2018 -- H 7146

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2018

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A N   A C T

RELATING TO TAXATION -- ESTATE TAX

     Introduced By: Representatives Morgan, Quattrocchi, Price, Giarrusso, and Mendonca

     Date Introduced: January 12, 2018

     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

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

     (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.

     (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

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.

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

if the business is a closely held corporation or a limited liability company, and has no more than

five hundred (500) employees as of the date of the decedent's death.

     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 -- ESTATE TAX

***

     This act would provide an exemption from the estate tax for a closely held corporation or

a limited liability company that has no more than five hundred (500) employees as of the date of

the decedent's death.

     This act would take effect upon passage.

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