2016 -- H 7732

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LC003525

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2016

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A N   A C T

RELATING TO TAXATION

     

     Introduced By: Representatives Morgan, Filippi, Giarrusso, Price, and Chippendale

     Date Introduced: February 24, 2016

     Referred To: House Finance

     It is enacted by the General Assembly as follows:

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     SECTION 1. Section 44-22-1 of the General Laws in Chapter 44-22 entitled "Estate and

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Transfer Taxes - Liability and Computation" is hereby amended to read as follows:

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     44-22-1. Tax on net estate of decedents -- Additional tax on postponed enjoyment --

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Deductions -- Marital deduction. -- (a) A tax is imposed upon the transfer of the net estate of

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every resident or nonresident decedent as a tax upon the right to transfer. The tax is imposed at

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the rate of two percent (2%) upon all amounts not in excess of twenty-five thousand dollars

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($25,000); at the rate of three percent (3%) upon all amounts in excess of twenty-five thousand

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dollars ($25,000) and not exceeding fifty thousand dollars ($50,000); at the rate of four percent

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(4%) upon all amounts in excess of fifty thousand dollars ($50,000) and not exceeding one

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hundred thousand dollars ($100,000); at the rate of five percent (5%) upon all amounts in excess

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of one hundred thousand dollars ($100,000) and not exceeding two hundred fifty thousand dollars

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($250,000); at the rate of six percent (6%) upon all amounts in excess of two hundred fifty

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thousand dollars ($250,000) and not exceeding five hundred thousand dollars ($500,000); at the

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rate of seven percent (7%) upon all amounts in excess of five hundred thousand dollars

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($500,000) and not exceeding seven hundred fifty thousand dollars ($750,000); at the rate of eight

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percent (8%) upon all amounts in excess of seven hundred fifty thousand dollars ($750,000) and

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not exceeding one million dollars ($1,000,000); at the rate of nine percent (9%) upon all amounts

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in excess of one million dollars ($1,000,000). An additional tax is imposed at the rate of two

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percent (2%) upon all or any part of each estate devised, bequeathed, or conveyed in such manner

 

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that it becomes necessary to postpone the assessment of taxes imposed by this chapter until the

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person entitled to the estate comes into beneficial enjoyment or possession of the estate; and

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provided, further, that an additional tax is not assessed and collected, as provided in §§ 44-23-9 --

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44-23-12, in case a settlement of taxes is effected under the provisions of § 44-23-25.

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      (b) In computing the value of the net estate in subsection (a) of this section, there is

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deducted from the estate and exempted from the tax twenty-five thousand dollars ($25,000).

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      (c) In computing the value of the net estate in subsection (a) of this section, there is

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deducted from the estate and exempted from the tax all property or interests transferred to any

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corporation, association, or institution located in Rhode Island which is exempt from taxation by

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charter or under the laws of this state; or to any corporation, association, or institution located

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outside of this state, which if located within this state, would be exempt from taxation; provided,

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that the state of domicile of the corporation, association, or institution allows a reciprocal

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exemption to any similar Rhode Island corporation, association, or institution; or to any person in

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trust for the same or for use by the same for charitable purposes; or to any city or town in this

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state for public purposes.

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      (d) In computing the value of the net estate in subsection (a) of this section, there is

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deducted from the estate and exempted from the tax United States civil and federal military

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service annuity payments.

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      (e) In computing the value of the net estate in subsection (a) of this section, there is

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deducted from the estate and exempted from the estate tax a marital deduction, as defined in 26

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U.S.C. § 2056, in the amount of one hundred seventy-five thousand dollars ($175,000), from

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property or beneficial interests which pass or have passed from the decedent to the surviving

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spouse, but only to the extent that the interests are included in determining the value of the gross

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estate.

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      (f) (1) In computing the value of the net estate in subsection (a) of this section, there is

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deducted from the estate and exempted from the estate tax, an orphan's deduction, provided, that:

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(i) the decedent does not have a surviving spouse, and (ii) the decedent is survived by a minor

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child who, immediately after the death of the decedent, has no known parent, an amount equal to

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the value of any interest in property which passes or has passed from the decedent to the child,

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but only to the extent that the interest is included in determining the value of the gross estate. The

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aggregate amount of the deductions allowed under this section (computed without regard to this

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subsection) with respect to interests in property passing to any minor child shall not exceed an

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amount equal to five thousand dollars ($5,000) multiplied by the excess of twenty-one (21) over

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the age (in years) which the child has attained on the date of the decedent's death.

 

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      (2) For purposes of this subsection, any term used in the subsection has the same

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meaning as when used in a comparable context in 26 U.S.C. § 2057 unless a different meaning is

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clearly required.

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      (1) A transfer of a qualified small business interest to one or more qualified transferees is

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exempt from estate tax, if the qualified small business interest:

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     (i) Continues to be owned by a qualified transferee for a minimum of five (5) years after

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the decedent's date of death; and

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     (ii) Is reported on a timely filed tax return.

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     (2) A qualified small business interest exempted from estate tax hereunder that is no

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longer owned by a qualified transferee at any time within five (5) years after the decedent's date

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of death shall be subject to estate tax under this chapter.

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     (3) Each owner of a qualified family-owned business interest exempted from estate tax

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hereunder shall certify to the department, on an annual basis, for five (5) years after the

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decedent's date of death, that the qualified small business interest continues to be owned by a

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qualified transferee, and shall notify the department within thirty (30) days of any transaction, or

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occurrence causing the qualified small business interest to fail to qualify for the exemption. Each

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year, the department shall inform all owners of a qualified small business interest exempted from

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estate tax of their obligation to provide an annual certification under this subsection. The

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certification and notification shall be completed in the form and manner as provided by the

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department. An owner's failure to comply with the certification or notification requirements shall

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result in the loss of the exemption and the qualified small business interest shall be subject to

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estate tax due under this chapter.

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     (4) For purposes of this subsection, the following terms shall have the following

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meanings:

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     (i) "Qualified transferee" means a decedent's:

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     (A) Husband or wife;

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     (B) Lineal descendants; and

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     (C) Siblings and the sibling's lineal descendants.

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     (ii) "Qualified small business interest" means an ownership interest in a trade or business

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if the business has a net book value of assets totaling an amount not greater than five million

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dollars ($5,000,000) as of the date of the decedent's death.

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     (g) Notwithstanding any other provisions of this chapter, the total estate tax payment on

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account of the estate of a decedent whose death occurs on or after January 1, 1986, is that

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percentage of the estate tax which would be payable under this chapter determined in accordance

 

LC003525 - Page 3 of 5

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with the following schedule:

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      (1) Death prior to January 1, 1987. - Ninety percent (90%) in the case of decedents

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whose deaths occur on or after January 1, 1986, and prior to January 1, 1987;

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      (2) Death prior to January 1, 1988. - Eighty percent (80%) in the case of decedents

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whose deaths occur on or after January 1, 1987, and prior to January 1, 1988;

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      (3) Death prior to January 1, 1989. - Sixty percent (60%) in the case of decedents whose

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deaths occur on or after January 1, 1988, and prior to January 1, 1989;

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      (4) Death prior to January 1, 1990. - Forty percent (40%) in the case of decedents whose

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deaths occur on or after January 1, 1989, and prior to January 1, 1990;

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      (5) Death prior to June 1, 1990. - Twenty percent (20%) in the case of decedents whose

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deaths occur on or after January 1, 1990, and prior to June 1, 1990;

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      (6) Death prior to January 1, 1992. - Forty percent (40%) in the case of decedents whose

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deaths occur on or after June 1, 1990, and prior to January 1, 1992.

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      (7) Death on or after January 1, 1992. - The estate tax payable on or account of the estate

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of a decedent whose death occurs on or after January 1, 1992, is determined in accordance with §

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44-22-1.1.

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      (h) The estate tax payable under this section shall in no event be less than the estate tax

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due under § 44-22-1.1, computed without regard to the date of death.

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     (i) In computing the value of the net estate in subsection (a) of this section, there is

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deducted from the estate and exempted from the tax, the value of a qualified small business.

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     SECTION 2. This act shall take effect upon passage.

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LC003525

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO TAXATION

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     This act would exempt from the estate tax the value of a qualified small business valued

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at an amount not greater than $5,000,000.

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     This act would take effect upon passage.

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LC003525

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