Assigned to FIN                                                                                                   FOR CAUCUS & FLOOR ACTION

ARIZONA STATE SENATE

Forty-seventh Legislature, Second Regular Session

AMENDED

FACT SHEET FOR S.B. 1170

estate; generation skipping taxes; repeal

Purpose

            Repeals the estate and generation skipping tax, retroactive to January 1, 2006.

Background

            The Arizona estate tax is a tax on the transfer of property or interest in property that takes effect upon the owner’s death. The estate tax is an amount equal to the federal credit for state death taxes. Estate taxes are collected by the Department of Revenue (DOR) and are deposited into the state General Fund. 

            The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) included significant changes to the estate and generation-skipping transfer tax.   The federal provisions in EGTRRA phased out and eventually repealed the federal state death tax credit beginning in tax year 2002. Laws 2002, Chapter 344 provided conformity with Internal Revenue Code provisions relating to EGTRRA.  Arizona’s estate tax is based on the maximum credit allowed by the federal state death credit. As a result, the state death tax credit was gradually phased out by 25 percent per year between 2002 and 2005.

            According to DOR, the fiscal impact is unknown.  However, income tax collections will decrease due to the subtraction of federal estate taxes from the Arizona gross income of an estate.

Provisions

1. Repeals the estate and generation skipping tax. 

2. Allows the amount of federal estate taxes to be subtracted from an estate’s Arizona gross income.

3. Makes technical and conforming changes.

4. Becomes effective on the general effective date, retroactive to January 1, 2006.

Amendments Adopted by Committee

· Adds a retroactive effective date.

Senate Action

FIN                 1/19/06     DPA     7-0-2-0

Prepared by Senate Research

January 19, 2006

SL/jas