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Senate of Pennsylvania
Session of 2015 - 2016 Regular Session


Posted: January 27, 2015 01:37 PM
From: Senator Mike Folmer
To: All Senate members
Subject: 0% Inheritance Tax for Disabled Child Beneficiaries
In the near future, I will be reintroducing my Senate Bill 383 to allow disabled children to inherit their parent’s property at a 0% tax rate. Previous cosponsors of SB 383 were Senators Folmer, Washington, Brewster, Mensch, Browne, Yudichak, Kasunic, Vulakovich, Teplitz, Argall, Ferlo, Fontana, Robbins, Kitchen, Stack, Greenleaf, Alloway, Rafferty, Erickson, Baker, Solobay, Yaw, Ward, Hughes, White, Scarnati, Tartaglione, Costa, Farnese, Waugh, Blake, Boscola, Williams, Smith, Wozniak, Smucker, Schwank, and Dinniman.

Pennsylvania is one of only three states that taxes disabled children who inherit from their parents. The Pennsylvania Department of Revenue has previously said it does not believe this proposed legislation violates the Uniformity Clause of Pennsylvania Constitution's. Article VIII, Section 2(b)(ii) of the Pennsylvania Constitution allows the General assembly to establish disabled individuals as class of persons "determined to be in need of tax exemption."

Under current Pennsylvania law, the transfer of property of a deceased spouse or a deceased minor child is taxed at a 0% rate. However, disabled children are taxed at the full 4.5% inheritance tax rate. My legislation would provide for the lower rate for disabled children while providing the definition of a “disabled child” is determined by governmental agencies only. It would NOT be a self-nominated status.

The most compassionate and cost effective place to raise, care for, and educate a disabled child is in their parent’s home with appropriate support. However, for some families with a disabled member, their estates may have only one major asset to pay inheritance taxes: the real estate where the child is living. When a home is sold in order to satisfy the 4.5% inheritance tax, those children can become homeless. Such children must then turn to the social safety net for care, housing, and other support. This is the most expensive, long term choice for the care of a disabled child.

If the Commonwealth stops imposing a tax on estates inherited by disabled children, their real estate can remain as the home bases for disabled people for as long as it is needed and at a much lower cost to the Commonwealth’s social safety net. This is a win-win for both disabled people and the taxpayers.

Thank you.

Introduced as SB623