NJ Estate Tax to be eliminated on Estates under $2,000,000 as of January 1, 2017

NJ Estate Tax to be eliminated on Estates under $2,000,000 as of January 1, 2017

         10/14/2016 Approved P.L.2016, c.57.

NJ Chapter Law c.57. reduces the sales and use tax rate from 7 percent to 6.875 percent on January 1, 2017 and reduce the rate from 6.875 percent to 6.625 percent on January 1, 2018. The law will revise the special transition provisions for taxing sales transactions that extend across the tax rate change dates. 

     The law will phase out the estate tax over two rather than four years, by first replacing the current $675,000 threshold with a “true” exclusion amount established at $2.0 million for decedents dying on or after January 1, 2017, and then eliminating the estate tax for decedents dying on and after January 1, 2018.  The law will also eliminate provisions of the bill that provided for the imposition of the estate tax on the New Jersey property of nonresident decedents. 

     The law will eliminate provisions of the bill that allowed an annual gross income tax deduction for State fuel taxes paid by taxpayers on purchases of motor fuel for the operation for personal use of the taxpayer’s motor vehicles and not otherwise reimbursed. 

     The law will cap the proposed increase in the gross income tax pension and retirement income exclusions to $100,000 for joint filers, $75,000 for individuals, and $50,000 for married but filing separately upon the full, four-year phase-in, by January 1, 2020, of the enhanced exclusion.  Under the law will, the phase in of the increase is as follows: 

Filer Type	Present	2017	2018	2019	2020
Joint	$20,000	$40,000	$60,000	$80,000	$100,000
Individual	$15,000	$30,000	$45,000	$60,000	$75,000
Separate	$10,000	$20,000	$30,000	$40,000	$50,000

The law will also eliminate the provision, for taxable years beginning on or after January 1, 2021, that allowed a taxpayer with income of more than $100,000 but not over $125,000 to exclude 50 percent of the amount of pension and retirement income otherwise allowed and a taxpayer with more than $125,000 but not more than $150,000 of gross income to exclude 25 percent of the amount otherwise allowed.

     The law will provide for an increase in the New Jersey Earned Income Tax Credit (NJ EITC) under the gross income tax to 35 percent, rather than 40 percent, of the federal benefit amount beginning in Tax Year 2016. The current statutory benefit amount under the NJ EITC is equal to 30 percent of the federal benefit amount.  

     The law will change the “2016 implementation date” for the new petroleum products gross receipts tax rates for most highway fuels to the later of November 1, 2016, or the 15th day after the date of enactment of the bill. The bill previously had anticipated a 2016 implementation date of September 1, 2016 or the 15th day after the date of enactment.

54:38-1 is amended to read as follows:

     54:38-1.  a. In addition to the inheritance, succession or legacy taxes imposed by this State under authority of chapters 33 to 36 of this title (R.S.54:33-1 et seq.), or hereafter imposed under authority of any subsequent enactment, there is hereby imposed an estate or transfer tax:

     (1)   Upon the transfer of the estate of every resident decedent dying before January 1, 2002 which is subject to an estate tax payable to the United States under the provisions of the federal revenue act of one thousand nine hundred and twenty-six and the amendments thereof and supplements thereto or any other federal revenue act in effect as of the date of death of the decedent, the amount of which tax shall be the sum by which the maximum credit allowable against any federal estate tax payable to the United States under any federal revenue act on account of taxes paid to any state or territory of the United States or the District of Columbia, shall exceed the aggregate amount of all estate, inheritance, succession or legacy taxes actually paid to any state or territory of the United States or the District of Columbia, including inheritance, succession or legacy taxes actually paid this State, in respect to any property owned by such decedent or subject to such taxes as a part of or in connection with the estate; and

     (2)   (a)   Upon the transfer of the estate of every resident decedent dying after December 31, 2001, but ²[after December 31, 2016,] before January 1, 2017,² which would have been subject to an estate tax payable to the United States under the provisions of the federal Internal Revenue Code of 1986 (26 U.S.C. s.1 et seq.) in effect on December 31, 2001, the amount of which tax shall be, at the election of the person or corporation liable for the payment of the tax under this chapter, either 

     (i)    the maximum credit that would have been allowable under the provisions of that federal Internal Revenue Code in effect on that date against the federal estate tax that would have been payable under the provisions of that federal Internal Revenue Code in effect on that date on account of taxes paid to any state or territory of the United States or the District of Columbia, or

     (ii)   determined pursuant to the simplified tax system as may be prescribed by the Director of the Division of Taxation in the Department of the Treasury to produce a liability similar to the liability determined pursuant to clause (i) of this paragraph reduced pursuant to paragraph (b) of this subsection.

     (b)   The amount of tax liability determined pursuant to subparagraph (a) of this paragraph shall be reduced by the aggregate amount of all estate, inheritance, succession or legacy taxes actually paid to any state or territory of the United States or the District of Columbia, including inheritance, succession or legacy taxes actually paid this State, in respect to any property owned by such decedent or subject to such taxes as a part of or in connection with the estate; provided however, that the amount of the reduction shall not exceed the proportion of the tax otherwise due under this subsection that the amount of the estates's property subject to tax by other jurisdictions bears to the entire estate taxable under this chapter.

     (3)   (a)   Upon the transfer of the estate of each resident decedent dying on or after January 1, 2017, ²[but before January 1, 2020,]² whether or not subject to an estate tax payable to the United States under the provisions of the federal Internal Revenue Code (26 U.S.C. s.1 et seq.), the amount of the taxable estate, determined pursuant to section 2051 of the federal Internal Revenue Code (26 U.S.C. s.2051), shall be subject to tax pursuant to the following schedule:

On any amount up to $100,000 . . . . . .	0.0%
On any amount in excess of $100,000, up to $150,000  . . . . . . . . . . . . . . .	0.8%  2of the excess over $100,0002
On any amount in excess of $150,000, up to $200,000. . . . . . . . . . . . . . . .	$400 plus 1.6% of the excess over $150,000
On any amount in excess of $200,000, up to $300,000. . . . . . . . . . . . . . . .	$1,200 plus 2.4% of the excess over $200,000
On any amount in excess of $300,000, up to $500,000. . . . . . . . . . . . . . . .	$3,600 plus 3.2% of the excess over $300,000
On any amount in excess of $500,000, up to $700,000. . . . . . . . . . . . . . . .	$10,000 plus 4.0% of the excess over $500,000
On any amount in excess of $700,000, up to $900,000. . . . . . . . . . . . . . . .	$18,000 plus 4.8% of the excess over $700,000
On any amount in excess of $900,000, up to $1,100,000. . . . . . . . . . . . . . .	$27,600 plus 5.6% of the excess over $900,000
On any amount in excess of $1,100,000, up to $1,600,000. . . . .	$38,800 plus 6.4% of the excess over $1,100,000
On any amount in excess of $1,600,000, up to $2,100,000. . . . .	$70,800 plus 7.2% of the excess over $1,600,000
On any amount in excess of $2,100,000, up to $2,600,000. . . . .	$106,800 plus 8.0% of the excess over $2,100,000
On any amount in excess of $2,600,000, up to $3,100,000. . . . .	$146,800 plus 8.8% of the excess over $2,600,000
On any amount in excess of $3,100,000, up to $3,600,000. . . . .	$190,800 plus 9.6% of the excess over $3,100,000
On any amount in excess of $3,600,000, up to $4,100,000. . . . .	$238,800 plus 10.4% of the excess over $3,600,000
On any amount in excess of $4,100,000, up to $5,100,000. . . . .	$290,800 plus 11.2% of the excess over $4,100,000
On any amount in excess of $5,100,000, up to $6,100,000 . . . .	$402,800 plus 12.0% of the excess over $5,100,000
On any amount in excess of $6,100,000, up to $7,100,000 . . . . .	$522,800 plus 12.8% of the excess over $6,100,000
On any amount in excess of $7,100,000, up to $8,100,000 . . . . .	$650,800 plus 13.6% of the excess over $7,100,000
On any amount in excess of $8,100,000, up to $9,100,000 . . . . .	$786,800 plus 14.4% of the excess over $8,100,000
On any amount in excess of $9,100,000, up to $10,100,000 . . . .	$930,800 plus 15.2% of the excess over $9,100,000
On any amount in excess of $10,100,000. . . . . . . . . . . . . . . . . . .	$1,082,800 plus 16.0% of the excess over $10,100,000

     (b)   A credit shall be allowed against the tax imposed pursuant to subparagraph (a) of this paragraph equal to the amount of tax which would be determined by subparagraph (a) of this paragraph if the amount of the taxable estate were equal to the exclusion amount.

     For the transfer of the estate of each resident decedent dying on or after January 1, 2017, but before January 1, 2018, the exclusion amount is  ²[$1,000,000] $2,000,000².

     ²[For the transfer of the estate of each resident decedent dying on or after January 1, 2018, but before January 1, 2019, the exclusion amount is $2,000,000.]²

     ³[For the transfer of the estate of each resident decedent dying on or after January 1, ²[2019] 2018² , but before January 1, 2020, the ²[exclusion amount is $3,000,000] tax imposed by this section shall be based upon the applicable exclusion amount determined pursuant to subsection (c) of section 2010 of the federal Internal Revenue Code (26 U.S.C. s.2010), as amended or adjusted by federal law, rule or regulation² .]³

     (c)   The amount of tax liability of a resident decedent determined pursuant to subparagraphs (a) and (b) of this paragraph shall be reduced by the aggregate amount of all estate, inheritance, succession or legacy taxes actually paid to any state of the United States, including inheritance taxes actually paid this State, in respect to any property owned by that decedent or subject to those taxes as a part of or in connection with the estate; provided however, that the amount of the reduction shall not exceed the proportion of the tax otherwise due under this subsection that the amount of the estate's property subject to tax by other jurisdictions bears to the entire estate taxable under this chapter.

     (4)   For the transfer of the estate of each resident decedent dying on or after January 1, ³[ 2020] 2018³ , there shall be no tax imposed.

     ³[(5)  Upon the transfer of the real or tangible personal property within New Jersey of each nonresident decedent dying on or after January 1, 2017, but before January 1, 2020, which tax shall bear the same ratio to the entire tax which that estate would have been subject to pursuant to subparagraphs (a) and (b) of paragraph (3) ²and paragraph (4)² of this subsection if that nonresident decedent had been a resident of this State, and all of the decedent’s property, real and personal, had been located within this State, as the taxable property within this State bears to the entire estate, wherever situated.]³

     b.    (1)   In the case of the estate of a decedent dying before January 1, 2002 where no inheritance, succession or legacy tax is due this State under the provisions of chapters 33 to 36 of this title or under authority of any subsequent enactment imposing taxes of a similar nature, but an estate tax is due the United States under the provisions of any federal revenue act in effect as of the date of death, wherein provision is made for a credit on account of taxes paid the several states or territories of the United States, or the District of Columbia, the tax imposed by this chapter shall be the maximum amount of such credit less the aggregate amount of such estate, inheritance, succession or legacy taxes actually paid to any state or territory of the  United States or the District of Columbia.

     (2)   In the case of the estate of a decedent dying after December 31, 2001, but before ²[December 31, 2016] January 1, 2017², where no inheritance, succession or legacy tax is due this State under the provisions of chapters 33 to 36 of this title or under authority of any subsequent enactment imposing taxes of a similar nature, the tax imposed by this chapter shall be determined pursuant to paragraph (2) of subsection a. of this section.

     (3)   In the case of the estate of a decedent dying on or after January 1, 2017 the tax imposed by this chapter shall be determined pursuant to paragraphs (3) ³[,] and³ (4) ³[, and (5)]³ of subsection a. of this section.

     c.     For the purposes of this section, a "simplified tax system" to produce a liability similar to the liability determined pursuant to clause (i) of subparagraph (a) of paragraph (2) of subsection a. of this section is a tax system that is based upon the $675,000 unified estate and gift tax applicable exclusion amount in effect under the provisions of the federal Internal Revenue Code of 1986 (26 U.S.C. s.1 et seq.) in effect on December 31, 2001, and results in general in the determination of a similar amount of tax but which will enable the person or corporation liable for the payment of the tax to calculate an amount of tax notwithstanding the lack or paucity of information for compliance due to such factors as the absence of an estate valuation made for federal estate tax purposes, the absence of a measure of the impact of gifts made during the lifetime of the decedent in the absence of federal gift tax information, and any other information compliance problems as the director determines are the result of the phased repeal of the federal estate tax.

(cf:  P.L.2002, c.31, s.1)