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:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

state for public purposes.

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

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

service annuity payments.

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

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

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

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

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

estate.

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

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

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

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

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

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

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

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

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

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

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

clearly required.

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

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

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

the decedent's date of death; and

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

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

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

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

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

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

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

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

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

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

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

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

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

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

estate tax due under this chapter.

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

meanings:

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

     (A) Husband or wife;

     (B) Lineal descendants; and

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

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

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

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

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

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

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

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with the following schedule:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

44-22-1.1.

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

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

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

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

     SECTION 2. This act shall take effect upon passage.

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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

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

     This act would take effect upon passage.

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