Pennsylvania is the only state in the country that does not give the grantor of an irrevocable trust the choice to remain legally obligated to pay state income on the trust's income. This choice has long been available for federal income tax purposes. The primary advantage of having the creator pay tax is that it frees the beneficiary from having to do so. The current law is an incentive for some people to set up their trust in another state. There is no good reason to sustain a system that makes Pennsylvania noncompetitive. By simplifying the rules to conform to practices across the nation, it will avoid confusion on the part of tax filers and make administration easier for state revenue officials. In net effect, this change will be revenue neutral or slightly positive. Separate bills are required to accomplish this goal. The first amends the Tax Reform Code of 1971. The second amends the Individual Net Income Tax Act. I invite you to join me in cosponsoring this effort to allow grantor trust treatment in Pennsylvania. |