ASSEMBLY, No. 1281

STATE OF NEW JERSEY

216th LEGISLATURE

 

PRE-FILED FOR INTRODUCTION IN THE 2014 SESSION

 


 

Sponsored by:

Assemblyman  RONALD S. DANCER

District 12 (Burlington, Middlesex, Monmouth and Ocean)

Assemblyman  DECLAN J. O'SCANLON, JR.

District 13 (Monmouth)

Assemblyman  THOMAS P. GIBLIN

District 34 (Essex and Passaic)

Assemblyman  ANTHONY M. BUCCO

District 25 (Morris and Somerset)

Assemblyman  BOB ANDRZEJCZAK

District 1 (Atlantic, Cape May and Cumberland)

Assemblywoman  VALERIE VAINIERI HUTTLE

District 37 (Bergen)

 

Co-Sponsored by:

Assemblywoman McHose, Assemblymen Space, S.Kean, Webber, Russo, Assemblywoman N.Munoz, Assemblyman Rumana, Assemblywoman Casagrande, Assemblymen DiMaio and Caputo

 

 

 

 

SYNOPSIS

     Eliminates transfer inheritance tax and increases filing threshold and applicable exclusion amounts under New Jersey estate tax in accordance with provisions of federal tax law.

 

CURRENT VERSION OF TEXT

     Introduced Pending Technical Review by Legislative Counsel

  


An Act eliminating the transfer inheritance tax and amending the New Jersey estate tax in accordance with the filing threshold and exclusion amounts provided under federal tax law, repealing parts of the statutory law and amending R.S.54:38-1.

 

     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] 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] estate’s property subject to tax by other jurisdictions bears to the entire estate taxable under this chapter.

     (c)   Notwithstanding the provisions of subparagraphs (a) and (b) of this paragraph, upon the transfer of the estate of every resident decedent dying after December 31, 2011, the tax imposed by this section shall be based upon the applicable exclusion amount determined pursuant to subsection (c) of section 2010 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.2010), as amended or adjusted by federal law, rule or regulation.

     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, 2012 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, 2011 is based upon the applicable exclusion amount determined pursuant to subsection (c) of section 2010 of the federal Internal Revenue Code of 1986 (26 U.S.C. s.2010) as amended or adjusted by federal law, rule or regulation, 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)

 

     2.    The following sections are repealed:

     R.S.54:33-1 through R.S.54:33-12;

     R.S.54:34-1 through R.S.54:34-10;

     R.S.54:34-12;

     R.S.54:34-13;

     R.S.54:35-1 through R.S.54:35-22;

     R.S.54:36-1 through R.S.54:36-7;

     R.S.54:37-1 through R.S.54:37-8;

     section 1 of P.L.1940, c.220 (C.54:33-9.1);

     section 2 of P.L.1985, c.57 (C.54:33-14);

     section 1 of P.L.1955, c.135 (C.54:34-1.1);

     section 4 of P.L.1978, c.172 (C.54:35-4.1);

     section 1 of P.L.1947, c.369 (C.54:35-5.1);

     section 2 of P.L.1956, c.54 (C.54:35-10.1); and

     section 1 of P.L.1939, c.122 (C.54:35-23);

provided, however, for the transfer of the estate of every resident decedent dying before January 1, 2012, this repeal shall not affect any obligation, lien or duty to pay taxes, interest or penalties which have accrued or may accrue by virtue of any taxes imposed pursuant to the provisions of the laws repealed by this act, or which may be imposed with respect to any redetermination, correction, recomputation or deficiency assessment; and provided that all taxes and returns which would have been due and payable under the provisions of the laws repealed shall be due and payable as if the laws were in effect; and provided that this repeal shall not affect the legal authority of the State to audit records and assess and collect taxes due or which may be due, together with such interest and penalties as have accrued or would have accrued thereon under the provisions of the laws repealed; and provided that this repeal shall not affect any determination of, or affect any proceeding for, the enforcement thereof.

 

     3.    This act shall take effect immediately, but section 1 shall only apply to transfers of property and estates of resident decedents dying after December 31, 2011.

 

 

STATEMENT

 

     This bill repeals the transfer inheritance tax and amends the New Jersey estate tax to increase the filing threshold and applicable exclusion amounts in accordance with the provisions of federal tax law.  The bill’s new estate tax system applies to transfers of property and the estates of resident decedents dying after December 31, 2011.

     Currently, New Jersey imposes a transfer inheritance tax on beneficiaries for the receipt of assets from a New Jersey resident decedent and certain New Jersey assets of nonresident decedents, as determined by the value of the assets transferred and the beneficiary's relationship to the decedent.

     The transfer inheritance tax is one of the State's oldest taxes, originating in 1892. The tax is imposed on the transfer of all personal and real property in the estates of New Jersey resident decedents and of all tangible and real property located in New Jersey in the estates of nonresident decedents. The tax was extensively revised in 1985 to exempt from taxation transfers to spouses, ancestors and descendants of the decedent, but "lateral" transfers, bequests to brothers and sisters of the decedent or their children, and to nonrelatives are taxed at rates of up to 16%.

     Additionally, under current law, an estate 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 inheritances taxes paid, based on the terms of 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.  However, under federal tax code changes enacted in 2001, the federal credit by which New Jersey’s estate tax is calculated was phased-out over a four year period, with a full repeal of the federal credit taking effect in 2005.  Thus, but for the enactment of P.L.2002, c.31 (C.54:38-1et seq.), which “decoupled” the New Jersey estate tax from the 2001 federal tax law changes, New Jersey's estate tax would have been completely eliminated in 2005.  Under current law, a New Jersey estate tax return must be filed if the decedent’s gross estate plus adjusted taxable gifts determined in accordance with the provisions of the Internal Revenue Code in effect on December 31, 2001 exceeds $675,000.

     This bill would amend the current estate tax law to increase the filing threshold and the allowable exclusion amounts under the New Jersey estate tax from the current level of $675,000 to the amounts applicable under the federal estate tax.  Adjusted for inflation, the basic federal exclusion amount for 2012, the first year in which the provisions of this bill would take effect, is $5,120,000.

     At present, New Jersey is one of only 17 states that imposes some form of an estate tax, and one of only seven states imposing an inheritance tax.  Only two states, New Jersey and Maryland, currently impose both forms of taxation on inheritance.