Is a Family-Owned Businesses Exempt from PA Inheritance Tax?

By Shannon L. Crew

Pennsylvania’s Inheritance Tax applies generally to transfers resulting from a person’s death. The tax rate (ranging from 0% to 15%) depends on the recipient’s relationship to the decedent. Some transfers are exempt, and as of July 9, 2013, a new exemption was added (Act 52) concerning specified transfers in a qualified family-owned business.

The exemption has conditions regarding the (1) size of the business, (2) identity of the transferees and (3) length of time that an eligible transferee must own the interest. Basically, a qualified business must have fewer than 50 full-time employees and assets with a book value less than $5,000,000. The eligible transferees are the decedent’s spouse, lineal descendants, siblings, sibling’s lineal descendants, ancestors and ancestor’s siblings. A qualified transferee must continue to own the transferred interest for at least seven years after the decedent’s death. Otherwise, the exemption is lost and tax plus interest will be due.

For more in-depth information on this topic seePennsylvania Inheritance Tax Law Has New Exemption For Small Family Businesses