senate Bill S4851A

Signed by Governor

Relates to the estate tax treatment of dispositions to surviving spouses who are not United States citizens

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Sponsor

Bill Status


  • Introduced
  • In Committee
  • On Floor Calendar
    • Passed Senate
    • Passed Assembly
  • Delivered to Governor
  • Signed by Governor
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actions

  • 26 / Apr / 2013
    • REFERRED TO INVESTIGATIONS AND GOVERNMENT OPERATIONS
  • 08 / May / 2013
    • AMEND (T) AND RECOMMIT TO INVESTIGATIONS AND GOVERNMENT OPERATIONS
  • 08 / May / 2013
    • PRINT NUMBER 4851A
  • 30 / May / 2013
    • 1ST REPORT CAL.840
  • 03 / Jun / 2013
    • 2ND REPORT CAL.
  • 04 / Jun / 2013
    • ADVANCED TO THIRD READING
  • 05 / Jun / 2013
    • PASSED SENATE
  • 05 / Jun / 2013
    • DELIVERED TO ASSEMBLY
  • 05 / Jun / 2013
    • REFERRED TO WAYS AND MEANS
  • 11 / Jun / 2013
    • SUBSTITUTED FOR A6556A
  • 11 / Jun / 2013
    • ORDERED TO THIRD READING RULES CAL.130
  • 11 / Jun / 2013
    • PASSED ASSEMBLY
  • 11 / Jun / 2013
    • RETURNED TO SENATE
  • 06 / Dec / 2013
    • DELIVERED TO GOVERNOR
  • 18 / Dec / 2013
    • SIGNED CHAP.538

Summary

Relates to the estate tax treatment of dispositions to surviving spouses who are not United States citizens.

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Bill Details

See Assembly Version of this Bill:
A6556A
Versions:
S4851
S4851A
Legislative Cycle:
2013-2014
Law Section:
Tax Law
Laws Affected:
Amd §951, Tax L
Versions Introduced in 2011-2012 Legislative Cycle:
S6649, A9481

Sponsor Memo

BILL NUMBER:S4851A

TITLE OF BILL: An act to amend the tax law, in relation to the estate
tax treatment of dispositions to surviving spouses who are not United
States citizens and providing for the repeal of such provisions upon
expiration thereof

This is one in a series of measures being introduced at the request of
the Chief Administrative Judge upon the recommendation of her Surro-
gate's Court Advisory Committee.

This measure would amend the Tax Law to reduce the expense and clarify
the procedure to obtain a marital deduction for a disposition to a non-
citizen surviving spouse where no Federal estate tax return is required.
Under § 2056(d) of the Internal Revenue Code, an estate is not entitled
to a marital deduction for bequests to a non-U.S. citizen surviving
spouse, unless the bequest passes to a qualified domestic trust ("QDT"),
as defined in IRC § 2056A. That section provides generally that when the
QDT terminates or distributes principal to the surviving spouse, a tax
is imposed equal to the estate tax that would have been imposed if the
value of the distributed property had been added to the original
decedent's taxable estate. In essence, this ensures that the marital
deduction will cause a deferral of estate tax, rather than a complete
elimination, if the surviving spouse is not subject to U.S. estate tax
at his or her death. However, there is no corresponding New York tax
imposed on the termination of a QDT or distribution of principal from a
QDT.

Because the New York estate tax imposed by Tax Law § 952 is based
entirely on what the Federal state death tax credit would be if it were
still in existence, it is essentially based on the size of the federal
taxable estate. If a federal estate tax return is required, the taxable
estate shown on that return is used in computing the New York tax.
However, if no Federal estate tax return is required, then the New York
estate tax is based on the taxable estate computed on a hypothetical
Federal return prepared for and filed with the New York estate tax
return. With the current Federal applicable exclusion amount of
$5,250,000 (contrasted with the effective New York exemption of
$1,000,000), there are a significant number of estates that are required
to file a New York estate tax return but not a Federal estate tax
return. Furthermore, for decedents dying in 2010, no estates were
required to file a Federal return.

For estates required to file a New York estate tax return but not a
Federal estate tax return, where the surviving spouse is not a U.S.
citizen, it is necessary for all dispositions to the spouse to be via a
QDT in order to qualify for the Federal marital deduction on the
hypothetical Federal estate tax return and thus reduce the hypothetical
Federal taxable estate and, ultimately, the New York estate tax. This
requirement imposes a substantial burden on estates and non-citizen
surviving spouses, inasmuch as the QDT requirements in IRC § 2055A are
cumbersome and frequently require that a U.S. bank be a trustee. Because

no New York tax is imposed on the QDT termination or distributions,
there is no New York purpose served by requiring the property to be
placed in a QDT. In fact the QDT may be terminated and distributed to
the surviving spouse almost immediately. The only consequence of the QDT
requirement is the incurring of significant legal expense and adminis-
trative costs, particularly where a bank is trustee.

This measure simply provides that, if no Federal estate tax return is
required, it is not necessary that a QDT be created in order to obtain,
on the hypothetical Federal estate tax return, a marital deduction for a
disposition to a surviving spouse who is not a U.S. citizen.

This measure, which would have no fiscal impact upon the State, would
take effect immediately and apply to the estates of decedents dying on
or after January 1, 2010, and shall expire and be deemed repealed July
1, 2016.

2013 Legislative History:

Senate 4851 (Sen. Bonacic) (ref to Investigations and Govt Ops) Assembly
6556 (M. of A. Weinstein) (rept ref to Ways & Means)

2012 Legislative History:

Senate 6649 (Sen. Bonacic) (Rules) Assembly 9481 (M. of A. Weinstein)
(Passed)

view bill text
                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                 4851--A

                       2013-2014 Regular Sessions

                            I N  S E N A T E

                             April 26, 2013
                               ___________

Introduced  by Sen. BONACIC -- (at request of the Office of Court Admin-
  istration) -- read twice and ordered printed, and when printed  to  be
  committed to the Committee on Investigations and Government Operations
  --  committee  discharged,  bill amended, ordered reprinted as amended
  and recommitted to said committee

AN ACT to amend the tax law, in relation to the estate tax treatment  of
  dispositions  to  surviving spouses who are not United States citizens
  and providing for the repeal of such provisions upon expiration there-
  of

  THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section  1.  Section  951  of  the  tax law is amended by adding a new
subsection (c) to read as follows:
  (C) DISPOSITION TO SURVIVING SPOUSE WHO IS NOT A UNITED  STATES  CITI-
ZEN.  IN  THE CASE OF AN ESTATE WHERE A FEDERAL ESTATE TAX RETURN IS NOT
REQUIRED FOR FEDERAL ESTATE TAX PURPOSES, A DISPOSITION TO  A  SURVIVING
SPOUSE  THAT  WOULD QUALIFY FOR THE FEDERAL ESTATE TAX MARITAL DEDUCTION
UNDER SECTION 2056 OF THE INTERNAL REVENUE CODE IF NOT FOR  THE  LIMITA-
TION  IMPOSED  BY SUBSECTION (D)(1) OF SUCH SECTION SHALL NONETHELESS BE
TREATED AS QUALIFYING FOR THE FEDERAL ESTATE TAX MARITAL  DEDUCTION  FOR
PURPOSES  OF COMPUTING THE TAX IMPOSED BY SECTION NINE HUNDRED FIFTY-TWO
OF THIS PART, WITHOUT  REQUIRING  THAT  SUCH  DISPOSITION  PASS  TO  THE
SURVIVING  SPOUSE  IN A QUALIFIED DOMESTIC TRUST AS REQUIRED FOR FEDERAL
PURPOSES BY INTERNAL REVENUE CODE SECTION 2056(D)(2).
  S 2. This act shall take effect immediately and  shall  apply  to  the
estates of decedents dying on or after January 1, 2010, and shall expire
and be deemed repealed July 1, 2016.


 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD09834-02-3

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