PENN STATE EXTENSION - As part of the 2012-13 budget package, there was a measure to exempt transfers of agricultural assets from the Pennsylvania inheritance tax when the receiving heir is a sibling or child of the deceased. It's part of House Bill 761. It appears to include forest reserves as eligible for the exemption.

Under current Pennsylvania law, children who inherit farm or forest land from their parents must pay a 4.5 percent inheritance tax. If the land is left to a sibling, the inheritor must pay a 12 percent inheritance tax in Pennsylvania. Landowners will still be liable for Federal estate tax which as you know will likely change by year's end.Section 23. 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.