NJ Estate Tax to be eliminated on Estates under $2,000,000 as of January 1,
2017
10/14/2016 Approved P.L.2016, c.57.
NJ Chapter Law c.57. reduces the sales and use tax rate from 7 percent to 6.875 percent
on January 1, 2017 and reduce the rate from 6.875 percent to 6.625 percent on
January 1, 2018. The law will revise the special transition provisions for
taxing sales transactions that extend across the tax rate change dates.
The law will phase out the estate
tax over two rather than four years, by first replacing the current
$675,000 threshold with a “true” exclusion amount established at $2.0 million
for decedents dying on or after January 1, 2017, and then eliminating the
estate tax for decedents dying on and after January 1, 2018. The law will
also eliminate provisions of the bill that provided for the imposition of the
estate tax on the New Jersey property of nonresident decedents.
The law will eliminate
provisions of the bill that allowed an annual gross income tax deduction
for State fuel taxes paid by taxpayers on purchases of motor fuel for the
operation for personal use of the taxpayer’s motor vehicles and not otherwise
reimbursed.
The law will cap the proposed
increase in the gross income tax pension and retirement income
exclusions to $100,000 for joint filers, $75,000 for individuals, and $50,000
for married but filing separately upon the full, four-year phase-in, by January
1, 2020, of the enhanced exclusion. Under the law will, the phase in of
the increase is as follows:
|
Filer Type
|
Present
|
2017
|
2018
|
2019
|
2020
|
|
Joint
|
$20,000
|
$40,000
|
$60,000
|
$80,000
|
$100,000
|
|
Individual
|
$15,000
|
$30,000
|
$45,000
|
$60,000
|
$75,000
|
|
Separate
|
$10,000
|
$20,000
|
$30,000
|
$40,000
|
$50,000
|
The law will also eliminate the provision, for taxable years beginning on
or after January 1, 2021, that allowed a taxpayer with income of more than
$100,000 but not over $125,000 to exclude 50 percent of the amount of pension and
retirement income otherwise allowed and a taxpayer with more than $125,000 but
not more than $150,000 of gross income to exclude 25 percent of the amount
otherwise allowed.
The law will provide for an increase in the New
Jersey Earned Income Tax Credit (NJ EITC) under the gross income tax to
35 percent, rather than 40 percent, of the federal benefit amount beginning in
Tax Year 2016. The current statutory benefit amount under the NJ EITC is equal
to 30 percent of the federal benefit amount.
The law will change the “2016
implementation date” for the new petroleum products gross receipts tax
rates for most highway fuels to the later of November 1, 2016, or the 15th day
after the date of enactment of the bill. The bill previously had anticipated a
2016 implementation date of September 1, 2016 or the 15th day after the date of
enactment.
54:38-1 is amended to read as follows:
54:38-1. a. In addition
to the inheritance, succession or legacy taxes imposed by this State under
authority of chapters 33 to 36 of this title (R.S.54:33-1 et seq.), or
hereafter imposed under authority of any subsequent enactment, there is hereby
imposed an estate or transfer tax:
(1) Upon the
transfer of the estate of every resident decedent dying before January 1, 2002
which is subject to an estate tax payable to the United States under the
provisions of the federal revenue act of one thousand nine hundred and
twenty-six and the amendments thereof and supplements thereto or any other
federal revenue act in effect as of the date of death of the decedent, the
amount of which tax shall be the sum by which the maximum credit allowable
against any federal estate tax payable to the United States under any federal
revenue act on account of taxes paid to any state or territory of the United
States or the District of Columbia, shall exceed the aggregate amount of all
estate, inheritance, succession or legacy taxes actually paid to any state or
territory of the United States or the District of Columbia, including inheritance,
succession or legacy taxes actually paid this State, in respect to any property
owned by such decedent or subject to such taxes as a part of or in connection
with the estate; and
(2)
(a) Upon the transfer of the estate of every resident decedent
dying after December 31, 2001, but 2[after December 31, 2016,] before January 1, 2017,2 which would have been subject to an estate tax payable to the United
States under the provisions of the federal Internal Revenue Code of 1986 (26
U.S.C. s.1 et seq.) in effect on December 31, 2001, the amount of which tax
shall be, at the election of the person or corporation liable for the payment
of the tax under this chapter, either
(i) the
maximum credit that would have been allowable under the provisions of that
federal Internal Revenue Code in effect on that date against the federal estate
tax that would have been payable under the provisions of that federal Internal
Revenue Code in effect on that date on account of taxes paid to any state or
territory of the United States or the District of Columbia, or
(ii) determined
pursuant to the simplified tax system as may be prescribed by the Director of
the Division of Taxation in the Department of the Treasury to produce a
liability similar to the liability determined pursuant to clause (i) of this
paragraph reduced pursuant to paragraph (b) of this subsection.
(b) The amount of
tax liability determined pursuant to subparagraph (a) of this paragraph shall
be reduced by the aggregate amount of all estate, inheritance, succession or
legacy taxes actually paid to any state or territory of the United States or
the District of Columbia, including inheritance, succession or legacy taxes
actually paid this State, in respect to any property owned by such decedent or
subject to such taxes as a part of or in connection with the estate; provided
however, that the amount of the reduction shall not exceed the proportion of
the tax otherwise due under this subsection that the amount of the estates's
property subject to tax by other jurisdictions bears to the entire estate
taxable under this chapter.
(3)
(a) Upon the transfer of the estate of each resident decedent dying
on or after January 1, 2017, 2[but before January 1,
2020,]2 whether or not subject to an estate tax payable to the United States
under the provisions of the federal Internal Revenue Code (26 U.S.C. s.1 et
seq.), the amount of the taxable estate, determined pursuant to section 2051 of
the federal Internal Revenue Code (26 U.S.C. s.2051), shall be subject to tax
pursuant to the following schedule:
|
On any amount up to $100,000 . . . . . .
|
0.0%
|
|
On any amount in excess of $100,000, up to
$150,000 . . . . . . . . . . . . . . .
|
0.8% 2of the excess over $100,0002
|
|
On any amount in excess of $150,000, up to $200,000.
. . . . . . . . . . . . . . .
|
$400 plus 1.6% of the excess over $150,000
|
|
On any amount in excess of $200,000, up to $300,000.
. . . . . . . . . . . . . . .
|
$1,200 plus 2.4% of the excess over $200,000
|
|
On any amount in excess of $300,000, up to $500,000.
. . . . . . . . . . . . . . .
|
$3,600 plus 3.2% of the excess over $300,000
|
|
On any amount in excess of $500,000, up to $700,000.
. . . . . . . . . . . . . . .
|
$10,000 plus 4.0% of the excess over $500,000
|
|
On any amount in excess of $700,000, up to $900,000.
. . . . . . . . . . . . . . .
|
$18,000 plus 4.8% of the excess over $700,000
|
|
On any amount in excess of $900,000, up to
$1,100,000. . . . . . . . . . . . . . .
|
$27,600 plus 5.6% of the excess over $900,000
|
|
On any amount in excess of $1,100,000, up to
$1,600,000. . . . .
|
$38,800 plus 6.4% of the excess over $1,100,000
|
|
On any amount in excess of $1,600,000, up to
$2,100,000. . . . .
|
$70,800 plus 7.2% of the excess over $1,600,000
|
|
On any amount in excess of $2,100,000, up to
$2,600,000. . . . .
|
$106,800 plus 8.0% of the excess over $2,100,000
|
|
On any amount in excess of $2,600,000, up to
$3,100,000. . . . .
|
$146,800 plus 8.8% of the excess over $2,600,000
|
|
On any amount in excess of $3,100,000, up to
$3,600,000. . . . .
|
$190,800 plus 9.6% of the excess over $3,100,000
|
|
On any amount in excess of $3,600,000, up to
$4,100,000. . . . .
|
$238,800 plus 10.4% of the excess over $3,600,000
|
|
On any amount in excess of $4,100,000, up to
$5,100,000. . . . .
|
$290,800 plus 11.2% of the excess over $4,100,000
|
|
On any amount in excess of $5,100,000, up to
$6,100,000 . . . .
|
$402,800 plus 12.0% of the excess over $5,100,000
|
|
On any amount in excess of $6,100,000, up to
$7,100,000 . . . . .
|
$522,800 plus 12.8% of the excess over $6,100,000
|
|
On any amount in excess of $7,100,000, up to
$8,100,000 . . . . .
|
$650,800 plus 13.6% of the excess over $7,100,000
|
|
On any amount in excess of $8,100,000, up to
$9,100,000 . . . . .
|
$786,800 plus 14.4% of the excess over $8,100,000
|
|
On any amount in excess of $9,100,000, up to
$10,100,000 . . . .
|
$930,800 plus 15.2% of the excess over $9,100,000
|
|
On any amount in excess of $10,100,000. . . . . . .
. . . . . . . . . . . .
|
$1,082,800 plus 16.0% of the excess over $10,100,000
|
(b) A
credit shall be allowed against the tax imposed pursuant to subparagraph (a) of
this paragraph equal to the amount of tax which would be determined by
subparagraph (a) of this paragraph if the amount of the taxable estate were
equal to the exclusion amount.
For the transfer of
the estate of each resident decedent dying on or after January 1, 2017, but
before January 1, 2018, the exclusion amount is 2[$1,000,000] $2,000,0002.
2[For the transfer of the estate of each resident decedent dying on or after
January 1, 2018, but before January 1, 2019, the exclusion amount is
$2,000,000.]2
3[For the transfer of the estate of each resident decedent dying on or after
January 1, 2[2019] 20182 , but before January 1, 2020, the 2[exclusion amount is $3,000,000] tax imposed by this section
shall be based upon the applicable exclusion amount determined pursuant to
subsection (c) of section 2010 of the federal Internal Revenue Code (26 U.S.C.
s.2010), as amended or adjusted by federal law, rule or regulation2 .]3
(c) The
amount of tax liability of a resident decedent determined pursuant to
subparagraphs (a) and (b) of this paragraph shall be reduced by the aggregate
amount of all estate, inheritance, succession or legacy taxes actually paid to
any state of the United States, including inheritance taxes actually paid this
State, in respect to any property owned by that decedent or subject to those
taxes as a part of or in connection with the estate; provided however, that the
amount of the reduction shall not exceed the proportion of the tax otherwise
due under this subsection that the amount of the estate's property subject to
tax by other jurisdictions bears to the entire estate taxable under this
chapter.
(4) For
the transfer of the estate of each resident decedent dying on or after January
1, 3[ 2020] 20183 , there shall be no tax imposed.
3[(5) Upon the transfer of the real or tangible personal property
within New Jersey of each nonresident decedent dying on or after January 1,
2017, but before January 1, 2020, which tax shall bear the same ratio to the
entire tax which that estate would have been subject to pursuant to
subparagraphs (a) and (b) of paragraph (3) 2and paragraph (4)2 of this
subsection if that nonresident decedent had been a resident of this State, and
all of the decedent’s property, real and personal, had been located within this
State, as the taxable property within this State bears to the entire estate,
wherever situated.]3
b.
(1) In the case of the estate of a decedent dying before January 1,
2002 where no inheritance, succession or legacy tax is due this State under the
provisions of chapters 33 to 36 of this title or under authority of any
subsequent enactment imposing taxes of a similar nature, but an estate tax is
due the United States under the provisions of any federal revenue act in effect
as of the date of death, wherein provision is made for a credit on account of
taxes paid the several states or territories of the United States, or the
District of Columbia, the tax imposed by this chapter shall be the maximum
amount of such credit less the aggregate amount of such estate, inheritance,
succession or legacy taxes actually paid to any state or territory of the
United States or the District of Columbia.
(2) In the case
of the estate of a decedent dying after December 31, 2001, but before 2[December 31, 2016] January 1, 20172, where no inheritance, succession or legacy tax
is due this State under the provisions of chapters 33 to 36 of this title or
under authority of any subsequent enactment imposing taxes of a similar nature,
the tax imposed by this chapter shall be determined pursuant to paragraph (2)
of subsection a. of this section.
(3) In
the case of the estate of a decedent dying on or after January 1, 2017 the tax
imposed by this chapter shall be determined pursuant to paragraphs (3) 3[,] and3 (4) 3[, and (5)]3 of subsection a. of this section.
c.
For the purposes of this section, a "simplified tax system" to
produce a liability similar to the liability determined pursuant to clause (i)
of subparagraph (a) of paragraph (2) of subsection a. of this section is a tax
system that is based upon the $675,000 unified estate and gift tax applicable
exclusion amount in effect under the provisions of the federal Internal Revenue
Code of 1986 (26 U.S.C. s.1 et seq.) in effect on December 31, 2001, and
results in general in the determination of a similar amount of tax but which
will enable the person or corporation liable for the payment of the tax to
calculate an amount of tax notwithstanding the lack or paucity of information
for compliance due to such factors as the absence of an estate valuation made
for federal estate tax purposes, the absence of a measure of the impact of
gifts made during the lifetime of the decedent in the absence of federal gift
tax information, and any other information compliance problems as the director
determines are the result of the phased repeal of the federal estate tax.
(cf: P.L.2002, c.31, s.1)
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