PROPOSED RULEMAKING
DEPARTMENT OF REVENUE
[61 PA. CODE CH. 93]
Inheritance Tax; Disclaimers of Nonprobate Taxable Assets
[27 Pa.B. 4750] The Department of Revenue (Department), under the authority contained in section 2103 of the Tax Reform Code of 1971 (TRC) (72 P. S. § 9103), proposes to add § 93.81 (relating to disclaimers of nonprobate taxable assets), to read as set forth in Annex A.
Section 2103(a) of the TRC provides that the Department may adopt and enforce rules and regulations for the just administration of Article XXI of the TRC (72 §§ 9101--9106) Inheritance Tax.
Purpose of Regulation
Based on the decision and order received from Commonwealth Court in In Re Estate of Bernecker, 654 A.2d 246 (Pa. Cmwlth. 1995), the Department is revising its policy on the effectiveness of disclaimers of nonprobate taxable assets for Commonwealth Inheritance Tax purposes.
Explanation of Regulatory Requirements
Section 93.81(b) sets forth specific conditions which the Department will utilize in determining whether a disclaimer executed in regard to nonprobate taxable assets and nontrust assets of resident decedents is valid for Commonwealth Inheritance Tax purposes when made either by the disclaiming party or the personal representative of the deceased individual or the guardian or attorney-in-fact of the incapacitated person or minor to whom the interest, absent the disclaimer, would have devolved.
Fiscal Impact
The Department has determined that the revenue impact of the proposed regulation may be a nominal loss to the Commonwealth. In most cases, disclaimers are used to reduce the beneficiary's Federal Estate Tax, rather than Pennsylvania Inheritance Tax. Use of disclaimers would most likely be by beneficiaries whose rate or level of taxation would exceed that of parties receiving assets through probate. It is believed that disclaimers from lower rates of tax to higher rates of tax through the estate would be rare.
Paperwork
The proposed regulation will not generate significant additional paperwork for the public or the Commonwealth.
Effectiveness/Sunset Date
The proposed regulation will become effective upon final publication in the Pennsylvania Bulletin. The proposed regulation is scheduled for review within 5 years of final publication. No sunset date has been assigned.
Contact Person
Interested persons are invited to submit in writing comments, suggestions or objections regarding the proposed regulation to Anita M. Doucette, Office of Chief Counsel, Department of Revenue, Dept. 281061, Harrisburg, PA 17128-1061, within 30 days of the date of the publication of this notice in the Pennsylvania Bulletin.
Regulatory Review
Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), on September 3, 1997, the Department submitted a copy of this proposed regulation to the Independent Regulatory Review Commission (IRRC) and the Chairpersons of the House Committee on Finance and the Senate Committee on Finance. In addition to submitting the proposed regulation, the Department has provided IRRC and the Committees with a copy of a detailed Regulatory Analysis Form prepared by the Department in compliance with Executive Order 1996-1, ''Regulatory Review and Promulgation.'' A copy of this material is available to the public upon request.
If IRRC has objections to any portion of the proposed regulation, it will notify the Department within 10 days of the close of the Committees' comment period. The notification shall specify the regulatory review criteria which have not been met by that portion. The Regulatory Review Act specifies detailed procedures for review of objections raised, prior to final publication of the regulation, by the Department, the General Assembly and the Governor.
ROBERT A. JUDGE, Sr.,
SecretaryFiscal Note: 15-390. (1) General Fund; (2) Implementing Year 1997-98 is $Minimal Revenue Loss; (3) 1st Succeeding Year 1998-99 is $Minimal Revenue Loss; 2nd Succeeding Year 1999-00 is $Minimal Revenue Loss; 3rd Succeeding Year 2000-01 is $Minimal Revenue Loss; 4th Succeeding Year 2001-02 is $Minimal Revenue Loss; 5th Succeeding Year 2002-03 is $Minimal Revenue Loss; (4) FY 1995-96 $Non-Applicable; FY 1994-95 $; FY 1993-94 $; (8) recommends adoption. This proposed regulation is in response to a Commonwealth Court decision that makes disclaimers of nonprobate taxable assets valid in certain instances. Properly executed disclaimers could result in a minimal loss of revenue to the General Fund.
Annex A
TITLE 61. REVENUE
Part I. DEPARTMENT OF REVENUE
Subpart B. GENERAL FUND REVENUES
ARTICLE IV. COUNTY COLLECTIONS
CHAPTER 93. INHERITANCE TAX DIVISION
Subchapter B. ENTRY INTO SAFE DEPOSIT BOX PENALTIES § 93.81. Disclaimers of nonprobate taxable assets.
(a) General. The Department is revising its policy on the validity of disclaimers of nonprobate taxable assets for Pennsylvania Inheritance Tax purposes to reflect the decision and order received from the Commonwealth Court in In Re Estate of Bernecker, 654 A.2d 246 (Pa. Cmwlth. 1995).
(b) Scope.
(1) Disclaimers executed with regard to nonprobate taxable assets of resident decedents, including rights of survivorship interests in multiple-party accounts, titled tangible personal property or real estate, beneficial interests in third-party beneficiary contracts (that is, retirement benefit plans, annuity contracts, individual retirement accounts, Keogh plan proceeds, matured endowment insurance policies and certain out-of-State government lottery contracts) and intervivos gifts are valid for Pennsylvania inheritance tax purposes if the following apply:
(i) They are made either by the disclaiming party or the personal representative of the deceased individual or the guardian or attorney-in-fact of the incapacitated person or minor to whom the interest, absent the disclaimer, would have devolved.
(ii) The applicable conditions in paragraphs (3)--(7) have been met.
(2) The same rule applies to nonresident decedents with nonprobate taxable assets subject to Pennsylvania Inheritance Tax.
(3) The disclaimer shall be in writing and shall satisfy the requirements of 20 Pa.C.S. Chapter 62 (relating to disclaimers) in effect at the time the disclaimer is made.
(4) The disclaimer shall be signed and dated within 9 months of the date of death of the decedent whose interest is being disclaimed. (See In Re Pomerantz' Estate, 28 D. & C.3d 521 (Montg. 1983)).
(5) The disclaimer shall be signed and dated by the individual, his personal representative if the individual seeking to disclaim has died, or the guardian or attorney-in-fact of an incapacitated individual or minor.
(6) If the disclaimer is made by the personal representative, the guardian of an incapacitated or minor person, or the attorney-in-fact of the person whose interest is being disclaimed, the petition required by 20 Pa.C.S. § 6202 (relating to disclaimers by fiduciaries or attorneys-in-fact) shall be filed with the applicable county orphans' court within 9 months of the date of death of the decedent whose interest, absent the disclaimer, would have devolved. (See, McGrady Estate, 42 D. & C.2d 519, 17 Fiduc. Rep. 408 (O.C. Phila. 1967) and In Re Pomerantz' Estate, 28 D. & C.3d 521 (O.C. Montg. 1983)).
(7) A personal representative may make a disclaimer on behalf of a decedent without court authorization if the following apply:
(i) The will of the decedent authorizes the personal representative to do so (See 20 Pa.C.S. § 6202).
(ii) A copy of the probated last will and testament is attached to the Inheritance Tax return filed with the Department.
(iii) The disclaimer is signed and dated within 9 months of the date of death of the decedent as provided in section 2116(c) of the TRC (72 P. S. § 9116 (c)) and paragraph (4).
(8) Notice of the filing of an estate's first and final account and of its call for audit or confirmation shall include notice of the disclaimer of the decedent's devolved interest, including the written disclaimer of any nonprobate taxable assets of the decedent, under section 2116(c) of the TRC. The notice shall be given to Office of Chief Counsel, Pa. Dept. of Revenue, Dept. 281061, Harrisburg, Pennsylvania 17128-1061.
[Pa.B. Doc. No. 97-1475. Filed for public inspection September 12, 1997, 9:00 a.m.]
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