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House Study Bill 505 - IntroducedA Bill ForAn Act 1relating to the inheritance tax by modifying the
2requirements to qualify for a deferment of tax payment under
3certain circumstances in the case of estates with a deferred
4estate or remainder interest, and including applicability
5provisions.
6BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 Section 1. Section 450.20, Code 2018, is amended to read as
2follows:
3450.20 Record of deferred estates.
4The department of revenue shall keep a separate record of
5any deferred estate upon which the tax due is not paid on or
6before the last day of the ninth month after the death of the
7decedent, showing substantially the same facts as are required
8in other cases, and also showing:
91. The date and amount of all bonds given to secure the
10payment of the tax with a list of the sureties thereon.
112. The type and amount of any security, other than a bond,
12given to secure the payment of the tax.
132. 3. The name of the person beneficially entitled to such
14estate or interest, with place of residence.
153. 4. A description of the property or a statement of
16conditions upon which such deferred estate is based or limited.
17 Sec. 2. Section 450.47, Code 2018, is amended to read as
18follows:
19450.47 Life and term estates in personal property.
20If an estate or interest for life or term of years in
21personal property is given to one or more persons other than
22those exempt by this chapter and the remainder or deferred
23estate to others, the property devised or conveyed shall be
24valued under section 450.37 as provided in ordinary estates
25and the value of the estates or interests devised or conveyed
26shall be determined as provided in section 450.51, and the
27tax upon the estates or interests liable for the tax shall be
28paid to the department of revenue from the property valued
29or by the persons entitled to the estate or interest on or
30before the last day of the ninth month after the death of the
31testator, grantor, or donor. However, payment of the tax upon
32a deferred estate or remainder interest may be deferred until
33the determination of the prior estate by the giving of a good
34and sufficient bond as provided in section 450.48.
35 Sec. 3. Section 450.48, Code 2018, is amended to read as
-1-1follows:
2450.48 Payment deferred — bond — exceptions.
31. When Except as provided in subsection 2, when in case of
4deferred estates or remainder interests in personal property or
5in the proceeds of any real estate that may be sold during the
6time of a life, term, or prior estate, the persons interested
7who may desire to defer the payment of the tax until the
8determination of the prior estate, shall file with the clerk
9of the proper district court a bond as provided herein in
10other cases, such bond to be renewed every two years until the
11tax upon such deferred estate is paid. If at the end of any
12two-year period the bond is not promptly renewed as herein
13provided and the tax has not been paid, the bond shall be
14declared forfeited, and the amount thereof forthwith collected.
152. When the estate of a decedent consists in part of real
16and in part of personal property, and there be includes an
17estate for life or for a term of years to one or more persons
18and a deferred or remainder estate to others, and such deferred
19or remainder estate is in whole or in part subject to the tax
20imposed by this chapter, if the then payment of the tax upon
21such deferred or remainder estates may be postponed until the
22determination of the prior estate without giving bond to secure
23payment of such tax as required under subsection 1 if one of
24the following requirements is satisfied:
25a. Thedeferred or remainder estates or interests are so
26disposed that good and sufficient security for the payment of
27the tax for which such deferred or remainder estates may be
28liable can be had because of the lien imposed by this chapter
29upon the real property of such estate, then payment of the tax
30upon such deferred or remainder estates may be postponed until
31the determination of the prior estate without giving bond as
32herein required to secure payment of such tax, and but the tax
33shall remain a lien upon such real estate until the tax upon
34such deferred estate or interest is paid.
35b. Security satisfactory to the department of revenue has
-2-1been provided, which security includes but is not limited to a
2bank or securities account with an irrevocable pay on death or
3transfer on death provision naming the department of revenue
4as beneficiary, or an escrow agreement with the department of
5revenue under which a private attorney will act as escrow agent
6and hold the escrow funds in the attorney’s trust account.
7 Sec. 4. APPLICABILITY. This Act applies to estates of
8decedents that include a deferred estate or remainder interest
9and that have not, on or before July 1, 2018, received approval
10from the department of revenue to defer payment of tax pursuant
11to sections 450.44 through 450.49.
12EXPLANATION
13The inclusion of this explanation does not constitute agreement with
14the explanation’s substance by the members of the general assembly.
15This bill relates to the inheritance tax. An estate
16subject to the inheritance tax may contain a deferred estate
17or remainder interest, which generally occurs when property is
18transferred to a person for a certain period of time, and then
19to a different person (remainderman) at the expiration of that
20time. Under Iowa law, the inheritance tax accrues at the date
21of death of the decedent and is due on or before the last day of
22the ninth month following that date. However, the payment of
23inheritance tax may be deferred for a remainderman until such
24time as the property actually passes to that person.
25When inheritance tax deferral is elected, Iowa law requires
26that a bond be given to secure the payment of the tax unless the
27estate contains real property and the automatic lien on such
28real property is sufficient to secure payment of the deferred
29tax.
30The bill provides that, in lieu of a bond, an estate
31containing personal property, real property, or a mix of
32both, may provide other security to secure payment of the
33deferred tax. The bill provides that the other security must
34be satisfactory to the department of revenue (DOR). The bill
35includes as examples of other security a bank or securities
-3-1account with an irrevocable pay-on-death or transfer-on-death
2provision naming DOR as beneficiary, or an escrow agreement
3with DOR under which a private attorney will act as escrow
4agent and hold the escrow funds in the attorney’s trust
5account.
6The bill requires that a description of the type and amount
7of the other security be added to the record of the deferred
8estate required to be kept under Code section 450.20.
9The bill applies to estates of decedents that include a
10deferred estate or remainder interest and that have not, on
11or before July 1, 2018, received approval from DOR to defer
12payment of the inheritance tax.
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2requirements to qualify for a deferment of tax payment under
3certain circumstances in the case of estates with a deferred
4estate or remainder interest, and including applicability
5provisions.
6BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 Section 1. Section 450.20, Code 2018, is amended to read as
2follows:
3450.20 Record of deferred estates.
4The department of revenue shall keep a separate record of
5any deferred estate upon which the tax due is not paid on or
6before the last day of the ninth month after the death of the
7decedent, showing substantially the same facts as are required
8in other cases, and also showing:
91. The date and amount of all bonds given to secure the
10payment of the tax with a list of the sureties thereon.
112. The type and amount of any security, other than a bond,
12given to secure the payment of the tax.
132. 3. The name of the person beneficially entitled to such
14estate or interest, with place of residence.
153. 4. A description of the property or a statement of
16conditions upon which such deferred estate is based or limited.
17 Sec. 2. Section 450.47, Code 2018, is amended to read as
18follows:
19450.47 Life and term estates in personal property.
20If an estate or interest for life or term of years in
21personal property is given to one or more persons other than
22those exempt by this chapter and the remainder or deferred
23estate to others, the property devised or conveyed shall be
24valued under section 450.37 as provided in ordinary estates
25and the value of the estates or interests devised or conveyed
26shall be determined as provided in section 450.51, and the
27tax upon the estates or interests liable for the tax shall be
28paid to the department of revenue from the property valued
29or by the persons entitled to the estate or interest on or
30before the last day of the ninth month after the death of the
31testator, grantor, or donor. However, payment of the tax upon
32a deferred estate or remainder interest may be deferred until
33the determination of the prior estate by the giving of a good
34and sufficient bond as provided in section 450.48.
35 Sec. 3. Section 450.48, Code 2018, is amended to read as
-1-1follows:
2450.48 Payment deferred — bond — exceptions.
31. When Except as provided in subsection 2, when in case of
4deferred estates or remainder interests in personal property or
5in the proceeds of any real estate that may be sold during the
6time of a life, term, or prior estate, the persons interested
7who may desire to defer the payment of the tax until the
8determination of the prior estate, shall file with the clerk
9of the proper district court a bond as provided herein in
10other cases, such bond to be renewed every two years until the
11tax upon such deferred estate is paid. If at the end of any
12two-year period the bond is not promptly renewed as herein
13provided and the tax has not been paid, the bond shall be
14declared forfeited, and the amount thereof forthwith collected.
152. When the estate of a decedent consists in part of real
16and in part of personal property, and there be includes an
17estate for life or for a term of years to one or more persons
18and a deferred or remainder estate to others, and such deferred
19or remainder estate is in whole or in part subject to the tax
20imposed by this chapter, if the then payment of the tax upon
21such deferred or remainder estates may be postponed until the
22determination of the prior estate without giving bond to secure
23payment of such tax as required under subsection 1 if one of
24the following requirements is satisfied:
25a. Thedeferred or remainder estates or interests are so
26disposed that good and sufficient security for the payment of
27the tax for which such deferred or remainder estates may be
28liable can be had because of the lien imposed by this chapter
29upon the real property of such estate, then payment of the tax
30upon such deferred or remainder estates may be postponed until
31the determination of the prior estate without giving bond as
32herein required to secure payment of such tax, and but the tax
33shall remain a lien upon such real estate until the tax upon
34such deferred estate or interest is paid.
35b. Security satisfactory to the department of revenue has
-2-1been provided, which security includes but is not limited to a
2bank or securities account with an irrevocable pay on death or
3transfer on death provision naming the department of revenue
4as beneficiary, or an escrow agreement with the department of
5revenue under which a private attorney will act as escrow agent
6and hold the escrow funds in the attorney’s trust account.
7 Sec. 4. APPLICABILITY. This Act applies to estates of
8decedents that include a deferred estate or remainder interest
9and that have not, on or before July 1, 2018, received approval
10from the department of revenue to defer payment of tax pursuant
11to sections 450.44 through 450.49.
12EXPLANATION
13The inclusion of this explanation does not constitute agreement with
14the explanation’s substance by the members of the general assembly.
15This bill relates to the inheritance tax. An estate
16subject to the inheritance tax may contain a deferred estate
17or remainder interest, which generally occurs when property is
18transferred to a person for a certain period of time, and then
19to a different person (remainderman) at the expiration of that
20time. Under Iowa law, the inheritance tax accrues at the date
21of death of the decedent and is due on or before the last day of
22the ninth month following that date. However, the payment of
23inheritance tax may be deferred for a remainderman until such
24time as the property actually passes to that person.
25When inheritance tax deferral is elected, Iowa law requires
26that a bond be given to secure the payment of the tax unless the
27estate contains real property and the automatic lien on such
28real property is sufficient to secure payment of the deferred
29tax.
30The bill provides that, in lieu of a bond, an estate
31containing personal property, real property, or a mix of
32both, may provide other security to secure payment of the
33deferred tax. The bill provides that the other security must
34be satisfactory to the department of revenue (DOR). The bill
35includes as examples of other security a bank or securities
-3-1account with an irrevocable pay-on-death or transfer-on-death
2provision naming DOR as beneficiary, or an escrow agreement
3with DOR under which a private attorney will act as escrow
4agent and hold the escrow funds in the attorney’s trust
5account.
6The bill requires that a description of the type and amount
7of the other security be added to the record of the deferred
8estate required to be kept under Code section 450.20.
9The bill applies to estates of decedents that include a
10deferred estate or remainder interest and that have not, on
11or before July 1, 2018, received approval from DOR to defer
12payment of the inheritance tax.
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