senate Bill S6649

2011-2012 Legislative Session

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

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Archive: Last Bill Status - In Committee


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

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Actions

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Assembly Actions - Lowercase
Senate Actions - UPPERCASE
Jun 21, 2012 committed to rules
May 30, 2012 advanced to third reading
May 23, 2012 2nd report cal.
May 22, 2012 1st report cal.859
Mar 08, 2012 referred to investigations and government operations

Votes

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May 22, 2012 - Investigations and Government Operations committee Vote

S6649
8
0
committee
8
Aye
0
Nay
0
Aye with Reservations
0
Absent
0
Excused
0
Abstained
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Investigations and Government Operations Committee Vote: May 22, 2012

S6649 - Bill Details

See Assembly Version of this Bill:
A9481
Current Committee:
Law Section:
Tax Law
Laws Affected:
Amd §951, Tax L

S6649 - Bill Texts

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

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BILL NUMBER:S6649 REVISED 05/24/12

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

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 entire-
ly 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
$5,120,000 (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 distrib-
utions, 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 would have no fiscal impact on the State. It would take
effect immediately and shall apply to the estates of decedents dying on
or after January 1, 2010.

LEGISLATIVE HISTORY:

None. New proposal.

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

                                  6649

                            I N  S E N A T E

                              March 8, 2012
                               ___________

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

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

  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 ARTICLE, 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 that have died on or after January 1, 2010.





 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD14028-01-2

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