SIOUX FALLS, S.D. (CN) – During her time as South Dakota’s lone congresswoman, Rep. Kristi Noem has long told a tale about the Internal Revenue Service’s crushing “death tax” on her farming and ranching family shortly after her father’s untimely death. But court documents suggest Noem’s story is less a tale of the taxman cometh, and more about bungled estate planning.
“Ron Arnold did a will in 1976, and never updated it between 1981 and 1994,” said Robert Lord, a Phoenix tax attorney who has looked at probate documents of Noem’s father. “Based on better estate planning and the law in 1994, Kristi Noem’s family could’ve and should’ve had zero tax liability.”
Over 130 pages of estate files – released for the first time Wednesday to a statewide public-access database and reviewed by Courthouse News and two tax attorneys – reveal Noem’s family not only could have avoided an estate tax in 1994 with a simple update to her father’s will, but also would not pay any inheritance tax if Ron Arnold died today.
As congressional Republicans push to reform the tax laws and further diminish the specter of the federal “death tax,” Noem has been telling her story to national media as an example of a greedy, overburdening tax system. To Fox News, she called the estate tax “immoral.” She told the Huffington Post her father “had done estate planning, he had had a will completed, but he hadn’t gotten it signed before he was killed.”
But documents tell a different story: Ron Arnold did possess a will, signed in 1976, which gave half his estate to his wife Corinne and the other half to a trust managed by his brothers. And had Arnold updated his will prior to his death in 1994 to take advantage of the 1981 spousal exemption, Noem’s family wouldn’t have paid a dime of federal estate tax.
Lord, the tax attorney, says the Kemp-Roth Tax Cut of 1981 allowed a 100 percent deduction if the estate passed to a spouse. Had Ron Arnold updated his will accordingly, his estate could have passed tax-free to his wife.
In a statement to Courthouse News, Noem said, "For a decade after a tragic farming accident took my dad's life, the death tax impacted nearly every decision our family made. To allege anything else is fake news."
Court records show Ron Arnold was the proverbial farmer: cash-poor, but asset- and land-rich. He had an old GMC pickup, $2,000 in a checking account, and a $26 IOU to a Christian movie-rental company based in Utah.
But he also owned 400 head of cattle and over $200,000 in grain inventory. He’d also started buying land in and around Hamlin and Codington counties in the late 1970s. By 1994 when he died, he and Corinne owned nearly 10,000 acres.
“He died young, and at that age he was building up the land,” said Ryan Cwach, a South Dakota tax attorney. “We should expect him to be carrying quite a bit of land and operational debt.”
Arnold had an estate worth over $2 million, with about two-thirds of that leveraged by expenses. And on the estate, Noem’s family did indeed face an estate tax liability of $169,858.
“I can tell you right off the bat that she paid those taxes,” Noem’s spokeswoman Brittany Comins said Wednesday.