New state budget to end business inheritance tax

Pennsylvania’s new state budget will make it easier to sustain a family business after the owner dies.

Pennsylvania’s new state budget will make it easier to sustain a family business after the owner dies.

Gov. Tom Corbett signed a $28.4 billion state budget that would eliminate the inheritance tax on business assets. The supporting legislation seems on the verge of being passed. The House approved House Bill 48 on June 24 with a vote of 198-0 and it has moved on to the Senate for potential approval.

The stated goal of the tax cut is to help businesses survive the transition after a death and prevent the loss of jobs when bereaved owners are forced to sell assets to scrounge up the tax payment.

Locally, the tax change didn’t come soon enough for the Light family, which operates A to Z Vacuum in Wyomissing.

Ron Light, in his 70s, sold the business to his son Scott in December, in part because of fears of a big inheritance-tax hit should Ron die.

Scott Light said the business was assessed at $1.5 million. If he inherited it, it would generate an estate tax of $67,500, based on the 4.5 percent rate for passing assets to lineal heirs.

He said he has seen three businesses close because they had to pay the inheritance tax after the owners died.

“Businesses already pay plenty of taxes,” Light said. “Why do they have to take more?”

In Pennsylvania, family owned businesses comprised 36 percent of businesses that responded to the U.S. Census’ 2007 Survey of Business Owners. They employed 42 percent of everyone working for the responding companies.

The existing Pennsylvania inheritance-tax rate varies depending on the relationship of the heir to the deceased.

LVB Business Events

2019 Health Care Symposium

Thursday, August 01, 2019
2019 Health Care Symposium

2019 CFO of the Year Awards

Wednesday, September 11, 2019
2019 CFO of the Year Awards

HR Symposium

Wednesday, September 25, 2019
HR Symposium

2019 Fastest Growing Companies Awards

Wednesday, October 23, 2019
2019 Fastest Growing Companies Awards