Report on Legislation to change the New York estate tax regime to eliminate the estate tax “cliff”

SUMMARY

The Committees on Trusts, Estates & Surrogate’s Courts and Estate & Gift Taxation issued a report recommending changes to the New York estate tax regime to eliminate the New York estate tax “cliff” and to make the estate tax more competitive vis-à-vis other states. The “cliff” results from the rapid phase-out of the applicable credit amount for taxable estates that are only slightly in excess of the basic exclusion amount for New York estate tax purposes. As a result, the marginal tax rate for an estate valued at just-over the phase-out level can exceed 100%. In addition, the Committees recommend: (i) permitting a separate state qualified terminable interest property (“QTIP”) election to be made where a federal estate tax return is being filed solely to make a portability election for federal estate tax purposes or in any other situation in which the executor would not be subject to penalties under the Internal Revenue Code for failure to file a federal estate tax return; (ii) preventing New Yorkers who make taxable gifts subject to addback to their New York gross estate under Tax Law § 954(a)(3) from being penalized for federal estate tax purposes due to deduction limitations for state death taxes under IRC; and (iii) permitting a portability election for New York estate tax purposes so as to conform to the portability election for federal estate tax purposes.

BILL INFORMATION

A.6419 (AM Weinstein) – sets the rate of taxation on estates (NYS 2015)