North Carolina to Reform Gift Tax?
On February 15, 2007, bill H235 was introduced in the North Carolina General Assembly to reform the North Carolina gift tax so that it would be based on the federal gift tax. Under the proposed legislation, NC gift tax would only be due if federal gift tax is due. The change would be effective January 1, 2007. Click "Continue Reading" to see the text of the bill.
Under current law, North Carolina allows the same $12,000 annual exclusions as the federal system, but rather than a $1 million lifetime exemption, there is only a $100,000 lifetime exemption, which applies only to ancestors and descendants.
The NC gift tax catches many residents (and even professional advisors) unaware, and many gifts are never reported, mainly because of ignorance of law, so the reform is probably a good idea. I'm not sure how much tax revenue would be lost.
A BILL TO BE ENTITLED 1
AN ACT TO REFORM THE STATE GIFT TAX SO THAT IT IS BASED ON THE 2
FEDERAL GIFT TAX, AS RECOMMENDED BY THE REVENUE LAWS 3
STUDY COMMITTEE. 4
The General Assembly of North Carolina enacts: 5
SECTION 1. Article 6 of Chapter 105 of the General Statutes is repealed. 6
SECTION 2. Chapter 105 of the General Statutes is amended by adding a 7
new Article to read: 8
"Article 1B. 9
"Gift Taxes. 10
"§ 105-32.20. Gift taxes; rates of tax. 11
(a) Definitions. - As used in this Article, 'taxable gift' has the same meaning as 12
under section 2503 of the Code. 13
(b) Tax. - A gift tax is imposed on a gift when a federal gift tax is imposed on 14
the gift under section 2501 of the Code and any of the following applies: 15
(1) The donor was a resident of this State at the time the gift was made. 16
(2) The donor was not a resident of this State at the time the gift was made 17
and the gift consisted of either of the following: 18
a. Real property or tangible personal property that was located in 19
this State at the time the gift was made. 20
b. Intangible personal property that had a tax situs in this State at 21
the time the gift was made. 22
(c) Rate. - The rates of tax, which are based on the value of the taxable gift, are 23
as follows: 24
Amount of Taxable Gift Rate 25
Up to $40,000 0% 26
General Assembly of North Carolina Session 2007
Page 2 H235 [Filed]
Over $40,000 up to $90,000 0.8% 1
Over $90,000 up to $140,000 1.6% 2
Over $140,000 up to $240,000 2.4% 3
Over $240,000 up to $440,000 3.2% 4
Over $440,000 up to $640,000 4.0% 5
Over $640,000 up to $840,000 4.8% 6
Over $840,000 up to $1,040,000 5.6% 7
Over $1,040,000 up to $1,540,000 6.4% 8
Over $1,540,000 up to $2,040,000 7.2% 9
Over $2,040,000 up to $2,540,000 8.0% 10
Over $2,540,000 up to $3,040,000 8.8% 11
Over $3,040,000 up to $3,540,000 9.6% 12
Over $3,540,000 up to $4,040,000 10.4% 13
Over $4,040,000 up to $5,040,000 11.2% 14
Over $5,040,000 up to $6,040,000 12.0% 15
Over $6,040,000 up to $7,040,000 12.8% 16
Over $7,040,000 up to $8,040,000 13.6% 17
Over $8,040,000 up to $9,040,000 14.4% 18
Over $9,040,000 up to $10,040,000 15.2% 19
Over $10,040,000 16.0% 20
(d) Value of Gift. - The value of a gift is determined in accordance with the 21
Code. If any property composing part of the gift is located in a state other than North 22
Carolina, the amount of tax payable depends on whether the donor was a resident of this 23
State at the time of the gift. If the donor was a resident of this State at the time of the 24
gift, the amount of tax due under this section is reduced by the lesser of the amount of 25
the gift tax paid the other state or an amount computed by multiplying the amount 26
otherwise due by a fraction, the numerator of which is the value of the taxable gift that 27
was located or had a tax situs in another state at the time of the gift and the denominator 28
of which is the value of the total taxable gift. If the donor was not a resident of this State 29
at the time of the gift, the amount of tax due under this section is an amount computed 30
by multiplying the amount otherwise due by a fraction, the numerator of which is the 31
value of real or tangible personal property that was located in North Carolina at the time 32
of the gift plus the value of any intangible property that had a tax situs in North Carolina 33
at the time of the gift and the denominator of which is the value of the taxable gift. 34
"§ 105-32.21. Lien for tax; collection of tax. 35
The tax imposed by this Article is a lien upon all gifts that constitute the basis for the 36
tax for a period of 10 years from the time they are made. If the tax is not paid by the 37
donor when due, each donee is personally liable, to the extent of his or her respective 38
gifts, for so much of the tax as has been assessed, or may be assessed, thereon. Any part 39
of the property comprised in the gift that has been sold by the donee to a bona fide 40
purchaser is divested of the lien imposed by this section and the lien, to the extent of the 41
value of the gift, shall attach to all the property of the donee (including after-acquired 42
property) except any part sold to a bona fide purchaser. 43
General Assembly of North Carolina Session 2007
H235 [Filed] Page 3
If the tax is not paid within 30 days after it has become due, the Department of 1
Revenue may use any of the methods authorized in this Subchapter for the collection of 2
other taxes to enforce the payment of taxes assessed under this Article. 3
In any proceeding by warrant or otherwise to enforce the collection of the tax, the 4
donor is liable for the full amount of the tax due by reason of all the gifts constituting 5
the basis for the tax, and each donee is liable only for so much of the tax as may be due 6
on account of his or her respective gift. 7
"§ 105-32.22. Death of donor within three years; time of assessment. 8
If a donor dies within three years after filing a return, gift taxes may be assessed at 9
any time within those three years, or on or before the date of final settlement of the 10
donor's State estate taxes, whichever is later. 11
"§ 105-32.23. When return required; due date of tax and return. 12
(a) When Return Required. - A gift tax return must be filed under this Article if a 13
federal gift tax return is required. The return must be filed on a form provided by the 14
Secretary. 15
(b) Due Date. - The gift tax imposed by this Article is due when the gift tax 16
return is due. The gift tax return is due on the date a federal gift tax return is due. 17
(c) Extension. - An extension of time to file a federal gift tax return is an 18
automatic extension of the time to file a gift tax return under this Article. The Secretary 19
may, in accordance with G.S. 105-263, extend the time for filing a gift tax return or 20
paying the tax imposed under this Article. 21
(d) Administration. - Article 9 of this Chapter applies to this Article. 22
"§ 105-32.24. Federal corrections. 23
If the amount of a taxpayer's taxable gifts is corrected or otherwise determined by 24
the federal government, the taxpayer must, within six months after being notified of the 25
correction or final determination by the federal government, file a gift tax return with 26
the Secretary of Revenue reflecting the corrected or determined taxable gifts. The 27
Secretary of Revenue shall determine from all available evidence the taxpayer's correct 28
tax liability for the taxable year. As used in this section, the term 'all available evidence' 29
means evidence of any kind that becomes available to the Secretary from any source, 30
whether or not the evidence was considered in the federal correction or determination. 31
The Secretary shall assess and collect any additional tax due from the taxpayer as 32
provided in Article 9 of this Chapter. The Secretary shall refund any overpayment of tax 33
as provided in Article 9 of this Chapter. A taxpayer who fails to comply with this 34
section is subject to the penalties in G.S. 105-236 and forfeits the right to any refund 35
due by reason of the determination." 36
SECTION 3. This act becomes effective January 1, 2008, and applies to 37
gifts made on or after that date. 38
did this bill ever become law?
ANSWER: No - I haven't heard anything about it recently.