Session Laws

Whereas, The deferred operation of this act would tend to defeat its purpose, which is to immediately regulate the estate tax, therefore it is hereby declared to be an emergency law, necessary for the preservation of the public convenience.

Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority of the same, as follows:

SECTION 1. Paragraph (a) of section 17 of chapter 62C of the General Laws, as appearing in the 1984 Official Edition, is hereby amended by striking out the first sentence and inserting in place thereof the following sentence:- In all cases where the Massachusetts gross estate of a resident decedent or the Massachusetts gross estate of a non-resident decedent, computed as if the decedent had been a resident, exceeds two hundred thousand dollars the executor, as defined in chapter sixty-five C, shall make a return within nine months after the date of the decedent's death with respect to the tax imposed by said chapter sixty-five C.

SECTION 2. Chapter 65 of the General Laws is hereby amended by striking out section 13, as appearing in the 1984 Official Edition, and inserting in place thereof the following section:-

Section 13. Except as otherwise provided in this section and section fourteen, the tax imposed by this chapter shall be assessed upon the value of the property at the time of the death of the decedent. In case of a devise, descent, bequest or grant to take effect in possession or enjoyment after the expiration of one or more life estates or of a term of years, the tax shall be assessed on the value of the property or interest therein coming to the beneficiary at the time when he becomes entitled to the same in possession or enjoyment. The value of an annuity or a life interest in any such property, or any interest therein less than an absolute interest, shall be determined by the tables used by the United States Commissioner of Internal Revenue for the valuation of property interests under the federal estate tax law for persons dying on the valuation date in question and not the tables in effect on the date of death of the decedent who created the interest; but when an annuity or a life interest is terminated by the death of the annuitant or life tenant, and the tax upon such interest is not due and has not been paid in advance, the value of said interest for the purposes of taxation under this chapter shall be the amount of the annuity or income actually paid or payable to the annuitant or life tenant during the period for which he was entitled to the annuity or was in possession of the life estate.

SECTION 3. Chapter 65A of the General Laws is hereby amended by striking out section 5, as so appearing, and inserting in place thereof the following section:-

Section 5. Whenever it appears upon any accounting, or in any appropriate action or proceeding, that an executor, administrator, trustee or other person acting in a fiduciary capacity, has paid or may be required to pay an estate tax levied or assessed under the provisions of chapter sixty-five C or under the provisions of this chapter, or under the provision of any estate tax law of the United States heretofore or hereafter enacted, upon the transfer of the estate of any person who at the time of his death was an inhabitant of this commonwealth, the net amount of said tax shall be apportioned among and borne by recipients and beneficiaries of the property and interests included in the gross estate in the following manner:-

(1) If any portion of the estate passed under the will of the decedent, such proportion of the net amount of the tax so levied or assessed, other than any tax payable from property described in paragraph (3) shall, except as otherwise provided or directed by the will, be charged to and paid from the general funds of the estate as the net amount of the property passing under the will and included in the measure of such tax, exclusive of property over which the decedent had any power of appointment as defined from time to time by the estate tax laws of the United States, bears to the amount of the net estate as hereafter defined in this section.

(2) If any portion of the property with respect to which such tax is levied or assessed, other than property described in paragraph three of this section, is held under the terms of any trust created inter vivos or is subject to such a power of appointment, such proportion of the net amount of the tax so levied or assessed, other than any tax payable from property described in paragraph (3), shall, except as otherwise provided or directed by the trust instrument with respect to the fund established thereby, or by the decedent's will, be charged to and paid from the corpus of the trust property or the property subject to such power of appointment, as the case may be, as the net amount of the property of such trust or property subject to such power of appointment and included in the measure of such tax bears to the amount of the net estate as hereafter defined in this section. The amount so charged shall not be apportioned between temporary and remainder estates.

(3) If any portion of the property with respect to which such tax is levied or assessed is property in which the decedent had a qualifying income interest for life within the meaning of section three A of chapter sixty-five C or section two thousand and forty-four of the Internal Revenue Code or any statutes of similar import in effect on January first, nineteen hundred and eighty-five, such portion of the net amount of the tax so levied or assessed, including, in the case of the Massachusetts estate tax, any tax imposed under the provision of subsection (b) of section two of said chapter sixty-five C, shall, except as otherwise provided or directed by the decedent's will, be charged to and paid from the corpus of such property as equals the amount by which the total net amount of such tax levied or assessed exceeds the total net amount of such tax which would have been levied or assessed if the value of such property which is included in the measure of such tax had not been so included. The amount so charged shall not be apportioned between temporary and remainder estates.

(4) The balance of the net amount of the tax so levied or assessed, or if paragraphs (1), (2) and (3) are inapplicable the whole of the net amount of such tax shall, except as otherwise provided or directed by the decedent's will, be equitably apportioned among and charged to and paid by the recipients and beneficiaries of property or interests included in the measure of such tax and passing or arising otherwise than under the will of the decedent or by virtue of any such trust or by the exercise or nonexercise of any such power of appointment or by reason of the termination of any such qualifying income interest for the decedent's life in the proportion that the net amount of such property or interest bears to the amount of the net estate as hereafter defined in this section; provided, however, that where any provision is made whereby any person is given an interest in income or an estate for years or for life or other temporary interest in any property or fund the amount so charged to such recipients or beneficiaries shall not be apportioned between temporary and remainder estates but shall be charged to and paid out of the corpus of such property or fund; and provided, further, that any apportionment made under this section shall accord with applicable estate tax laws of the United States where such laws specify with respect to an apportionment or a right of recovery.

(5) For the purposes of the apportionment of the tax levied or assessed under the provisions of chapter sixty-five C or this chapter, or under the provisions of any estate tax law of the United States, the term "net estate" as used in this section shall mean the gross estate as defined for purposes of the particular tax less (i) any property described in paragraph (3) which is included in the gross estate for purposes of the particular tax and (ii) any deductions, other than specific exemptions, allowed for purposes of the particular tax other than deductions attributable to such property described in said paragraph (3).

(6) If the court shall determine that it is inequitable, because of special circumstances, to apportion interest and penalties in connection with estate taxes as provided herein, it may direct apportionment thereof in such manner as it shall find equitable.

SECTION 4. Said chapter 65A is hereby further amended by striking out section 5A, as so appearing, and inserting in place thereof the following section:-

Section 5A. In all cases in which any property required to be included in the gross estate as defined by the applicable estate tax laws of the United States or the commonwealth does not come into the possession of the executor or administrator as such, he shall, in cases where property of a trust created inter vivos, property subject to a power of appointment, or property in which the decedent had a qualifying income interest for life is included in the gross estate for purposes of either such tax, be entitled to recover from the fiduciary in possession of the corpus of such trust or of such property, and in all other cases from the recipients or beneficiaries of property or interests with respect to which the federal or the commonwealth estate tax is levied or assessed the proportionate amount of the federal or the commonwealth tax, as the case may be, payable by such fiduciary or persons with which they are chargeable under the provisions of section five; provided, however, that no such tax or any part thereof shall be recovered from any company issuing (1) any policy of insurance, annuity or endowment contract on the life of or insuring the decedent, including accident and health policies, or (2) any such policy or contract insuring the decedent and one or more other persons jointly, or (3) any such policy or contract on the life of or insuring one or more persons other than the decedent in which the decedent owned any interest at the time of his death; or from any bank, trust company or other banking institution with respect to any account standing in the joint names of the decedent and any other person of which it is the depositary. Any person who shall have paid more than the proportionate amount of the tax apportionable to him under section five on any property or interest passing to him, or in his possession, shall be entitled to a just and equitable contribution from those who shall not have paid the full amount of the tax apportionable to them respectively.

SECTION 5. Section 1 of chapter 65C of the General Laws, as so appearing, is hereby amended by striking out paragraph (d) and inserting in place thereof the following paragraph:-

(d) "Federal gross estate", the gross estate as defined under the Code except that, (1) notwithstanding section two thousand and thirty-five of the Code, the value of the gross estate shall include the value of all property to the extent of any interest therein of which the decedent has at any time made a transfer, relinquished a power, or exercised or released a general power of appointment, except in case of a bona fide sale for an adequate and full consideration in money or money's worth, by trust or otherwise, during the three year period ending with the date of the decedent's death; provided, however, that the value of such property or interest therein so transferred or subject to the power so relinquished, exercised or released exceeds ten thousand dollars for any person during a calendar year; and (2) notwithstanding section two thousand and forty of the Code, one-half of the value of any interest in any property shall be included in the gross estate if such interest is held by the decedent and the decedent's spouse as tenants by the entirety, or joint tenants with right of survivorship, but only if the decedent and the spouse of the decedent are the only joint tenants.

SECTION 6. Said section 1 of said chapter 65C, as so appearing, is hereby further amended by striking out paragraph (f) and inserting in place thereof the following paragraph:-

(f) "Massachusetts gross estate", the federal gross estate, whether or not a federal estate tax return is required to be filed, plus the value of any property (i) in which the decedent had at death a qualifying income interest for life described in subsection ()c) of section three A, or to the extent of any such interest therein of which the decedent has at any time made a transfer, by trust or otherwise, under any circumstances which would require the property to be included in the gross estate under the provisions of this chapter and (ii) for which a deduction was allowed for Massachusetts estate tax purposes with respect to the transfer of such property to the decedent; and less the value of real and tangible personal property having an actual situs outside the commonwealth. The Massachusetts gross estate shall not include the value of any property in which the decedent had a qualifying income interest for life which is not otherwise includible in the Massachusetts gross estate under the first sentence of this paragraph, notwithstanding the right of the executor of the decedent's estate to recover federal or Massachusetts estate taxes from such property.

SECTION 7. Subsection (a) of section 2 of said chapter 65C, as so appearing, is hereby amended by inserting after the word "table", in line 1, the following words:- less the credit, if any, provided in subsection (a) of section three,.

SECTION 7A. Said subsection (a) of said section 2 of said chapter 65C, as so appearing, is hereby further amended by striking out, in line 6, the words "sixty thousand dollars" and inserting in place thereof the following words:- two hundred thousand dollars.

SECTION 8. Said section 2 of said chapter 65C, as so appearing, is hereby further amended by striking out subsection (b) and inserting in place thereof the following subsection:-

(b) If the maximum credit for state death taxes allowable to the estate of a deceased resident or nonresident against the federal estate tax, computed according to the rate schedule found in section two thousand and eleven of the Code based upon an amount equal to the Massachusetts taxable estate, computed, with respect to a nonresident, as if the decedent had been a resident and apportioned in accordance with subsection (b) of section four, exceeds the tax imposed under subsection (a), the amount of such excess shall be added to the tax imposed under said subsection (a). In the case of a decedent who was a nonresident of the United States, however, the Massachusetts taxable estate shall be computed as if such decedent had been a resident without apportionment in accordance with subsection (b) of section four. For purposes of this subsection, the Massachusetts taxable estate shall include the value of any property subject to a power of appointment to the extent that such value has been excluded from the computation in said subsection (a) because a tax had been paid thereon pursuant to section fourteen of chapter sixty-five and shall also include the value of qualified terminable interest property, as defined in subsection (b) (7) (B) of section two thousand and fifty-six of the Internal Revenue Code in effect on January first, nineteen hundred and eighty-five, to the extent that such property has been included in the gross estate of the decedent as finally determined for federal estate tax purposes but has not been included in the gross estate of the decedent for Massachusetts estate tax purposes, in each case less the deductions described in subsection (b) of section three attributable thereto and the value of real and tangible personal property includible therein and having an actual situs outside the commonwealth.

SECTION 9. Section 3 of said chapter 65C, as so appearing, is hereby amended by striking out subsection (a) and inserting in place thereof the following subsection:-

(a) If the Massachusetts net estate is two hundred thousand dollars or less there shall be an exemption equal to the Massachusetts net estate. If the Massachusetts net estate exceeds two hundred thousand dollars no exemption shall apply and a credit equal to the Massachusetts estate tax liability or one thousand five hundred dollars, whichever is less, shall be allowed.

SECTION 10. Subsection (b) of said section 3 of said chapter 65C, as so appearing, is hereby amended by adding the following sentence:- No deduction for interest shall be allowed hereunder unless the same has been paid or has, solely through the passage of time, accrued within three years from the due date of the return, without regard to any extension granted.

SECTION 11. Said section 3 of said chapter 65C, as so appearing, is hereby further amended by striking out subsection (c) and inserting in place thereof the following two subsections:-

(c) Notwithstanding the provisions of subsection (b) or any general or special law to the contrary, if a deduction from any federal estate tax would not be allowed because of a failure to meet the requirements set forth pursuant to section two thousand and fifty-five of the Code in effect on January first, nineteen hundred and eighty-five, and if the relevant governing instrument is the subject of a qualified reformation as hereinafter defined as a result of which a deduction under said section two thousand and fifty-five would be allowable from any federal estate tax, then a similar deduction shall be allowed from any tax imposed pursuant to this chapter to the extent that it can be attributed to property included in the Massachusetts gross estate. For purposes of this subsection, the term "qualified reformation" shall mean a change of a governing instrument which is a qualified reformation as defined in section two thousand and fifty-five (e) of the Internal Revenue Code in effect on January first, nineteen hundred and eighty-five.

(d) If the right to claim any deduction otherwise allowable is waived for federal estate tax purposes, such right shall be considered waived for Massachusetts estate tax purposes.

SECTION 12. Said chapter 65C is hereby further amended by inserting after section 3 the following section:-

Section 3A. (a) In the case of qualified terminable interest property, (i) for purposes of subsection (a) of section two thousand and fifty-six of the Code, such property shall be treated as passing to the surviving spouse, and (ii) for purposes of subsection (b)(1)(A) of section two thousand and fifty-six of the Code, no part of such property shall be treated as passing to any person other than the surviving spouse, to the extent that a deduction with respect to such qualified terminable interest property which, when added to the value of all other property which has passed or passes to the surviving spouse, will not cause the total deductions for property which has passed or passes to the surviving spouse to exceed fifty per cent of the Massachusetts adjusted gross estate.

(b) For purposes of this section, the term "qualified terminable interest property" shall mean property (i) which is included in the Massachusetts gross estate, (ii) which passes from the decedent, (iii) in which the surviving spouse has a qualifying income interest for life, and (iv) to which an election under this section applies.

(c) The surviving spouse has a qualifying income interest for life if (i) the surviving spouse is entitled to all the income from the property, payable annually or at more frequent intervals, and (ii) no person has a power to appoint any part of the property to any person other than the surviving spouse. Clause (ii) of this subsection shall not apply to a power exercisable only at or after the death of the surviving spouse.

(d) The term "property" includes an interest in property.

(e) A specific portion of property shall be treated as separate property.

(f) An election under this section with respect to any property shall be made by the executor on the Massachusetts estate tax return filed within the time prescribed for filing such return, or any extension of such time granted by the commissioner, to have the property treated as qualified terminable interest property for Massachusetts estate tax purposes. Such election, once made, shall be irrevocable and shall be separate from and independent of any election made by the executor for federal estate tax purposes.

(g) If the surviving spouse of the decedent is the only noncharitable beneficiary of a qualified charitable remainder trust, subsection (b) (1) of section two thousand and fifty-six of the Code shall not apply to any interest in such trust which passes or has passed from the decedent to such surviving spouse. For purposes of the preceding sentence, the term "noncharitable beneficiary" shall mean any beneficiary of the qualified charitable remainder trust other than an organization described in subsection (c) of section one hundred and seventy of the Code and the term "qualified charitable remainder trust" shall mean a charitable remainder annuity trust or charitable remainder unitrust as described in section six hundred and sixty-four of the Code.

(h) Nothing in this section or any other provision of this chapter shall allow the value of any interest in property to be deducted under this chapter more than once with respect to the same decedent.

SECTION 13. Section 4 of said chapter 65C is hereby amended by striking out subsection (b), as appearing in the 1984 Official Edition, and inserting in place thereof the following subsection:-

(b) The tax imposed under subsection (a) shall be an amount which bears the same ratio to the tax that would be due if the decedent had been a resident as (i) the value of all real and tangible personal property, diminished by any mortgage or lien thereon, having an actual situs in Massachusetts, the transfer of which is subject to tax under said subsection (a) bears to (ii) the value of the decedent's Massachusetts gross estate, diminished by any mortgage or lien or property included therein, determined as if he had been a resident.

SECTION 14. Said chapter 65C is hereby further amended by striking out section 5, as so appearing, and inserting in place thereof the following section:-

Section 5. (a) Property in the Massachusetts gross estate shall be valued as of the date of death of the decedent; provided, however, that if an alternate valuation has been properly elected for purposes of the federal estate tax in accordance with section two thousand and thirty-two of the Code in effect on January first, nineteen hundred and eighty-five the property in the Massachusetts gross estate shall be valued as of the dates used for federal estate tax valuation purposes; and provided, further, that if no federal estate tax is payable under federal estate tax laws applicable to the decedent's estate, whether or not a federal estate tax return is required to be filed, the executor may elect to value the property in the Massachusetts gross estate on the alternate valuation dates and in the manner provided under the provisions of section two thousand and thirty-two of said Code on the Massachusetts estate tax return.

(b) The value of an annuity, a life estate or an interest in property less than an absolute interest shall be determined in accordance with the actuarial tables in effect as of the decedent's death under section two thousand and thirty-one of the Code in effect on January first, nineteen hundred and eighty-five at such time and regulations issued thereunder.

(c) If the gross estate of a decedent includes real property devoted to use as a farm for farming purposes, the estate may elect to value such property in accordance with section two thousand and thirty-two A of the Code, in effect on January first, nineteen hundred and eighty-five. If a federal return is required to be filed the election under this subsection shall be consistent with the election made for federal estate tax purposes. All the substantive and procedural provisions of said section two thousand and thirty-two A shall, insofar as pertinent and consistent, apply to the election made under this subsection. The commissioner shall promulgate regulations to carry out the provisions of this subsection.

SECTION 15. Section 14 of said chapter 65C, as so appearing, is hereby amended by striking out subsection (b) and inserting in place thereof the following subsection:-

(b) If the tax imposed by this chapter is not paid when due, then the spouse, transferee, trustee, surviving tenant, person in possession of the real or personal property by reason of the exercise, nonexercise, or release of a power of appointment, or beneficiary, who receives, or has on the date of the decedent's death, real or personal property included in the Massachusetts gross estate to the extent of the value, at the time of the decedent's death, of such property shall be personally liable for such tax. Any part of such real property, which, prior to the decedent's death, was conveyed by a deed of the decedent not disclosing an intention that it take effect in possession or enjoyment at or after his death and such deed was recorded or registered prior to the decedent's death, and any part of such personal property transferred by, or transferred by a transferee of, such spouse, transferee, trustee, surviving tenant, person in possession of property by reason of the exercise, nonexercise, or release of a power of appointment, or beneficiary, to a bona fide purchaser, mortgagee or pledgee, for an adequate and full consideration in money or money's worth shall be divested of the lien provided in subsection (a), and a lien shall then attach to all the property of such spouse, transferee, trustee, surviving tenant, person in possession, beneficiary, or transferee of any such person, except any part transferred to a bona fide purchaser, mortgagee or pledgee for an adequate and full consideration in money or money's worth.

SECTION 16. Said section 14 of said chapter 65C, as so appearing, is hereby further amended by adding the following paragraph:-

(f) In the case of any interest in qualified real property, devoted to use as a farm for farming purposes and valued pursuant to the provisions of subsection (c) of section 5, an amount equal to the adjusted tax difference attributable to such interest within the meaning of section two thousand and thirty-two A of the Code in effect on January first, nineteen hundred and eighty-five shall be a lien in favor of the commonwealth on the property in which such interest exists. Such lien shall arise at the time an election is filed under subsection (c) and shall continue with respect to any interest in the qualified real property (1) until the liability of tax under subsection (c) of section two thousand and thirty-two A of said Code, with respect to such interest has been satisfied or (2) until it is established to the satisfaction of the commissioner that no further tax liability may arise under section two thousand and thirty-two A of said Code, with respect to such interest. For purposes of this section, the term "qualified real property" includes qualified replacement property (within the meaning of section two thousand and thirty-two A (h) (3) (B) of said Code, and qualified exchange property (within the meaning of section two thousand and thirty-two A (i) (3) of said Code.

SECTION 17. Section 32 of chapter 202 of the General Laws, as so appearing, is hereby amended by inserting after the word "appointed", in line 15, the following words:- that the executor or administrator has filed in the probate court a certificate of the commissioner of revenue showing either that the amount of tax under chapter sixty-five C has been paid, that payment thereof has been secured as provided in section ten of said chapter sixty-five C, or that no tax is due.

SECTION 18. Notwithstanding any general or special law to the contrary, and in addition to any rights granted under section thirty-seven of chapter sixty-two C of the General Laws, any taxpayer claiming the deduction authorized by subsection (c) of section three of chapter sixty-five C or the deduction authorized by section one of chapter five hundred and thirty-one of the acts of nineteen hundred and eighty-two from any tax assessed pursuant to said chapter sixty-five C may apply within one year from the effective date of this section for abatement of so much of said tax as would become excessive in amount upon allowance of the aforesaid deduction; provided, however, that this section shall apply only to wills executed before December thirty-first, nineteen hundred and seventy-eight, or trusts created before such date, which have been amended or conformed in accordance with the requirements of said chapter five hundred and thirty-one on or before either December thirty-first, nineteen hundred and eighty-one, or, if later, on or before the thirtieth day after any judicial proceedings which are required to amend or conform such instrument and which are commenced on or before said December thirty-first, nineteen hundred and eighty-one, become final. Any such application shall be considered as timely for the purposes of chapter sixty-two C, notwithstanding the expiration of the time ordinarily allowed for making abatement applications pursuant to section thirty-seven of said chapter sixty-two C.

SECTION 19. Sections one, five, six, seven, nine, twelve, fourteen, and sixteen of this act shall apply to estates of decedents dying on or after January first, nineteen hundred and eighty-six; provided, however, that subsection (b) of section five of chapter sixty-five C of the General Laws, as inserted by section fourteen of this act, shall apply to the estate of a decedent without regard to the date of death of such decedent. Section two of this act shall apply with respect to property or interests therein which become possessory on or after the effective date of this act without regard to the date of death of the decedent who created the interest.