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As Reported by House Finance and Appropriations Committee
123rd General Assembly
Regular Session
1999-2000 | Sub. S. B. No. 108 |
SENATORS LATTA-OELSLAGER-WATTS-BLESSING-MUMPER-WHITE-
NEIN-WACHTMANN-CUPP-HOTTINGER-CARNES-ARMBRUSTER-SPADA-
JOHNSON-DRAKE-RAY-GARDNER-SCHAFRATH-HORN-DiDONATO-KEARNS-
REPRESENTATIVES COUGHLIN-WILSON-PERRY-BOYD-OGG-BARRETT-SULLIVAN-
CORBIN-MEAD-AMSTUTZ-WOMER BENJAMIN-MOTTLEY-KREBS-DAMSCHRODER-
EVANS-HOOPS-METZGER-NETZLEY-PETERSON-O'BRIEN-STAPLETON-CAREY-
KILBANE
A BILL
To amend sections 1339.412, 5731.02, 5731.14, 5731.21, 5731.47, and 5731.48
and to enact section 5731.20 of the Revised Code to reduce the estate tax by
increasing the credit amount, to exempt the value of family-owned businesses
from the estate tax when such a business passes to family members, to reduce
the share of the estate tax paid to the state, and to specify that a
trustee
of a trust qualifying for the estate tax marital deduction has a duty to
annually distribute income from an IRA to the surviving spouse.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:
Section 1. That sections 1339.412, 5731.02, 5731.14, 5731.21, 5731.47, and
5731.48 be amended and section 5731.20 of the Revised Code be enacted to read
as follows:
Sec. 1339.412. (A) Except
as provided in division (B) of this section,
an instrument that creates an inter vivos or testamentary trust shall not
require or permit the accumulation for more than one
year
of any income of property that satisfies both of the following:
(1) The property is granted to a surviving spouse of the testator or
other settlor.
(2) The property qualifies for the federal estate tax marital deduction
allowed by subtitle B,
Chapter 11 of the
"Internal
Revenue Code
of 1986," 26
U.S.C.
2056, as amended, or the estate tax marital deduction allowed by division
(A) of section 5731.15 of the
Revised Code.
(B)(1) Division
(A) of this section does not apply if an
instrument that creates an inter vivos or testamentary trust expressly states
the intention of the testator or other settlor that obtaining a marital
deduction as described in division (A)(2) of
this section is less important than requiring or permitting the accumulation
of
income of property in accordance with a provision in the instrument that
requires or permits the accumulation for more than one year of any income of
property.
(2) Division (A) of this section does
not apply to any beneficiary of an inter vivos or testamentary trust other
than the surviving spouse of the testator or other settlor or to any inter
vivos or testamentary trust of which the surviving spouse of the testator or
other settlor is a beneficiary if an interest in property does not qualify
for a marital deduction as described in division
(A)(2) of this section.
(C)(1) THE TRUSTEE OF A TRUST THAT QUALIFIES FOR AN ESTATE
TAX MARITAL DEDUCTION FOR FEDERAL OR OHIO ESTATE TAX PURPOSES
AND THAT IS THE BENEFICIARY OF AN INDIVIDUAL RETIREMENT ACCOUNT HAS A
FIDUCIARY DUTY, IN REGARD TO THE INCOME DISTRIBUTION PROVISION OF THE TRUST,
TO WITHDRAW AND DISTRIBUTE THE INCOME OF THE INDIVIDUAL RETIREMENT ACCOUNT, AT
LEAST ANNUALLY, TO THE SURVIVING SPOUSE OF THE TESTATOR OR OTHER SETTLOR.
(2) A TRUSTEE'S FIDUCIARY DUTY AS DESCRIBED IN DIVISION (C)(1) OF
THIS SECTION IS SATISFIED IF THE TERMS OF THE TRUST INSTRUMENT EXPRESSLY
PROVIDE THE SURVIVING SPOUSE A RIGHT TO WITHDRAW ALL OF THE ASSETS
FROM THE TRUST OR A RIGHT TO COMPEL THE TRUSTEE TO WITHDRAW AND
DISTRIBUTE THE INCOME OF THE INDIVIDUAL RETIREMENT ACCOUNT TO THE
SURVIVING SPOUSE.
(D) Divisions (A) and, (B), AND
(C)(1) of
this section are intended to codify certain EXISTING fiduciary
and trust law
principles relating to the interpretation of a testator's or other settlor's
intent with respect to the INCOME provisions of a trust. Divisions (A)
and, (B), AND (C) of this section apply
to trust instruments executed prior to and
existing on the effective date of this section, unless the
OCTOBER 1, 1996, OR EXECUTED THEREAFTER.
THE trustee of a
trust of that nature DESCRIBED IN DIVISION (A) OR
(B) OF THIS SECTION, in a written trust amendment, elects to
do otherwise MAY ELECT TO NOT APPLY DIVISIONS (A) AND
(B) OF THIS SECTION TO THE TRUST.
Any election of that nature, when made, is irrevocable.
Sec. 5731.02. (A) A tax is hereby levied on the transfer
of the taxable estate, determined as provided in section 5731.14
of the Revised Code, of every person dying on or after July 1,
1968, who at the time of his death was a resident of this state,
as follows:
If the taxable estate is: | The tax shall be: |
Not over $40,000 | 2% of the taxable estate |
Over $ 40,000 but not over $100,000 | $800 plus 3% of the excess over
$40,000 |
Over $100,000 but not over $200,000 | $2,600 plus 4% of the excess
over $100,000 |
Over $200,000 but not over $300,000 | $6,600 plus 5% of the
excess over $200,000 |
Over $300,000 but not over $500,000 | $11,600 plus 6% of the
excess over $300,000 |
Over $500,000 | $23,600 plus 7% of the
excess over $500,000. |
(B) A credit shall be allowed against the tax imposed by
division (A) of this section equal to the lesser of five
hundred dollars or the amount of the tax FOR PERSONS DYING ON OR AFTER
JULY 1, 1968, BUT BEFORE
JANUARY 1, 2001; THE LESSER OF SIX THOUSAND SIX HUNDRED DOLLARS OR
THE
AMOUNT OF THE TAX FOR PERSONS DYING
ON OR AFTER JANUARY 1, 2001, BUT BEFORE JANUARY 1, 2002; OR
THE
LESSER OF THIRTEEN THOUSAND NINE HUNDRED DOLLARS OR THE AMOUNT OF THE TAX FOR
PERSONS DYING ON OR AFTER
JANUARY 1, 2002.
Sec. 5731.14. For purposes of the tax levied by section 5731.02 of the
Revised Code, the value of the taxable estate shall be determined by deducting
from the value of the gross estate deductions provided for in sections 5731.15
to 5731.17 AND 5731.20 of the Revised Code.
Sec. 5731.20. (A) AS USED IN THIS SECTION:
(1) "TAX DIFFERENTIAL WITH RESPECT TO THE ESTATE" MEANS THE
EXCESS OF (a) THE AMOUNT THAT THE ESTATE TAX LIABILITY WOULD
BE
UNDER SECTION 5731.02 of the Revised Code IF THE DEDUCTION UNDER
THIS SECTION HAD NOT BEEN DEDUCTED FROM THE VALUE OF THE GROSS ESTATE,
OVER (b) THE ESTATE TAX LIABILITY UNDER THAT SECTION AFTER
THE DEDUCTION UNDER THIS SECTION.
(2) "TAX DIFFERENTIAL ATTRIBUTABLE TO A QUALIFIED FAMILY-OWNED
BUSINESS INTEREST" MEANS AN AMOUNT THAT BEARS THE SAME RATIO TO THE TAX
DIFFERENTIAL WITH RESPECT TO THE ESTATE AS THE VALUE OF THAT
INTEREST BEARS TO THE VALUE OF ALL QUALIFIED FAMILY-OWNED BUSINESS
INTERESTS THAT ARE INCLUDED IN THE VALUE OF THE GROSS ESTATE FOR
THE PURPOSES OF SECTION 2057(b) OF THE INTERNAL
REVENUE CODE.
(3) ANY TERM USED IN THIS SECTION HAS THE SAME MEANING AS USED IN
SECTION 2057 OF THE INTERNAL REVENUE CODE
EXCEPT AS OTHERWISE PROVIDED IN THIS SECTION.
(B) THIS SECTION APPLIES TO THE ESTATES OF DECEDENTS DYING ON OR
AFTER JANUARY 1, 2001.
FOR THE PURPOSES OF THE TAX LEVIED UNDER SECTION 5731.02 of the Revised Code, THE VALUE OF
THE TAXABLE ESTATE SHALL BE DETERMINED BY
DEDUCTING FROM THE VALUE OF THE GROSS ESTATE THE ADJUSTED VALUE OF
ANY QUALIFIED FAMILY-OWNED BUSINESS INTEREST DEDUCTIBLE FROM THE
VALUE OF THE FEDERAL GROSS ESTATE UNDER SECTION 2057 OF THE
INTERNAL REVENUE CODE, TO THE
EXTENT THE AMOUNT DEDUCTIBLE UNDER THAT SECTION IS INCLUDED IN THE VALUE OF
THE GROSS ESTATE AS DEFINED IN SECTION 5731.01 of the Revised Code AND NOT OTHERWISE
DEDUCTED IN THE DETERMINATION OF THE TAXABLE ESTATE. THE DEDUCTION SHALL BE
MADE ONLY IF ELECTED
PURSUANT TO DIVISION (D) OF THIS SECTION, BUT MAY BE MADE REGARDLESS
OF WHETHER A DEDUCTION IS MADE FOR FEDERAL ESTATE TAX PURPOSES UNDER SECTION
2057 OF THE INTERNAL REVENUE CODE.
(C) IF ANY OF THE EVENTS THAT WOULD CAUSE
ADDITIONAL FEDERAL ESTATE TAX TO BE IMPOSED PURSUANT TO SECTION
2057(f) OF
THE INTERNAL REVENUE CODE OCCUR
WITHIN TEN YEARS AFTER THE DATE OF THE DECEDENT'S DEATH AND BEFORE THE DEATH
OF THE QUALIFIED HEIR, AN ADDITIONAL ESTATE TAX IS
HEREBY IMPOSED. THE ADDITIONAL TAX SHALL EQUAL THE SUM OF THE
FOLLOWING:
(1) THE APPLICABLE PERCENTAGE, AS DETERMINED UNDER SECTION
2057(f) OF THE INTERNAL
REVENUE CODE, OF THE TAX DIFFERENTIAL ATTRIBUTABLE TO THE
QUALIFIED FAMILY-OWNED BUSINESS INTEREST ACQUIRED BY OR PASSING TO THE
QUALIFIED HEIR;
(2) INTEREST ON THE AMOUNT DETERMINED UNDER DIVISION (C)(1) OF
THIS SECTION AT THE RATE DETERMINED UNDER SECTION 5703.47 of the Revised Code FOR THE PERIOD
BEGINNING ON THE DATE THE ESTATE TAX LIABILITY WAS DUE UNDER SECTION
5731.02 of the Revised Code AND ENDING ON THE DATE THE
ADDITIONAL ESTATE TAX IS DUE.
THE ADDITIONAL TAX IS DUE ON THE FIRST DAY OF THE SEVENTH MONTH
AFTER THE EVENT CAUSING THE IMPOSITION OF ADDITIONAL FEDERAL
ESTATE TAX OCCURS.
THE QUALIFIED HEIR IS PERSONALLY LIABLE FOR THE ADDITIONAL TAX
IMPOSED UNDER THIS DIVISION.
(D) THE ELECTION TO MAKE THE DEDUCTION PROVIDED IN THIS SECTION
SHALL BE MADE ON THE RETURN FILED PURSUANT TO SECTION 5731.21 of the Revised Code AND AS
PRESCRIBED BY RULE OF THE TAX
COMMISSIONER.
THE
ELECTION, ONCE MADE, IS IRREVOCABLE.
AN ELECTION MAY BE MADE UNDER THIS SECTION WITH RESPECT TO A
QUALIFIED FAMILY-OWNED BUSINESS INTEREST ONLY IF EACH PERSON IN BEING
HAVING AN INTEREST IN ANY PROPERTY DESIGNATED IN THE AGREEMENT CONSENTS
TO THE APPLICATION OF DIVISION (C) OF THIS SECTION WITH RESPECT TO
SUCH PROPERTY BY WRITTEN AGREEMENT SIGNED BY EACH SUCH PERSON, UNDER RULES OF
THE TAX COMMISSIONER. THE TAX COMMISSIONER
MAY EXTEND THE TIME FOR SUBMITTING THE INFORMATION AND ANY
SIGNATURES REQUIRED TO MAKE AN ELECTION UNDER THIS DIVISION.
(E) IF SECTION 2057(g) OF THE
INTERNAL
REVENUE CODE
WOULD APPLY TO A QUALIFIED HEIR, ANY INTEREST PASSING TO THAT HEIR MAY BE
TREATED
AS A QUALIFIED FAMILY-OWNED BUSINESS INTEREST UNDER THIS SECTION ONLY IF THE
INTEREST PASSES, IS ACQUIRED, OR IS HELD IN A QUALIFIED TRUST AS DEFINED IN
SECTION 2057(g) OF THE INTERNAL REVENUE
CODE.
Sec. 5731.21. (A)(1)(a) Except as provided under division
(A)(3) of this section, the executor or administrator, or, if no
executor or administrator has been appointed, then such other
person in possession of property, the transfer of which is
subject to estate taxes under section 5731.02 or division (A) of
section 5731.19 of the Revised Code, shall file an estate tax
return, within nine months of the date of the decedent's death,
in the form prescribed by the tax commissioner, in duplicate,
with the probate court of the county. The return shall include
all property the transfer of which is subject to estate taxes,
whether such property is transferred under the last will and
testament of the decedent or otherwise. The time for filing the
return may be extended by the tax commissioner.
(b) The estate tax return described in division (A)(1)(a)
of this section shall be accompanied by a certificate, in the
form prescribed by the tax commissioner, that is signed by the
executor, administrator, or other person required to file the
return, and that states all of the following:
(i) The fact that the return was filed;
(ii) The date of the filing of the return;
(iii) The fact that the estate taxes under section 5731.02
or division (A) of section 5731.19 of the Revised Code, that are
shown to be due in the return, have been paid in full;
(iv) If applicable, the fact that real property listed in
the inventory for the decedent's estate is included in the
return;
(v) If applicable, the fact that real property not listed
in the inventory for the decedent's estate, including, but not
limited to, survivorship tenancy property as described in section
5302.17 of the Revised Code, also is included in the return. In
this regard, the certificate additionally shall describe that
real property by the same description used in the return.
(2) The probate court shall forward one copy of the estate
tax return described in division (A)(1)(a) of this section to the
tax commissioner.
(3) If the value of the gross estate of the decedent is
twenty-five thousand dollars or less and the decedent was a
resident of this state, the A person otherwise required to file
a
return may file a return, but shall not be required to do
so,
FILE A RETURN UNDER DIVISION (A) OF THIS SECTION IF THE DECEDENT
WAS A RESIDENT OF THIS STATE AND THE
VALUE OF THE DECEDENT'S GROSS ESTATE IS TWENTY-FIVE THOUSAND DOLLARS OR
LESS IN THE CASE OF A DECEDENT DYING ON OR AFTER JULY 1, 1968, BUT
BEFORE JANUARY 1, 2001; TWO HUNDRED THOUSAND DOLLARS OR LESS IN THE
CASE OF A DECEDENT DYING ON OR AFTER JANUARY 1, 2001, BUT BEFORE
JANUARY
1, 2002; OR THREE HUNDRED THIRTY-EIGHT THOUSAND DOLLARS OR LESS IN THE
CASE OF A DECEDENT DYING ON OR AFTER JANUARY 1, 2002.
(4)(a) Upon receipt of the estate tax return described in
division (A)(1)(a) of this section and the accompanying
certificate described in division (A)(1)(b) of this section, the
probate court promptly shall give notice of the return, by a form
prescribed by the tax commissioner, to the county auditor. The
auditor then shall make a charge based upon the notice and shall
certify a duplicate of the charge to the county treasurer. The
treasurer then shall collect, subject to division (A) of section
5731.25 of the Revised Code or any other statute extending the
time for payment of an estate tax, the tax so charged.
(b) Upon receipt of the return and the accompanying
certificate, the probate court also shall forward the certificate
to the auditor. When satisfied that the estate taxes under
section 5731.02 or division (A) of section 5731.19 of the Revised
Code, that are shown to be due in the return, have been paid in
full, the auditor shall stamp the certificate so forwarded to
verify that payment. The auditor then shall return the stamped
certificate to the probate court.
(5)(a) The certificate described in division (A)(1)(b) of
this section is a public record subject to inspection and copying
in accordance with section 149.43 of the Revised Code. It shall
be kept in the records of the probate court pertaining to the
decedent's estate and is not subject to the confidentiality
provisions of section 5731.90 of the Revised Code.
(b) All persons are entitled to rely on the statements
contained in a certificate as described in division (A)(1)(b) of
this section if it has been filed in accordance with that
division, forwarded to a county auditor and stamped in accordance
with division (A)(4) of this section, and placed in the records
of the probate court pertaining to the decedent's estate in
accordance with division (A)(5)(a) of this section. The real
property referred to in the certificate shall be free of, and may
be regarded by all persons as being free of, any lien for estate
taxes under section 5731.02 and division (A) of section 5731.19
of the Revised Code.
(B) An estate tax return filed under this section, in the
form prescribed by the tax commissioner, and showing that no
estate tax is due shall result in a determination that no estate
tax is due, if the tax commissioner within three months after the
receipt of the return by the department of taxation, fails to
file exceptions to the return in the probate court of the county
in which the return was filed. A copy of exceptions to such a
return, when the tax commissioner files them within that period,
shall be sent by ordinary mail to the person who filed the
return. The tax commissioner is not bound under this division by
a determination that no estate tax is due, with respect to
property not disclosed in the return.
(C) If the executor, administrator, or other person
required to file an estate tax return fails to file it within
nine months of the date of the decedent's death, the tax
commissioner may determine the estate tax in such estate and
issue a certificate of determination in the same manner as is
provided in division (B) of section 5731.27 of the Revised Code.
Such certificate of determination has the same force and effect
as though a return had been filed and a certificate of
determination issued with respect to the return.
Sec. 5731.47. The fees of the sheriff or other officers for services
performed
under Chapter 5731. of the Revised Code, and the expenses of the county
auditor shall be certified by the county auditor by a report filed with the
tax
commissioner. If the tax commissioner finds that such fees and expenses are
correct and reasonable in amount, he THE COMMISSIONER shall
indicate his approval OF THE FEES AND EXPENSES in writing to
the county auditor. The auditor shall pay such fees and expenses out of the
state's share of the undivided inheritance taxes in the county treasury
and
draw his warrants payable from such taxes, on the county
treasurer in
favor of the fee funds or officers personally entitled thereto.
IF THE FEES AND EXPENSES APPROVED BY THE TAX COMMISSIONER EXCEED
THE AMOUNT OF THE STATE'S SHARE OF UNDIVIDED INHERITANCE TAXES IN THE
COUNTY TREASURY, THE COUNTY AUDITOR SHALL CERTIFY THE AMOUNT OF THE
EXCESS TO THE TAX COMMISSIONER, WHO SHALL CERTIFY THE AMOUNT TO THE
DIRECTOR OF BUDGET AND MANAGEMENT. THE DIRECTOR SHALL PROVIDE FOR
PAYMENT OF THE EXCESS FROM THE GENERAL REVENUE FUND TO THE COUNTY
TREASURY, AND THE COUNTY AUDITOR SHALL DRAW WARRANTS ON THE COUNTY
TREASURER IN FAVOR OF THE APPROPRIATE FEE FUNDS OR OFFICERS.
Sec. 5731.48. (A) If a decedent dies on or after July 1, 1989,
AND BEFORE JANUARY 1, 2001,
sixty-four per cent of the
gross amount of taxes levied
and paid
under this chapter shall be for the use of the
municipal
corporation or township in which the tax originates, and shall be
credited as follows PROVIDED IN DIVISION (A)(1), (2), OR
(3) OF THIS SECTION:
(A)(1) To the general revenue fund in the case of a city;
(B)(2) To the general revenue fund of a village or to the
board of education of a village, for school purposes, as the
village council by resolution may approve;
(C)(3) To the general revenue fund or to the board of
education of the school district of which the township is a part,
for school purposes, as the board of township trustees by
resolution may approve, in the case of a township.
Where
THE REMAINDER OF THE TAXES LEVIED AND PAID SHALL BE FOR THE USE OF
THE STATE AND SHALL BE CREDITED TO THE GENERAL REVENUE FUND AFTER ANY
DEDUCTION FOR FEES AND COSTS CHARGED UNDER SECTION 5731.47 of the Revised Code.
(B) IF A DECEDENT DIES ON OR AFTER JANUARY 1, 2001, AND
BEFORE JANUARY 1, 2002, SEVENTY PER CENT OF THE
GROSS AMOUNT OF TAXES LEVIED AND PAID UNDER THIS CHAPTER
SHALL BE
FOR THE USE OF THE MUNICIPAL CORPORATION OR TOWNSHIP IN WHICH THE TAX
ORIGINATES AND CREDITED AS PROVIDED IN DIVISION (A)(1), (2), OR (3)
OF THIS SECTION, AND
THE REMAINDER SHALL BE FOR THE USE OF THE STATE AND CREDITED TO THE GENERAL
REVENUE FUND AFTER ANY DEDUCTION
FOR FEES AND COSTS CHARGED UNDER SECTION 5731.47 of the Revised Code.
(C) IF A DECEDENT DIES ON OR AFTER JANUARY 1, 2002,
EIGHTY PER CENT OF THE GROSS AMOUNT OF TAXES LEVIED AND PAID
UNDER THIS CHAPTER
SHALL BE FOR THE USE OF THE
MUNICIPAL CORPORATION OR TOWNSHIP IN WHICH THE TAX ORIGINATES AND
CREDITED AS PROVIDED IN DIVISION (A)(1), (2), OR (3) OF THIS
SECTION, AND THE REMAINDER SHALL BE FOR THE USE OF THE STATE AND
SHALL BE CREDITED TO THE GENERAL REVENUE FUND AFTER ANY
DEDUCTION FOR FEES AND COSTS CHARGED UNDER SECTION 5731.47 of the Revised Code.
(D) IF
a municipal corporation is in default with respect to
the principal or interest of any outstanding notes or bonds, one
half of the taxes distributed under this section shall be
credited to the sinking or bond retirement fund of the municipal
corporation, and the residue shall be credited to the general
revenue fund.
(E) The council, board of trustees, or other legislative
authority of a village or township may, by ordinance in the case
of a village, or by resolution in the case of a township, provide
that whenever there is money in the treasury of the village or
township from taxes levied under this chapter, not required for
immediate use, that money may be invested in federal, state,
county, or municipal bonds, upon which there has been no default
of the principal during the preceding five years.
The remainder of the taxes levied and paid under this
chapter, after deducting the fees and costs charged against the
proceeds of the tax under this chapter, shall be for the use of
the state, and shall be paid into the state treasury to the
credit of the general revenue fund.
Section 2. That existing sections 1339.412, 5731.02, 5731.14, 5731.21,
5731.47, and 5731.48 of the Revised Code are hereby repealed.
Section 3. No later than December
1, 2001, the members of the Joint Committee on Estate and Death Taxes, which
is hereby created, shall report to the Governor and to the majority and
minority leaders of both the House of Representatives and Senate on a proposal
to eliminate or phase out all remaining estate taxes by 2006. This proposal
shall move Ohio toward a true "pick-up tax" or "sponge tax" and shall
incorporate any effort by the federal government to expedite the elimination
of, or eliminate entirely, federal estate tax. The Joint Committee on Estate
and Death Taxes shall be comprised of six members, three from each house, with
two from the majority party and one from the minority party. The committee
shall choose co-chairs, one from each house. The committee shall take into
consideration testimony presented to it. The committee shall cease to exist
after it issues its report.
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