; agreement). 
‘‘(K) Section 2032A(e)(10) (relating to 
community property). 
‘‘(L) Section 2032A(e)(14) (relating to 
treatment of replacement property acquired in 
section 1031 or 1033 transactions). 
‘‘(M) Section 2032A(f) (relating to statute 
of limitations). 
‘‘(N) Section 2032A(g) (relating to appli-
cation of this section and section 6324B to in-
terests 
in 
partnerships, 
corporations, 
and 
trusts). 
‘‘(O) Section 2032A(h) (relating to special 
rules for involuntary conversions of qualified 
real property). 
‘‘(P) Section 2032A(i) (relating to ex-
changes of qualified real property). 
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‘‘(Q) Section 6166(b)(3) (relating to farm-
houses and certain other structures taken into 
account). 
‘‘(R) Subparagraphs (B), (C), and (D) of 
section 6166(g)(1) (relating to acceleration of 
payment). 
‘‘(S) Section 6324B (relating to special 
lien for additional estate tax).’’. 
(b) CONFORMING AMENDMENT.—Section 2032A of 
such Code is amended by adding at the end the following: 
‘‘(e) TERMINATION.—This section shall not apply 
with respect to decedents dying after December 31, 
2012.’’. 
(c) CLERICAL AMENDMENT.—The table of sections 
for part III of subchapter A of chapter 11 of such Code 
is amended by inserting after the item relating to section 
2033 the following new item: 
‘‘Sec. 2033A. Family-owned business exclusion.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to estates of decedents dying after 
December 31, 2012. 
SEC. 3. ESTATE TAX MADE PERMANENT. 
(a) IN GENERAL.—Title III of the Tax Relief, Unem-
ployment Insurance Reauthorization, and Job Creation 
Act of 2010 is amended by striking section 304. 
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