Today's Law As Amended

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SB-378 Taxation: estate, gift, and generation-skipping transfer taxes.(2019-2020)



SECTION 1.
 The Legislature finds and declares the following:
(a) The most significant predictor of the future financial success of a child is the wealth level of the child’s parents with at least 20 percent, and up to 80 percent, of a person’s wealth being the result of an intergenerational transfer.
(b) Throughout history, federal and state governments have provided “wealth starter kits” for some Americans, giving gifts of land, education, government-backed mortgages and farm loans, a social safety net, and business subsidies sometimes exclusively and usually disproportionately, to White families.
(c) According to economist Darrick Hamilton, for communities of color, especially Blacks and Latinos, it has never been easy to build assets of any type because of low levels of intergenerational wealth transfers.
(d) The typical Black or Latino family essentially has no economic cushion. According to the California Family Economic Self-Sufficiency Standard, a measure that quantifies the minimum income necessary to cover all basic expenses, about one-half of Black and Latino households are barely scraping by and unable to meet their most basic financial needs without family or public support.
(e) Given the roles of intergenerational wealth transfer, and past and present barriers that have kept marginalized families from building wealth, private action and market forces alone cannot be expected to address wide-scale racial wealth inequality, and public sector intervention is needed.
SEC. 2.
 It is the intent of the Legislature to address the racial wealth gap by enacting legislation that would create California Social Inheritance Accounts to counterbalance the uneven effects of intergenerational wealth transfer and reverse our state’s record level of inequality.

SEC. 3.

 Section 13301 of the Revenue and Taxation Code is repealed.

13301.
 Neither the state nor any political subdivision of the state shall impose any gift, inheritance, succession, legacy, income, or estate tax, or any other tax, on gifts or on the estate or inheritance of any person or on or by reason of any transfer occurring by reason of a death.

SEC. 4.

 Part 8.1 (commencing with Section 15001) is added to Division 2 of the Revenue and Taxation Code, to read:

PART 8.1. Estate, Gift, and Generation-Skipping Transfer Tax

15001.
 (a) For estates of decedents dying on and after January 1, 2021, a tax is hereby imposed on the transfer of the taxable estate of every decedent who was a citizen or resident of the United States and a resident of the State of California.
(b) The tax imposed by this section shall be an amount equal to the tax imposed by Chapter 11 of Subtitle B of the Internal Revenue Code of 1986, as amended, with the following modifications:
(1) The basic exclusion amount shall be three million five hundred thousand dollars ($3,500,000), which shall not be adjusted for inflation.
(2) The taxpayer shall be granted a credit for all taxes paid to the United States under Chapter 11 of Subtitle B of the Internal Revenue Code.
(c) The tax imposed by this section shall be paid by the executor, and shall be due nine months after the date of death of the decedent.
15002.
 (a) For transfers of property by gifts made on and after January 1, 2021, a tax is hereby imposed for each calendar year on the transfer of property by gift during the calendar year by any citizen or resident of the United States who is also a resident of the State of California.
(b) The tax imposed by this section shall be an amount equal to the tax imposed by Chapter 12 of Subtitle B of the Internal Revenue Code of 1986, as amended, with the following modifications:
(1) The lifetime exclusion amount shall be three million five hundred thousand dollars ($3,500,000), which shall not be adjusted for inflation.
(2) The taxpayer shall be granted a credit for all taxes paid to the United States under Chapter 12 of Subtitle B of the Internal Revenue Code.
(c) The tax imposed by this section shall be paid by the donor, and shall be due by the deadline to submit state income tax returns for the year in which the transfer of property by gift was made.
15003.
 (a) For generation-skipping transfers occurring on and after January 1, 2021, a tax is hereby imposed on every generation-skipping transfer within the meaning of Chapter 13 of Subtitle B of the Internal Revenue Code of 1986, as amended.
(b) The tax imposed by this section shall be an amount equal to the tax imposed by Chapter 13 of Subtitle B of the Internal Revenue Code of 1986, as amended, with the following modifications:
(1) The basic exclusion amount shall be three million five hundred thousand dollars ($3,500,000), which shall not be adjusted for inflation.
(2) The taxpayer shall be granted a credit for all taxes paid to the United States under Chapter 13 of Subtitle B of the Internal Revenue Code.
(c) The tax imposed by this section shall be paid in accordance with Section 15002 for a transfer of property by gift and in accordance with Section 15001 for a transfer of the taxable estate of a decedent.
15004.
 (a) A taxpayer may elect to extend the time to pay the tax imposed by this part for any reason and in the same manner permitted to a similarly situated United States taxpayer under the Internal Revenue Code of 1986, as amended, but in no case shall the time extended to pay the tax exceed 14 years from the date the tax is due.
(b) On or before July 1, 2021, the Franchise Tax Board shall develop returns for payment of the taxes imposed under this part.
(c) Notwithstanding any other provision of law, the penalties set forth in Part 10 (commencing with Section 17001), including any amendments thereto, apply to this part as follows:
(1) Penalties for failing to file a timely return also apply for failing to file a timely return for the taxes imposed under this part.
(2) Penalties for failing to timely pay the tax also apply for failing to timely pay the taxes imposed under this part.
(3) Penalties for filing a false or misleading return apply to filing a false or misleading return for taxes imposed under this part.
(d) The Franchise Tax Board may promulgate regulations to implement this part.
15005.
 (a) The Children’s Wealth and Opportunity Building Fund is hereby created as a special fund in the State Treasury. All taxes, interest, penalties, and other amounts collected and paid to the Franchise Tax Board pursuant to this part, less payments of refunds, shall be deposited in the fund.
(b) Notwithstanding Section 13340 of the Government Code, moneys deposited in the Children’s Wealth and Opportunity Building Fund are hereby continuously appropriated, without regard to fiscal years, to programs and services that directly address and alleviate socio-economic inequality and that build assets among people that have historically lacked them.
15006.
 This part shall become operative on January 1, 2021.
SEC. 5.
 This act may be amended by a bill passed by a majority vote of the membership of both houses of the Legislature, unless otherwise required by the California Constitution.
SEC. 6.
 (a) As an amendment of an initiative statute, Sections 3 to 5, inclusive, of this act shall become effective only upon approval by the voters at a statewide election.
(b) A special election is hereby called, to be held throughout the state on the date of the next statewide election, for approval by the voters of Sections 3 to 5, inclusive, of this act. The special election shall be consolidated with the statewide election to be held. The consolidated elections shall be held and conducted in all aspects as if there were only one election, and only one form of ballot shall be used.
(c) Notwithstanding Section 9040 of the Elections Code, or any other law, the Secretary of State shall, pursuant to subdivision (c) of Section 10 of Article II of the California Constitution, submit Sections 3 to 6, inclusive, of this act to the voters for their approval at the consolidated statewide election.
SEC. 7.
 This act calls an election within the meaning of Article IV of the California Constitution and shall go into immediate effect.