AN ACT Relating to revenue and taxation; amending RCW 83.100.030 and 83.100.040; adding a new chapter to Title 83 RCW; adding a new section to chapter 83.100 RCW; and creating a new section.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. As used in this chapter:

(1) "Department" means the department of revenue, the director of that department, or any employee of the department exercising authority lawfully delegated by the director;

(2) "Nonresident transferor" means a decedent who was domiciled outside Washington at death, or a donor residing outside Washington;

(3) "Person" means any individual, estate, trust, receiver, cooperative association, club, corporation, company, firm, partnership, joint venture, syndicate, or other entity and, to the extent permitted by law, any federal, state, or other governmental unit or subdivision or agency, department, or instrumentality thereof;

(4) "Personal representative" means the executor or administrator of a transferor's estate or, if no executor or administrator is appointed, qualified, and acting, any person who has possession of any property of the transferor;

(5) "Property" means property taxable under this chapter;

(6) "Resident transferor" means a decedent who was domiciled in Washington at death or a donor residing in Washington at the date of a gift;

(7) "Transfer" means "transfer" as defined and used in section 2001 of the United States Internal Revenue Code of 1954, as amended or renumbered.

(8) "Transferor" means a deceased person or a donor of a gift.

NEW SECTION. Sec. 2. All property within the jurisdiction of this state, and any interest therein, whether belonging to the inhabitants of this state or not, and whether tangible or intangible, which passes:

(1) By will or by the statutes of inheritance of this or any other state;

(2) By deed, grant, sale, contract, or gift made in contemplation of the death of the grantor, or donor;

(3) By deed, grant, sale, contract, or gift made or intended to take effect in possession or in enjoyment after death of the grantor, or donor, to any person in trust or otherwise;

(4) By gift where no compensation is received or where compensation is less than fair market value; or

(5) By a transfer in trust or otherwise, under which the grantor or donor has retained for his or her life or for any period not ascertainable without reference to his or her death, or for any period which does not in fact end before his or her death, the possession or enjoyment of any part of the property, or the right to all or any part of the income from the property, or the right, either alone or in conjunction with any person, to designate the persons who shall possess or enjoy the property or the income therefrom shall, for the use of the state, be subject to a tax as provided for in this chapter measured by the full value of the entire property after deduction of the amounts allowable under this chapter.

NEW SECTION. Sec. 3. The following shall be allowed as deductions from the gross value of the property transferred upon death:

(1) All debts owing by the decedent at the date of death: PROVIDED, That debts founded upon a promise or agreement shall be allowable only to the extent that they were contracted, bona fide and for full and adequate consideration in money or money's worth;

(2) All unpaid local and state taxes assessed on the decedent's property and payable before or during the calendar year of the decedent's death;

(3) Reasonable costs of funeral, burial, and monument or crypt;

(4) Court costs and reasonable fees of the personal representative and his or her attorneys, accountants, and appraisers incurred in administering the decedent's estate;

(5) Reasonable fees of trustee, attorneys, accountants, and appraisers incurred in determining the amount of the state and federal death taxes payable by reason of decedent's death; and

(6) Any portion of the decedent's one-half interest in community property which passes to a surviving spouse by testamentary direction or by law.

NEW SECTION. Sec. 4. All transfers of property at death or by gift to or for the use of any of the following shall be exempt from tax under this chapter:

(1) The United States, the state of Washington, or any political subdivision of the state;

(2) An entity exclusively engaged in or devoted to any religious, charitable, scientific, literary, educational, public or other like work, no part of the net earnings of which inures to the benefit of any private stockholder or individual, whether or not it be organized under the laws of this state or engaged in such work therein.

No exemption is allowed under this section for any portion of a gift, devise, or bequest which is directed and used for the payment of any federal estate or gift tax or state transfer tax.

NEW SECTION. Sec. 5. All property specified in section 2 of this act, for the purposes of computing the tax under this chapter, shall be valued and appraised at the fair market value on the day of the death of the decedent owner thereof, or in the case of a gift, on the day of the gift, and subsequent sales shall not affect the value so used. The executor, administrator, or trustee in preparing the inventory in all probate cases, shall insert at the right of each real estate tract, the assessed valuation of such tract and of the improvements thereon for the information of the appraisers and other interested parties.

NEW SECTION. Sec. 6. (1) In addition to any other taxes imposed by law, a tax equal to ten percent of the value of the property specified in section 2 of this act, minus allowable deductions and exemptions, is imposed on the transfer of property by any resident transferor. The first five hundred thousand dollars of property transferred at death or by gift by a transferor is exempt from this tax: PROVIDED, That the first five hundred thousand dollars of transfers made during the transferor's life is exempt from this tax. Any portion not used during the transferor's life may be used as an exemption in the transferor's estate.

(2) If any property of a resident transferor is subject to a transfer tax imposed by another state, and if the tax imposed by the other state is not qualified by a reciprocal provision allowing the property to be taxed in the state of the transferor's domicile, the amount of the tax due under this section shall be credited with the lesser of:

(a) The amount of the transfer tax paid the other state; or

(b) An amount computed by multiplying the tax due under subsection (1) of this section by a fraction, the numerator of which is the value of the property subject to the transfer tax imposed by the other state, and the denominator of which is the value of the transferor's taxable estate or gift.

NEW SECTION. Sec. 7. (1) In addition to any other taxes imposed by law, a tax in an amount computed as provided in this section is imposed on the transfer of real property located in Washington, and tangible personal property not permanently located (having situs) outside Washington, of every nonresident transferor.

(2) The tax shall be computed by multiplying the tax payable by a resident under section 2 of this act by a fraction, the numerator of which is the value of the real property located in Washington, plus the value of the tangible personal property not permanently located (having situs) outside Washington, and the denominator of which is the value of the transferor's taxable estate or gift.

(3) If the state in which the nonresident transferor is domiciled exempts from estate, inheritance, or other transfer taxes the property of residents of Washington, the estate or gift of such transferor shall be exempt from tax under this chapter. This exemption will apply if, as of the date of the transferor's death or gift he or she was a citizen of the United States, resident of the United States but not of Washington, and such laws of the domicile state: (a) Made specific reference to this state; or (b) Contained a reciprocal provision under which nonresidents were exempted from applicable transfer taxes with respect to property or transfers otherwise subject to the jurisdiction of such state. In those instances where application of this provision results in loss of available federal credit which would otherwise be allowed by the federal government, Washington will absorb that proportional share which is applicable to property within the jurisdiction of this state. Application of this provision will not act to increase the total tax obligation of the estate and will not apply if federal regulations prevent allowance of such credit. The exemption provided under this section does not apply to transferors under section 8 of this act.

NEW SECTION. Sec. 8. No exemption is allowed under section 7 of this act as to the tax otherwise payable under this chapter if the transferor was not a resident of a territory or state of the United States, and the property of such transferor shall be taxable whether the same is tangible or intangible property, including certificates of stock, bonds, bills, notes, bank deposits, and other written evidences of intangible property which are physically situated within the state of Washington, or where the domicile of the debtor is in the state of Washington.

NEW SECTION. Sec. 9. (1) For reasonable cause the director may extend the time for payment of any part of the amount of tax imposed or of any deficiency assessed under this chapter for a reasonable period not to exceed ten years from the date prescribed by the department for payment of the tax.

(2) No extension may be granted for the payment of any deficiency if the deficiency is due to negligence, fraud with intent to evade the tax, or an intentional disregard of the rules of the department.

(3) If payment of any amount of the tax imposed under this chapter is extended under this section, interest on the unpaid amount at the rate set forth in RCW 82.32.050 shall be paid with each installment payment of the tax.

(4) If any installment under this section is not paid on or before the date fixed for its payment, the remainder of the tax payable in installments, plus interest, shall be paid upon notice and demand from the director.

(5) In the event an extension of time is granted, the director may require the executor to furnish a bond, or such other security as may be deemed reasonable, conditioned upon the payment of the amount deferred in accordance with the terms of the extension.

(6) The director shall adopt rules to carry out this section.

NEW SECTION. Sec. 10. (1) The personal representative of every estate shall pay the tax imposed under this chapter.

(2) The provisions of RCW 82.32.300, 82.32.310, 82.32.320, and 82.32.330 apply to the tax imposed under this chapter as though they were set forth in this chapter.

NEW SECTION. Sec. 11. (1) Where the tax imposed under this chapter is of a lesser amount than the maximum credit of the federal estate tax allowed by the federal estate tax act, then the tax under this chapter shall be increased so that the amount of tax due the state of Washington shall be the maximum amount of the credit allowed under the federal estate tax act: PROVIDED, That the additional tax shall be paid out of the same funds as any ordinary charge against the estate.

(2) If no tax is imposed by this chapter because of the exemptions provided in this chapter and a tax is due the United States under the federal estate tax act, then a tax shall be due the state of Washington equal to the maximum amount of the credit allowed under the federal estate tax act.

(3) Persons liable for tax under this chapter and chapter 83.100 RCW upon the same transfer of property shall pay the higher of the taxes imposed. If tax has already been paid under chapter 83.100 RCW on a transfer of property taxable under this chapter, the amount of tax that shall be collected under this chapter shall be limited to the amount by which the tax under this chapter exceeds the tax imposed under chapter 83.100 RCW. If a lower amount is payable, however, no refund or credit may be claimed.

NEW SECTION. Sec. 12. All taxes imposed under this chapter shall take effect and accrue upon the death of the decedent or upon the date of the gift by a donor. Persons liable for tax under this chapter upon the transfer of property by reason of death shall file a report and pay any tax due within nine months of the date of death. Other reports shall be filed and tax paid by April 15 following the calendar year of the gift. No report or payment of tax is required on gifts that, combined, do not exceed ten thousand dollars to any individual within a calendar year. If such tax is not paid as required, interest shall be charged and collected at the rate of one percent per month, computed from the due date until paid.

NEW SECTION. Sec. 13. Whenever it is determined that a transferor or personal representative has overpaid the tax due under this chapter, the department may refund the amount of the overpayment, together with interest at the then existing statutory rate of interest. No claim for refund may be initiated more than one year after the date of the department's issuance of a release.

Sec. 14. Section 83.100.030, chapter 7, Laws of 1981 2nd ex. sess. and RCW 83.100.030 are each amended to read as follows:

(1) A tax in an amount equal to the federal credit is imposed on the transfer of the net estate of every resident. Persons liable for tax under this chapter and chapter 83.--!sc ,1RCW (sections 1 through 13 of this 1987 act) shall pay the higher of the taxes imposed.

(2) If any property of a resident is subject to a death tax imposed by another state for which a credit is allowed by section 2011, and if the tax imposed by the other state is not qualified by a reciprocal provision allowing the property to be taxed in the state of decedent's domicile, the amount of the tax due under this section shall be credited with the lesser of:

(a) The amount of the death tax paid the other state and credited against the federal estate tax; or

(b) An amount computed by multiplying the federal credit by a fraction, the numerator of which is the value of the property subject to the death tax imposed by the other state, and the denominator of which is the value of the decedent's gross estate.

Sec. 15. Section 83.100.040, chapter 7, Laws of 1981 2nd ex. sess. and RCW 83.100.040 are each amended to read as follows:

(1) Tax in an amount computed as provided in this section is imposed on the transfer of the net estate located in Washington of every nonresident.

(2) The tax shall be computed by multiplying the federal credit by a fraction, the numerator of which is the value of the property located in Washington, and the denominator of which is the value of the decedent's gross estate. Persons liable for tax under this chapter and chapter 83.--!sc ,1RCW (sections 1 through 13 of this 1987 act) shall pay the higher of the taxes imposed.

(3) The transfer of the property of a nonresident is exempt from the tax imposed by this section to the extent that the property of residents is exempt from taxation under the laws of the state in which the nonresident is domiciled.

NEW SECTION. Sec. 16. A new section is added to chapter 83.100 RCW to read as follows:

If tax has already been paid under chapter 83.--!sc ,1RCW (sections 1 through 13 of this act) on a transfer of property taxable under this chapter, the amount of tax that shall be collected under this chapter shall be limited to the amount by which the tax under this chapter exceeds the tax imposed under chapter 83.--!sc ,1RCW (sections 1 through 13 of this act) on the same transfer of property. If a lower amount is payable, however, no refund or credit may be claimed.

NEW SECTION. Sec. 17. Sections 1 through 13 of this act shall constitute a new chapter in Title 83 RCW.

NEW SECTION. Sec. 18. If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.

NEW SECTION. Sec. 19. This act shall apply to decedents dying or gifts made after the effective date of this act.