Bill Text: NJ S477 | 2016-2017 | Regular Session | Introduced
Bill Title: Phases out estate tax over five-year period.
Spectrum: Moderate Partisan Bill (Republican 10-2)
Status: (Introduced - Dead) 2016-01-12 - Introduced in the Senate, Referred to Senate Budget and Appropriations Committee [S477 Detail]
Download: New_Jersey-2016-S477-Introduced.html
STATE OF NEW JERSEY
217th LEGISLATURE
PRE-FILED FOR INTRODUCTION IN THE 2016 SESSION
Sponsored by:
Senator STEVEN V. OROHO
District 24 (Morris, Sussex and Warren)
Senator PAUL A. SARLO
District 36 (Bergen and Passaic)
Co-Sponsored by:
Senators A.R.Bucco, Beck, Connors, Doherty, Holzapfel, Bateman, O'Toole, Singer, Stack and Kyrillos
SYNOPSIS
Phases out estate tax over five-year period.
CURRENT VERSION OF TEXT
Introduced Pending Technical Review by Legislative Counsel.
An Act phasing out the estate tax over a five-year period, amending R.S.54:38-1 and R.S.54:38-3.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. 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.
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 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 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.
d. Notwithstanding any provision of law to the contrary, upon the transfer of the estate of every resident decedent dying after December 31, 2010 the amount of estate or transfer tax due pursuant to paragraph 2 of subsection a. of this section shall be modified in accordance with the following schedule:
(1) Upon the transfer of the estate of every resident decedent dying after December 31, 2010 but before January 1, 2012, the amount of tax calculated as due pursuant to paragraph 2 of subsection a. of this section shall be reduced by 20% of that amount;
(2) Upon the transfer of the estate of every resident decedent dying after December 31, 2011 but before January 1, 2013, the amount of tax calculated as due pursuant to paragraph 2 of subsection a. of this section shall be reduced by 40% of that amount;
(3) Upon the transfer of the estate of every resident decedent dying after December 31, 2012 but before January 1, 2014, the amount of tax calculated as due pursuant to paragraph 2 of subsection a. of this section shall be reduced by 60% of that amount;
(4) Upon the transfer of the estate of every resident decedent dying after December 31, 2013 but before January 1, 2015, the amount of tax calculated as due pursuant to paragraph 2 of subsection a. of this section shall be reduced by 80% of that amount; and
(5) Upon the transfer of the estate of every resident decedent dying after December 31, 2014, no tax shall be calculated as due pursuant to paragraph 2 of subsection a. of this section.
(cf: P.L.2002, c.31, s.1)
2. R.S.54:38-3 is amended to read as follows:
54:38-3. If, subsequent to the determination of the tax due under this chapter, the amount of the Federal estate tax shall be decreased and the amount of the Federal credit correspondingly reduced by reason of any corrected assessment or redetermination or the amount due under this chapter is reduced by subsection d. of R.S.54:38-1, the tax due hereunder shall be reduced accordingly upon satisfactory proof submitted to the [State Tax Commissioner] Director of the Division of Taxation of the Department of the Treasury, and, if the tax due hereunder shall have theretofore been paid into the State treasury, the [Comptroller of the Treasury] Director of the Division of Budget and Accounting in the Department of the Treasury, on satisfactory proof of such fact submitted to the [State Tax Commissioner] Director of the Division of Taxation, and duly certified by him to the [Comptroller] Director of the Division of Budget and Accounting, shall draw his warrant on the State Treasurer in favor of the executor, administrator, trustee, person or corporation who has paid said tax, or who may be lawfully entitled to receive the same, for the amount of such tax excessively paid and said warrant shall be paid by the State Treasurer out of any appropriation for the refund of transfer inheritance taxes the same as warrants for the refund of such taxes under the transfer inheritance tax statutes of this State are paid. The foregoing provisions respecting refund shall apply with the same force and effect to any other payments determined by the [State Tax Commissioner] Director of the Division of Taxation to have been excessively made under this chapter.
All applications for the refund of taxes claimed to have been excessively or erroneously paid hereunder must be filed with the [State Tax Commissioner] Director of the Division of Taxation within three years from the date of payment or if the refund of taxes claimed is due to the effect of the reduction provided by subsection d. of R.S.54:38-1 upon a prior payment the application must be filed with the Director of the Division of Taxation within three years from the date of enactment of P.L. , c. , (pending before the Legislature as this bill).
(cf: P.L.1944, c.75, s.1.)
3. This act shall take effect immediately and apply retroactively to the transfer of the estate of every resident decedent dying after December 31, 2010.
STATEMENT
This bill phases out New Jersey's estate tax over a five-year period. The estate tax imposes a tax on the estate of a resident decedent based on the amount of the credit allowed under federal estate tax law for state inheritance taxes paid as provided under the Internal Revenue Code as of December 31, 2001.
Up until 2002, the State estate tax was designed to absorb the value of federal estate tax credit remaining for state inheritance taxes paid. In 2002, the federal government began phasing that credit out until it no longer existed as of 2005. To avoid the potential revenue loss by the change in federal estate tax treatment, New Jersey tied its estate tax to the amount of such federal credit immediately before the phase out took effect. The resultant State estate tax structure is an imposition which is based upon a federal credit which has not existed for about a decade.
This bill phases out New Jersey's estate tax over a five-year period. Beginning with 2011 and continuing up until the tax is no longer collectible in 2015, the amount of estate tax calculated as due under the existing structure will be reduced by 20% each year. In the event the bill takes effect after January 1, 2011, the bill does contain a refund mechanism for the estate of a resident decedent which pays an amount of estate tax due that is subsequently reduced by the enactment of this bill. A request for refund under this mechanism must be made within three years of the date of enactment of this bill.
The purpose of this bill is to simplify New Jersey's taxation of decedent estates, while allowing for an orderly adjustment to the associated revenue loss through the bill's five-year phase out.
