Sponsored by:
Assemblyman RONALD S. DANCER
District 12 (Burlington, Middlesex, Monmouth and Ocean)
Co-Sponsored by:
Assemblymen McGuckin and Wolfe
SYNOPSIS
Increases exclusion amount under New Jersey estate tax; phases out estate tax over four years.
CURRENT VERSION OF TEXT
As introduced.
An Act increasing the exclusion amount under the New Jersey estate tax and phasing out the estate tax over four years, 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 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, but before January 1, 2017, 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.
(3) (a) Upon the transfer of the estate of each resident decedent dying on or after January 1, 2017, whether or not subject to an estate tax payable to the United States under the provisions of the federal Internal Revenue Code (26 U.S.C. s.1 et seq.), the amount of the taxable estate, determined pursuant to section 2051 of the federal Internal Revenue Code (26 U.S.C. s.2051), shall be subject to tax pursuant to the following schedule:
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On any amount up to $100,000 . . . . . . |
0.0% |
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On any amount in excess of $100,000, up to $150,000 . . . . . . . . . . . . . . . |
0.8% of the excess over $100,000 |
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On any amount in excess of $150,000, up to $200,000. . . . . . . . . . . . . . . . |
$400 plus 1.6% of the excess over $150,000 |
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On any amount in excess of $200,000, up to $300,000. . . . . . . . . . . . . . . . |
$1,200 plus 2.4% of the excess over $200,000 |
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On any amount in excess of $300,000, up to $500,000. . . . . . . . . . . . . . . . |
$3,600 plus 3.2% of the excess over $300,000 |
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On any amount in excess of $500,000, up to $700,000. . . . . . . . . . . . . . . . |
$10,000 plus 4.0% of the excess over $500,000 |
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On any amount in excess of $700,000, up to $900,000. . . . . . . . . . . . . . . . |
$18,000 plus 4.8% of the excess over $700,000 |
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On any amount in excess of $900,000, up to $1,100,000. . . . . . . . . . . . . . . |
$27,600 plus 5.6% of the excess over $900,000 |
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On any amount in excess of $1,100,000, up to $1,600,000. . . . . |
$38,800 plus 6.4% of the excess over $1,100,000 |
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On any amount in excess of $1,600,000, up to $2,100,000. . . . . |
$70,800 plus 7.2% of the excess over $1,600,000 |
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On any amount in excess of $2,100,000, up to $2,600,000. . . . . |
$106,800 plus 8.0% of the excess over $2,100,000 |
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On any amount in excess of $2,600,000, up to $3,100,000. . . . . |
$146,800 plus 8.8% of the excess over $2,600,000 |
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On any amount in excess of $3,100,000, up to $3,600,000. . . . . |
$190,800 plus 9.6% of the excess over $3,100,000 |
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On any amount in excess of $3,600,000, up to $4,100,000. . . . . |
$238,800 plus 10.4% of the excess over $3,600,000 |
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On any amount in excess of $4,100,000, up to $5,100,000. . . . . |
$290,800 plus 11.2% of the excess over $4,100,000 |
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On any amount in excess of $5,100,000, up to $6,100,000 . . . . |
$402,800 plus 12.0% of the excess over $5,100,000 |
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On any amount in excess of $6,100,000, up to $7,100,000 . . . . . |
$522,800 plus 12.8% of the excess over $6,100,000 |
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On any amount in excess of $7,100,000, up to $8,100,000 . . . . . |
$650,800 plus 13.6% of the excess over $7,100,000 |
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On any amount in excess of $8,100,000, up to $9,100,000 . . . . . |
$786,800 plus 14.4% of the excess over $8,100,000 |
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On any amount in excess of $9,100,000, up to $10,100,000 . . . . |
$930,800 plus 15.2% of the excess over $9,100,000 |
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On any amount in excess of $10,100,000. . . . . . . . . . . . . . . . . . . |
$1,082,800 plus 16.0% of the excess over $10,100,000 |
(b) A credit shall be allowed against the tax imposed pursuant to subparagraph (a) of this paragraph equal to the amount of tax which would be determined by subparagraph (a) of this paragraph if the amount of the taxable estate were equal to the exclusion amount.
For the transfer of the estate of each resident decedent dying on or after January 1, 2017, but before January 1, 2018, the exclusion amount is $2,000,000.
For the transfer of the estate of each resident decedent dying on or after January 1, 2018, but before January 1, 2020, 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 (26 U.S.C. s.2010), as amended or adjusted by federal law, rule or regulation.
(c) The amount of tax liability of a resident decedent determined pursuant to subparagraphs (a) and (b) of this paragraph shall be reduced by the aggregate amount of all estate, inheritance, succession or legacy taxes actually paid to any state of the United States, including inheritance taxes actually paid this State, in respect to any property owned by that decedent or subject to those 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 estate's property subject to tax by other jurisdictions bears to the entire estate taxable under this chapter.
(4) For the transfer of the estate of each resident decedent dying on or after January 1, 2020, there shall be no tax imposed.
(5) Upon the transfer of the real or tangible personal property within New Jersey of each nonresident decedent dying on or after January 1, 2017, but before January 1, 2020, which tax shall bear the same ratio to the entire tax which that estate would have been subject to pursuant to subparagraphs (a) and (b) of paragraph (3) and paragraph (4) of this subsection if that nonresident decedent had been a resident of this State, and all of the decedent’s property, real and personal, had been located within this State, as the taxable property within this State bears to the entire estate, wherever situated.
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, but before January 1, 2017, 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.
(3) In the case of the estate of a decedent dying on or after January 1, 2017 the tax imposed by this chapter shall be determined pursuant to paragraphs (3), (4) and (5) 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.
(cf: P.L.2002, c.31, s.1)
2. This act shall take effect immediately.
STATEMENT
This bill phases out the New Jersey estate tax over four years by increasing the tax exclusion threshold under the New Jersey estate tax, first by replacing the current $675,000 threshold with a “true” exclusion amount initially established at $2.0 million for decedents dying on or after January 1, 2017, and incorporating the federal applicable exclusion amount determined pursuant to the federal Internal Revenue Code for decedents dying on or after January 1, 2018, and finally eliminating the estate tax for decedents dying on and after January 1, 2020. The federal exclusion amount for calendar year 2016 is $5,450,000; that exclusion amount will increase for calendar years 2018 and 2019 as it is subject to annual cost-of-living adjustments determined pursuant to the current federal estate law.
The current New Jersey estate tax is determined by reference to a repealed federal credit against a system of federal estate taxation that no longer exists. The former federal credit was part of a national revenue-sharing policy, no longer in effect, that was originally designed to provide to states a portion of what would otherwise have been a high-rate federal tax. Because the mechanics of the current tax are a remnant of that former federal imposition, the current New Jersey estate tax is initially imposed at a rate of 37 percent until all the tax that would have been imposed on the value of the estate below $675,000 is made up. This bill eliminates that tax rate “bump” and provides a true exclusion amount by abandoning the references to the old federal credit and establishing the necessary mechanics under New Jersey law to eliminate the tax imposed on estate values below the statutory exclusion amount.
Currently, the estate tax is only imposed on the property of resident decedents. Under this bill, from January 1, 2017 until the estate tax is eliminated in 2020, the estate tax will be imposed on the New Jersey property of nonresident decedents as well. The bill uses a “ratio” method to compute nonresident liability: the estate of a nonresident computes estate tax as though a State resident, then pays the proportion of that liability that the estate’s New Jersey property is of the estate’s total property.