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.
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.
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 $250,0000% 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 $50,0000% 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 $250,0000% 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 $10,000,000over $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 $50,0000% 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 plusThe tax is:
33 the lifetime amount of New York
34 taxable gifts is:
35 Not over $750,0000% 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 $30,000,000over $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 $750,0000% 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 $30,000,000over $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.