NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A6419
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 exclu-
sion amount by five percent (5%) or less are subject to a complex calcu-
lation 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 feder-
al exemption amount. However, this increase in New York's estate exclu-
sion amount came with a large problem, called the "cliff." Over time,
the basic exclusion amount is increased as follows:
Death on Exclusion
or After And Before Amount
April 1, 2014 April 1, 2015 $2,062,500
April 1, 2015 April 1, 2016 $3,125,000
April 1, 2016 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 phas-
es 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 exclusion amount altogether
for the estate of any decedent whose New York taxable estate exceeds one
hundred and five percent of the basic exclusion 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: This is a new bill.
FISCAL IMPLICATIONS: To be determined.
EFFECTIVE DATE: This act shall take effect immediately.
STATE OF NEW YORK
________________________________________________________________________
6419
2015-2016 Regular Sessions
IN ASSEMBLY
March 24, 2015
___________
Introduced by M. of A. BRAUNSTEIN, SIMOTAS, SIMANOWITZ, SCHIMMINGER,
ABINANTI, OTIS, MOSLEY, ZEBROWSKI, GALEF, STIRPE, SCHIMEL, BROOK-KRAS-
NY -- Multi-Sponsored by -- M. of A. ARROYO, DenDEKKER, GLICK, LUPAR-
DO, 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.
LBD06655-02-5
