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A04643 Summary:

BILL NOA04643A
 
SAME ASSAME AS S03462
 
SPONSORSolages
 
COSPNSRDe La Rosa, Gonzalez-Rojas, Rosenthal L, Seawright, Bichotte Hermelyn, Thiele, Mitaynes, Epstein, Burgos, Forrest, Cruz, Anderson, Simon, Reyes, Pichardo, Mamdani, Carroll, Kelles, Meeks, Niou, Clark, Walker, Gottfried, Jackson, Frontus, Kim, Barron, Barnwell, Davila, Burke
 
MLTSPNSR
 
Amd Tax L, generally
 
Relates to creating a separate tax on inheritance income, creating a separate tax on gift income, the computation of the estate tax, and creating a gift tax.
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A04643 Actions:

BILL NOA04643A
 
02/04/2021referred to ways and means
02/10/2021amend (t) and recommit to ways and means
02/10/2021print number 4643a
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A04643 Memo:

NEW YORK STATE ASSEMBLY
MEMORANDUM IN SUPPORT OF LEGISLATION
submitted in accordance with Assembly Rule III, Sec 1(f)
 
BILL NUMBER: A4643A
 
SPONSOR: Solages
  TITLE OF BILL: An act to amend the tax law, in relation to establishing separate taxes on inheritance income and on gift income, amending the estate tax, and establishing a gift tax   PURPOSE: This act amends the tax law to reform the system for taxing inherited wealth by changing the estate tax rates and brackets, introducing a gift tax, and introducing a tax on inherited income, both as a source of funding for general governmental purposes and in order to help reduce racial and economic inequality, the continued growth of which poses an increasingly serious challenge to the maintenance of a stable democratic society.   SUMMARY OF PROVISIONS: Section 1 of the bill adds a new section 604 to the tax law to create a separate tax within the personal income tax on inheritance income received from an estate, and adds a new section 604A to the tax law to create a separate tax within the personal income tax on gift income. Subsection (a) of the proposed section 604 defines "inheritance income" and "family member," and subsection (b) imposes a tax on inheritance income. Subsection (c) of proposed section 604 provides that the follow- ing will not be considered inheritance income for purposes of the sepa- rate tax on inheritance income: inheritances that provide for the payment of certain educational or medical expenses, that are received from the estate of a spouse, or that consist of certain retirement accounts. In addition, such subsection provides that some of the value of certain primary residences and residential homes, and certain family farms and farm equipment, will not be considered inheritance income for purposes of the separate tax on inheritance income. Subsection (d) of such section also provides that payment of the separate tax on inheri- tance income may be deferred until disposition of inherited property consisting of certain primary residences or of certain family-owned businesses. Subsection (a) of proposed section 604-A defines "gift income" and "family member," and subsection (b) imposes a tax on gift income. Subsection (c) of proposed section 604-A of the tax law provides that the following gifts will not be considered gift income for purposes of the separate tax on gift income: gifts for the payment of certain educational and medical expenses, gifts from a spouse, and gifts consisting of certain retirement accounts. Subsection (d) of such section provides that, for gift income consisting of equity interests in certain family businesses, the payment of the separate tax on gift income may be deferred until the taxpayer sells such equity interests. Sections 2 and 4 of the bill add sections 620-B and 640, respectively, to the tax law to allow for a credit against the separate tax on inheri- tance income in the amount of the New York estate tax, or any estate or inheritance tax imposed by another state, a political subdivision of a state, or the District of Columbia, on any inheritance income received by a taxpayer. Proposed section 620-B allows such credit for residents, and proposed section 640 allows such credit for nonresidents and part- year residents. Sections 3 and 4 of the bill add new sections 624-A and 637-A to the tax law to provide for the computation of the separate tax on inheritance income received by residents, nonresidents and part-year residents, and add new sections 624-B and 637-B to provide for the computation of the separate tax on gift income received by residents and part-year resi- dents. Proposed sections 624A and 637-A of the tax law provide for inheritance income to be taxed at the following rates: No tax on the first $250,000 of an inheritance income; 5% on the amount of inheritance income in excess of $250,000 and up to $500,000; 15% on the amount of inheritance income in excess of $500,000 and up to $1,000,000; 30% on the amount of inheritance income in excess of $1,000,000 and up to $2,000,000; 40% on the amount of inheritance income in excess of $2,000,000 and up to $10,000,000; and 50% on the amount of inheritance income in excess of $10,000,000. Proposed sections 624-B and 637-B provide for gift income to be taxed at the following rates: No tax on the first $50,000 of gift income. 5% on the amount of gift income in excess of $50,000 and up to $100,000; 15% on the amount of gift income in excess of $100,000 and up to $200,000; 30% on the amount of gift income in excess of $200,000 and up to $400,000; 40% on the amount of gift income in excess of $400,000 and up to $2,000,000; and 50% on the amount of gift income in excess of $2,000,000. Section 5 of the bill amends section 951-a of the tax law to define the term "New York taxable gifts.If Section 6 of the bill amends section 952 of the tax law to provide for new estate tax rates for decedents dying after April 1, 2021, phase out the applicable credit amount for the estate tax for decedents dying after April 1, 2021, and provide for a credit against the estate tax for the lifetime amount of gift taxes paid. The proposed paragraph (2) of subsection (b) of section 952 provides that for estates of decedents dying after April 1, 2021, estate tax will be determined based on the taxable estate plus the lifetime amount of New York taxable gifts, at the following rates: No tax on the first $750,000 of taxable estate and the lifetime amount of New York taxable gifts; 5% on the estate and gifts in excess of $750,000 and up to $1,500,000; 15% on the estate and gifts in excess of $1,500,000 and up to $3,000,000; 30% on the estate and gifts in excess of $3,000,000 and up to $6,000,000; 40% on the estate and gifts in excess of $6,000,000 and up to $30,000,000; and 50% on the estate and gifts in excess of $30,000,000. Section 7 of the bill amends section 954 of the tax law to provide that the New York gross estate will be reduced by the amount of certain transfers related to educational and medical expenses, and by transfers of property consisting of certain retirement accounts. The proposed amendments to section 954 also provide that the New York gross estate will be reduced by a portion of the value of certain primary residences, residential homes, and family farms and farm equipment. Section 8 of the bill amends section 955 of the tax law to provide that the New York taxable estate will be reduced by the amount of federal estate tax imposed on the estate of a resident. The proposed amendments to section 955 also provide that, with respect to the estate of a dece- dent who was a nonresident of New York on the date of death, the New York taxable estate will be reduced by the amount of federal estate tax allocable to the portion of the estate that is subject to the tax imposed by section 960 of the tax law. Section 9 of the bill adds an article 26-A of the tax law to create a gift tax. Proposed section 1000 of the proposed article 26-A defines the terms "taxable gifts" and "New York taxable gifts." Proposed section 1001 of the proposed article 26-A imposes a tax on the transfer of prop- erty by gift. Proposed section 1002 of the proposed article 26-A provides that the gift tax will be imposed on the aggregate amount of gifts made by a donor during all calendar years commencing on January 1, 2022, but that a credit will be allowed against the tax for the amount of gift tax previously paid to the state by the donor. Such section provides that New York taxable gifts will be taxed at the following rates: No tax on the first $750,000 of New York taxable gifts; 5% on New York taxable gifts in excess of $750,000 and up to $1,500,000; 15% on New York taxable gifts in excess of $1,500,000 and up to $3,000,000; 30% on New York taxable gifts in excess of $3,000,000 and up to $6,000,000; 40% on New York taxable gifts in excess of $6,000,000 and up to $30,000,000; and 50% on New York taxable gifts in excess of $30,000,000. Proposed section 1003 of the proposed article 26-A provides that the commissioner of taxation and finance shall promulgate rules and regulations necessary and appropriate to effectuate the provisions of the proposed article. Section 10 of the bill provides that this act shall take effect imme- diately.   JUSTIFICATION: New York is an exceptionally wealthy state. Treated as a separate coun- try, it would have one of the world's largest economies. With such a strong economy, all New Yorkers should have fundamental economic rights: high-quality education, healthcare, guaranteed housing, and basic social services and social insurance. New York must also finance investments in green energy, green jobs, and green infrastructure in order to mitigate the catastrophic risks of climate change. Unfortunately, New York is also the most unequal state in the nation. In part this is because the tax system has not kept pace with changes in the economy, leaving the many high-earning professionals and wealthy families in this state undertaxed. The benefits of economic growth from recent decades has overwhelmingly been hoarded by a small segment of elites, while inflation-adjusted wages have stagnated for the vast majority of working people since the 1970s. The state government, lack- ing adequate tax revenues, has been unable to afford essential public investment and social spending, including upgrading our infrastructure, repairing public housing, protecting public education, and financing Medicaid. State tax policy must focus on mitigating economic inequality. Inter- generational wealth accumulation is one of the main sources of long-term inequality and must therefore be directly addressed by the tax law. New York currently has an estate tax, which imposes a tax on the total assets of a deceased person. However, the current estate tax rate is very low, ranging from 5% to 16%, and it only applies to estates worth more than $5.85 million. This is one of the highest estate tax exemptions in the country, having steadily skyrocketed from $300,000 prior to 2000. An effective inheritance tax is particularly critical for addressing the racial wealth gap. Nationwide, the wealth of the median white household is nearly ten times that of the median Black household, and nearly all of the wealthiest households in the country are white. Without a fair tax on inherited wealth, intergenerational inequality will continue unabated and the racial wealth gap will only worsen. In order to effec- tively tax intergenerational wealth transfers, we need a comprehensive system of taxes on estates, inheritances, and gifts. This bill lowers the estate tax threshold, with progressive marginal tax rates (as speci- fied in the above summary) applying to estates worth more than $750,000. It would also impose a gift tax, modeled on the federal gift tax, on individuals who give gifts in excess of the lifetime exemption limit, which is equal to the zero-rate bracket for the estate tax ($750,000). Lifetime gifts are treated as part of the estate when estate tax liabil- ity is determined, as in the federal estate tax. The gift tax imposed on giftors, however, would not include in taxable gifts any gifts that are subject to tax on the giftee, as discussed below. In addition to amending the estate tax and imposing a gift tax, this bill amends the income tax to treat inheritances and gifts as income to the recipient. Inheritance income would be taxed under the rates speci- fied above, with a credit available for estate tax already paid on the same amount of property. The inheritance tax is imposed on inheritances of more than $250,000. Per the Federal Reserve Board 2019 Survey of Consumer Finances, such a tax only applies to the top 1% of inheritanc- es. The gift tax would be imposed on an annual basis, at the rates spec- ified above, on the receipt of gifts worth more than $50,000. Numerous exceptions are provided to ensure that working people are not overly burdened by these reforms: Spousal transfers are exempt from all of the above taxes. Money used to pay for certain educational or medical expenses is not subject to any of the above taxes. Retirement accounts and pensions are also exempt from the above taxes. In the case of a residence which has been the primary residence of the decedent for ten years prior to death, or is the primary residence of the inheritor for five years after receipt, an additional $1,750,000 is excludible from the taxable value of the property. An exemption from all of the above taxes is also provided for estates or inheritances with a total value of up to $5 million, at least 50% of which is attributable to farmland or farming equipment. Finally, for inheritances that include equity inter- ests in family businesses or primary residences and are worth up to $5 million, tax can be deferred until sale of the inherited assets, provided that the business interests or primary residence makes up over 50% of the total value of the inheritance. The inheritance and gift tax remedies a serious defect in the way we tax income. Currently, income from working is taxed at the highest rates, income from investing is taxed at lower rates, and income from inheri- tance is not taxed at all. In addition to the obvious unfairness of this system, it puts the economic burdens in all the wrong places. Those who earn wage income are most burdened by taxes on their income; heirs, who need not work for their inheritance, are best able to bear the burden of taxation, and yet pay no income tax on their inherited income. Moreover, there is virtually no economic downside to taxing inherited income, as the economic benefits for state spending vastly outweigh any minimal disincentive created by taxing heirs. An inheritance tax is also necessary to counteract avoidance problems with the estate tax. Estate taxes can incentivize wealthy individuals, in their old age, to move out of state to avoid the tax. The inheritors of such wealth, by contrast, typically have families, often with kids in school, and are less likely to relocate solely for tax reasons. There- fore, an inheritance is less likely to be avoided. An inheritance tax also creates an incentive for wealthy individuals to spread their wealth among more beneficiaries, thereby benefiting more people and reducing the intergenerational accumulation of wealth. Reforming wealth transfer taxes is especially important as a means of offsetting the tax benefit of basis step-up, one of the largest federal tax handouts to the weal- thy. When a decedent passes on appreciated assets, which would otherwise produce taxable capital gains if they were sold, all of that taxable gain is eliminated by "stepping up" the basis of the asset to its fair market value. The heirs to these appreciated assets, who would otherwise pay substantial tax on their capital gains, end up paying no tax at all. An inheritance tax, by imposing a tax on these inherited assets, offsets some of the benefit of the federal step-up rules. Finally, the inheritance tax helps mitigate the anti-democratic effects of massive intergenerational wealth accumulation. The wealthy use their resources to exert tremendous influence over the political system, stripping away protections for poor and working people, distorting the tax laws, and undermining the very basis of representative democracy. It is imperative that we minimize the power of wealth to unduly influence our political system.   LEGISLATIVE HISTORY: This is a new bill.   STATE FISCAL IMPLICATIONS: This act is projected to raise approximately 8 billion dollars annually in new revenue.   EFFECTIVE DATE: This bill is effective on January 1, 2021.
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A04643 Text:



 
                STATE OF NEW YORK
        ________________________________________________________________________
 
                                         4643--A
 
                               2021-2022 Regular Sessions
 
                   IN ASSEMBLY
 
                                    February 4, 2021
                                       ___________
 
        Introduced  by  M.  of A. SOLAGES, DE LA ROSA, GONZALEZ-ROJAS, L. ROSEN-
          THAL, SEAWRIGHT, BICHOTTE HERMELYN, THIELE -- read once  and  referred
          to  the  Committee  on  Ways  and  Means -- committee discharged, bill
          amended, ordered reprinted as amended and recommitted to said  commit-
          tee

        AN  ACT to amend the tax law, in relation to establishing separate taxes
          on inheritance income and on gift income, amending the estate tax, and
          establishing a gift tax
 
          The People of the State of New York, represented in Senate and  Assem-
        bly, do enact as follows:
 
     1    Section  1.  The tax law is amended by adding two new sections 604 and
     2  604-a to read as follows:
     3    § 604. Separate tax on inheritance income. (a)  Definitions.  For  the
     4  purposes  of  this section, the following terms have the following mean-
     5  ings:
     6    (1) Except as otherwise provided in subsection (c)  of  this  section,
     7  "inheritance  income" means any income excluded for federal tax purposes
     8  from federal adjusted gross income pursuant to subsection (a) of section
     9  one hundred two of the internal revenue code that is received  from  any
    10  estate,  regardless  of  the  residence  of the decedent of such estate,
    11  after the federal estate tax has been paid on such income.
    12    (2) "Family member" means "member of  the  family"  as  such  term  is
    13  defined in paragraph (2) of subsection (e) of section two thousand thir-
    14  ty-two-A of the internal revenue code.
    15    (b)  Imposition  of  separate  tax.  (1)  In addition to any other tax
    16  imposed by this article, there is hereby imposed for each taxable year a
    17  separate tax on the total amount of inheritance income received from any
    18  estate of a decedent during such taxable year by any individual who  was
    19  a New York state resident on the date of death of such decedent.
    20    (2)  The  tax imposed by this subsection shall be computed as provided
    21  in section six hundred twenty-four-a of this  article  with  respect  to
 
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD08928-02-1

        A. 4643--A                          2
 
     1  residents  and  section  six hundred thirty-seven-a of this article with
     2  respect to nonresidents and part-year residents.
     3    (c)  Exclusions  from  inheritance  income. (1) Educational or medical
     4  expenses. A qualified transfer, as such term is defined in paragraph (2)
     5  of subsection (e) of section two thousand  five  hundred  three  of  the
     6  internal  revenue  code,  shall not be considered inheritance income for
     7  purposes of this section.
     8    (2) Spousal transfers. Transfers of property from a spouse  shall  not
     9  be considered inheritance income for purposes of this section.
    10    (3) Retirement accounts. Transfers of property consisting of pensions,
    11  health  savings accounts, or retirement accounts established pursuant to
    12  sections four hundred one, four hundred three, four hundred eight,  four
    13  hundred  eight-A,  or  four  hundred fifty-seven of the internal revenue
    14  code shall not be considered inheritance income  for  purposes  of  this
    15  section.
    16    (4)  Certain  residences.  An individual subject to the tax imposed by
    17  this section may claim not more than one  of  the  following  exclusions
    18  from  inheritance  income,  and  may not claim either such exclusion for
    19  more than one transfer of real property:
    20    (A) Primary residences. For real property transferred to  a  resident,
    21  nonresident  or  part-year  resident  individual  that (i) serves as the
    22  primary residence of the transferor of such property or of the resident,
    23  nonresident, or part-year resident transferee for  the  ten  consecutive
    24  years preceding such transfer or (ii) serves as the primary residence of
    25  such  transferee for the five consecutive years following such transfer,
    26  up to one million seven hundred fifty thousand dollars of the  value  of
    27  such property shall not be considered inheritance income for purposes of
    28  this section.
    29    (B)  Residential homes purchased with a federal housing administration
    30  insured mortgage. For a residential  home  transferred  to  a  resident,
    31  nonresident  or  part-year resident individual that was purchased with a
    32  federal housing administration insured mortgage,  up  to  seven  hundred
    33  fifty thousand dollars of the value of such home shall not be considered
    34  inheritance income for purposes of this section.
    35    (5)  Family  farms. A transfer to a resident, nonresident or part-year
    36  resident individual from the estate of a decedent who is a family member
    37  of such individual of farmland and farm equipment shall not  be  consid-
    38  ered  inheritance  income for purposes of this section provided that the
    39  total value of inheritance income (including the value of such  farmland
    40  and  farm  equipment)  received by such individual from such estate does
    41  not exceed five million dollars, and provided further that the value  of
    42  such  farmland and equipment constitutes over fifty percent of the total
    43  value of such inheritance income received from such estate.
    44    (d) Deferrals. (1) Primary residence liquidity deferral.  A  resident,
    45  nonresident  or  part-year  resident  individual  who  in a taxable year
    46  receives from a single estate inheritance income totaling less than five
    47  million dollars, over fifty percent of the total value of which consists
    48  of real property that will serve as the primary residence of such  indi-
    49  vidual,  may  elect  to defer payment of the tax imposed by this section
    50  until the time at which such individual  sells  such  real  property  or
    51  ceases using such property as a primary residence.
    52    (2) Family-owned business liquidity deferral. (A) A resident, nonresi-
    53  dent  or  part-year  resident  individual who in a taxable year receives
    54  from the estate of a decedent who is a family member of such  individual
    55  inheritance  income  totaling less than five million dollars, over fifty
    56  percent of the total value of which consists of equity  interests  in  a

        A. 4643--A                          3

     1  family-owned  business, may elect to defer payment of the tax imposed by
     2  this section until the time at which such individual  sells  such  busi-
     3  ness,  provided that during the time of deferral interest will accrue on
     4  the amount of such tax at a rate equal to the federal short-term rate as
     5  provided  under paragraph three of subsection (j) of section six hundred
     6  ninety-seven of this article.
     7    (B) For the purposes of this paragraph, "family-owned business"  means
     8  a  business  for which, at the time ownership of such business is trans-
     9  ferred to a resident, nonresident or part-year resident individual,  the
    10  transferor of such business or family members of such transferor collec-
    11  tively have retained majority ownership and have materially participated
    12  in the operation of such business for the ten consecutive years proceed-
    13  ing such transfer.
    14    §  604-a.  Separate  tax  on  gift  income.  (a)  Definitions. For the
    15  purposes of this section, the following terms have the  following  mean-
    16  ings:
    17    (1)  "Gift  income" means the value of any taxable gifts, as such term
    18  is defined in section one thousand of this chapter, received by an indi-
    19  vidual who is a New York state resident at the time  of  receiving  such
    20  gifts.
    21    (2)  "Family  member"  means  "member  of  the family" as such term is
    22  defined in paragraph (2) of subsection (e) of section two thousand thir-
    23  ty-two-A of the internal revenue code.
    24    (b) Imposition of separate tax. (1)  In  addition  to  any  other  tax
    25  imposed by this article, there is hereby imposed for each taxable year a
    26  separate  tax  on  gift  income received during such taxable year by any
    27  resident or part-year resident individual.
    28    (2) The tax imposed by this section shall be computed as  provided  in
    29  section  six hundred twenty-four-b of this article with respect to resi-
    30  dents and section  six  hundred  thirty-seven-b  of  this  article  with
    31  respect to part-year residents.
    32    (c)  Exclusions from gift income. (1) Educational or medical expenses.
    33  A qualified transfer, as such  term  is  defined  in  paragraph  (2)  of
    34  subsection  (e)  of  section  two thousand three of the internal revenue
    35  code, shall not be considered gift income for purposes of this section.
    36    (2) Spousal transfers. Transfers of property from a spouse  shall  not
    37  be considered gift income for purposes of this section.
    38    (3) Retirement accounts. Transfers of property consisting of pensions,
    39  health  savings accounts, or retirement accounts established pursuant to
    40  sections four hundred one, four hundred three, four hundred eight,  four
    41  hundred  eight-A,  or  four  hundred fifty-seven of the internal revenue
    42  code shall not be considered gift income for purposes of this section.
    43    (4) Family farms. A transfer to a resident or part-year resident indi-
    44  vidual from a donor who is a family member of such individual  of  farm-
    45  land and farm equipment shall not be considered gift income for purposes
    46  of  this section provided that the total value of gift income (including
    47  the value of such farmland and farm equipment) received by such individ-
    48  ual from such donor does not exceed one million dollars.
    49    (d) Family-owned business liquidity deferral. (1) A resident or  part-
    50  year resident individual who in a taxable year receives from a donor who
    51  is  a  family  member  of such individual gift income totaling less than
    52  five million dollars, over fifty percent of the  total  value  of  which
    53  consists  of  equity  interests in a family-owned business, may elect to
    54  defer payment of the tax imposed by this section until the time at which
    55  such individual sells such equity interests, provided  that  during  the
    56  time  of  deferral  interest  will accrue on the amount of such tax at a

        A. 4643--A                          4
 
     1  rate equal to the federal short-term rate as  provided  under  paragraph
     2  three  of  subsection  (j)  of  section six hundred ninety-seven of this
     3  article.
     4    (2) For the purposes of this subsection, "family-owned business" means
     5  a  business  for which, at the time ownership of such business is trans-
     6  ferred to a resident or part-year resident individual, the transferor of
     7  such business or family members of  such  transferor  collectively  have
     8  retained  majority  ownership  and  have  materially participated in the
     9  operation of such business for the ten consecutive years proceeding such
    10  transfer.
    11    § 2. The tax law is amended by adding a new section 620-b to  read  as
    12  follows:
    13    § 620-b. Credit against separate tax on inheritance income. A resident
    14  shall be allowed a credit against the tax imposed by section six hundred
    15  four  of this article in the amount of the estate tax imposed by article
    16  twenty-six of this chapter or any estate or inheritance tax  imposed  by
    17  another  state  of  the  United  States, a political subdivision of such
    18  state, or the District of Columbia, upon any inheritance income, as such
    19  term is defined in such section, received by such resident in a  taxable
    20  year.  Such resident may elect to calculate the amount of such credit in
    21  accordance with either subsection (a) or subsection (b) of this section.
    22    (a) The amount of credit allowed  pursuant  to  this  section  may  be
    23  calculated  by multiplying the total amount of estate or inheritance tax
    24  imposed by this state, another state of the United States,  a  political
    25  subdivision  of  such  state,  or the District of Columbia on the estate
    26  from which such resident has received inheritance income by a  fraction,
    27  the  numerator  of which is the amount of inheritance income received by
    28  such resident from such estate and the denominator of which is the total
    29  value of such estate after the federal estate  tax  has  been  paid  but
    30  before  the  estate  tax of this state, or any estate or inheritance tax
    31  imposed by another state of the United States, a  political  subdivision
    32  of  such  state, or the District of Columbia, has been paid. In order to
    33  calculate such credit in accordance with this subsection, such  resident
    34  must  know the total amount of estate or inheritance tax imposed on such
    35  estate by this state, another state of the United  States,  a  political
    36  subdivision  of  such  state,  or the District of Columbia and the total
    37  value of such estate after the federal estate  tax  has  been  paid  but
    38  before the estate or inheritance tax of this state, another state of the
    39  United States, a political subdivision of such state, or the District of
    40  Columbia, has been paid.
    41    (b)  The  amount  of  credit  allowed  pursuant to this section may be
    42  calculated as equal to the amount of estate tax or  inheritance  tax  of
    43  this  state, another state of the United States, a political subdivision
    44  of such state, or the District of Columbia, that would be imposed on the
    45  estate from which such resident receives inheritance income as  if  such
    46  inheritance income were equal to the total value of such estate.
    47    § 3. The tax law is amended by adding two new sections 624-a and 624-b
    48  to read as follows:
    49    § 624-a. Computation of separate tax on inheritance income received by
    50  a  resident  individual.  The  amount  of  tax imposed under section six
    51  hundred four of this article for  any  taxable  year,  with  respect  to
    52  inheritance  income  received  by a resident individual, shall be deter-
    53  mined in accordance with the following table:
    54    For taxable years beginning after two thousand twenty:
    55  If the inheritance income is:        The tax is:
    56  Not over $250,000                    0% of inheritance income

        A. 4643--A                          5
 
     1  Over $250,000 but not over $500,000  $0 plus 5% of excess over $250,000
     2  Over $500,000 but not over           $12,500 plus 15% of excess over
     3  $1,000,000                           $500,000
     4  Over $1,000,000 but not over         $87,500 plus 30% of excess over
     5  $2,000,000                           $1,000,000
     6  Over $2,000,000 but not over         $387,000 plus 40% of excess over
     7  $10,000,000                          $2,000,000
     8  Over $10,000,000                     $3,587,500 plus 50% of excess over
     9                                       $10,000,000
    10    §  624-b.  Computation  of  separate  tax on gift income received by a
    11  resident individual. The amount of tax imposed under section six hundred
    12  four-a of this part for any taxable year, with respect  to  gift  income
    13  received  by  a  resident  individual, shall be determined in accordance
    14  with the following table:
    15  If the gift income is:               The tax is:
    16  Not over $50,000                     0% of gift income
    17  Over $50,000 but not over $100,000   $0 plus 5% of excess over $50,000
    18  Over $100,000 but not over           $2,500 plus 15% of excess over
    19  $200,000                             $100,000
    20  Over $200,000 but not over           $17,500 plus 30% of excess over
    21  $400,000                             $200,000
    22  Over $400,000 but not over           $77,500 plus 40% of excess over
    23  $2,000,000                           $400,000
    24  Over $2,000,000                      $717,500 plus 50% of excess over
    25                                       $2,000,000
    26    § 4. The tax law is amended by adding three new sections 637-a,  637-b
    27  and 640 to read as follows:
    28    § 637-a. Computation of separate tax on inheritance income received by
    29  nonresident or part-year resident individuals. The amount of tax imposed
    30  under  section  six  hundred  four of this article for any taxable year,
    31  with respect to inheritance income received by a  nonresident  or  part-
    32  year  resident  individual,  shall  be determined in accordance with the
    33  following table:
    34    (a) For taxable years beginning after two thousand twenty:
    35  If the inheritance income is:        The tax is:
    36  Not over $250,000                    0% of inheritance income
    37  Over $250,000 but not over $500,000  $0 plus 5% of excess over $250,000
    38  Over $500,000 but not over           $12,500 plus 15% of excess over
    39  $1,000,000                           $500,000
    40  Over $1,000,000 but not over         $87,500 plus 30% of excess over
    41  $2,000,000                           $1,000,000
    42  Over $2,000,000 but not over         $387,000 plus 40% of excess
    43  $10,000,000                          over $2,000,000
    44  Over $10,000,000                     $3,587,500 plus 50% of excess over
    45                                       $10,000,000
    46    § 637-b. Computation of separate tax on gift income received by  part-
    47  year  resident  individuals. The amount of tax imposed under section six
    48  hundred four-a of this article for any taxable  year,  with  respect  to
    49  gift income received by a part-year resident individual, shall be deter-
    50  mined in accordance with the following table:
    51  If the gift income is:               The tax is:
    52  Not over $50,000                     0% of gift income
    53  Over $50,000 but not over $100,000   $0 plus 5% of excess over $50,000
    54  Over $100,000 but not over $200,000  $2,500 plus 15% of excess over
    55                                       $100,000
    56  Over $200,000 but not over           $17,500 plus 30% of excess over

        A. 4643--A                          6
 
     1  $400,000                             $200,000
     2  Over $400,000 but not over           $77,500 plus 40% of excess over
     3  $2,000,000                           $400,000
     4  Over $2,000,000                      $717,500 plus 50% of excess over
     5                                       $2,000,000
     6    §  640. Credits against separate tax on inheritance income. A nonresi-
     7  dent or part-year resident individual shall be allowed a credit  against
     8  the  tax  imposed  by  section  six  hundred four of this article in the
     9  amount of the estate tax imposed by article twenty-six of this  chapter,
    10  or  of  any  estate  or  inheritance tax imposed by another state of the
    11  United States, a political subdivision of such state, or the District of
    12  Columbia, upon any inheritance income, as such term is defined  in  such
    13  section,  received by such individual in a taxable year. Such individual
    14  may elect to calculate the amount of  such  credit  in  accordance  with
    15  either subsection (a) or subsection (b) of this section.
    16    (a)  The  amount  of  credit  allowed  pursuant to this section may be
    17  calculated by multiplying the total amount of estate or inheritance  tax
    18  imposed  by  this state, another state of the United States, a political
    19  subdivision of such state, or the District of  Columbia  on  the  estate
    20  from  which  such  individual has received inheritance income by a frac-
    21  tion, the numerator  of  which  is  the  amount  of  inheritance  income
    22  received  by  such  individual  from  such estate and the denominator of
    23  which is the total value of such estate after the federal estate tax has
    24  been paid but before the estate tax of this  state,  or  any  estate  or
    25  inheritance  tax  imposed by another state of the United States, a poli-
    26  tical subdivision of such state, or the District of Columbia,  has  been
    27  paid.  In  order  to  calculate  such  credit  in  accordance  with this
    28  subsection, such individual must know the  total  amount  of  estate  or
    29  inheritance  tax  imposed on such estate by this state, another state of
    30  the United States,  a  political  subdivision  of  such  state,  or  the
    31  District of Columbia and the total value of such estate after the feder-
    32  al  estate tax has been paid but before the estate or inheritance tax of
    33  this state, another state of the United States, a political  subdivision
    34  of such state, or the District of Columbia, has been paid.
    35    (b)  The  amount  of  credit  allowed  pursuant to this section may be
    36  calculated as equal to the amount of estate tax or  inheritance  tax  of
    37  this  state, another state of the United States, a political subdivision
    38  of such state, or the District of Columbia that would be imposed on  the
    39  estate from which such individual receives inheritance income as if such
    40  inheritance income were equal to the total value of such estate.
    41    §  5.  Section  951-a  of  the  tax  law  is  amended  by adding a new
    42  subsection (g) to read as follows:
    43    (g) The term "New York taxable gifts" has the same meaning as provided
    44  in section one thousand of this chapter.
    45    § 6. Section 952 of the tax law, as amended by section 2 of part X  of
    46  chapter  59  of the laws of 2014, subsection (b) as amended by section 1
    47  of part BB of chapter 59 of the laws of 2015,  is  amended  to  read  as
    48  follows:
    49    § 952. Tax imposed. (a) A tax is hereby imposed on the transfer of the
    50  New York estate by every deceased individual who at his or her death was
    51  a resident of New York state.
    52    (b)  Computation  of  tax.  The  tax  imposed by this section shall be
    53  computed on the deceased resident's New York taxable estate as follows:
    54    (1) In the case of decedents dying before April 1, 2021:

        A. 4643--A                          7
 
     1  If the New York taxable estate is:      The tax is:
     2  Not over $500,000                       3.06% of taxable estate
     3  Over $500,000 but not over $1,000,000   $15,300 plus 5.0% of excess over
     4                                          $500,000
     5  Over $1,000,000 but not over $1,500,000 $40,300 plus 5.5% of excess over
     6                                          $1,000,000
     7  Over $1,500,000 but not over $2,100,000 $67,800 plus 6.5% of excess over
     8                                          $1,500,000
     9  Over $2,100,000 but not over $2,600,000 $106,800 plus 8.0% of excess
    10                                          over $2,100,000
    11  Over $2,600,000 but not over $3,100,000 $146,800 plus 8.8% of excess over
    12                                          $2,600,000
    13  Over $3,100,000 but not over $3,600,000 $190,800 plus 9.6% of excess over
    14                                          $3,100,000
    15  Over $3,600,000 but not over $4,100,000 $238,800 plus 10.4% of excess
    16                                          over $3,600,000
    17  Over $4,100,000 but not over $5,100,000 $290,800 plus 11.2% of excess
    18                                          over $4,100,000
    19  Over $5,100,000 but not over $6,100,000 $402,800 plus 12.0% of excess
    20                                          over $5,100,000
    21  Over $6,100,000 but not over $7,100,000 $522,800 plus 12.8% of excess
    22                                          over $6,100,000
    23  Over $7,100,000 but not over $8,100,000 $650,800 plus 13.6% of excess
    24                                          over $7,100,000
    25  Over $8,100,000 but not over $9,100,000 $786,800 plus 14.4% of excess
    26                                          over $8,100,000
    27  Over $9,100,000 but not over            $930,800 plus 15.2% of excess over
    28  $10,100,000                             $9,100,000
    29  Over $10,100,000                        $1,082,800 plus 16.0% of excess
    30                                          over $10,100,000
    31    (2) In the case of decedents dying on or after April 1, 2021:
    32  If the New York taxable estate plus  The tax is:
    33  the lifetime amount of New York
    34  taxable gifts is:
    35  Not over $750,000                    0% of taxable estate
    36  Over $750,000 but not over           $0 plus 5% of excess over $750,000
    37  $1,500,000
    38  Over $1,500,000 but not over         $37,500 plus 15% of excess over
    39  $3,000,000                           $1,500,000
    40  Over $3,000,000 but not over         $262,500 plus 30% of excess over
    41  $6,000,000                           $3,000,000
    42  Over $6,000,000 but not over         $1,162,500 plus 40% of excess
    43  $30,000,000                          over $6,000,000
    44  Over $30,000,000                     $10,762,500 plus 50% of excess over
    45                                       $30,000,000
    46    (c)  Applicable  credit  amount.  (1)  [A] In the case of any decedent
    47  dying before April first, two  thousand  twenty-one,  a  credit  of  the
    48  applicable  credit  amount  shall  be allowed against the tax imposed by
    49  this section as provided in this subsection. In the case of such a dece-
    50  dent whose New York taxable estate is less than or equal  to  the  basic
    51  exclusion  amount,  the  applicable credit amount shall be the amount of
    52  tax that would be due under subsection  (b)  of  this  section  on  such
    53  decedent's New York taxable estate. In the case of such a decedent whose
    54  New  York taxable estate exceeds the basic exclusion amount by an amount
    55  that is less than or equal to five percent of such amount, the  applica-
    56  ble  credit  amount  shall  be the amount of tax that would be due under

        A. 4643--A                          8
 
     1  subsection (b) of this section if the amount on which the tax is  to  be
     2  computed  were  equal  to  the  basic exclusion amount multiplied by one
     3  minus a fraction, the numerator of which  is  the  decedent's  New  York
     4  taxable  estate minus the basic exclusion amount, and the denominator of
     5  which is five percent of the basic exclusion amount. Provided,  however,
     6  that  the  credit  allowed  by  this subsection shall not exceed the tax
     7  imposed by this section, and no credit shall be allowed to the estate of
     8  any decedent whose New York taxable  estate  exceeds  one  hundred  five
     9  percent of the basic exclusion amount.
    10    (2) (A) For purposes of this section, the basic exclusion amount shall
    11  be as follows:
    12  In  the  case of decedents dying on or after: The basic exclusion amount
    13  is:
    14  April 1, 2014 and before April 1, 2015       $ 2,062,500
    15  April 1, 2015 and before April 1, 2016       3,125,000
    16  April 1, 2016 and before April 1, 2017       4,187,500
    17  April 1, 2017 and before January 1, 2019     5,250,000
    18    (B) In the case of any decedent dying [in a calendar  year  beginning]
    19  on or after January first, two thousand nineteen and before April first,
    20  two thousand twenty-one, the basic exclusion amount shall be equal to:
    21    (i) five million dollars, multiplied by
    22    (ii)  one  plus  the  cost-of-living  adjustment,  which  shall be the
    23  percentage by which the consumer price index for the preceding  calendar
    24  year  exceeds  the  consumer  price index for calendar year two thousand
    25  ten.
    26    (C) (i) For purposes of this paragraph, "consumer price  index"  means
    27  the  most  recent consumer price index for all-urban consumers published
    28  by the United States department of labor.
    29    (ii) For purposes of clause (ii) of subparagraph  (B)  of  this  para-
    30  graph, the consumer price index for any calendar year shall be the aver-
    31  age  of  the  consumer  price  index as of the close of the twelve-month
    32  period ending on August thirty-first of such calendar year.
    33    (iii) If any amount adjusted under this paragraph is not a multiple of
    34  ten thousand dollars, such amount shall be rounded to the nearest multi-
    35  ple of ten thousand dollars.
    36    (d) Credit for lifetime gift taxes paid. In the  case  of  a  decedent
    37  dying  on  or after April first, two thousand twenty-one, a credit shall
    38  be allowed against the tax imposed by this section equal  to  the  total
    39  amount  of  gift tax imposed by section one thousand one of this chapter
    40  paid by such decedent during the lifetime of such decedent.
    41    § 7. Subsection (a) of section 954 of the tax law is amended by adding
    42  six new paragraphs 5, 6, 7, 8, 9 and 10 to read as follows:
    43    (5) Reduced by the amount of any qualified transfer, as such  term  is
    44  defined  in paragraph (2) of subsection (e) of section two thousand five
    45  hundred three of the internal revenue code, to the extent the amount  of
    46  such transfer is included in the decedent's federal gross estate.
    47    (6)  Reduced  by  the value of any transfers of property consisting of
    48  pensions, health savings accounts, or  retirement  accounts  established
    49  pursuant  to sections four hundred one, four hundred three, four hundred
    50  eight, four hundred eight-A, or four hundred fifty-seven of the internal
    51  revenue code to the extent the amount of any such transfer  is  included
    52  in the decedent's federal gross estate.
    53    (7) Reduced by one of the following, but not both, with respect to not
    54  more than one transfer of real property:
    55    (A)  Up  to  one  million  seven hundred fifty thousand dollars of the
    56  value of real property transferred to an individual that (i)  served  as

        A. 4643--A                          9
 
     1  the  primary residence of the decedent or of such individual for the ten
     2  consecutive years preceding such transfer or (ii) serves as the  primary
     3  residence  of  such  individual for the five consecutive years following
     4  such  transfer to the extent the value of such real property is included
     5  in the decedent's federal gross estate; or
     6    (B) Up to seven hundred fifty thousand dollars of the value of a resi-
     7  dential home that was purchased with a  federal  housing  administration
     8  insured  mortgage  to  the  extent the value of such residential home is
     9  included in the decedent's federal gross estate.
    10    (8) Reduced by the value of farmland and farm equipment transferred to
    11  an individual from the estate of a family member of such  individual  to
    12  the  extent  the value of such farmland and equipment is included in the
    13  decedent's federal gross estate, provided that the total  value  of  all
    14  transfers  from such estate to such individual is less than five million
    15  dollars, and provided further that the value of such farmland and equip-
    16  ment constitutes over fifty percent of the total value  of  such  trans-
    17  fers.  For  the purposes of this paragraph, "family member" has the same
    18  meaning as provided in section six hundred four of this chapter.
    19    (9) Reduced by the value of real property transferred by the estate of
    20  the decedent to an individual who was a resident of this  state  on  the
    21  date  of death of such decedent that will serve as the primary residence
    22  of such individual, provided that the total value of all transfers  from
    23  such  estate  to  such  individual is less than five million dollars and
    24  provided that the value of such real  property  constitutes  over  fifty
    25  percent  of the total value of such transfers; and provided further that
    26  such estate and such individual agree in writing at the time of transfer
    27  that such individual will be liable for any inheritance tax  imposed  by
    28  section six hundred four of this chapter on the transfer of such proper-
    29  ty  that  may  be deferred and paid upon disposition of such property as
    30  provided in paragraph one of subsection (d) of such section.
    31    (10) Reduced by the value of a family-owned  business  transferred  by
    32  the  estate  of the decedent to an individual who was a resident of this
    33  state on the date of death of such decedent,  provided  that  the  total
    34  value  of all transfers from such estate to such individual is less than
    35  five million dollars and provided that the value  of  such  family-owned
    36  business  constitutes  over  fifty  percent  of  the total value of such
    37  transfers; and provided further that such  estate  and  such  individual
    38  agree  in  writing  at the time of transfer that such individual will be
    39  liable for any inheritance tax imposed by section six  hundred  four  of
    40  this  chapter  on the transfer of such family-owned business that may be
    41  deferred and paid upon disposition of such business as provided in para-
    42  graph two of subsection (d) of such section. For the  purposes  of  this
    43  paragraph,  the  term  "family-owned  business"  has the same meaning as
    44  provided in subparagraph (B) of  paragraph  two  of  subsection  (d)  of
    45  section six hundred four of this chapter.
    46    § 8. Subsection (a) of section 955 of the tax law, as added by section
    47  4  of  part  X  of chapter 59 of the laws of 2014, is amended to read as
    48  follows:
    49    (a) General.--The taxable estate of a New York resident shall  be  his
    50  or  her New York gross estate, minus the deductions allowable for deter-
    51  mining his or her federal taxable estate under the internal revenue code
    52  (whether or not a federal estate tax return is required  to  be  filed),
    53  except  to  the  extent  that such deductions relate to real or tangible
    54  personal property sitused outside New York state, reduced by the  amount
    55  of  federal  estate tax imposed on the estate of such resident, provided
    56  that with respect to the estate of a decedent who on the  date  of  such

        A. 4643--A                         10
 
     1  decedent's  death  was  a not a resident of New York, the New York gross
     2  estate shall be reduced only by an amount equal to the total  amount  of
     3  federal  estate  tax imposed on such estate multiplied by a fraction the
     4  numerator  of  which  is  the value of property contained in such estate
     5  that is subject to the tax imposed by section nine hundred sixty of this
     6  part and the denominator of which is the total value of such estate.
     7    § 9. The tax law is amended by adding a new article 26-A  to  read  as
     8  follows:
     9                                ARTICLE 26-A
    10                                  GIFT TAX
    11  Section 1000. Definitions.
    12          1001. Tax imposed.
    13          1002. Rate of tax.
    14          1003. Administration.
    15    §  1000.  Definitions. (a) "Taxable gifts" means the transfers by gift
    16  which are included in taxable gifts for federal gift tax purposes  under
    17  section  2503 and sections 2511 to 2514, inclusive, and sections 2516 to
    18  2519, inclusive, of the  internal  revenue  code,  less  the  deductions
    19  allowed in sections 2522 to 2524, inclusive, of such code.
    20    (b)  (1)  Except  as  otherwise  provided  in  paragraph  two  of this
    21  subsection, "New York taxable gifts" means taxable gifts made  during  a
    22  taxable  year commencing on or after January first, two thousand twenty-
    23  two, that are (i) for residents, taxable gifts, wherever located, except
    24  for gifts of real estate or tangible personal property  located  outside
    25  New  York  and (ii) for nonresidents of this state, gifts of real estate
    26  or tangible personal property located within New York.
    27    (2) Gifts made to any person by the donor during the calendar year for
    28  which a tax is imposed on such person for the receipt of  such  gift  by
    29  this  state, another state of the United States, a political subdivision
    30  of such state, or the District of Columbia, including the tax imposed by
    31  section six hundred four-a of this chapter, shall not for  the  purposes
    32  of  paragraph  one of this subsection be included in the total amount of
    33  New York taxable gifts made during such year.
    34    (c) In the administration of the tax under this article,  the  commis-
    35  sioner  shall  apply the provisions of sections 2701 to 2704, inclusive,
    36  of the internal revenue code, and the term "secretary or  his  delegate"
    37  as used in such sections means the commissioner.
    38    §  1001.  Tax  imposed.  For  the  calendar year commencing on January
    39  first, two thousand twenty-two, and for  each  year  thereafter,  a  tax
    40  computed  as  provided  in  section  one thousand two of this article is
    41  hereby imposed on the transfer of property by gift during a taxable year
    42  by any resident or nonresident individual.
    43    § 1002. Rate of tax. With  respect  to  New  York  taxable  gifts,  as
    44  defined  in section one thousand of this article, made by a donor during
    45  a calendar year commencing on or after January first, two thousand twen-
    46  ty-two, including the aggregate amount of all  New  York  taxable  gifts
    47  made by the donor during all calendar years commencing on or after Janu-
    48  ary first, two thousand twenty-two, the tax imposed by section one thou-
    49  sand  one of this article for the calendar year shall be at the rate set
    50  forth in the following schedule, with a credit allowed against such  tax
    51  for  any  tax  previously  paid  to this state pursuant to this section,
    52  provided such credit shall not exceed the amount of tax imposed by  this
    53  section:
    54  If the amount of New York
    55  taxable gifts is:                    The tax is:
    56  Not over $750,000                    0% of taxable gifts

        A. 4643--A                         11
 
     1  Over $750,000 but not over           $0 plus 5% of excess over $750,000
     2  $1,500,000
     3  Over $1,500,000 but not over         $37,500 plus 15% of excess over
     4  $3,000,000                           $1,500,000
     5  Over $3,000,000 but not over         $262,500 plus 30% of excess over
     6  $6,000,000                           $3,000,000
     7  Over $6,000,000 but not over         $1,162,500 plus 40% of excess
     8  $30,000,000                          over $6,000,000
     9  Over $30,000,000                     $10,762,500 plus 50% of excess over
    10                                       $30,000,000
    11    §  1003.  Administration.  The commissioner shall promulgate rules and
    12  regulations necessary and appropriate to effectuate  the  provisions  of
    13  this  article,  including  the establishment of deadlines and procedures
    14  for the filing of gift tax returns by any  resident  or  nonresident  of
    15  this state who gave New York taxable gifts during a taxable year.
    16    § 10. This act shall take effect immediately.
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