ASSEMBLY, No. 2302

STATE OF NEW JERSEY

210th LEGISLATURE

INTRODUCED MAY 9, 2002

Sponsored by:

Assemblywoman BONNIE WATSON COLEMAN

District 15 (Mercer)

Assemblyman REED GUSCIORA

District 15 (Mercer)

SYNOPSIS

    Provides for computation of New Jersey estate tax in accordance with terms of federal estate tax in effect on December 31, 2001.

CURRENT VERSION OF TEXT

    As introduced.

(Sponsorship Updated As Of: 6/14/2002)

An Act concerning the tax imposed under chapter 38 of Title 54 of the Revised Statutes, amending R.S.54:38-1 and R.S.54:38-7 and repealing R.S.54:38-8 and R.S.54:38-9.

    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 ([s.] 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 [upon]:

    (1) Upon the transfer of the estate of every resident decedent dying before January 1, 2002 and on or after January 1, 2011 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 [his] the estate; and

    (2) Upon the transfer of the estate of every resident decedent dying after December 31, 2001 and on or before December 31, 2010 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 the sum by which 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, 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.

    b. (1) In [any] the case of the estate of a decedent dying before January 1, 2002 and on or after January 1, 2011 where no inheritance, succession or legacy tax is due this state under the provisions of [said] 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 and on or before December 31, 2010 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 would have been due 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 tax imposed by this chapter shall be the maximum amount of the credit that would have been allowable under the provisions of that federal Internal Revenue Code in effect on that date on account of taxes paid the several states or territories of the United States or the District of Columbia less the aggregate amount of such estate, inheritance, succession or legacy taxes actually paid to any state or territory of the United State or the District of Columbia.

(cf: R.S.54:38-1)

    2. R.S.54:38-7 is amended to read as follows:

    54:38-7. The executor, administrator, trustee or other person or corporation liable for the payment of the tax hereunder shall file with the [state tax commissioner] Director of the Division of Taxation in the Department of the Treasury a copy of the federal estate tax return for the estate of every decedent dying on or before December 31, 2009 and after December 31, 2010 within thirty days after the filing of the original with the federal government, and a copy of any communication from the federal government making any final change in said return, or confirming, increasing or diminishing the tax thereby shown to be due, which is to be filed within thirty days after receipt thereof[, and]. In the case of any decedent dying after December 31, 2001 and on or before December 31, 2010, the executor, administrator, trustee or other person or corporation liable for the payment of such tax shall prepare and file with the director, in addition to a copy of such return, if any, as shall have been filed with the federal government, a federal estate tax return in the form in which such return would have been required to be filed with the federal government under the provisions of the federal Internal Revenue Code of 1986, 26 U.S.C. s.l et seq., in effect on December 31, 2001, within 30 days after the date on which such a filing would have been due under those provisions for a decedent dying on that date.

    In addition to the copy or copies of the federal estate tax return, the executor, administrator, trustee or other person or corporation shall file any other evidence, information or data that the [state tax commissioner] Director of the Division of Taxation shall in [his] the director's discretion deem necessary. For the purposes of this chapter the [state tax commissioner] Director of the Division of Taxation is hereby authorized and empowered to promulgate such rules and regulations, not inconsistent with the provisions hereof, as [he] the director shall deem necessary.

(cf: R.S.54:38-7)

    3. R.S.54:38-8 and R.S.54:38-9 are repealed.

    4. This act shall take effect immediately and shall apply to the estate of any resident decedent dying after December 31, 2001.

STATEMENT

    This bill provides that the New Jersey estate tax shall be computed in accordance with the terms of federal estate tax in effect on December 31, 2001.

    New Jersey's estate tax is based on a credit allowed by federal law against the federal estate tax for the payment of inheritance or other legacy taxes imposed by the several states. The State estate tax is designed to absorb the excess (if any) of the maximum amount of this federal credit over the cumulative liability of a decedent's heirs for New Jersey inheritance tax on transfers from the decedent's estate.

    Under changes in the federal estate tax enacted in 2001, New Jersey's estate tax will be reduced. This reduction will occur primarily through a four-year phase-out of the federal credit. Even before the phase-out is completed, the credit (and thus liability for New Jersey estate tax) will also be reduced for many estates by the extension of full exemption from federal tax to successively larger estates.

    This bill preserves the New Jersey estate tax as it existed up to the point at which the changes in federal law took effect by providing that the tax would be computed as though the terms of the federal estate tax, including those governing liability for that tax and allowance of the state legacy tax credit, continued to apply to the estates of resident decedents dying after December 31, 2001 as they did to that of a resident decedent dying on that date.

    The bill would repeal R.S.54:38-8 and R.S.54:38-9, which provide for, respectively, (1) the voiding of New Jersey's estate tax in the event of the repeal of the federal estate tax or the federal credit for state legacy taxes, and (2) the revision of the State estate tax in response to any substantial revision of the federal credit. It is the central intent of this legislation to preclude either such consequence.