BP BHEAD INT S [atlas:bill]

AN ACT Relating to estate tax apportionment; and amending RCW 83.110.010, 83.110.020, 83.110.030, 83.110.050, 83.110.060, and 83.110.090.

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

Sec. 1. RCW 83.110.010 and 1998 c 292 s 402 are each amended to read as follows:

As used in this chapter, the following terms have the meanings indicated unless the context clearly requires otherwise.

(1) "Estate" means the gross estate of a decedent as determined for the purpose of federal estate tax and the estate tax payable to this state;

(2) ((~~"Excise tax" means the federal excise tax imposed by section 4980A(d) of the Internal Revenue Code, and interest and penalties imposed in addition to the excise tax;~~

~~(3)~~)) "Fiduciary" means executor, administrator of any description, and trustee;

((~~(4)~~)) (3) "Internal Revenue Code" means the United States Internal Revenue Code of 1986, as defined in and as of the date specified in RCW 83.100.020;

((~~(5)~~)) (4) "Person" means any individual, partnership, association, joint stock company, corporation, government, political subdivision, governmental agency, or local governmental agency;

(((6) "Persons interested in retirement distributions" means any person determined as of the date the excise tax is due, including a personal representative, guardian, trustee, or beneficiary, entitled to receive, or who has received, by reason of or following the death of a decedent, any property or interest therein which constitutes a retirement distribution as defined in section 4980A(e) of the Internal Revenue Code, but this definition excludes any alternate payee under a qualified domestic relations order as such terms are defined in section 414(p) of the Internal Revenue Code;

~~(7)~~)) (5) "Person interested in the estate" means any person, including a personal representative, guardian, or trustee, entitled to receive, or who has received, from a decedent while alive or by reason of the death of a decedent any property or interest therein included in the decedent's ((~~taxable~~)) estate;

((~~(8)~~)) (6) "Qualified heir" means a person interested in the estate who is entitled to receive, or who has received, an interest in qualified real property or a qualified family-owned business interest;

((~~(9)~~)) (7) "Qualified real property" means real property for which the election described in section 2032A of the Internal Revenue Code has been ((~~made~~)) allowed;

((~~(10)~~)) (8) "Qualified family-owned business interest" means a family-owned business interest for which the election in section 2057 of the Internal Revenue Code has been allowed;

(9) "State" means any state, territory, or possession of the United States, the District of Columbia, or the Commonwealth of Puerto Rico; and

((~~(11)~~)) (10) "Tax" means the federal estate tax((~~, the excise tax defined in subsection (2) of this section,~~)) and the estate tax payable to this state and interest and penalties imposed in addition to the tax, but not the additional estate tax under section 2032A(c) or 2057(f) of the Internal Revenue Code. Unless the will, trust, or other dispositive instrument otherwise provides, apportionment of estate, inheritance, legacy, or succession tax payable to any other state, or to any foreign country, and interest and penalties imposed in addition to the tax, shall be governed by the law of that state or foreign country.

Sec. 2. RCW 83.110.020 and 1989 c 40 s 2 are each amended to read as follows:

((~~(1) Tax other than excise tax.~~)) Except as provided in RCW 83.110.090 ((~~or subsection (2) of this section~~)), and unless the will, trust, or other dispositive instrument otherwise provides, the tax((~~, but not the excise tax,~~)) shall be apportioned among all persons interested in the estate. Except as provided in RCW 83.110.050, the apportionment shall be made in the proportion that the value of the interest of each person interested in the estate bears to the total value of the interests of all persons interested in the estate. Except as provided in RCW 83.110.050, the values used in determining the tax shall be used for that purpose.

(((2) Excise tax. Except as provided in RCW 83.110.030(6) and unless the will, beneficiary designation, trust, or other instrument governing the disposition of property subject to the excise tax otherwise provides, the excise tax shall be apportioned among and charged to the persons interested in retirement distributions on which the excise tax is actually imposed. Each person shall be severally liable for the timely payment of the portion of the excise tax so apportioned to the person. The apportionment shall be made in the proportion that the value of the interest of each person interested in the retirement distributions bears to the total value of the interests of all persons interested in the retirement distributions. The values used in determining the excise tax shall be used for that purpose. In order to facilitate timely payment of the excise tax, the fiduciary shall have the right, but not the obligation, in addition to any other power and consistent with the power granted by RCW 11.98.070(13), to make loans, either secured or unsecured at such interest as the fiduciary may determine, not exceeding the amount of the excise tax so apportioned to the persons liable for payment of the excise tax. If the fiduciary or other person is required to pay the excise tax, the fiduciary or other person shall have the rights of recovery provided in RCW 83.110.040 or otherwise.))

Sec. 3. RCW 83.110.030 and 1990 c 180 s 6 are each amended to read as follows:

(1) The court having jurisdiction over the administration of the estate of a decedent shall determine the apportionment of the tax. If there are no probate proceedings, the court of the county wherein the decedent was domiciled at death shall determine the apportionment of the tax upon the application of the person required to pay the tax.

(2) If the court finds that it is inequitable to apportion interest and penalties in the manner provided in this chapter because of special circumstances, it may direct apportionment thereon in the manner it finds equitable.

(3) The expenses reasonably incurred by any fiduciary and by other persons interested in the estate in connection with the determination of the amount and apportionment of the tax shall be apportioned as provided in RCW 83.110.020 and charged and collected as a part of the tax apportioned. If the court finds it is inequitable to apportion the expenses as provided in RCW 83.110.020, it may direct apportionment thereof equitably.

(4) If the court finds that the assessment of penalties and interest is due to delay caused by the negligence of the fiduciary, the court may charge the fiduciary with the amount of the assessed penalties and interest.

(5) In any suit or judicial proceeding to recover from any person interested in the estate the amount of the tax apportioned to the person in accordance with this chapter, the determination of the court in respect thereto is prima facie correct.

(((6) In the case where there are successive interests with respect to retirement distributions, the excise tax shall be equitably apportioned by the court having jurisdiction over the administration of the estate among the persons interested in the retirement distributions as defined in RCW 83.110.010(6).))

Sec. 4. RCW 83.110.050 and 1993 c 73 s 11 are each amended to read as follows:

(1) In making an apportionment, allowances shall be made for any exemptions granted, any classification made of persons interested in the estate, and any deductions and credits allowed by the law imposing the tax.

(2) Any exemption or deduction allowed (a) by section 2057 of the Internal Revenue Code, (b) by reason of the relationship of any person to the decedent, or (c) by reason of the purposes of the gift inures to the benefit of the person bearing that relationship or receiving the gift. When an interest is subject to a prior present interest which is not allowable as a deduction, the tax apportionable against the present interest shall be paid from principal.

(3) Any deduction for property previously taxed and any credit for gift taxes or death taxes of a foreign country paid by the decedent or the decedent's estate inures to the proportionate benefit of all persons liable to apportionment.

(4) Any credit for inheritance, succession, or estate taxes or taxes in the nature thereof in respect to property or interests includable in the estate inures to the benefit of the persons or interests chargeable with the payment thereof to the extent that or in proportion that the credit reduces the tax.

(5) To the extent that property passing to or in trust for a surviving spouse or any charitable, public, or similar gift or bequest does not constitute an allowable deduction for purposes of the tax solely by reason of an inheritance tax or other death tax imposed upon and deductible from the property, the property shall not be included in the computation provided for in this chapter, and to that extent no apportionment shall be made against the property. This does not apply in any instance where the result under section 2053(d) of the Internal Revenue Code relates to deduction for state death taxes on transfers for public, charitable, or religious uses. To the extent the amount otherwise allowed as a deduction under section 2057 of the Internal Revenue Code does not constitute an allowable deduction for purposes of the tax solely by reason of an inheritance tax or other death tax imposed upon and deductible from the amount, the amount shall not be included in the computation provided for in this chapter, and to that extent no apportionment shall be made against the amount.

(6) In the case of qualified real property or a qualified family-owned business interest, the apportionment of the tax shall be based on the values that would have been used to determine the tax without regard to section 2032A or 2057 of the Internal Revenue Code. The reduction in the tax attributable to the application of section 2032A or 2057 shall inure as follows:

(a) First to the benefit of the qualified heirs in proportion to their relative interests in the qualified real property or qualified family-owned business interest, until the tax attributable to the qualified real property or qualified family-owned business interest is reduced to zero;

(b) Then to the qualified heirs in proportion to their relative interests in other property of the estate, until the tax attributable to the property is reduced to zero; and

(c) Then to other persons interested in the estate in proportion to their relative interests in other property of the estate.

(7) Any extension in the payment of a part of the tax under any provision of the Internal Revenue Code shall inure to the benefit of, and the tax subject to the extension shall be equitably apportioned among, the persons receiving the property relating to the extension. Any tax benefit derived from the interest paid with respect to the tax shall be equitably apportioned among the persons receiving the property.

Sec. 5. RCW 83.110.060 and 1989 c 40 s 5 are each amended to read as follows:

((~~Except as otherwise provided in RCW 83.110.030(6),~~)) No interest in income and no estate for years or for life or other temporary interest in any property or fund is subject to apportionment as between the temporary interest and the remainder. The tax on the temporary interest and the tax, if any, on the remainder is chargeable against the corpus of the property or funds subject to the temporary interest and remainder. No tax shall be paid from a charitable remainder annuity trust or a charitable remainder unitrust described in section 664 of the Internal Revenue Code.

Sec. 6. RCW 83.110.090 and 1989 c 40 s 6 are each amended to read as follows:

If the liabilities of persons interested in the estate as prescribed by this chapter differ from those which result under the federal estate tax law, for example, section 2206, 2207, 2207A, or 2207B of the Internal Revenue Code, the liabilities imposed by the federal law will control and the balance of this chapter shall apply as if the resulting liabilities had been prescribed in this chapter. Nothing in this chapter affects the right of a personal representative to recover payments due an estate pursuant to the provisions of ((~~section 2207A of~~)) the Internal Revenue Code.