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SENATE BILL No. 293

Citations Affected: IC 6-4.1.

Synopsis: Inheritance tax. Reclassifies a spouse, widow, or widower of a child of the transferor as a Class A transferee instead of a Class B transferee. Reclassifies a spouse, widow, or widower of a stepchild of the transferor as a Class A transferee instead of a Class C transferee. Provides for a 10 year phase-out of the inheritance tax beginning in 2012. Increases the inheritance tax exemption amounts with respect to taxable transfers resulting from the deaths of individuals dying after June 30, 2012, as follows: (1) from $100,000 to $250,000 for Class A transferees; (2) from $500 to $25,000 for Class B transferees; and (3) from $100 to $25,000 for Class C transferees.

Effective: July 1, 2012.

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Smith J , Hershman, Head, Miller, Holdman, Randolph, Zakas, Schneider
(HOUSE SPONSORS _ TURNER, MCMILLIN, GRUBB, WELCH)

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    January 5, 2012, read first time and referred to Committee on Tax and Fiscal Policy.
    January 26, 2012, amended, reported favorably _ Do Pass.
    January 30, 2012, read second time, ordered engrossed. Engrossed.
    January 31, 2012, read third time, passed. Yeas 50, nays 0.

    February 9, 2012, read first time and referred to Committee on Ways and Means.
    February 23, 2012, amended, reported _ Do Pass.

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

SOURCE: IC 6-4.1-1-0.5; (12)ES0293.1.1. -->     SECTION 1. IC 6-4.1-1-0.5 IS ADDED TO THE INDIANA CODE AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2012]: Sec. 0.5. This chapter does not apply to a property interest transferred by a decedent whose death occurs after June 30, 2022.

SOURCE: IC 6-4.1-1-3; (12)ES0293.1.2. -->     SECTION 2. IC 6-4.1-1-3, AS AMENDED BY P.L.220-2011, SECTION 149, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2012]: Sec. 3. (a) "Class A transferee" means a transferee who is any of the following:
        (1) A lineal ancestor of the transferor.
        (2) A lineal descendant of the transferor.
        (3) A stepchild of the transferor, whether or not the stepchild is adopted by the transferor. This subdivision applies to the estate of an individual who dies after June 30, 2004.
        (4) A lineal descendant of a stepchild of the transferor, whether or not the stepchild is adopted by the transferor.
         (5) A spouse, widow, or widower of a child of the transferor. This subdivision applies to the estate of an individual who dies

after June 30, 2012.
        (6) A spouse, widow, or widower of a stepchild of the transferor, whether or not the stepchild is adopted by the transferor. This subdivision applies to the estate of an individual who dies after June 30, 2012.
    (b) "Class B transferee" means a transferee who is a:
        (1) brother or sister of the transferor;
        (2) descendant of a brother or sister of the transferor; or
        (3) spouse, widow, or widower of a child of the transferor. This subdivision applies to the estate of an individual who dies before July 1, 2012.
    (c) "Class C transferee" means a transferee, except a surviving spouse, who is neither a Class A nor a Class B transferee.
    (d) For purposes of this section, a legally adopted child is to be treated as if the child were the natural child of the child's adopting parent if the adoption occurred before the individual was totally emancipated. However, an individual adopted after being totally emancipated shall be treated as the natural child of the adopting parent if the adoption was finalized before July 1, 2004.
    (e) For purposes of this section, if a relationship of loco parentis has existed for at least ten (10) years and if the relationship began before the child's fifteenth birthday, the child is to be considered the natural child of the loco parentis parent.
    (f) As used in this section, "stepchild" means a child of the transferor's surviving, deceased, or former spouse who is not a child of the transferor.

SOURCE: IC 6-4.1-2-0.5; (12)ES0293.1.3. -->     SECTION 3. IC 6-4.1-2-0.5 IS ADDED TO THE INDIANA CODE AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2012]: Sec. 0.5. This chapter does not apply to a property interest transferred by a decedent whose death occurs after June 30, 2022.

SOURCE: IC 6-4.1-2-1; (12)ES0293.1.4. -->     SECTION 4. IC 6-4.1-2-1 IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2012]: Sec. 1. (a) An inheritance tax is imposed at the time of a decedent's death on certain property interest transfers made by him. the decedent. The transfer of a property interest is subject to the tax if:
        (1) the property transferred is described in:
            (i) (A) section 2 of this chapter, if the property is transferred by a resident decedent; or
            (ii) (B) section 3 of this chapter, if the property is transferred by a nonresident decedent;
        (2) the transfer is described in section 4 of this chapter; and
        (3) neither the transfer nor the property is exempt from the

inheritance tax under IC 6-4.1-3.
    (b) For purposes of this article, a transfer described in section 4 of this chapter is considered a transfer made by the deceased transferor regardless of when the transferee acquires the property interest.

SOURCE: IC 6-4.1-3-0.5; (12)ES0293.1.5. -->     SECTION 5. IC 6-4.1-3-0.5 IS ADDED TO THE INDIANA CODE AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2012]: Sec. 0.5. This chapter does not apply to a property interest transferred by a decedent whose death occurs after June 30, 2022.

SOURCE: IC 6-4.1-3-10; (12)ES0293.1.6. -->     SECTION 6. IC 6-4.1-3-10 IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2012]: Sec. 10. (a) With respect to a taxable transfer or transfers resulting from the death of a decedent who dies before July 1, 2012, the first one hundred thousand dollars ($100,000) of property interests transferred to a Class A transferee under a the taxable transfer or transfers is exempt from the inheritance tax.
     (b) With respect to a taxable transfer or transfers resulting from the death of a decedent who dies after June 30, 2012, the first two hundred fifty thousand dollars ($250,000) of property interests transferred to a Class A transferee under the taxable transfer or transfers is exempt from the inheritance tax.

SOURCE: IC 6-4.1-3-11; (12)ES0293.1.7. -->     SECTION 7. IC 6-4.1-3-11 IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2012]: Sec. 11. (a) With respect to a taxable transfer or transfers resulting from the death of a decedent who dies before July 1, 2012, the first five hundred dollars ($500) of property interests transferred to a Class B transferee under a the taxable transfer or transfers is exempt from the inheritance tax.
     (b) With respect to a taxable transfer or transfers resulting from the death of a decedent who dies after June 30, 2012, the first twenty-five thousand dollars ($25,000) of property interests transferred to a Class B transferee under the taxable transfer or transfers is exempt from the inheritance tax.

SOURCE: IC 6-4.1-3-12; (12)ES0293.1.8. -->     SECTION 8. IC 6-4.1-3-12 IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2012]: Sec. 12. (a) With respect to a taxable transfer or transfers resulting from the death of a decedent who dies before July 1, 2012, the first one hundred dollars ($100) of property interests transferred to a Class C transferee under a the taxable transfer or transfers is exempt from the inheritance tax.
     (b) With respect to a taxable transfer or transfers resulting from the death of a decedent who dies after June 30, 2012, the first twenty-five thousand dollars ($25,000) of property interests transferred to a Class C transferee under the taxable transfer or transfers is exempt from the inheritance tax.

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SOURCE: IC 6-4.1-4-0.2; (12)ES0293.1.9. -->     SECTION 9. IC 6-4.1-4-0.2 IS ADDED TO THE INDIANA CODE AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2012]: Sec. 0.2. This chapter does not apply to a property interest transferred by a decedent whose death occurs after June 30, 2022.

SOURCE: IC 6-4.1-5-0.5; (12)ES0293.1.10. -->     SECTION 10. IC 6-4.1-5-0.5 IS ADDED TO THE INDIANA CODE AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2012]: Sec. 0.5. This chapter does not apply to a property interest transferred by a decedent whose death occurs after June 30, 2022.

SOURCE: IC 6-4.1-5-1.1; (12)ES0293.1.11. -->     SECTION 11. IC 6-4.1-5-1.1 IS ADDED TO THE INDIANA CODE AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2012]: Sec. 1.1. (a) This section applies to a property interest transferred by a decedent whose death occurs after June 30, 2012.
    (b) For purposes of determining the amount of inheritance tax imposed under this article, a credit is allowed against the tax imposed under section 1 of this chapter on a decedent's transfer of property interests. The amount of the credit equals the inheritance tax imposed under section 1 of this chapter multiplied by the percentage prescribed in the following table:
    DATE OF     PERCENTAGE
    INDIVIDUAL'S DEATH     OF CREDIT
After June 30, 2012, and
    before July 1, 2013    9%
After June 30, 2013, and
    before July 1, 2014    18%
After June 30, 2014, and
    before July 1, 2015    27%
After June 30, 2015, and
    before July 1, 2016    36%
After June 30, 2016, and
    before July 1, 2017    45%
After June 30, 2017, and
    before July 1, 2018    55%
After June 30, 2018, and
    before July 1, 2019    64%
After June 30, 2019, and
    before July 1, 2020    73%
After June 30, 2020, and
    before July 1, 2021    82%
After June 30, 2021, and
    before July 1, 2022    91%

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    (c) A person who is liable for inheritance tax imposed under this article may claim the credit allowed under this section at the time the person pays the tax. When the payment is made, the person collecting the tax shall reduce the inheritance tax due by the amount of the credit specified in subsection (b).

SOURCE: IC 6-4.1-6-0.5; (12)ES0293.1.12. -->     SECTION 12. IC 6-4.1-6-0.5 IS ADDED TO THE INDIANA CODE AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2012]: Sec. 0.5. This chapter does not apply to a property interest transferred by a decedent whose death occurs after June 30, 2022.

SOURCE: IC 6-4.1-7-0.5; (12)ES0293.1.13. -->     SECTION 13. IC 6-4.1-7-0.5 IS ADDED TO THE INDIANA CODE AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2012]: Sec. 0.5. This chapter does not apply to a property interest transferred by a decedent whose death occurs after June 30, 2022.

SOURCE: IC 6-4.1-8-0.5; (12)ES0293.1.14. -->     SECTION 14. IC 6-4.1-8-0.5 IS ADDED TO THE INDIANA CODE AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2012]: Sec. 0.5. This chapter does not apply to a property interest transferred by a decedent whose death occurs after June 30, 2022.

SOURCE: IC 6-4.1-9-0.5; (12)ES0293.1.15. -->     SECTION 15. IC 6-4.1-9-0.5 IS ADDED TO THE INDIANA CODE AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2012]: Sec. 0.5. This chapter does not apply to a property interest transferred by a decedent whose death occurs after June 30, 2022.

SOURCE: IC 6-4.1-11-6; (12)ES0293.1.16. -->     SECTION 16. IC 6-4.1-11-6 IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2012]: Sec. 6. (a) The department of state revenue shall collect the Indiana estate tax and the interest charges imposed under this chapter. The department shall remit the money which it collects under this chapter to the state treasurer, and the state treasurer shall deposit the money in the state general fund.
    (b) Before August 15 of each year Except as provided in subsection (e), the treasurer of state shall annually distribute to each county the amount determined under subsection (c) or (d) for the county. The distribution for a particular state fiscal year must be made before August 15 of the following state fiscal year. There is appropriated from the state general fund the amount necessary to make the distributions under this section. subsection.
    (c) For a state fiscal year ending before July 1, 2012, the department of state revenue shall determine the inheritance tax replacement amount for each county using the following formula:
        STEP ONE: Determine the amount of inheritance tax revenue

retained by each county in each state fiscal year beginning with the state fiscal year that began July 1, 1990, and ending with the state fiscal year that ends June 30, 1997.
        STEP TWO: Determine the average annual amount of inheritance tax revenue retained by each county using five (5) of the seven (7) state fiscal years described in STEP ONE after excluding the two (2) years in which each county retained its highest and lowest totals of inheritance tax revenue.
        STEP THREE: Determine the remainder of the STEP TWO amount minus the amount of inheritance taxes retained by the county during the immediately preceding state fiscal year.
     (d) For a state fiscal year beginning after June 30, 2012, and ending before July 1, 2022, the department of state revenue shall determine the inheritance tax replacement amount for each county using the following formula:
         STEP ONE: Determine the inheritance tax replacement amount distributed to the county for the state fiscal year beginning after June 30, 2011, and ending before July 1, 2012.
         STEP TWO: Multiply the amount determined under STEP ONE by the appropriate percentage as follows:
            (A) Ninety-one percent (91%) for a state fiscal year beginning after June 30, 2012, and ending before July 1, 2013.
            (B) Eighty-two percent (82%) for a state fiscal year beginning after June 30, 2013, and ending before July 1, 2014.
            (C) Seventy-three percent (73%) for a state fiscal year beginning after June 30, 2014, and ending before July 1, 2015.
            (D) Sixty-four percent (64%) for a state fiscal year beginning after June 30, 2015, and ending before July 1, 2016.
             (E) Fifty-five percent (55%) for a state fiscal year beginning after June 30, 2016, and ending before July 1, 2017.
             (F) Forty-five percent (45%) for a state fiscal year beginning after June 30, 2017, and ending before July 1, 2018.
             (G) Thirty-six percent (36%) for a state fiscal year beginning after June 30, 2018, and ending before July 1, 2019.
             (H) Twenty-seven percent (27%) for a state fiscal year

beginning after June 30, 2019, and ending before July 1, 2020.
             (I) Eighteen percent (18%) for a state fiscal year beginning after June 30, 2020, and ending before July 1, 2021.
             (J) Nine percent (9%) for a state fiscal year beginning after June 30, 2021, and ending before July 1, 2022.
    (e) A county is not entitled to a distribution under subsection (b) for a state fiscal year beginning after June 30, 2022.

SOURCE: IC 6-4.1-12-0.5; (12)ES0293.1.17. -->     SECTION 17. IC 6-4.1-12-0.5 IS ADDED TO THE INDIANA CODE AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2012]: Sec. 0.5. (a) For an individual who dies after June 30, 2022, there is no inheritance tax imposed on the decedent's transfer of property interests.
    (b) Sections 1 through 12 of this chapter do not apply to a property interest transferred by a decedent whose death occurs after June 30, 2022.