BILL REQ. #:  S-3755.3 

Read first time 01/11/2006.   Referred to Committee on Ways & Means.

     AN ACT Relating to the Washington state estate and transfer tax; 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 84.52.068; adding new sections to chapter 83.100 RCW; creating a new section; repealing RCW 83.100.046, 83.100.047, and 83.100.095; repealing 2005 c 516 s 1 (uncodified); and declaring an emergency.

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

Sec. 1   RCW 83.100.020 and 2005 c 516 s 2 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 of the Internal Revenue Code;
     (((4))) (5) "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;
     (((5))) (7) "Gross estate" means "gross estate" as defined and used in section 2031 of the Internal Revenue Code;
     (((6))) (8) "Nonresident" means a decedent who was domiciled outside Washington at his death;
     (9) "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;
     (((7))) (10) "Person required to file the federal return" means any person required to file a return required by chapter 11 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;
     (((8))) (11) "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;
     (((9))) (12) "Resident" means a decedent who was domiciled in Washington at time of death;
     (((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))) (13) "Transfer" means "transfer" as used in section 2001 of the Internal Revenue Code((. However, "transfer" does not include a qualified heir disposing of an interest in property qualifying for a deduction under RCW 83.100.046 or ceasing to use the property for farming purposes)), or a disposition or cessation of qualified use as defined and used in section 2032A(c) of the Internal Revenue Code;
     (((12))) (14) "Trust" means "trust" under Washington law and any arrangement described in section 2652 of the Internal Revenue Code; and
     (15) "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, ((2005)) 2006;
     (((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 RCW 83.100.046; 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.))

NEW SECTION.  Sec. 2   A new section is added to chapter 83.100 RCW to read as follows:
     (1) A tax in an amount equal to the federal credit is imposed on every transfer of property of a resident.
     (2) If the transfer is subject to a similar tax imposed by another state for which the federal credit is allowed, and if the tax imposed by the other state is not qualified by a reciprocal provision allowing the transfer to be taxed only in this state, 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 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 tax imposed by the other state, and the denominator of which is the value of the decedent's gross estate.

Sec. 3   RCW 83.100.040 and 2005 c 516 s 3 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)(((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) A tax in an amount equal to the federal credit is imposed on every generation-skipping transfer, if real or tangible personal property subject to the federal tax is located in this state or if the trust has its principal place of administration in this state at the time of the generation-skipping transfer.
     (2) If the generation-skipping transfer is subject to a similar tax imposed by another state for which the federal credit is allowed, the amount of the tax due under this section shall be credited with the lesser of:
     (a) The amount of the tax paid to the other state and credited against the federal 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 generation-skipping transfer tax imposed by the other state, and the denominator of which is the value of all property subject to the federal tax.

Sec. 5   RCW 83.100.050 and 2005 c 516 s 5 are each amended to read as follows:
     (1) ((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)) The person required to file 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 ((under subsection (4) of this section,)) the federal return:
     (a) 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.
     (((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.)) (2) 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 2005 c 516 s 6 are each amended to read as follows:
     (1) The taxes imposed by this chapter shall be paid by the person required to file ((a Washington)) the federal 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 83.100.095 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 2005 c 516 s 7 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 ((Washington)) federal return ((under RCW 83.100.050)) voluntarily reports the filing and files both the ((Washington return)) state and federal estate tax returns 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 ((Washington)) federal return.
     (b) If the Washington return is not filed when due under RCW 83.100.050 and the person required to file the ((Washington)) federal 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 ((Washington)) state estate tax return, the person required to file the ((Washington)) federal 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 2005 c 516 s 8 are each amended to read as follows:
     ((Notwithstanding the periods of limitation in RCW 83.100.095 and 83.100.130:))
     (1) If the person required to file the ((Washington)) federal 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 ((Washington)) federal return ((under RCW 83.100.050)) shall notify the department in writing within ((one hundred twenty)) sixty 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 2005 c 516 s 9 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 ((Washington)) federal return ((under RCW 83.100.050)) has obtained an extension of time for payment of the 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 2005 c 516 s 10 are each amended to read as follows:
     (1) ((If, upon receipt of an application by a taxpayer for a refund, or upon examination of the returns or records of any taxpayer,)) Whenever the department determines that ((within the statutory period for assessment of taxes, penalties, or interest prescribed by RCW 83.100.095)) a person required to file the ((Washington)) federal 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 ((as provided in subsection (2) of this section)) at the then existing rate under RCW 83.100.070(1). If the application for refund, with supporting documents, is filed within 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 one hundred twenty days after the adjustment or final determination, the department shall pay interest only until the end of the 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 RCW 83.100.095 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 2005 c 516 s 11 are each amended to read as follows:
     Any person required to file the ((Washington)) federal return who willfully fails to file a Washington return when required by this chapter or who 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 2005 c 516 s 12 are each amended to read as follows:
     (1) The department may collect the estate tax imposed under ((RCW)) section 2 of this act and RCW 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 ((computed as provided in RCW 83.100.040)), the federal credit, the person required to file the ((Washington)) federal 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 section 4 of this act, 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.

Sec. 13   RCW 83.100.210 and 2005 c 516 s 15 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. 14   The following acts or parts of acts are each repealed:
     (1) RCW 83.100.046 (Deduction--Property used for farming--Requirements, conditions) and 2005 c 514 s 1201 & 2005 c 516 s 4;
     (2) RCW 83.100.047 (Marital deduction, qualified domestic trust--Election--Other deductions taken for income tax purposes disallowed) and 2005 c 516 s 13;
     (3) RCW 83.100.095 (Examination by department of returns, other information--Assessment of additional tax, interest) and 2005 c 516 s 14; and
     (4) 2005 c 516 s 1 (uncodified).

Sec. 15   RCW 84.52.068 and 2005 c 514 s 1104 are each amended to read as follows:
     (1) A portion of the proceeds of the state property tax levy shall be deposited into the student achievement fund as provided in this section.
     (2)(a) The amount of the deposit shall be based upon the average number of full-time equivalent students in the school districts during the previous school year as reported to the office of the superintendent of public instruction by August 31st of the previous school year.
     (b) ((For the 2004-2005 through 2007-2008 school years, an annual amount equal to two hundred fifty-four dollars per full-time equivalent student in all school districts shall be deposited in the student achievement fund.
     (c) For the 2008-2009 school year, an annual amount equal to two hundred sixty-five dollars per full-time equivalent student in all school districts shall be deposited in the student achievement fund.
     (d) For the 2009-2010 school year, an annual amount equal to two hundred seventy-seven dollars per full-time equivalent student in all school districts shall be deposited in the student achievement fund.
     (e) For the 2010-2011 school year and each year thereafter, an annual amount equal to two hundred seventy-eight dollars per full-time equivalent student in all school districts shall be deposited in the student achievement fund)) For the 2005-06 school year, an amount equal to three hundred dollars per full-time equivalent student in all school districts shall be deposited in the student achievement fund.
     (c) For the 2006-07 school year, an amount equal to three hundred seventy-five dollars per full-time equivalent student in all school districts shall be deposited in the student achievement fund.
     (d) For the 2007-08 school year, an amount equal to four hundred fifty dollars per full-time equivalent student in all school districts shall be deposited in the student achievement fund.
     (e) For each subsequent school year, the amount deposited per full-time equivalent student shall be adjusted for inflation.
     (f) The school district annual amounts shall be deposited based on the monthly apportionment schedule as defined in RCW 28A.510.250. The office of the superintendent of public instruction shall notify the department of the monthly amounts to be deposited into the student achievement fund to meet the apportionment schedule.
     (3) For the purposes of this section, "inflation" means the percentage change in the implicit price deflator for the United States for each fiscal year as published by the federal bureau of labor statistics.

NEW SECTION.  Sec. 16   This act applies to the estates of decedents dying on or after the effective date of this act. This act does not affect any existing right acquired or liability or obligation incurred under the sections amended or repealed in this act or under any rule or order adopted under those sections, nor does it affect any proceeding instituted under those sections.

NEW SECTION.  Sec. 17   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.