Introduced Version






HOUSE BILL No. 1939

_____


DIGEST OF INTRODUCED BILL



Citations Affected: IC 6-4.1.

Synopsis: Inheritance tax exemptions. Provides that each family member inheriting a family farm or a family business is allowed an Indiana inheritance tax exemption equal to the amount of the estate's unified credit against the federal estate tax. Provides that the amount of the exemption increases incrementally to $1,000,000 for family farms and family businesses transferred by persons who die after June 30, 2006. Requires transferees who inherit a family farm or a family business to materially participate in the operation of the farm or business for at least ten years following the person's death. Provides the amount of inheritance tax that exceeds the exemptions available under current law is subject to recapture if the transferee disposes of the property or ceases to use the property for the family farm or family business. Provides that the finally determined federal estate tax value of a property interest is presumed to be the fair market value of the property interest for Indiana inheritance tax purposes in all circumstances. (Current law provides that the finally determined federal estate tax value does not apply to family farms and family businesses valued under Section 2032 of the Internal Revenue Code and requires the transferees to use the property's fair market value.)

Effective: July 1, 2001.





Grubb, Goodin, Kruse, Turner




    January 17, 2001, read first time and referred to Committee on Ways and Means.







Introduced

First Regular Session 112th General Assembly (2001)


PRINTING CODE. Amendments: Whenever an existing statute (or a section of the Indiana Constitution) is being amended, the text of the existing provision will appear in this style type, additions will appear in this style type, and deletions will appear in this style type.
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HOUSE BILL No. 1939



    A BILL FOR AN ACT to amend the Indiana Code concerning taxation.

Be it enacted by the General Assembly of the State of Indiana:

SOURCE: IC 6-4.1-1-6.5; (01)IN1939.1.1. -->     SECTION 1. IC 6-4.1-1-6.5 IS ADDED TO THE INDIANA CODE AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2001]: Sec. 6.5. "Member of the decedent's family" means:
        (1) the decedent's spouse;
        (2) a lineal ancestor of the decedent;
        (3) a lineal descendant of the decedent;
        (4) a brother or sister of the decedent;
        (5) a descendant of a brother or sister of the decedent; or
        (6) the spouse, widow, or widower of a child of the decedent.

SOURCE: IC 6-4.1-1-10.5; (01)IN1939.1.2. -->     SECTION 2. IC 6-4.1-1-10.5 IS ADDED TO THE INDIANA CODE AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2001]: Sec. 10.5. As used in IC 6-4.1-3-11.5 , "qualified property interests" refers to real property located in Indiana that meets the following criteria:
        (1) That on the date of a person's death the real property was being used by the decedent or a member of the decedent's family for a qualified use.

        (2) That during the eight (8) year period ending on the date of a person's death there have been periods aggregating at least five (5) years during which:
            (A) the real property was owned by the decedent or a member of the decedent's family;
            (B) the real property was used for a qualified use; and
            (C) the decedent or a member of the decedent's family materially participated in the operation of the farm or other business.

SOURCE: IC 6-4.1-1-10.7; (01)IN1939.1.3. -->     SECTION 3. IC 6-4.1-1-10.7 IS ADDED TO THE INDIANA CODE AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2001]: Sec. 10.7. As used in IC 6-4.1-3-11.5 , "qualified transferee" means an individual who:
        (1) is a Class A or Class B transferee (as defined in section 3 of this chapter);
        (2) receives a qualified property interest from the estate of a decedent; and
        (3) agrees to materially participate in the management of the real property in the continued qualified use of the real property.

SOURCE: IC 6-4.1-1-10.9; (01)IN1939.1.4. -->     SECTION 4. IC 6-4.1-1-10.9 IS ADDED TO THE INDIANA CODE AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2001]: Sec. 10.9. ''Qualified use'' means the devotion of real property to one (1) of the following uses:
        (1) As a farm for farming purposes.
        (2) In a trade or business other than the trade or business of farming.

SOURCE: IC 6-4.1-3-11.5; (01)IN1939.1.5. -->     SECTION 5. IC 6-4.1-3-11.5 IS ADDED TO THE INDIANA CODE AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2001]: Sec. 11.5. (a) With respect to a person who dies after June 30, 2001, the amount of the decedent's qualified property interests transferred to a qualified transferee as set forth in the following table is exempt from the inheritance tax:
DATE OF    AMOUNT OF EXEMPTION
DEATH    FOR QUALIFIED TRANSFEREE
After June 30, 2001, and
    before July 1, 2002            The first $675,000
After June 30, 2002, and
     before July 1, 2003            The first $700,000
After June 30, 2003, and
    before July 1, 2004            The first $850,000
After June 30, 2004, and
    before July 1, 2005            The first $900,000
After June 30, 2005, and
    before July 1, 2006            The first $950,000
After June 30, 2006            The first $1,000,000

     (b) Notwithstanding IC 6-4.1-4-0.5 , an inheritance tax return must be filed under IC 6-4.1-4-1 regardless of whether the exemption allowed in subsection (a) to a qualified transferee exceeds the total fair market value of the property interests transferred by the decedent.
    (c) To obtain the exemption provided under this section, a qualified transferee of qualified property interests transferred by the decedent shall file an agreement to materially participate in the continued qualified use of the qualified property interest with the appropriate probate court. A qualified transferee may file a copy of an agreement required under Section 2032 of the Internal Revenue Code to satisfy the requirements of this subsection.
    (d) The amount of inheritance tax exempted under this section that exceeds the exemption available under section 10 or 11 of this chapter is subject to recapture if the qualified transferee does one (1) of the following within ten (10) years of the date of the person's death:
        (1) Disposes of an interest in the qualified property interests except for a disposition to a member of the qualified transferee's family.
        (2) Ceases to use the qualified property interests for a qualified use.
    (e) If a qualified transferee disposes of a partial interest or ceases to use a part of the real property subject to subsection (d), the department shall recapture the exempted inheritance tax on a pro rata basis.
    (f) The amount of inheritance tax recaptured under this section is due and payable within six (6) months of the date on which the qualified transferee disposed of the real property or ceased using the real property for a qualified use.

SOURCE: IC 6-4.1-5-1.5; (01)IN1939.1.6. -->     SECTION 6. IC 6-4.1-5-1.5 IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2001]: Sec. 1.5. (a) For purposes of determining the fair market value of each property interest transferred by a decedent, the appraisal date for the property interest is the date used to value the property interest for federal estate tax purposes. However, if no federal estate tax return is filed for the decedent's estate, the appraisal date for each property interest transferred by the decedent is the date of the decedent's death.
    (b) The finally determined federal estate tax value of a property interest is presumed to be the fair market value of the property interest for Indiana inheritance tax purposes. unless the federal estate tax value is determined under Section 2032A of the Internal Revenue Code. However, the presumption is rebuttable. A property interest that is valued for federal estate tax purposes under Section 2032A of the Internal Revenue Code shall be valued for Indiana inheritance tax purposes at its fair market value on the appraisal date prescribed by subsection (a).
SOURCE: ; (01)IN1939.1.7. -->     SECTION 7. [EFFECTIVE JULY 1, 2001] IC 6-4.1-5-1.5 , as amended by this act, applies to the estate of a person who dies after June 30, 2001.