Read first time 03/24/2005.   Referred to Committee on Ways & Means.

     AN ACT Relating to generating new tax revenues to provide education funding; amending RCW 83.100.020, 83.100.040, 83.100.050, 83.100.060, 83.100.070, 83.100.090, 83.100.110, 83.100.130, 83.100.140, 83.100.150, 83.100.210, and 83.100.010; adding new sections to chapter 83.100 RCW; creating new sections; repealing RCW 83.100.030 and 83.100.045; and declaring an emergency.

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

NEW SECTION.  Sec. 1   The legislature recognizes that on February 3, 2005, the Washington state supreme court decided in Estate of Hemphill v. Dep't of Rev., Docket No. 74974-4, that Washington's estate tax is tied to the current federal Internal Revenue Code. The legislature finds that the revenue loss resulting from the Hemphill decision will severely affect the legislature's ability to fund programs vital to the peace, health, safety, and support of the citizens of this state. The legislature intends to address the adverse fiscal impact of the Hemphill decision and provide funding for education by creating a stand-alone state estate tax.

Sec. 2   RCW 83.100.020 and 2001 c 320 s 15 are each amended to read as follows:
     As used in this chapter:
     (1) "Decedent" means a deceased individual;
     (2) "Department" means the department of revenue, the director of that department, or any employee of the department exercising authority lawfully delegated to him by the director;
     (3) (("Federal credit" means (a) for a transfer, the maximum amount of the credit for state taxes allowed by section 2011 of the Internal Revenue Code; and (b) for a generation-skipping transfer, the maximum amount of the credit for state taxes allowed by section 2604 of the Internal Revenue Code;
     (4))) "Federal return" means any tax return required by chapter 11 ((or 13)) of the Internal Revenue Code;
     (((5))) (4) "Federal tax" means (((a) for a transfer,)) a tax under chapter 11 of the Internal Revenue Code; ((and (b) for a generation-skipping transfer, the tax under chapter 13 of the Internal Revenue Code;
     (6) "Generation-skipping transfer" means a "generation-skipping transfer" as defined and used in section 2611 of the Internal Revenue Code;
     (7))) (5) "Gross estate" means "gross estate" as defined and used in section 2031 of the Internal Revenue Code;
     (((8) "Nonresident" means a decedent who was domiciled outside Washington at his death;
     (9))) (6) "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;
     (((10))) (7) "Person required to file the federal return" means any person required to file a return required by chapter 11 ((or 13)) of the Internal Revenue Code, such as the personal representative of an estate((; or a transferor, trustee, or beneficiary of a generation-skipping transfer; or a qualified heir with respect to qualified real property, as defined and used in section 2032A(c) of the Internal Revenue Code));
     (((11))) (8) "Property" means (((a) for a transfer,)) property included in the gross estate((; and (b) for a generation-skipping transfer, all real and personal property subject to the federal tax));
     (((12))) (9) "Resident" means a decedent who was domiciled in Washington at time of death;
     (((13))) (10) "Taxpayer" means a person upon whom tax is imposed under this chapter, including an estate or a person liable for tax under RCW 83.100.120;
     (11) "Transfer" means "transfer" as used in section 2001 of the Internal Revenue Code((, or a disposition or cessation of qualified use as defined and used in section 2032A(c) of the Internal Revenue Code)). However, "transfer" does not include a qualified heir disposing of an interest in property qualifying for a deduction under section 4 of this act or ceasing to use the property for farming purposes;
     (((14) "Trust" means "trust" under Washington law and any arrangement described in section 2652 of the Internal Revenue Code; and
     (15))) (12) "Internal Revenue Code" means, for the purposes of this chapter and RCW 83.110.010, the United States Internal Revenue Code of 1986, as amended or renumbered as of January 1, ((2001)) 2005;
     (13) "Washington taxable estate" means the federal taxable estate, less: (a) One million five hundred thousand dollars for decedents dying before January 1, 2006; and (b) two million dollars for decedents dying on or after January 1, 2006; and (c) the amount of any deduction allowed under section 4 of this act; and
     (14) "Federal taxable estate" means the taxable estate as determined under chapter 11 of the Internal Revenue Code without regard to: (a) The termination of the federal estate tax under section 2210 of the Internal Revenue Code or any other provision of law, and (b) the deduction for state estate, inheritance, legacy, or succession taxes allowable under section 2058 of the Internal Revenue Code.

Sec. 3   RCW 83.100.040 and 1988 c 64 s 4 are each amended to read as follows:
     (1) A tax in an amount computed as provided in this section is imposed on every transfer of property located in Washington ((of every nonresident)). For the purposes of this section, any intangible property owned by a resident is located in Washington.
     (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.
     (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.)) (a) Except as provided in (b) of this subsection, the amount of tax is the amount provided in the following table:

NEW SECTION.  Sec. 4   A new section is added to chapter 83.100 RCW to read as follows:
     (1) For the purposes of determining the Washington taxable estate, a deduction is allowed from the federal taxable estate for the value of qualified real property and the value of any tangible personal property used primarily for farming purposes conducted on the qualified real property, reduced by any amounts allowable as a deduction in respect of the qualified real property and tangible personal property under section 2053(a)(4) of the Internal Revenue Code, if the decedent was at the time of his or her death a citizen or resident of the United States. For the purposes of determining the deduction amount, the value of property is its value as used to determine the value of the gross estate.
     (2) Property shall be considered to have been acquired from or to have passed from the decedent if:
     (a) The property is so considered under section 1014(b) of the Internal Revenue Code;
     (b) The property is acquired by any person from the estate; or
     (c) The property is acquired by any person from a trust, to the extent the property is includible in the gross estate of the decedent.
     (3) If the decedent and the decedent's surviving spouse at any time held qualified real property as community property, the interest of the surviving spouse in the property shall be taken into account under this section to the extent necessary to provide a result under this section with respect to the property which is consistent with the result which would have obtained under this section if the property had not been community property.
     (4) In the case of any qualified woodland, the value of trees growing on the woodland may be deducted if otherwise qualified under this section.
     (5) If property is qualified real property with respect to a decedent, hereinafter in this subsection referred to as the "first decedent," and the property was acquired from or passed from the first decedent to the surviving spouse of the first decedent, active management of the farm by the surviving spouse shall be treated as material participation by the surviving spouse in the operation of the farm.
     (6) Property owned indirectly by the decedent may qualify for a deduction under this section if owned through an interest in a corporation, partnership, or trust as the terms corporation, partnership, or trust are used in section 2032A(g) of the Internal Revenue Code. In order to qualify for a deduction under this subsection, the interest, in addition to meeting the other tests for qualification under this section, must qualify under section 6166(b)(1) of the Internal Revenue Code as an interest in a closely held business on the date of the decedent's death and for sufficient other time, combined with periods of direct ownership, to equal at least five years of the eight-year period preceding the death.
     (7)(a) If, on the date of the decedent's death, the requirements of subsection (10)(f)(i)(C)(II) of this section with respect to the decedent for any property are not met, and the decedent (i) was receiving old age benefits under Title II of the social security act for a continuous period ending on such date, or (ii) was disabled for a continuous period ending on this date, then subsection (10)(f)(i)(C)(II) of this section shall be applied with respect to the property by substituting "the date on which the longer of such continuous periods began" for "the date of the decedent's death" in subsection (10)(f)(i)(C) of this section.
     (b) For the purposes of (a) of this subsection, an individual shall be disabled if the individual has a mental or physical impairment which renders that individual unable to materially participate in the operation of the farm.
     (8) Property may be deducted under this section whether or not special valuation is elected under section 2032A of the Internal Revenue Code on the federal return.
     (9)(a) In the case of any qualified replacement property, any period during which there was ownership, qualified use, or material participation with respect to the replaced property by the decedent or any member of the decedent's family shall be treated as a period during which there was ownership, use, or material participation, as the case may be, with respect to the qualified replacement property.
     (b) Subsection (9)(a) of this section shall not apply to the extent that the fair market value of the qualified replacement property, as of the date of its acquisition, exceeds the fair market value of the replaced property, as of the date of its disposition.
     (c) For the purposes of this subsection (9), the following definitions apply:
     (i) "Qualified replacement property" means any real property:
     (A) Which is acquired in an exchange which qualifies under section 1031 of the Internal Revenue Code; or
     (B) The acquisition of which results in the nonrecognition of gain under section 1033 of the Internal Revenue Code.
     The term "qualified replacement property" only includes property which is used for the same qualified use as the replaced property was being used before the exchange.
     (ii) "Replaced property" means the property was:
     (A) Transferred in the exchange which qualifies under section 1031 of the Internal Revenue Code; or
     (B) Compulsorily or involuntarily converted within the meaning of section 1033 of the Internal Revenue Code.
     (10) For the purposes of this section, the following definitions apply:
     (a) "Active management" means the making of the management decisions of a farm, other than the daily operating decisions.
     (b) "Farm" includes stock, dairy, poultry, fruit, furbearing animal, and truck farms; plantations; ranches; nurseries; ranges; greenhouses or other similar structures used primarily for the raising of agricultural or horticultural commodities; and orchards and woodlands.
     (c) "Farming purposes" means:
     (i) Cultivating the soil or raising or harvesting any agricultural or horticultural commodity, including the raising, shearing, feeding, caring for, training, and management of animals on a farm;
     (ii) Handling, drying, packing, grading, or storing on a farm any agricultural or horticultural commodity in its unmanufactured state, but only if the owner, tenant, or operator of the farm regularly produces more than one-half of the commodity so treated; and
     (iii)(A) The planting, cultivating, caring for, or cutting of trees; or
     (B) The preparation, other than milling, of trees for market.
     (d) "Member of the family" means, with respect to any individual, only:
     (i) An ancestor of the individual;
     (ii) The spouse of the individual;
     (iii) A lineal descendant of the individual, of the individual's spouse, or of a parent of the individual; or
     (iv) The spouse of any lineal descendant described in (d)(iii) of this subsection.
     For the purposes of this subsection (10)(d), a legally adopted child of an individual shall be treated as the child of such individual by blood.
     (e) "Qualified heir" means, with respect to any property, a member of the decedent's family who acquired property, or to whom property passed, from the decedent.
     (f)(i) "Qualified real property" means real property which was acquired from or passed from the decedent to a qualified heir of the decedent and which, on the date of the decedent's death, was being used for a qualified use by the decedent or a member of the decedent's family, but only if:
     (A) Fifty percent or more of the adjusted value of the gross estate consists of the adjusted value of real or personal property which:
     (I) On the date of the decedent's death, was being used for a qualified use by the decedent or a member of the decedent's family; and
     (II) Was acquired from or passed from the decedent to a qualified heir of the decedent;
     (B) Twenty-five percent or more of the adjusted value of the gross estate consists of the adjusted value of real property which meets the requirements of (f)(i)(A)(II) and (f)(i)(C) of this subsection; and
     (C) During the eight-year period ending on the date of the decedent's death there have been periods aggregating five years or more during which:
     (I) The real property was owned by the decedent or a member of the decedent's family and used for a qualified use by the decedent or a member of the decedent's family; and
     (II) There was material participation by the decedent or a member of the decedent's family in the operation of the farm. For the purposes of this subsection (f)(i)(C)(II), material participation shall be determined in a manner similar to the manner used for purposes of section 1402(a)(1) of the Internal Revenue Code.
     (ii) For the purposes of this subsection, the term "adjusted value" means:
     (A) In the case of the gross estate, the value of the gross estate, determined without regard to any special valuation under section 2032A of the Internal Revenue Code, reduced by any amounts allowable as a deduction under section 2053(a)(4) of the Internal Revenue Code; or
     (B) In the case of any real or personal property, the value of the property for purposes of chapter 11 of the Internal Revenue Code, determined without regard to any special valuation under section 2032A of the Internal Revenue Code, reduced by any amounts allowable as a deduction in respect of such property under section 2053(a)(4) of the Internal Revenue Code.
     (g) "Qualified use" means the property is used as a farm for farming purposes. In the case of real property which meets the requirements of (f)(i)(C) of this subsection, residential buildings and related improvements on the real property occupied on a regular basis by the owner or lessee of the real property or by persons employed by the owner or lessee for the purpose of operating or maintaining the real property, and roads, buildings, and other structures and improvements functionally related to the qualified use shall be treated as real property devoted to the qualified use.
     (h) "Qualified woodland" means any real property which:
     (i) Is used in timber operations; and
     (ii) Is an identifiable area of land such as an acre or other area for which records are normally maintained in conducting timber operations.
     (i) "Timber operations" means:
     (i) The planting, cultivating, caring for, or cutting of trees; or
     (ii) The preparation, other than milling, of trees for market.

Sec. 5   RCW 83.100.050 and 1988 c 64 s 6 are each amended to read as follows:
     (1) ((The)) A Washington return must be filed if: (a) A federal return is required to be filed; or (b) for decedents dying prior to January 1, 2006, the gross estate exceeds one million five hundred thousand dollars; or (c) for decedents dying on or after January 1, 2006, the gross estate exceeds two million dollars.
     (2)(a) A person required to file ((the)) a federal return shall file with the department on or before the date the federal return is required to be filed, including any extension of time for filing ((the federal return:
     (a))) under subsection (4) of this section, a Washington return for the tax due under this chapter((; and
     (b) A copy of the federal return.
     No Washington return need be filed if no federal return is required)).
     (b) If no federal return is required to be filed, a taxpayer shall file with the department on or before the date a federal return would have been required to be filed, including any extension of time for filing under subsection (5) of this section, a Washington return for the tax due under this chapter.
     (3) A Washington return delivered to the department by United States mail shall be considered to have been received by the department on the date of the United States postmark stamped on the cover in which the return is mailed, if the postmark date is within the time allowed for filing the Washington return, including extensions.
     (((2))) (4) In addition to the Washington return required to be filed in subsection (2) of this section, a person, if required to file a federal return, shall file with the department on or before the date the federal return, is required to be filed a copy of the federal return along with all supporting documentation. If the person required to file the federal return has obtained an extension of time for filing the federal return, the person shall file the Washington return within the same time period and in the same manner as provided for the federal return. A copy of the federal extension shall be filed with the department on or before the date the Washington return is due, not including any extension of time for filing, or within thirty days of issuance, whichever is later.
     (5) A person who is required to file a Washington return under subsection (2) of this section, but is not required to file a federal return, may obtain an extension of time for filing the Washington return as provided by rule of the department.

Sec. 6   RCW 83.100.060 and 1988 c 64 s 7 are each amended to read as follows:
     (1) The taxes imposed by this chapter shall be paid by the person required to file ((the federal)) a Washington return on or before the date the Washington return is required to be filed under RCW 83.100.050, not including any extension of time for filing. Payment delivered to the department by United States mail shall be considered to have been received by the department on the date of the United States postmark stamped on the cover in which payment is mailed, if the postmark date is within the time allowed for making the payment, including any extensions.
     (2) If the person ((required to file the federal return)) has obtained an extension of time for payment of the federal tax or has elected to pay such tax in installments, the person may elect to pay the tax imposed by this chapter within the same time period and in the same manner as provided for payment of the federal tax. A copy of the federal extension shall be filed on or before the date the tax imposed by this chapter is due, not including any extension of time for payment, or within thirty days of issuance, whichever is later.
     (3) A person who is required to file a Washington return under RCW 83.100.050, but is not required to file a federal return, may obtain an extension of time for payment of the Washington tax or elect to pay such tax in installments as provided by rule of the department.
     (4) The periods of limitation in RCW 83.100.130 and section 14 of this act shall extend an additional three years beyond the due date of the last scheduled installment payment authorized under this section.

Sec. 7   RCW 83.100.070 and 2000 c 105 s 1 are each amended to read as follows:
     (1) For periods before January 2, 1997, any tax due under this chapter which is not paid by the due date under RCW 83.100.060(1) shall bear interest at the rate of twelve percent per annum from the date the tax is due until the date of payment.
     (2) Interest imposed under this section for periods after January 1, 1997, shall be computed at the rate as computed under RCW 82.32.050(2). The rate so computed shall be adjusted on the first day of January of each year.
     (3)(a) If the Washington return is not filed when due under RCW 83.100.050 and the person required to file the ((federal)) Washington return under RCW 83.100.050 voluntarily ((reports the filing and)) files ((both)) the ((state and federal estate tax returns)) Washington return with the department before the department notifies the person in writing that the department has determined that the person has not filed a Washington return, no penalty is imposed on the person required to file the ((federal)) Washington return.
     (b) If the Washington return is not filed when due under RCW 83.100.050 and the person required to file the ((federal)) Washington return under RCW 83.100.050 does not file a return with the department before the department notifies the person in writing that the department has determined that the person has not filed a ((state estate tax)) Washington return, the person required to file the ((federal)) Washington return shall pay, in addition to interest, a penalty equal to five percent of the tax due for each month after the date the return is due until filed. However, in no instance may the penalty exceed the lesser of twenty-five percent of the tax due or one thousand five hundred dollars.
     (c) If the department finds that a return due under this chapter has not been filed by the due date, and the delinquency was the result of circumstances beyond the control of the responsible person, the department shall waive or cancel any penalties imposed under this chapter with respect to the filing of such a tax return. The department shall adopt rules for the waiver or cancellation of the penalties imposed by this section.

Sec. 8   RCW 83.100.090 and 1988 c 64 s 10 are each amended to read as follows:
     Notwithstanding the periods of limitation in section 14 of this act and RCW 83.100.130:
     (1) If the person required to file the ((federal)) Washington return under RCW 83.100.050 files an amended federal return, that person shall immediately file with the department an amended Washington return with a copy of the amended federal return. If the amended Washington return requires payment of an additional tax under this chapter, the tax shall be paid in accordance with RCW 83.100.060 and interest shall be paid in accordance with RCW 83.100.070.
     (2) Upon any adjustment in, or final determination of, the amount of federal tax due, the person required to file the ((federal)) Washington return under RCW 83.100.050 shall notify the department in writing within ((sixty)) one hundred twenty days after the adjustment or final determination. If the adjustment or final determination requires payment of an additional tax under this chapter, the tax shall be paid in accordance with RCW 83.100.060 and interest shall be paid in accordance with RCW 83.100.070.
     (3) If the department determines the amended Washington return, adjustment, or final determination requires payment of an additional tax under this chapter, the department may assess against the taxpayer an additional amount found to be due within one year of receipt of the amended Washington return or written notice as required by this section, or at any time if no amended Washington return is filed or notice is provided as required by this section. The execution of a written waiver at the request of the department by the person required to file the Washington return under RCW 83.100.050 may extend this limitation. Interest shall be added to the amount of tax assessed by the department in accordance with RCW 83.100.070. The department shall notify the taxpayer by mail of the additional amount, and the additional amount shall become due and shall be paid within thirty days from the date of the notice, or within such further time as the department may provide.
     (4) If the department determines the amended Washington return, adjustment, or final determination requires the refund of overpaid tax, penalties, or interest under this chapter, the department shall refund the amount of the overpayment with interest in accordance with RCW 83.100.130. The person required to file the Washington return under RCW 83.100.050 shall provide the department with any additional information or supporting documents necessary to determine if a refund is due. The execution of a written waiver to extend the period for assessment under subsection (3) of this section shall extend the time for making a refund, if prior to the expiration of the waiver period an application for refund of the taxes is made by the person required to file the Washington return under RCW 83.100.050, or the department discovers a refund is due.

Sec. 9   RCW 83.100.110 and 1988 c 64 s 11 are each amended to read as follows:
     (1) Unless any tax due under this chapter is sooner paid in full, it shall be a lien upon the property subject to the tax for a period of ten years from the date of the transfer ((or the generation-skipping transfer)), except that any part of the property which is used for the payment of claims against the property or expenses of its administration, allowed by any court having jurisdiction thereof, shall be divested of the lien. Liens created under this subsection shall be qualified as follows:
     (a) Any part of the property subject to the tax which is sold to a bona fide purchaser shall be divested of the lien and the lien shall be transferred to the proceeds of the sale; and
     (b) The lien shall be subordinate to any mortgage or deed of trust on the property pursuant to an order of court for payment of claims against the property or expenses of administration. The lien shall attach to any proceeds from the sale of the property in excess of the obligations secured by the mortgage or deed of trust and the expenses of sale, including a reasonable charge by the trustee and by his or her attorney where the property has been sold by a nonjudicial trustee's sale pursuant to chapter 61.24 RCW, and including court costs and any attorneys' fees awarded by the superior court of the county in which the property is sold at sheriff's sale pursuant to a judicial foreclosure of the mortgage or deed of trust.
     (2) If the person required to file the ((federal)) Washington return under RCW 83.100.050 has obtained an extension of time for payment of the ((federal)) tax or has elected to pay such tax in installments, the tax lien under this section shall be extended as necessary to prevent its expiration prior to twelve months following the expiration of any such extension or the installment.
     (3) The tax lien shall be extended as necessary to prevent its expiration prior to twelve months following the conclusion of litigation of any question affecting the determination of the amount of tax due if a lis pendens has been filed with the auditor of the county in which the property is located.

Sec. 10   RCW 83.100.130 and 1997 c 157 s 6 are each amended to read as follows:
     (1) ((Whenever)) If, upon receipt of an application by a taxpayer for a refund, or upon examination of the returns or records of any taxpayer, the department determines that within the statutory period for assessment of taxes, penalties, or interest prescribed by section 14 of this act a person required to file the ((federal)) Washington return under RCW 83.100.050 has overpaid the tax due under this chapter, the department shall refund the amount of the overpayment, together with interest ((at the then existing rate under RCW 83.100.070(1))) as provided in subsection (2) of this section. If the application for refund, with supporting documents, is filed within ((four months)) one hundred twenty days after an adjustment or final determination of federal tax liability, the department shall pay interest until the date the refund is mailed. If the application for refund, with supporting documents, is filed after ((four months)) one hundred twenty days after the adjustment or final determination, the department shall pay interest only until the end of the ((four-month)) one hundred twenty-day period.
     (2) Interest refunded under this section for periods before January 2, 1997, shall be computed at the rate provided in RCW 83.100.070(1). Interest refunded under this section for periods after January 1, 1997, through December 31, 1998, shall be computed on a daily basis at the rate as computed under RCW 82.32.050(2) less one percentage point. Interest allowed for periods after December 31, 1998, shall be computed at the rate as computed under RCW 82.32.050(2). Except as provided in subsection (1) of this section, interest shall be refunded from the date of overpayment until the date the refund is mailed. The rate so computed shall be adjusted on the first day of January of each year.
     (3) Except as otherwise provided in subsection (4) of this section and RCW 83.100.090, no refund shall be made for taxes, penalties, or interest paid more than four years prior to the beginning of the calendar year in which the refund application is made or an examination of records is complete.
     (4) The execution of a written waiver under section 14 of this act shall extend the time for making a refund if, prior to the expiration of the waiver period, an application for refund is made by the taxpayer or the department discovers a refund is due.
     (5) An application for refund shall be on a form prescribed by the department and shall contain any information and supporting documents the department requires.

Sec. 11   RCW 83.100.140 and 1988 c 64 s 13 are each amended to read as follows:
     Any person required to file the ((federal)) Washington return who ((wilfully)) willfully fails to file a Washington return when required by this chapter or who ((wilfully)) willfully files a false return commits a gross misdemeanor as defined in Title 9A RCW and shall be punished as provided in Title 9A RCW for the perpetration of a gross misdemeanor.

Sec. 12   RCW 83.100.150 and 1988 c 64 s 14 are each amended to read as follows:
     (((1))) The department may collect the estate tax imposed under RCW ((83.100.030 and)) 83.100.040, including interest and penalties, and shall represent this state in all matters pertaining to the same, either before courts or in any other manner. At any time after the Washington return is due, the department may file its findings regarding the amount of the tax((, the federal credit)) computed as provided in RCW 83.100.040, the person required to file the ((federal)) Washington return under RCW 83.100.050, and all persons having an interest in property subject to the tax with the clerk of the superior court in the matter of the estate of the decedent or, if no probate or administration proceedings have been commenced in any court of this state, of the superior court for the county in which the decedent was a resident, if the resident was a domiciliary, or, if the decedent was a nondomiciliary, of any superior court which has jurisdiction over the property. Such a court first acquiring jurisdiction shall retain jurisdiction to the exclusion of every other court.
     (((2) The department may collect the generation-skipping transfer tax under RCW 83.100.045, including interest and penalties, and shall represent this state in all matters pertaining to the same, either before courts or in any other manner. At any time after the Washington return is due, the department may file its findings regarding the amount of the tax, the federal credit, the person required to file the federal return, and all persons having an interest in property subject to the tax with the clerk of the superior court in the matter of the trust or the estate of the decedent, if any, or, if no trust, probate or administration proceedings have been commenced in any court of this state, of any superior court which has jurisdiction over the property. Such a court first acquiring jurisdiction shall retain jurisdiction to the exclusion of every other court.))

NEW SECTION.  Sec. 13   A new section is added to chapter 83.100 RCW to read as follows:
     (1) If the federal taxable estate on the federal return is determined by making an election under section 2056 or 2056A of the Internal Revenue Code, or if no federal return is required to be filed, the department may provide by rule for a separate election on the Washington return, consistent with section 2056 or 2056A of the Internal Revenue Code, for the purpose of determining the amount of tax due under this chapter. The election shall be binding on the estate and the beneficiaries, consistent with the Internal Revenue Code. All other elections or valuations on the Washington return shall be made in a manner consistent with the federal return, if a federal return is required, and such rules as the department may provide.
     (2) Amounts deducted for federal income tax purposes under section 642(g) of the Internal Revenue Code of 1986, shall not be allowed as deductions in computing the amount of tax due under this chapter.

NEW SECTION.  Sec. 14   A new section is added to chapter 83.100 RCW to read as follows:
     (1) If upon examination of any returns or from other information obtained by the department it appears that a tax or penalty has been paid less than that properly due, the department shall assess against the taxpayer an additional amount found to be due and shall add interest as provided in RCW 83.100.070 on the tax only. The department shall notify the taxpayer by mail of the additional amount, and the additional amount shall become due and shall be paid within thirty days from the date of the notice, or within such further time as the department may provide.
     (2) Interest shall be computed from the original due date of the Washington return until the due date of the notice. If payment in full is not made by the due date of the notice, additional interest shall be computed until the date of payment.
     (3) No assessment or correction of an assessment for additional taxes, penalties, or interest due may be made by the department more than four years after the close of the calendar year in which a Washington return is due under this chapter, including any extension of time for filing, except upon a showing of fraud or of misrepresentation of a material fact by the taxpayer or as provided under subsection (4) or (5) of this section or as otherwise provided in this chapter.
     (4) For persons liable for tax under RCW 83.100.120, the period for assessment or correction of an assessment shall extend an additional three years beyond the period described in subsection (3) of this section.
     (5) A taxpayer may extend the periods of limitation under subsection (3) or (4) of this section by executing a written waiver. The execution of the waiver shall also extend the period for making a refund as provided in RCW 83.100.130.

Sec. 15   RCW 83.100.210 and 1996 c 149 s 18 are each amended to read as follows:
     (1) The following provisions of chapter 82.32 RCW have full force and application with respect to the taxes imposed under this chapter unless the context clearly requires otherwise: RCW 82.32.110, 82.32.120, 82.32.130, 82.32.320, and 82.32.340. The definitions in this chapter have full force and application with respect to the application of chapter 82.32 RCW to this chapter unless the context clearly requires otherwise.
     (2) The department may enter into closing agreements as provided in RCW 82.32.350 and 82.32.360.

NEW SECTION.  Sec. 16   A new section is added to chapter 83.100 RCW to read as follows:
     All receipts from taxes, penalties, interest, and fees collected under this chapter must be deposited into the education legacy trust account.

NEW SECTION.  Sec. 17   The following acts or parts of acts are each repealed:
     (1) RCW 83.100.030 (Residents -- Estate tax imposed -- Credit for tax paid other state) and 1988 c 64 s 3 & 1981 2nd ex.s. c 7 s 83.100.030; and
     (2) RCW 83.100.045 (Generation-skipping transfers -- Tax imposed -- Credit for tax paid to another state) and 1988 c 64 s 5.

NEW SECTION.  Sec. 18   The repealed sections in section 17 of this act do not affect any existing right acquired or liability or obligation incurred under the statutes repealed or under any rule or order adopted under those statutes nor do they affect any proceeding instituted under them.

Sec. 19   RCW 83.100.010 and 1988 c 64 s 1 are each amended to read as follows:
     This chapter may be cited as the "Estate and Transfer Tax Act ((of 1988))."

NEW SECTION.  Sec. 20   This act applies prospectively only and not retroactively. Sections 2 through 17 of this act apply only to estates of decedents dying on or after the effective date of this section.

NEW SECTION.  Sec. 21   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. 22   This act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and takes effect immediately.