(For a discussion, see Godfrey, "The Phaseout of the
Federal State Death Tax Credit" Part I, TTA, February 2004, p.
(25) Although there do not appear to be any regulations, cases, or IRS rulings on point, it is the authors' opinion that the payment of state estate taxes to states, such as Florida, which have a "pick up" tax would not constitute the payment of a "debt." However, the payment of estate taxes in excess of the
federal state death tax credit would, in our opinion, constitute a "debt" payment.
If the decedent's state death tax is based on the Form 706
federal state death tax credit, the alternative valuation election will reduce the tax.
Chart of Current State Law State Type of Tax California Pick-up Only Connecticut Pick-up Plus Inheritance, but inheritance tax will be phased out by 2006 Georgia Pick-up only Illinois Pick-up only Indiana Pick-up Plus Inheritance Maryland Pick-up Plus Inheritance Massachusetts Pick-up Only Michigan Pick-up Only New Jersey Pick-up Plus Inheritance New York Pick-up Only North Pick-up Only Carolina Ohio Pick-up Plus Estate Pennsylvania Pick-up Plus Inheritance Wisconsin Pick-up Only State Effect of EGTRRA on Pick-Up Tax and Size of Gross Estate California Tax tied to
Federal state death tax credit. CA REV & TAX [subsection] 13302; 13411.
(2) For a detailed discussion, see Godfrey; "The Phaseout of the
Federal State Death Tax Credit," Part I, 35 The Tax Adviser 96 (February 2004) and Part II, 35 The Tax Adviser 148 (March 2004).
The
Federal state death tax credit (SDTC) was reduced from 50% to 25%.
Death tax revenues of many states are declining as a result of the phaseout of the
Federal state death tax credit (SDTC) and the credit for state generation-skipping transfer (GST) taxes.