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A01522 Summary:

BILL NOA01522
 
SAME ASNo Same As
 
SPONSORBraunstein
 
COSPNSRSimotas, Schimminger, Abinanti, Otis, Mosley, Zebrowski, Galef, Stirpe, O'Donnell
 
MLTSPNSRArroyo, DenDekker, Glick, Lupardo, Solages, Thiele
 
Amd 952, Tax L
 
Sets the rate of taxation on estates.
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A01522 Memo:

NEW YORK STATE ASSEMBLY
MEMORANDUM IN SUPPORT OF LEGISLATION
submitted in accordance with Assembly Rule III, Sec 1(f)
 
BILL NUMBER: A1522
 
SPONSOR: Braunstein (MS)
  TITLE OF BILL: An act to amend the tax law, in relation to the rate of the estate tax   PURPOSE OR GENERAL IDEA OF BILL: This bill will remove the estate tax "cliff" enacted by Chapter 59 of the Laws of 2014. As enacted, this chapter requires estates that exceed the exclusion amount by over five percent (5%) to lose any exemption from taxes. The result is that estates with a value over one hundred and five percent (105%) of the current exclusion amount are taxed on their full value, not just the value in excess of the exclusion amount. Estates that exceed the exclusion amount by five percent (5%) or less are subject to a complex calculation to determine the amount of estate tax due. Such a tax is patently unfair as it results in a marginal tax rate in excess of one hundred percent (100%). This new bill will remedy this unfairness by limiting taxation to the portion of the taxable estate that exceeds the exclusion amount.   SUMMARY OF SPECIFIC PROVISIONS: 1. Section 1.Subsection (b) of section 952 of the tax law, as amended by section 2 of part X of chapter 59 of the laws of 2014, is amended to state that the current method of calculating the estate tax shall only apply to decedents dying on or after April 1, 2014 and before April 1, 2015. 2. Section 2. Paragraph 1 of subsection (c) of section 952 of the tax law, as added by section 2 of part X of chapter 59 of the laws of 2014, is amended by removing the language that created the estate tax "cliff "   JUSTIFICATION: By enacting Chapter 59 of the Laws of 2014 New York State more than doubled its estate tax exemption from $1,000,000 to $2,062,500. New York State's exemption amount is scheduled to gradually increase through 2019, at which time it will once again match the federal exemption amount. However, this increase in New York's estate exclusion amount came with a large problem, called the "cliff." Over time, the basic exclusion amount is increased as follows: Death on or After And Before Exclusion Amount April 1, 2014 April 1, 2015 $2062,500 April 1, 2016 April 1, 2016 $3,125,000 April 1, 2017 April 1, 2017 $4,187,500 April 1, 2017 January 1, 2019 $5,250,000 Along with the increased exclusion amount, Chapter 59 of the Laws of 2014 also contains legislation that increases the amount of the estate that is subject to taxation. Under this new legislation, if a New York decedent's taxable estate is from one to five percent (5%) greater than the basic exclusion amount, the applicable credit amount is limited based upon a formula, resulting in a rapidly increasing tax for each percentage point over the basic exclusion amount. When the taxable estate exceeds five percent (5%) of the exclusion amount, the estate "falls off the cliff," and the entire value of the estate (not just the portion in excess of the exclusion amount), is subject to taxation. Simply put, the current law provides an extremely steep slope that phases out the applicable credit amount for New York taxable estates that are between one hundred and one hundred and five percent of the basic exclusion amount, and eliminates the basic exclu- sion amount altogether for the estate of any decedent whose New York taxable estate exceeds one hundred and five percent of the basic exclu- sion amount. The unfairness of this legislation will only increase as the exclusion amount increases over the next few years, as shown in the following example. For example, under the current law, assuming a basic exclusion amount of $ 5,250,000, a decedent with a New York taxable estate of $5,512,500 (which is 105% of the basic exclusion amount of $5,250,000) would pay a New York estate tax of $ 430,050 as a result of the "Cliff." In effect, there is a New York estate tax of $430,050 (or a marginal New York estate tax rate of nearly 164%) on the additional New York taxable estate of $262,500 in excess of the basic exclusion amount of $5,250,000. This result is patently unfair. Other states that have adopted the "cliff method" of collecting estate taxes have reversed their legislation. Connecticut (2010) and Rhode Island (2015) have since eliminated the "cliff in their estate taxes.   PRIOR LEGISLATIVE HISTORY: 2015-2016: A.6419 - Referred to Ways and Means.   FISCAL IMPLICATIONS: To be determined.   EFFECTIVE DATE: This act shall take effect immediately.
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A01522 Text:



 
                STATE OF NEW YORK
        ________________________________________________________________________
 
                                          1522
 
                               2017-2018 Regular Sessions
 
                   IN ASSEMBLY
 
                                    January 12, 2017
                                       ___________
 
        Introduced  by  M.  of  A. BRAUNSTEIN, SIMOTAS, SIMANOWITZ, SCHIMMINGER,
          ABINANTI, OTIS, MOSLEY, ZEBROWSKI, GALEF, STIRPE, O'DONNELL --  Multi-
          Sponsored  by -- M.  of A. ARROYO, DenDEKKER, GLICK, LUPARDO, SOLAGES,
          THIELE -- read once and referred to the Committee on Ways and Means
 
        AN ACT to amend the tax law, in relation to the rate of the estate tax

          The People of the State of New York, represented in Senate and  Assem-
        bly, do enact as follows:
 
     1    Section  1.  Paragraph  1  of subsection (c) of section 952 of the tax
     2  law, as added by section 2 of part X of chapter 59 of the laws of  2014,
     3  is amended to read as follows:
     4    (1)  A credit of the applicable credit amount shall be allowed against
     5  the tax imposed by this section as provided in this subsection.  In  the
     6  case  of  a decedent whose New York taxable estate is less than or equal
     7  to the basic exclusion amount, the applicable credit amount shall be the
     8  amount of tax that would be due under subsection (b) of this section  on
     9  such  decedent's  New  York  taxable  estate. [In the case of a decedent
    10  whose New York taxable estate exceeds the basic exclusion amount  by  an
    11  amount  that  is  less than or equal to five percent of such amount, the
    12  applicable credit amount shall be the amount of tax that  would  be  due
    13  under  subsection  (b) of this section if the amount on which the tax is
    14  to be computed were equal to the basic exclusion  amount  multiplied  by
    15  one  minus a fraction, the numerator of which is the decedent's New York
    16  taxable estate minus the basic exclusion amount, and the denominator  of
    17  which is five percent of the basic exclusion amount.] Provided, however,
    18  that  the  credit  allowed  by  this subsection shall not exceed the tax
    19  imposed by this section[, and no credit shall be allowed to  the  estate
    20  of  any  decedent whose New York taxable estate exceeds one hundred five
    21  percent of the basic exclusion amount].
    22    § 2. This act shall take effect immediately.
 
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD01753-01-7
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