Bill Text: NJ S2776 | 2014-2015 | Regular Session | Introduced
Bill Title: Exempts transfers of property to Class C beneficiaries from transfer inheritance tax and increases filing threshold and applicable exclusion amount under estate tax to $5,000,000 over five-year period.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced - Dead) 2015-03-09 - Introduced in the Senate, Referred to Senate Budget and Appropriations Committee [S2776 Detail]
Download: New_Jersey-2014-S2776-Introduced.html
Sponsored by:
Senator ANTHONY R. BUCCO
District 25 (Morris and Somerset)
SYNOPSIS
Exempts transfers of property to Class C beneficiaries from transfer inheritance tax and increases filing threshold and applicable exclusion amount under estate tax to $5,000,000 over five-year period.
CURRENT VERSION OF TEXT
As introduced.
An Act exempting transfers of property to Class C beneficiaries from the transfer inheritance tax and increasing the filing threshold and applicable exclusion amount under the estate tax to $5,000,000 over a period of five years, amending R.S.54:34-2 and R.S.54:38-1.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. R.S.54:34-2 is amended to read as follows:
54:34-2. a. (1) The transfer of property to a husband or wife, or a domestic partner as defined in section 3 of P.L.2003, c.246 (C.26:8A-3), of a decedent shall be taxed at the following rates:
For transfers made through December 31, 1984:
On any amount in excess of $15,000.00, up to $50,000.00 .........2%
On any amount in excess of $50,000.00, up to $100,000.00 .......3%
On any amount in excess of $100,000.00, up to $150,000.00 .....4 %
On any amount in excess of $150,000.00, up to $200,000.00 .....5%
On any amount in excess of $200,000.00, up to $300,000.00 ......6%
On any amount in excess of $300,000.00, up to $500,000.00 ......7%
On any amount in excess of $500,000.00, up to $700,000.00 ......8%
On any amount in excess of $700,000.00, up to $900,000.00 ......9%
On any amount in excess of $900,000.00, up to $1,100,000.00....10%
On any amount in excess of $1,100,000.00, up to $1,400,000.00....11%
On any amount in excess of $1,400,000.00, up to $1,700,000.00....12%
On any amount in excess of $1,700,000.00, up to $2,200,000.00....13%
On any amount in excess of $2,200,000.00, up to $2,700,000.00....14%
On any amount in excess of $2,700,000.00, up to $3,200,000.00....15%
On any amount in excess of $3,200,000.00 ................................16%
For transfers made on or after January 1, 1985 there shall be no tax imposed under this paragraph.
(2) The transfer of property to a father, mother, grandparent, child or children of a decedent, or to any child or children adopted by the decedent in conformity with the laws of this State, or of any of the United States or of a foreign country, or the issue of any child or legally adopted child of a decedent, shall be taxed at the following rates:
For transfers through June 30, 1985:
On any amount in excess of $15,000.00, up to $50,000.00 .........2%
On any amount in excess of $50,000.00, up to $100,000.00 .......3%
On any amount in excess of $100,000.00, up to $150,000.00 .....4%
On any amount in excess of $150,000.00, up to $200,000.00 .....5%
On any amount in excess of $200,000.00, up to $300,000.00 .....6%
On any amount in excess of $300,000.00, up to $500,000.00 .....7%
On any amount in excess of $500,000.00, up to $700,000.00 ......8%
On any amount in excess of $700,000.00, up to $900,000.00 ......9%
On any amount in excess of $900,000.00, up to $1,100,000.00.....10%
On any amount in excess of $1,100,000.00, up to $1,400,000.00.....11%
On any amount in excess of $1,400,000.00, up to $1,700,000.00.....12%
On any amount in excess of $1,700,000.00, up to $2,200,000.00.....13%
On any amount in excess of $2,200,000.00, up to $2,700,000.00.....14%
On any amount in excess of $2,700,000.00, up to $3,200,000.00.....15%
On any amount in excess of $3,200,000.00 ................................16%
For transfers made from July 1, 1985 through June 30, 1986:
On any amount in excess of $50,000.00, up to $100,000.00 ........3%
On any amount in excess of $100,000.00, up to $150,000.00 ......4%
On any amount in excess of $150,000.00, up to $200,000.00 ......5%
On any amount in excess of $200,000.00, up to $300,000.00 ......6%
On any amount in excess of $300,000.00, up to $500,000.00 ......7%
On any amount in excess of $500,000.00, up to $700,000.00 ......8%
On any amount in excess of $700,000.00, up to $900,000.00 ......9%
On any amount in excess of $900,000.00, up to $1,100,000.00......10%
On any amount in excess of $1,100,000.00, up to $1,400,000.00.....11%
On any amount in excess of $1,400,000.00, up to $1,700,000.00.....12%
On any amount in excess of $1,700,000.00, up to $2,200,000.00.....13%
On any amount in excess of $2,200,000.00, up to $2,700,000.00.....14%
On any amount in excess of $2,700,000.00, up to $3,200,000.00.....15%
On any amount in excess of $3,200,000.00 ...............................16%
For transfers made from July 1, 1986 through June 30, 1987:
On any amount in excess of $150,000.00, up to $200,000.00 ......5%
On any amount in excess of $200,000.00, up to $300,000.00 ......6%
On any amount in excess of $300,000.00, up to $500,000.00 ......7%
On any amount in excess of $500,000.00, up to $700,000.00 ......8%
On any amount in excess of $700,000.00, up to $900,000.00 ......9%
On any amount in excess of $900,000.00, up to $1,100,000.00 ...10%
On any amount in excess of $1,100,000.00, up to $1,400,000.00 .11%
On any amount in excess of $1,400,000.00, up to $1,700,000.00 ..12%
On any amount in excess of $1,700,000.00, up to $2,200,000.00 ..13%
On any amount in excess of $2,200,000.00, up to $2,700,000.00 ..14%
On any amount in excess of $2,700,000.00, up to $3,200,000.00 ..15%
On any amount in excess of $3,200,000.00 .............................. 16%
For transfers made from July 1, 1987 through June 30, 1988:
On any amount in excess of $250,000.00, up to $300,000.00 ..... 6%
On any amount in excess of $300,000.00, up to $500,000.00 ......7%
On any amount in excess of $500,000.00, up to $700,000.00 ......8%
On any amount in excess of $700,000.00, up to $900,000.00 ......9%
On any amount in excess of $900,000.00, up to $1,100,000.00 ...10%
On any amount in excess of $1,100,000.00, up to $1,400,000.00 ...11%
On any amount in excess of $1,400,000.00, up to $1,700,000.00 . ...12%
On any amount in excess of $1,700,000.00, up to $2,200,000.00 ...13%
On any amount in excess of $2,200,000.00, up to $2,700,000.00 ...14%
On any amount in excess of $2,700,000.00, up to $3,200,000.00 ...15%
On any amount in excess of $3,200,000.00 ..............................16%
For transfers made on or after July 1, 1988 there shall be no tax imposed under this subsection.
b. (Deleted by amendment.)
c. The transfer of property to a brother or sister of a decedent, wife or widow of a son of a decedent, or husband or widower of a daughter of a decedent shall be taxed at the following rates:
(1) For transfers through June 30, 1988:
On any amount up to $1,100,000.00 ......................................... 11%
On any amount in excess of $1,100,000.00, up to $1,400,000.00 ....13%
On any amount in excess of $1,400,000.00, up to $1,700,000.00 ....14%
On any amount in excess of $1,700,000.00 ..............................16%
(2) For transfers made on or after July 1, 1988:
On any amount in excess of $25,000.00, up to $1,100,000.00 .....11%
On any amount in excess of $1,100,000.00, up to $1,400,000.00 ....13%
On any amount in excess of $1,400,000.00, up to $1,700,000.00 ....14%
On any amount in excess of $1,700,000.00 ..............................16%
For transfers made on or after January 1, 2016 there shall be no tax imposed under this subsection.
d. The transfer of property to every other transferee, distributee or beneficiary not hereinbefore classified shall be taxed at the following rates:
On any amount up to $700,000.00 .............................................15%
On any amount in excess of $700,000.00 ..................................16%
For every purpose of this subtitle all persons, including the decedent, shall be deemed to have been born in lawful wedlock and this provision shall apply to the estate of every decedent whether said decedent died before March 25, 1935, or shall die thereafter, but it shall not entitle any person to a refund of any tax paid before the aforementioned date.
(cf: P.L.2003, c.246, s.37)
2. R.S.54:38-1 is amended to read as follows:
54:38-1. a. In addition to the inheritance, succession or legacy taxes imposed by this State under authority of chapters 33 to 36 of this title (R.S.54:33-1 et seq.), or hereafter imposed under authority of any subsequent enactment, there is hereby imposed an estate or transfer tax:
(1) Upon the transfer of the estate of every resident decedent dying before January 1, 2002 which is subject to an estate tax payable to the United States under the provisions of the federal revenue act of one thousand nine hundred and twenty-six and the amendments thereof and supplements thereto or any other federal revenue act in effect as of the date of death of the decedent, the amount of which tax shall be the sum by which the maximum credit allowable against any federal estate tax payable to the United States under any federal revenue act on account of taxes paid to any state or territory of the United States or the District of Columbia, shall exceed the aggregate amount of all estate, inheritance, succession or legacy taxes actually paid to any state or territory of the United States or the District of Columbia, including inheritance, succession or legacy taxes actually paid this State, in respect to any property owned by such decedent or subject to such taxes as a part of or in connection with the estate; and
(2) (a) Upon the transfer of the estate of every resident decedent dying after December 31, 2001 which would have been subject to an estate tax payable to the United States under the provisions of the federal Internal Revenue Code of 1986 (26 U.S.C. s.1 et seq.) in effect on December 31, 2001, the amount of which tax shall be, at the election of the person or corporation liable for the payment of the tax under this chapter, either
(i) the maximum credit that would have been allowable under the provisions of that federal Internal Revenue Code in effect on that date against the federal estate tax that would have been payable under the provisions of that federal Internal Revenue Code in effect on that date on account of taxes paid to any state or territory of the United States or the District of Columbia, or
(ii) determined pursuant to the simplified tax system as may be prescribed by the Director of the Division of Taxation in the Department of the Treasury to produce a liability similar to the liability determined pursuant to clause (i) of this paragraph reduced pursuant to paragraph (b) of this subsection.
(b) The amount of tax liability determined pursuant to subparagraph (a) of this paragraph shall be reduced by the aggregate amount of all estate, inheritance, succession or legacy taxes actually paid to any state or territory of the United States or the District of Columbia, including inheritance, succession or legacy taxes actually paid this State, in respect to any property owned by such decedent or subject to such taxes as a part of or in connection with the estate; provided however, that the amount of the reduction shall not exceed the proportion of the tax otherwise due under this subsection that the amount of the estates's property subject to tax by other jurisdictions bears to the entire estate taxable under this chapter.
(c) (i) Notwithstanding the provisions of subparagraph (a) of this paragraph (2), upon the transfer of the estate of every resident decedent dying after December 31, 2015 but before January 1, 2017, the tax imposed by this section shall only apply if the decedent's taxable estate plus adjusted taxable gifts determined in accordance with the provisions of the federal Internal Revenue Code of 1986 (26 U.S.C. s.1 et seq.) in effect on December 31, 2001 exceeds $1,000,000, provided however, that the applicable exclusion amount for the purposes of subsection (c) of section 2010 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.2010) shall be $1,000,000.
(ii) Notwithstanding the provisions of subparagraph (a) of this paragraph (2), upon the transfer of the estate of every resident decedent dying after December 31, 2016 but before January 1, 2018, the tax imposed by this section shall only apply if the decedent's taxable estate plus adjusted taxable gifts determined in accordance with the provisions of the federal Internal Revenue Code of 1986 (26 U.S.C. s.1 et seq.) in effect on December 31, 2001 exceeds $2,000,000, provided however, that the applicable exclusion amount for the purposes of subsection (c) of section 2010 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.2010) shall be $2,000,000.
(iii) Notwithstanding the provisions of subparagraph (a) of this paragraph (2), upon the transfer of the estate of every resident decedent dying after December 31, 2017 but before January 1, 2019, the tax imposed by this section shall only apply if the decedent's taxable estate plus adjusted taxable gifts determined in accordance with the provisions of the federal Internal Revenue Code of 1986 (26 U.S.C. s.1 et seq.) in effect on December 31, 2001 exceeds $3,000,000, provided however, that the applicable exclusion amount for the purposes of subsection (c) of section 2010 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.2010) shall be $3,000,000.
(iv) Notwithstanding the provisions of subparagraph (a) of this paragraph (2), upon the transfer of the estate of every resident decedent dying after December 31, 2018 but before January 1, 2020, the tax imposed by this section shall only apply if the decedent's taxable estate plus adjusted taxable gifts determined in accordance with the provisions of the federal Internal Revenue Code of 1986 (26 U.S.C. s.1 et seq.) in effect on December 31, 2001 exceeds $4,000,000, provided however, that the applicable exclusion amount for the purposes of subsection (c) of section 2010 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.2010) shall be $4,000,000.
(v) Notwithstanding the provisions of subparagraph (a) of this paragraph (2), upon the transfer of the estate of every resident decedent dying after December 31, 2019, the tax imposed by this section shall only apply if the decedent's taxable estate plus adjusted taxable gifts determined in accordance with the provisions of the federal Internal Revenue Code of 1986 (26 U.S.C. s.1 et seq.) in effect on December 31, 2001 exceeds $5,000,000, provided however, that the applicable exclusion amount for the purposes of subsection (c) of section 2010 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.2010) shall be $5,000,000.
b. (1) In the case of the estate of a decedent dying before January 1, 2002 where no inheritance, succession or legacy tax is due this State under the provisions of chapters 33 to 36 of this title or under authority of any subsequent enactment imposing taxes of a similar nature, but an estate tax is due the United States under the provisions of any federal revenue act in effect as of the date of death, wherein provision is made for a credit on account of taxes paid the several states or territories of the United States, or the District of Columbia, the tax imposed by this chapter shall be the maximum amount of such credit less the aggregate amount of such estate, inheritance, succession or legacy taxes actually paid to any state or territory of the United States or the District of Columbia.
(2) In the case of the estate of a decedent dying after December 31, 2001 where no inheritance, succession or legacy tax is due this State under the provisions of chapters 33 to 36 of this title or under authority of any subsequent enactment imposing taxes of a similar nature, the tax imposed by this chapter shall be determined pursuant to paragraph (2) of subsection a. of this section.
c. For the purposes of this section, a "simplified tax system" to produce a liability similar to the liability determined pursuant to clause (i) of subparagraph (a) of paragraph (2) of subsection a. of this section is a tax system that for the transfer of the estate of every resident decedent dying after December 31, 2001 but before January 1, 2016 is based upon the $675,000 unified estate and gift tax applicable exclusion amount in effect under the provisions of the federal Internal Revenue Code of 1986 (26 U.S.C. s.1 et seq.) in effect on December 31, 2001, and for the transfer of the estate of every resident decedent dying:
after December 31, 2015 but before January 1, 2017 is based upon an applicable exclusion amount of $1,000,000 for purposes of subsection (c) of section 2010 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.2010),
after December 31, 2016 but before January 1, 2018 is based upon an applicable exclusion amount of $2,000,000 for purposes of subsection (c) of section 2010 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.2010),
after December 31, 2017 but before January 1, 2019 is based upon an applicable exclusion amount of $3,000,000 for purposes of subsection (c) of section 2010 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.2010),
after December 31, 2018 but before January 1, 2020 is based upon an applicable exclusion amount of $4,000,000 for purposes of subsection (c) of section 2010 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.2010), and
after December 31, 2019 is based upon an applicable exclusion amount of $5,000,000 for purposes of subsection (c) of section 2010 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.2010), and results in general in the determination of a similar amount of tax but which will enable the person or corporation liable for the payment of the tax to calculate an amount of tax notwithstanding the lack or paucity of information for compliance due to such factors as the absence of an estate valuation made for federal estate tax purposes, the absence of a measure of the impact of gifts made during the lifetime of the decedent in the absence of federal gift tax information, and any other information compliance problems as the director determines are the result of the phased repeal of the federal estate tax.
(cf: P.L.2002, c.31, s.1)
3. This act shall take effect immediately.
STATEMENT
This bill exempts transfers of property to Class C beneficiaries from the transfer inheritance tax, and increases the filing threshold and applicable exclusion amount allowed under the estate tax to $5,000,000 over a period of five years.
Currently, the State of New Jersey imposes two taxes that apply to inheritances. The State imposes a transfer inheritance tax that applies to transfers of property made at death, or in contemplation of death, to certain classes of beneficiaries, and imposes an estate tax that applies to estates of resident decedents.
Under the transfer inheritance tax, transfers of property are taxed, at varying rates, dependent, in part, on the relationship between the decedent and the beneficiary. The law exempts the transfer of property to Class A beneficiaries (e.g. father, mother, grandparents, wife, husband, and children of a decedent), but requires tax to be imposed at rates between 11% and 16% on transfers of property to Class C beneficiaries (i.e. brother or sister of a decedent, wife or widow of a son of a decedent, or husband or widower of a daughter of a decedent) and tax to be imposed at rates between 15% and 16% on transfers of property to Class D beneficiaries (beneficiaries not otherwise classified).
Under the estate tax, tax is imposed on the estate of a resident decedent equal to the amount of the credit allowed under federal estate tax law for state inheritance taxes paid, based on the federal estate tax in effect on December 31, 2001, or at the election of the estate pursuant to a simplified system developed by the Director of the Division of Taxation in the Department of the Treasury. Current law requires that, under either system, an estate tax return must be filed if the decedent's gross estate plus adjusted taxable gifts exceeds $675,000.
This bill amends the transfer inheritance tax to provide an exemption for all transfers of property to Class C beneficiaries. The bill provides that no tax will be imposed or collected on transfers of property to a brother or sister of a decedent, to a wife or widow of a son of a decedent, or a husband or widower of a daughter of a decedent made on or after January 1, 2016.
In addition, the bill amends the estate tax to increase the filing threshold and applicable exclusion amount from a gross estate of $675,000 to a taxable estate of $5,000,000. The bill provides for the increase to be phased in over a period of five years, beginning with the estate of resident decedents dying after December 31, 2015 and ending, when the increase is fully phased in, with the estate of resident decedents dying after December 31, 2019.
The purpose of this bill is to allow transfers of property to Class C beneficiaries to be treated on par with exempt transfers to other immediate family members, and to gradually increase the estate tax filing threshold to levels that more closely resemble the federal estate tax filing threshold. The current threshold is the lowest in the nation, and has encouraged individuals and small businesses to leave this State in order to avoid paying the tax.
