Regular Session 2017-2018 House Bill 2054 P.N. 3010

PRINTER'S NO. 3010

THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

No.

2054

Session of

2018

INTRODUCED BY ROTHMAN, WARD, KINSEY, KAUFFMAN, TOEPEL, BLOOM,

RYAN, DUNBAR, SIMMONS, EMRICK, METZGAR, STAATS, READSHAW,

SAYLOR, DUSH, DOWLING, BARRAR, PICKETT, TALLMAN, BERNSTINE,

CHARLTON, KEEFER, BAKER, MILLARD, A. HARRIS, SANKEY, DeLUCA,

D. COSTA, ZIMMERMAN, B. MILLER, OBERLANDER, COX, GILLEN AND

MOUL, FEBRUARY 8, 2018

REFERRED TO COMMITTEE ON FINANCE, FEBRUARY 8, 2018

AN ACT

Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An

act relating to tax reform and State taxation by codifying

and enumerating certain subjects of taxation and imposing

taxes thereon; providing procedures for the payment,

collection, administration and enforcement thereof; providing

for tax credits in certain cases; conferring powers and

imposing duties upon the Department of Revenue, certain

employers, fiduciaries, individuals, persons, corporations

and other entities; prescribing crimes, offenses and

penalties," repealing provisions relating to inheritance tax;

in procedure and administration, further providing for

petition for reassessment; and, in governmental obligations,

further providing for taxability of government obligations.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1. Article XXI of the act of March 4, 1971 (P.L.6,

No.2), known as the Tax Reform Code of 1971, is repealed:

[ARTICLE XXI

INHERITANCE TAX

PART I

PRELIMINARY PROVISIONS

Section 2101. Short Title.--This article shall be known and

may be cited as the "Inheritance and Estate Tax Act."

Section 2102. Definitions.--The following words, terms and

phrases, when used in this article, shall have the meanings

ascribed to them in this section, except where the context

clearly indicates a different meaning:

"Adverse interest." A substantial beneficial interest in the

property transferred which might be adversely affected by the

exercise or nonexercise of the power or right reserved or

possessed by the transferor.

"Business of agriculture." The term shall include the

leasing to members of the same family or the leasing to a

corporation or association owned by members of the same family

of property which is directly and principally used for

agricultural purposes. The business of agriculture shall not be

deemed to include:

(1) recreational activities such as, but not limited to,

hunting, fishing, camping, skiing, show competition or racing;

(2) the raising, breeding or training of game animals or

game birds, fish, cats, dogs or pets or animals intended for use

in sporting or recreational activities;

(3) fur farming;

(4) stockyard and slaughterhouse operations; or

(5) manufacturing or processing operations of any kind.

"Children." Includes natural children whether or not they

have been adopted by others, adopted children and stepchildren.

"Clerk." The clerk of the orphans' court division of the

court of common pleas having jurisdiction.

"Court." The orphans' court division of the court of common

pleas of:

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(1) The county in which the decedent resided at the time of

his death.

(2) The county in which letters, if any, are granted if the

decedent was a nonresident of this Commonwealth.

(3) Dauphin County in all other cases.

"Date of death." The date of actual death or, in the case of

a presumed decedent, the date found by the final decree to be

the date of the absentee's presumed death. For the purpose of

determining interest and discount, "date of death" means the

date upon which the court enters its final decree of presumptive

death.

"Death taxes." Includes inheritance, succession, transfer

and estate taxes and any other taxes levied against the estate

of a decedent by reason of his death.

"Decedent" or "transferor." Any person by or from whom a

transfer is made and includes any testator, intestate, grantor,

settlor, bargainor, vendor, assignor, donor, joint tenant and

insured.

"Department." The Department of Revenue of the Commonwealth.

"Exemption income." All moneys or property, including,

without limitation, interest, gains or income derived from

obligations which are statutorily free from State or local

taxation under any other Federal or State laws, received of

whatever nature and from whatever source derived.

"Financial institution." A bank, a national banking

association, a bank and trust company, a trust company, a

savings and loan association, a building and loan association, a

mutual savings bank, a credit union, a savings bank and a

company that rents safe deposit boxes.

"Future interest." Includes a successive life interest and a

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successive interest for a term certain.

"Lineal descendants." All children of the natural parents

and their descendants, whether or not they have been adopted by

others, adopted descendants and their descendants and

stepdescendants.

"Members of the same family." Any individual, such

individual's brothers and sisters, the brothers and sisters of

such individual's parents and grandparents, the ancestors and

lineal descendents of any of the foregoing, a spouse of any of

the foregoing and the estate of any of the foregoing.

Individuals related by the half blood or legal adoption shall be

treated as if they were related by the whole blood. For a

transfer made by a surviving spouse, the term shall include any

individual considered to be a member of the same family of the

decedent spouse.

"Notice." Written notice.

"Presumed decedent." A person found to be presumptively dead

under the provisions of 20 Pa.C.S. Ch. 57 (relating to absentees

and presumed decedents) or, if a nonresident of this

Commonwealth, under the laws of his domicile.

"Property" or "estate." Includes the following:

(1) All real property and all tangible personal property of

a resident decedent or transferor having its situs in this

Commonwealth.

(2) All intangible personal property of a resident decedent

or transferor.

(3) All real property and all tangible personal property of

a resident decedent having its situs outside this Commonwealth,

which the decedent had contracted to sell, provided the

jurisdiction in which the property has its situs does not

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subject it to death tax.

(4) All real property and all tangible personal property of

a nonresident decedent or transferor having its situs in this

Commonwealth, including property held in trust.

(5) A liquor license issued by the Commonwealth.

"Register." The register of wills having jurisdiction to

grant letters testamentary or of administration in the estate of

the decedent or transferor.

"Safe deposit box of a decedent." A safe deposit box in a

financial institution located within this Commonwealth in the

name of the decedent alone or in the names of the decedent and

one or more persons other than the spouse of the decedent.

"Secretary." The Secretary of Revenue of the Commonwealth.

"Sibling." An individual who has at least one parent in

common with the decedent, whether by blood or by adoption.

"Territory." Includes the District of Columbia and all

possessions of the United States.

"Transfer." Includes the passage of ownership of property,

or interest in property or income from property, in possession

or enjoyment, present or future, in trust or otherwise.

"Transferee." Any person to whom a transfer is made and

includes any legatee, devisee, heir, next of kin, grantee,

beneficiary, vendee, assignee, donee, surviving joint tenant and

insurance beneficiary.

"Transfer of property for the sole use." A transfer to or

for the use of a transferee if, during the transferee's

lifetime, the transferee is entitled to all income and principal

distributions from the property and no person, including the

transferee, possesses an inter vivos power of appointment over

the property.

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"Value." The price at which the property would be sold by a

willing seller, not compelled to sell, to a willing buyer, not

compelled to buy, both of whom have reasonable knowledge of the

relevant facts. In determining the value of property, no

reduction shall be made on account of income, excise or other

taxes which may become payable subsequent to the valuation date

by the transferee or out of the property. Value as to land in

agricultural use, agricultural reserve or forest reserve means

the value which the land has for its particular use according to

the standards provided in section 2122.

Section 2103. Powers of Department.--(a) The department may

adopt and enforce rules and regulations for the just

administration of this article.

(b) The department shall have complete supervision of the

making of appraisements, the allowance of deductions and the

assessment of tax, including, but not limited to, the power to

regulate the actions of registers in the allowance and

disallowance of deductions and assessment of tax. The

department's supervision of the making of appraisements includes

the employment and compensation of investigators, appraisers and

expert appraisers. The compensation of investigators, appraisers

and expert appraisers shall be paid from the inheritance tax

collections in the respective counties.

fails to take the necessary proceedings in connection with the

appraisement, allowance of deductions, assessment of tax or

collection of tax, have all the powers vested in the register in

this article and, at its option, may take the necessary action

and shall charge to the register and deduct from any commissions

or fees otherwise due him all costs and expenses incurred by the

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department in connection with the proceedings.

PART II

TRANSFERS SUBJECT TO TAX

Section 2106. Imposition of Tax.--An inheritance tax for the

use of the Commonwealth is imposed upon every transfer subject

to tax under this article at the rates specified in section

2116.

Section 2107. Transfers Subject to Tax.--(a) The transfers

enumerated in this section are subject to the tax imposed by

section 2106.

(b) All transfers of property by will, by the intestate laws

of this Commonwealth or, in the case of a transfer from a

nonresident, by the laws of succession of another jurisdiction

are subject to tax. The transfer of property of a person

determined by decree of a court of competent jurisdiction to be

a presumed decedent is subject to tax within the meaning of this

section and section 2108.

(3) through (7) which are made by a resident or a nonresident

during his lifetime are subject to tax to the extent that they

are made without valuable and adequate consideration in money or

money's worth at the time of transfer.

(2) When the decedent retained or reserved an interest or

power with respect to only a part of the property transferred,

in consequence of which a tax is imposed under subclauses (4)

through (7), the amount of the taxable transfer is only the

value of that portion of the property transferred which is

subject to the retained or reserved interest or power.

(3) A transfer conforming to subclause (1) and made within

one year of the death of the transferor is subject to tax only

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to the extent that the value at the time of the transfer or

transfers in the aggregate to or for the benefit of the

transferee exceeds three thousand dollars ($3,000) during any

calendar year.

(4) A transfer conforming to subclause (1) which takes

effect in possession or enjoyment at or after the death of the

transferor and under which the transferor has retained a

reversionary interest in the property, the value of which

interest immediately before the death of the transferor exceeds

five per cent of the value of the property transferred, is

subject to tax. The term "reversionary interest" includes a

possibility that property transferred may return to the

transferor or his estate or may be subject to a power of

disposition by him, but the term does not include a possibility

that the income alone from the property may return to him or

become subject to a power of disposition by him.

(5) A transfer conforming to subclause (1), and under which

the transferor expressly or impliedly reserves for his life or

any period which does not in fact end before his death, the

possession or enjoyment of, or the right to the income from, the

property transferred, or the right, either alone or in

conjunction with any person not having an adverse interest, to

designate the persons who shall possess or enjoy the property

transferred or the income from the property, is subject to tax.

(6) A transfer conforming to subclause (1), and under which

the transferee promises to make payments to, or for the benefit

of, the transferor or to care for the transferor during the

remainder of the transferor's life, is subject to tax.

(7) A transfer conforming to subclause (1), and under which

the transferor has at his death, either in himself alone or in

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conjunction with any person not having an adverse interest, a

power to alter, amend or revoke the interest of the beneficiary,

is subject to tax. Similarly, the relinquishment of such a power

within one year of the death of the transferor is a transfer

subject to tax except as otherwise provided in subclause (3).

(d) All succeeding interests which follow the interest of a

surviving spouse in a trust or similar arrangement, to the

extent specified in section 2113, are transfers subject to tax

as if the surviving spouse were the transferor.

Section 2108. Joint Tenancy.--(a) When any property is held

in the names of two or more persons or is deposited in a

financial institution in the names of two or more persons so

that, upon the death of one of them, the survivor or survivors

have a right to the immediate ownership or possession and

enjoyment of the whole property, the accrual of such right, upon

the death of one of them, shall be deemed a transfer subject to

tax of a fractional portion of such property to be determined by

dividing the value of the whole property by the number of joint

tenants in existence immediately preceding the death of the

deceased joint tenant.

(b) Except as provided in subsection (c), this section shall

not apply to property or interests in property passing by right

of survivorship to the survivor of husband and wife.

the death of the co-tenant, the entire interest transferred

shall be subject to tax only under, and to the extent stated in,

subsection (c)(3) of section 2107 as though a part of the estate

of the person who created the co-ownership.

PART III

TRANSFERS NOT SUBJECT TO TAX

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Section 2111. Transfers Not Subject to Tax.--(a) The

transfers enumerated in this section are not subject to the tax

imposed by this article.

(b) Transfers of property to or for the use of any of the

following are exempt from inheritance tax:

(1) The United States of America.

(2) The Commonwealth of Pennsylvania.

(3) A political subdivision of the Commonwealth of

Pennsylvania.

following are exempt from inheritance tax:

(1) Any corporation, unincorporated association or society

organized and operated exclusively for religious, charitable,

scientific, literary or educational purposes, including the

encouragement of art and the prevention of cruelty to children

or animals, no part of the net earnings of which inures to the

benefit of any private stockholder or individual and no

substantial part of the activities of which is carrying on

propaganda or otherwise attempting to influence legislation.

(2) Any trustee or trustees or any fraternal society, order

or association operating under the lodge system, but only if the

property transferred is to be used by the trustee or trustees or

by the fraternal society, order or association exclusively for

religious, charitable, scientific, literary or educational

purposes or for the prevention of cruelty to children or

animals, and no substantial part of the activities of the

trustee or trustees or of the fraternal society, order or

association is carrying on propaganda or otherwise attempting to

influence legislation.

(3) Any veterans' organization incorporated by act of

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Congress or its departments or local chapters or posts, no part

of the net earnings of which inures to the benefit of any

private shareholder or individual.

(d) All proceeds of insurance on the life of the decedent

are exempt from inheritance tax. Refunds of unearned premiums

for the current policy period and post mortem dividends shall be

considered exempt proceeds.

(e) All proceeds of any Federal War Risk Insurance, National

Service Life Insurance or similar governmental insurance are

exempt from inheritance tax. Refunds of unearned premiums for

the current policy period and post mortem dividends shall be

considered exempt proceeds.

(f) The pay and allowances determined by the United States

to be due a member of its armed forces for service in the

Vietnam conflict after August 5, 1964, for the period between

the date declared by it as the beginning of his missing-in-

action status to the date determined by it to be the date of his

death, are exempt from inheritance tax.

(g) Inter vivos transfers as defined in subsection (c) of

section 2107 which might otherwise be subject to inheritance tax

are exempt where the transferee is a governmental body as

provided in subsection (b) or a charity as provided in

subsection (c).

(h) Intangible personal property held by, for or for the

benefit of a decedent who, at the time of his death, was a

nonresident is exempt from inheritance tax.

(i) A transfer made as an advancement of or on account of an

intestate share or in satisfaction or partial satisfaction of a

gift by will, but not within the meaning of subsection (c)(3) of

section 2107, is exempt from inheritance tax.

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(j) Adjusted service certificates issued under the act of

Congress of May 19, 1924, and adjusted service bonds issued

under the act of Congress of January 27, 1936, are exempt from

inheritance tax.

(k) Property subject to a power of appointment, whether or

not the power is exercised, and notwithstanding any blending of

such property with the property of the donee, is exempt from

inheritance tax in the estate of the donee of the power of

appointment.

(l) Property awarded to the Commonwealth as statutory heir

by escheat or without escheat, otherwise than as custodian for a

known distributee, is exempt from inheritance tax. Inheritance

tax shall be deducted at the applicable rate without interest

from any such exempt funds thereafter distributed by the

Commonwealth.

(m) Property owned by husband and wife with right of

survivorship is exempt from inheritance tax. If the ownership

was created within the meaning of section 2107(c)(3), the entire

interest transferred shall be subject to tax under section

2107(c)(3) as though a part of the estate of the spouse who

created the co-ownership.

(n) Property held in the name of a decedent who had no

beneficial interest in the property is exempt from inheritance

tax.

(o) Obligations owing to the decedent which are worthless

immediately before death are exempt from inheritance tax

although collectible from the obligor's distributive share of

the estate.

(p) The lump-sum death payment from the Social Security

Administration or Veterans' Administration or any county

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veterans' death benefit or other similar death benefit, whether

or not paid to the decedent's estate, is exempt from inheritance

tax.

(q) The lump-sum burial benefit from the United States

Railroad Retirement Board, whether or not paid to the decedent's

estate, is exempt from inheritance tax.

(r) Payments under pension, stock bonus, profit-sharing and

other retirement plans, including H.R.10 plans, individual

retirement accounts, individual retirement annuities and

individual retirement bonds to distributees designated by the

decedent or designated in accordance with the terms of the plan,

are exempt from inheritance tax to the extent that the decedent

before his death did not otherwise have the right to possess

(including proprietary rights at termination of employment),

enjoy, assign or anticipate the payment made. In addition to

this exemption, whether or not the decedent possessed any of

these rights, the payments are exempt from inheritance tax to

the same extent that they are exempt from Federal estate tax

under the provisions of the Internal Revenue Code of 1986

(Public Law 99-514, 26 U.S.C. § 1 et seq.), as amended, any

supplement to the code or any similar provision in effect from

time to time for Federal estate tax purposes, except that a

payment which would otherwise be exempt for Federal estate tax

purposes if it had not been made in a lump-sum or other

nonexempt form of payment shall be exempt from inheritance tax

even though paid in a lump-sum or other form of payment. The

proceeds of life insurance otherwise exempt under subsection (d)

shall not be subject to inheritance tax because they are paid

under a pension, stock bonus, profit-sharing, H.R.10 or other

retirement plan.

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(s) A transfer of real estate devoted to the business of

agriculture to or for the benefit of members of the same family,

provided that after the transfer the real estate continues to be

devoted to the business of agriculture for a period of seven

years beyond the transferor's date of death, the real estate

derives a yearly gross income of at least two thousand dollars

($2,000) and the real estate is reported on a timely filed

inheritance tax return, provided that:

(1) Any tract of land under this article which is no longer

devoted to the business of agriculture within seven years beyond

the transferor's date of death or does not derive a yearly gross

income of at least two thousand dollars ($2,000) shall be

subject to inheritance tax due the Commonwealth under section

2107, in the amount that would have been paid or payable on the

basis of valuation authorized under section 2121 for nonexempt

transfers of property, plus interest thereon accruing as of the

transferor's date of death, at the rate established in section

2143.

(2) Any tax imposed under section 2107 shall be a lien in

favor of the Commonwealth upon the property no longer being

devoted to the business of agriculture or which does not derive

a yearly gross income of at least two thousand dollars ($2,000),

as well as the personal obligation of the owner of the property

at the time of the event causing the property to fail to qualify

for exemption and all beneficiaries of any trust that is an

owner of the property. Liability for the tax shall be joint and

several.

(3) Every owner of real estate exempt under this subsection

shall certify to the department on an annual basis that the land

qualifies for this exemption and shall notify the department

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within thirty days of any transaction or occurrence causing the

real estate to fail to qualify for the exemption. Each year the

department shall inform all owners of their obligation to

provide an annual certification under this subclause. This

certification and notification shall be completed in the form

and manner as provided by the department.

(s.1) A transfer of an agricultural commodity, agricultural

conservation easement, agricultural reserve, agricultural use

property or a forest reserve, as those terms are defined in

section 2122(a), to or for the benefit of lineal descendants or

siblings is exempt from inheritance tax, provided the foregoing

property is reported on a timely filed inheritance tax return.

(t) A qualified family-owned business. The following shall

apply:

(1) A transfer of a qualified family-owned business interest

to or for the benefit of members of the same family is exempt

from inheritance tax if the qualified family-owned business

interest:

(i) continues to be owned by members of the same family or a

trust whose beneficiaries are comprised solely of members of the

same family for a minimum of seven years after the decedent's

date of death; and

(ii) is reported on a timely filed inheritance tax return.

(2) A qualified family-owned business interest that was

exempted from inheritance tax under this subsection that is no

longer owned by members of the same family or a trust whose

beneficiaries are comprised solely of members of the same family

at any time within seven years after the decedent's date of

death shall be subject to inheritance tax due the Commonwealth

under section 2107, in an amount equal to the inheritance tax

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that would have been paid or payable on the value of the

qualified family-owned business interest using the valuation

authorized under section 2121 for nonexempt transfers of

property. Interest shall accrue from the payment date

established under section 2142 at the rate established under

section 2143.

(2.1) The exemption under this subsection shall not apply to

property transferred by the decedent into the qualified family-

owned business within one year of the death of the decedent

unless the property was transferred for a legitimate business

purpose.

(3) Inheritance tax due under section 2107 as a result of

disqualification under paragraphs (2) or (4), plus interest on

the inheritance tax, shall be a lien in favor of the

Commonwealth on the real and personal property of the owner of

the qualified family-owned business interest at the time of the

transaction or occurrence that disqualified the qualified

family-owned business interest from the exemption provided under

this subsection. The inheritance tax due and interest shall be

the personal obligation of the owner of the qualified family-

owned business interest at the time of the transaction or

occurrence that disqualified the qualified family-owned business

interest from the exemption provided under this subsection and

all beneficiaries of any trust that is an owner of the qualified

family-owned business interest. Liability for the tax shall be

joint and several. The lien shall remain until the inheritance

tax and accrued interest are paid in full.

(4) Each owner of a qualified family-owned business interest

exempted from inheritance tax under this subsection shall

certify to the department, on an annual basis, for seven years

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after the decedent's date of death, that the qualified family-

owned business interest continues to be owned by members of the

same family or a trust whose beneficiaries are comprised solely

of members of the same family and shall notify the department

within thirty days of any transaction or occurrence causing the

qualified family-owned business interest to fail to qualify for

the exemption. Each year, the department shall inform all owners

of a qualified family-owned business interest exempted from

inheritance tax under this subsection of their obligation to

provide an annual certification under this paragraph. The

certification and notification shall be completed in the form

and manner as provided by the department. An owner's failure to

comply with the certification or notification requirements shall

result in the loss of the exemption, and the qualified family-

owned business interest shall be subject to inheritance tax due

the Commonwealth under section 2107, in an amount equal to the

inheritance tax that would have been paid or payable on the

value of the qualified family-owned business interest using the

valuation authorized under section 2121 for nonexempt transfers

of property. Interest shall accrue from the payment date

established in section 2142 at the rate established in section

2143.

(5) For purposes of this subsection, the term "qualified

family-owned business interest" shall be as follows:

(i) an interest as a proprietor in a trade or business

carried on as a proprietorship, if the proprietorship has fewer

than fifty full-time equivalent employees as of the date of the

decedent's death, the proprietorship has a net book value of

assets totaling less than five million dollars ($5,000,000) as

of the date of the decedent's death and has been in existence

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for five years prior to the date of the decedent's death; or

(ii) an interest in an entity carrying on a trade or

business, if:

(A) the entity has fewer than fifty full-time equivalent

employees as of the date of the decedent's death;

(B) the entity has a net book value of assets totaling less

than five million dollars ($5,000,000) as of the date of the

decedent's death;

wholly owned by the decedent, by the decedent and members of the

same family, by a trust whose beneficiaries are comprised solely

of members of the same family or by an entity that is owned

solely by members of the same family;

(D) the entity is engaged in a trade or business the

principal purpose of which is not the management of investments

or income-producing assets owned by the entity; and

(E) the entity has been in existence for five years prior to

the decedent's date of death.

"Qualified transferee." A decedent's:

(i) husband or wife;

(ii) lineal descendants;

(iii) siblings and the sibling's lineal descendants; and

(iv) ancestors and the ancestor's siblings.

Section 2113. Trusts and Similar Arrangements for Spouses.--

(a) In the case of a transfer of property for the sole use of

the transferor's surviving spouse during the surviving spouse's

entire lifetime, all succeeding interests which follow the

interest of the surviving spouse shall not be subject to tax as

transfers by the transferor if the transfer was made by a

decedent dying on or after January 1, 1995, provided that the

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transferor's personal representative may elect, on a timely

filed inheritance tax return, to have this section not apply to

a trust or similar arrangement or portion of a trust or similar

arrangement.

(b) Succeeding interests not subject to tax as transfers by

the transferor by reason of subsection (a) shall be deemed to be

transfers subject to tax by the surviving spouse of the property

held in the trust or similar arrangement at the death of the

surviving spouse. The tax on that property shall be based upon

its value at the death of the surviving spouse, the tax rates

applicable to dispositions by the surviving spouse or by the

transferor, whichever are lower, and any exemptions relating to

the kind or location of property held in the trust or similar

arrangement at the surviving spouse's death.

interests not subject to tax as transfers by the transferor by

reason of subsection (a) were also not subject to tax by reason

of an exemption based upon the kind or location of property at

the transferor's death.

(d) This section shall not apply to inter vivos transfers

otherwise exempt from inheritance tax.

PART IV

RATE OF TAX

Section 2116. Inheritance Tax.--(a) (1) Inheritance tax

upon the transfer of property passing to or for the use of any

of the following shall be at the rate of four and one-half per

cent:

(i) grandfather, grandmother, father, mother, except

transfers under subclause (1.2), and lineal descendants; or

(ii) wife or widow and husband or widower of a child.

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(1.1) Inheritance tax upon the transfer of property passing

to or for the use of a husband or wife shall be:

(i) At the rate of three per cent for estates of decedents

dying on or after July 1, 1994, and before January 1, 1995.

(ii) At a rate of zero per cent for estates of decedents

dying on or after January 1, 1995.

(1.2) Inheritance tax upon the transfer of property from a

child twenty-one years of age or younger to or for the use of a

natural parent, an adoptive parent or a stepparent of the child

shall be at the rate of zero per cent.

(1.3) Inheritance tax upon the transfer of property passing

to or for the use of a sibling shall be at the rate of twelve

per cent.

(2) Inheritance tax upon the transfer of property passing to

or for the use of all persons other than those designated in

subclause (1), (1.1), (1.2) or (1.3) or exempt under section

2111(m) shall be at the rate of fifteen per cent.

(3) When property passes to or for the use of a husband and

wife with right of survivorship, one of whom is taxable at a

rate lower than the other, the lower rate of tax shall be

applied to the entire interest.

(b) (1) When the decedent was a resident, the tax shall be

computed upon the value of the property, in excess of the

deductions specified in Part VI, at the rates in effect at the

transferor's death.

(2) When the decedent was a nonresident, the tax shall be

computed upon the value of real property and tangible personal

property having its situs in this Commonwealth, in excess of

unpaid property taxes assessed on the property and any

indebtedness for which it is liened, mortgaged or pledged, at

20180HB2054PN3010 - 20 -

the rates in effect at the transferor's death. The person liable

to make the return under section 2136 may elect to have the tax

computed as if the decedent was a resident and his entire estate

was property having its situs in this Commonwealth, and the tax

due shall be the amount which bears the same ratio to the tax

thus computed as the real property and tangible personal

property located in this Commonwealth bears to the entire estate

of the decedent.

(b.1) The inheritance tax due upon the transfer of property

passing to or for the use of a husband or wife shall be the

lesser of the tax imposed under subsection (a)(1.1) or the tax

due after the allowance of the credit provided for under section

2112.

estate, whether under an inter vivos trust, a will or the

intestate law, renounces his right to receive the distributive

share receiving therefor no consideration, or exercises his

elective rights under 20 Pa.C.S. Ch. 22 (relating to elective

share of surviving spouse) receiving therefor no consideration

other than the interest in assets passing to him as the electing

spouse, the tax shall be computed as though the persons who

benefit by such renunciation or election were originally

designated to be the distributees, conditioned upon an

adjudication or decree of distribution expressly confirming

distribution to such distributees. The renunciation shall be

made within nine months after the death of the decedent. In the

case of a surviving spouse taking his elective share of an

estate, the renunciation shall be made within the time for

election and any extension thereof under 20 Pa.C.S. § 2210(b)

(relating to procedure for election; time limit). Notice of the

20180HB2054PN3010 - 21 -

filing of the account and of its call for audit or confirmation

shall include notice of the renunciation or election to the

department. When an unconditional vesting of a future interest

does not occur at the decedent's death, the renunciation

specified in this subsection of the future interest may be made

within three months after the occurrence of the event or

contingency which resolves the vesting of the interest in

possession and enjoyment.

(d) In case of a compromise of a dispute regarding rights

and interests of transferees, made in good faith, the tax shall

be computed as though the persons so receiving distribution were

originally entitled to it as transferees of the property

received in the compromise, conditioned upon an adjudication or

decree of distribution expressly confirming distribution to such

distributees. Notice of the filing of the account and of its

call for audit or confirmation shall include notice to the

department.

(e) If the rate of tax which will be applicable when an

interest vests in possession and enjoyment cannot be established

with certainty, the department, after consideration of relevant

actuarial factors, valuations and other pertinent circumstances,

may enter into an agreement with the person responsible for

payment to establish a specified amount of tax which, when paid

within sixty days after the agreement, shall constitute full

payment of all tax otherwise due upon such transfer. Rights of

withdrawal of a surviving spouse not exercised within nine

months of the transferor's death shall be ignored in making such

calculations.

(f) Property subject to a power of appointment, whether or

not the power is exercised and notwithstanding any blending of

20180HB2054PN3010 - 22 -

the property with the property of the donee, shall be taxed only

as part of the estate of the donor.

Section 2117. Estate Tax.--(a) In the event that a Federal

estate tax is payable to the Federal Government on the transfer

of the taxable estate of a decedent who was a resident of this

Commonwealth at the time of his death, and the inheritance tax,

if any, actually paid to the Commonwealth by reason of the death

of the decedent (disregarding interest or the amount of any

discount allowed under section 2142) is less than the maximum

credit for State death taxes allowable under section 2011 of the

Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. §

2011), a tax equal to the difference is imposed. If a resident

decedent owned or had an interest in real property or tangible

personal property having a situs in another state, the tax so

imposed shall be reduced by the greater of:

(1) the amount of death taxes actually paid to the other

state with respect to the estate of the decedent, excluding any

death tax expressly imposed to receive the benefit of the credit

for state death taxes allowed under section 2011 of the Internal

Revenue Code of 1986 (26 U.S.C. § 2011); or

(2) an amount computed by multiplying the maximum credit for

state death taxes allowable under section 2011 of the Internal

Revenue Code of 1986 (26 U.S.C. § 2011) by a fraction, the

numerator of which is the value of the real property and

tangible personal property to the extent included in the

decedent's gross estate for Federal estate tax purposes and

having a situs in the other state and the denominator of which

is the value of the decedent's gross estate for Federal estate

tax purposes.

(b) In the event that a Federal estate tax is payable to the

20180HB2054PN3010 - 23 -

Federal Government on the transfer of the taxable estate of a

decedent who was not a resident of this Commonwealth at the time

of his death but who owned or had an interest in real property

or tangible personal property having a situs in this

Commonwealth, a tax is imposed in an amount computed by

multiplying the maximum credit for State death taxes allowable

under section 2011 of the Internal Revenue Code of 1986 (26

U.S.C. § 2011) by a fraction, the numerator of which is the

value of the real property and tangible personal property to the

extent included in the decedent's gross estate for Federal

estate tax purposes having a situs in this Commonwealth and the

denominator of which is the value of the decedent's gross estate

for Federal estate tax purposes, and deducting from that amount

the inheritance tax, if any, actually paid to the Commonwealth

(disregarding interest or the amount of any discount allowed

under section 2142).

imposed under subsection (a) or (b) has been paid, the estate

tax paid shall be credited against any inheritance tax later

imposed.

PART V

VALUATION

Section 2121. Valuation.--(a) Except as otherwise provided

in this part, the valuation date shall be the date of the

transferor's death. When the transfer was made during lifetime

and was not in trust, the property transferred shall be valued

at the transferor's death. When the transfer was to an inter

vivos trust, the property to be valued shall be that comprising

the portion of the trust, if any, which exists at the

transferor's death and which portion is traceable from property

20180HB2054PN3010 - 24 -

the transfer of which is subject to tax under this article.

(b) The value of a life interest shall be determined in

accordance with rules and regulations promulgated by the

department. Until the promulgation of rules and regulations to

the contrary, the regulations in effect for Federal estate tax

purposes shall apply.

determined in accordance with rules and regulations promulgated

by the department. Until the promulgation of rules and

regulations to the contrary, the regulations in effect for

Federal estate tax purposes shall apply.

(d) If an annuity or a life estate is terminated by the

death of the annuitant or life tenant or by the happening of a

contingency within nine months after the death of the

transferor, the value of the annuity or estate shall be the

value, at the date of the transferor's death, of the amount of

the annuity or income actually paid or payable to the annuitant

or life tenant during the period he was entitled to the annuity

or was in possession of the estate. If an appraisement of an

annuity or life estate has been filed before the termination,

the appraisement and any assessment based on the appraisement

shall be revised in accordance with this section upon request of

any party in interest, including the Commonwealth and the

personal representative, insofar as the appraisement and any

assessment based on the appraisement relates to the valuation of

the terminated annuity or life estate, without the necessity of

the party in interest following any procedure described in Part

XI.

(e) The value of a future interest shall be determined in

accordance with rules and regulations promulgated by the

20180HB2054PN3010 - 25 -

department. Until the promulgation of rules and regulations to

the contrary, the regulations in effect for Federal estate tax

purposes shall apply.

(f) When a decedent's property is subject, during his

lifetime and at the time of his death, to a binding option or

agreement to sell, the appraised value of the property shall not

exceed the amount of the established price payable for it

provided the option or agreement is a bona fide arrangement and

not a device to transfer the property for less than an adequate

and full consideration in money or money's worth. If the option

or agreement is not exercised and consummated, the value at

which the property is appraised shall not be limited to the

established price payable for the property, and it shall not

exceed the value of the property on the date of the transferor's

death. When tax has been assessed on the basis of an established

price and the option or agreement is not exercised and

consummated or an amount greater than the established price is

received for the property, the fiduciary or transferee shall

file a supplemental return reporting the facts.

Section 2122. Valuation of Certain Farmland.--(a) The

following words and phrases, when used in this section, shall

have the meaning ascribed to them in this section, except where

the context clearly indicates a different meaning:

"Agricultural commodity." Any and all plant and animal

products, including Christmas trees produced in this

Commonwealth for commercial purposes.

"Agricultural conservation easement." As defined in section

3 of the act of June 30, 1981 (P.L.128, No.43), known as the

"Agricultural Area Security Law."

"Agricultural reserve." Noncommercial open space lands used

20180HB2054PN3010 - 26 -

for outdoor recreation or the enjoyment of scenic or natural

beauty and open to the public for such use, without charge or

fee, on a nondiscriminatory basis.

"Agricultural use." Use of the land for the purpose of

producing an agricultural commodity or when devoted to and

meeting the requirements and qualifications for payments or

other compensation pursuant to a soil conservation program under

an agreement with an agency of the Federal Government.

"Forest reserve." Land, ten acres or more, stocked by forest

trees of any size and capable of producing timber or other wood

products.

"Separation." A division, by conveyance or other action of

the owner, of lands devoted to agricultural use, agricultural

reserve or forest reserve and preferentially assessed under the

provisions of this section into two or more tracts of land which

continue to be agricultural use, agricultural reserve or forest

reserve and all tracts so formed meet the requirements of

section 3 of the act of December 19, 1974 (P.L.973, No.319),

known as the "Pennsylvania Farmland and Forest Land Assessment

Act of 1974."

"Split-off." A division, by conveyance or other action of

the owner, of lands devoted to agricultural use, agricultural

reserve or forest reserve and preferentially assessed under the

provisions of this section into two or more tracts of land, the

use of which on one or more of such tracts does not meet the

requirements of section 3 of the act of December 19, 1974

(P.L.973, No.319), known as the "Pennsylvania Farmland and

Forest Land Assessment Act of 1974."

(b) (1) The value for transfer inheritance tax purposes of

land or an interest in land which is owned by a decedent and

20180HB2054PN3010 - 27 -

devoted to agricultural use, agricultural reserve or forest

reserve shall be that value which such land has for its

particular use if it also meets the following conditions:

(i) in the case of land devoted to agricultural use, the

land was devoted to such agricultural use for the three years

preceding the death of such decedent and is not less than ten

contiguous acres in area or has an anticipated yearly gross

income derived from agricultural use of two thousand dollars

($2,000);

(ii) in the case of land devoted to agricultural reserve,

the land is not less than ten contiguous acres in area;

(iii) in the case of land presently devoted to forest

reserve, the land is not less than ten contiguous acres in area;

(iv) the contiguous tract of land for which application is

made is not less than the entire contiguous area of the owner

used for agricultural use, agricultural reserve or forest

reserve purposes.

(2) In determining the value of land in agricultural use,

agricultural reserve or forest reserve for its particular use,

consideration shall be given to available evidence of such

land's capability for its particular use as derived from the

soil survey at The Pennsylvania State University, the National

Cooperative Soil Survey, the United States Census of

Agricultural Categories of land use classes and other evidence

of the capability of the land devoted to such use and also, if

the land is assessed under the provisions of the "Pennsylvania

Farmland and Forest Land Assessment Act of 1974," to the

valuation determined by the local county assessor thereunder.

20180HB2054PN3010 - 28 -

agricultural reserve or forest reserve, which is valued for

inheritance tax purposes under the provisions of this part, is

applied to a use other than agricultural use, agricultural

reserve or forest reserve or for any other reason, except

condemnation thereof, is removed from the category of land

preferentially valued under this part within seven years

following the death of such decedent, the owner at such time the

land is so removed shall be subject and liable to tax due the

Commonwealth in an amount equal to the difference, if any,

between the taxes paid or payable on the basis of the valuation

authorized under this section and the taxes that would have been

paid or payable had that land been valued and taxed on the basis

of its market value at the death of the decedent, plus interest

thereon for the period from the date of death to the change of

use at the rate established in section 2143.

(2) The tax shall be a lien upon the property in favor of

the Commonwealth, collectible in the manner provided by law for

the collection of delinquent real estate taxes, as well as the

personal obligation of the owner at the time of such change of

use. The tax shall become due on the date of change of use.

(3) Every owner of land preferentially valued under this

section shall notify the register of wills of the county or

counties in which the land is located of any change or proposed

change in the use of the land. Any owner failing to make

notification commits a misdemeanor of the third degree.

(d) (1) The split-off of a part of the land which has been

valued, assessed and taxed under this article for a use other

than agricultural use, agricultural reserve or forest reserve

within the seven-year period provided for by subsection (c)

shall, except when the split-off occurs through condemnation,

20180HB2054PN3010 - 29 -

subject the land divided and the entire parcel from which the

land was divided to liability for taxes as otherwise set forth

in this article except as provided in subclause (2).

(2) The owner of property subject to a preferential tax

assessment may split off land covered by the preferential tax

assessment within the seven-year period. The tract of land so

split-off shall not exceed two acres annually and may only be

used for residential use, agricultural use, agricultural reserve

or forest reserve and the construction of a residential dwelling

to be occupied by the person to whom the land is transferred.

The total parcel or parcels of land split-off under the

provisions of this subsection shall not exceed ten per cent or

ten acres, whichever is less, of the entire tract subject to the

preferential tax assessment. The split-off of a parcel of land

which meets the requirements of this subsection shall not

invalidate the preferential tax assessment if it continues to

meet the requirements of subsection (b).

(3) The owner of property subject to a preferential use

assessment may separate land covered by the preferential use

assessment. The separation shall not invalidate the preferential

tax assessment unless a subsequent abandonment of preferential

use occurs within seven years of the separation. The abandonment

shall subject the entire tract of land separated to liability

for taxes, which are to be paid by the person changing the use,

as set forth in this article.

(4) When property subject to preferential tax assessment is

separated among the beneficiaries taxed under subsection (a)(1)

of section 2116, a subsequent change within the seven-year

period provided for in subsection (b) in the use of one

beneficiary's portion of the property shall subject only that

20180HB2054PN3010 - 30 -

tract held by the beneficiary who changes the use to liability

under this article.

(e) The value for transfer inheritance tax purposes of land

or an interest in land which is part of an agricultural

conservation easement shall be at fifty per cent of the value

otherwise determined under this section.

PART VI

DEDUCTIONS

Section 2126. Deductions Generally.--The only deductions

from the value of the property transferred shall be those set

forth in this part. Except as otherwise provided in this

article, they shall be deductible regardless of whether or not

assets comprising the decedent's taxable estate are employed in

the payment or discharge of the deductible items. When a tax is

imposed upon a transfer described in subsection (c) of section

2107 and section 2108, the deductions shall be allowed to the

transferee only to the extent that the transferee has actually

paid the deductible items and either the transferee was legally

obligated to pay the deductible items or the estate subject to

administration by a personal representative is insufficient to

pay the deductible items.

Section 2127. Expenses.--The following expenses may be

deducted from the value of the property transferred:

(1) Administration expenses. All reasonable expenses of

administration of the decedent's estate and of the assets

includable in the decedent's taxable estate are deductible.

(2) Bequest to fiduciary or attorney in lieu of fees. A

transfer to an executor, trustee or attorney in lieu of

compensation for services is deductible to the extent it does

not exceed reasonable compensation for the services to be

20180HB2054PN3010 - 31 -

performed.

(3) Family exemption. The family exemption is deductible.

(4) Funeral and burial expenses. Reasonable and customary

funeral expenses, including the cost of a family burial lot or

other resting place, are deductible.

(5) Tombstones and gravemarkers. Reasonable and customary

expenses for the purchase and erection of a monument, gravestone

or marker on decedent's burial lot or final resting place are

deductible.

(6) Burial trusts or contracts. Bequests or devises in

trust, or funds placed in trust after decedent's death or funds

paid under a contract after decedent's death, in reasonable

amounts, to the extent that the funds or income from the funds

is to be applied to the care and preservation of the family

burial lot or other final resting place in which the decedent is

buried or the remains of the decedent repose and the structure

on the burial lot or other final resting place, are deductible.

(7) Bequests for religious services. Bequests in reasonable

amounts for the performance or celebration of religious rites,

rituals, services or ceremonies, in consequence of the death of

the decedent, shall be deductible.

Section 2128. Taxes.--The following taxes may be deducted

from the value of the property transferred:

(1) Property taxes. Taxes imposed against the decedent or

against any property constituting a part of decedent's gross

taxable estate and which are owing prior to decedent's death are

deductible. However, taxes for which decedent is not personally

liable shall not be deductible in an amount exceeding the value

of the property against which the taxes are liened.

(2) State and foreign death taxes. Death taxes other than

20180HB2054PN3010 - 32 -

the Federal estate tax, disregarding interest and penalty, paid

to other states and territories of the United States and to

taxing jurisdictions outside the United States and its

territories on assets, the transfer of which is subject to tax

under this article, if the taxes are required to be paid to

bring the assets into this Commonwealth, or to transfer them to

the new owner, are deductible.

Section 2129. Liabilities.--(a) Except as set forth in

section 2130(5), all liabilities of the decedent shall be

deductible subject to the limitations set forth in this section.

(b) Except as otherwise provided in subsections (h) and (i),

the deductions for indebtedness of the decedent, when founded

upon a promise or agreement, shall be limited to the extent that

it was contracted bona fide and for an adequate and full

consideration in money or money's worth.

indebtedness owing by the decedent upon a secured loan is

deductible whether or not the security is a part of the gross

taxable estate.

(d) Except as provided by subclause (4) of section 2130, the

decedent's liability (net of all collectible contribution) on a

joint obligation is deductible whether or not payment of the

obligation is secured by entireties property or property which

passes to another under the right of survivorship.

(e) Indebtedness arising from a contract for the support of

the decedent is deductible.

(f) Decedent's obligation is deductible whether or not

discharged by testamentary gift.

(g) Decedent's debt, which is unenforceable because of any

statute of limitations, is deductible if paid by the estate.

20180HB2054PN3010 - 33 -

(h) A pledge to a transferee exempt under the provisions of

subsection (c) of section 2111 is deductible if paid by the

estate, whether or not it is legally enforceable.

(i) Liabilities arising from the decedent's tort or from

decedent's status as an accommodation endorser, guarantor or

surety are deductible, except to the extent that it can be

reasonably anticipated that decedent's estate will be exonerated

or reimbursed by others primarily liable or subject to

contribution.

(j) The fact that a surviving spouse is legally liable and

financially able to pay any item which, if the deceased spouse

were unmarried, would qualify as a deduction under this part

shall not result in the disallowance of such item as a

deduction.

(k) Obligations for decedent's medical expenses are not

deductible to the extent decedent's estate will be exonerated or

reimbursed for such expenses from other sources.

Section 2130. Deductions Not Allowed.--The following are not

deductible:

(2) Claims of a former spouse, or others, under an agreement

between the former spouse and the decedent, insofar as they

arise in consideration of a relinquishment or promised

relinquishment of marital or support rights.

(3) Litigation expenses of beneficiaries.

(4) Indebtedness secured by real property or tangible

personal property, all of which has its situs outside of this

Commonwealth, except to the extent the indebtedness exceeds the

value of the property.

(5) Expenses, debts, obligations and liabilities incurred in

connection with a qualified family-owned business interest

20180HB2054PN3010 - 34 -

exempted from inheritance under section 2111(t) and any property

exempted from inheritance tax under section 2111(s) or (s.1).

PART VII

PAYMENT OF TAX

Section 2136. Returns.--(a) The following persons shall

make a return:

(1) The personal representative of the estate of the

decedent as to property of the decedent administered by him and

additional property which is or may be subject to inheritance

tax of which he shall have or acquire knowledge.

(2) The transferee of property upon the transfer of which

inheritance tax is or may be imposed by this article, including

a trustee of property transferred in trust. No separate return

need be made by the transferee of property included in the

return of a personal representative.

(b) The inclusion of property in the return shall not

constitute an admission that its transfer is taxable.

(a) shall promptly file a supplemental return with respect to

additional assets and transfers which come to his knowledge

after the original return has been filed.

(d) The returns required by subsection (a) shall be filed

within nine months after the death of the decedent. At any time

prior to the expiration of the nine-month period, the

department, in its discretion, may grant an extension of the

time for filing a return for an additional period of six months.

(e) The returns required by subsections (a) and (c) shall be

made in the form prescribed by the department.

(f) When the decedent was a resident, the returns shall be

filed with the register. When the decedent was a nonresident,

20180HB2054PN3010 - 35 -

the returns shall be filed with the register who issued letters,

if any, in this Commonwealth; otherwise, the returns shall be

filed with the department.

Section 2137. Appraisement.--The department shall have

supervision over, and make or cause to be made, fair and

conscionable appraisements of property the transfer of which is

subject to tax under this article. The appraisement, unless

suspended until audit, shall be made within six months after the

return has been filed and, if not so made, shall be made within

an additional period as the court, upon application of any party

in interest, including the personal representative, shall fix.

Section 2138. Deductions.--The official with whom the return

is required by subsection (f) of section 2136 to be filed shall

determine the allowance or disallowance of all deductions

claimed. The determination, unless suspended until audit, shall

be made within six months after the claim for allowance has been

filed and, if not so made, shall be made within such further

period as the court, upon application by any party in interest,

including the personal representative, shall fix. However, the

court, at the request of the fiduciary at the audit of his

account, may determine and allow, as deductions, all properly

deductible credits claimed in the account or allowed at the

audit without requiring the filing of a separate claim for them,

and the court may then fix the amount of the tax and decree

payment of the tax. Deductions exceeding one hundred dollars

($100) in the aggregate shall not be allowed by the court unless

the Commonwealth is represented at the audit by counsel or

unless there is proof that the register has had at least thirty

days notice of the claim.

Section 2139. Assessment of Tax.--After the appraisement has

20180HB2054PN3010 - 36 -

been made and the allowance or disallowance of deductions

determined, the inheritance tax, as affected by the court's

determination of the allowance or disallowance of deductions as

provided in section 2138, shall be assessed by the official with

whom the return is required to be filed under subsection (f) of

section 2136. The assessment, unless suspended until audit,

shall be made within one month after the filing of the

appraisement or determination of deductions, whichever occurs

later, and, if not so made, shall be made within an additional

period as the court, upon application by any party in interest,

including the personal representative, shall fix.

Section 2140. Notice.--The department shall give, or cause

to be given, notice of the filing of the appraisement, the

determination of the allowance or disallowance of deductions and

the amount of tax assessed, and all supplements, to the personal

representative and to any transferee who filed a tax return or

to their respective attorneys.

Section 2141. Failure to File Returns Not a Bar to

Assessment of Tax.--Failure to file a return of a taxable

transfer shall not bar the making of an appraisement or

supplemental appraisement or assessment of tax or supplemental

assessment of tax based upon taxable transfers not returned

under the provisions of this article.

Section 2142. Payment Date and Discount.--Inheritance tax is

due at the date of the decedent's death and shall become

delinquent at the expiration of nine months after the decedent's

death. To the extent that the inheritance tax is paid within

three months after the death of the decedent, a discount of five

per cent shall be allowed.

Section 2143. Interest.--If the inheritance tax is not paid

20180HB2054PN3010 - 37 -

before the date it becomes delinquent, interest on the unpaid

tax shall be charged after the date of delinquency at the rate

established pursuant to section 806 of the act of April 9, 1929

(P.L.343, No.176), known as "The Fiscal Code." When payment of

inheritance tax is not made because of litigation or other

unavoidable cause of delay and the property on which the tax has

been calculated has remained in the hands of a fiduciary and has

not produced a net income equal to the rate of interest provided

in this section annually, interest for such period shall be

calculated at the rate of the net income produced by the

property. Any payment on delinquent inheritance tax shall be

applied first to any interest due on the tax at the date of

payment and then, if there is any balance, to the tax itself.

Section 2144. Source of Payment.--(a) In the absence of a

contrary intent appearing in the will, the inheritance tax,

including interest, on the transfer of property which passes by

will absolutely and in fee, and which is not part of the

residuary estate, shall be paid out of the residuary estate and

charged in the same manner as a general administration expense

of the estate. The payments shall be made by the personal

representative and, if not so paid, shall be made by the

transferee of the residuary estate.

(b) In the absence of a contrary intent appearing in the

inter vivos trust, the inheritance tax, including interest, on

the transfer of property which passes absolutely and in fee by

inter vivos trust, and which is not part of the residue of the

inter vivos trust, shall be paid out of the residue of the trust

and charged in the same manner as a general administration

expense of the trust. The payment shall be made by the trustee

and, if not so paid, shall be made by the transferee of the

20180HB2054PN3010 - 38 -

residue of the trust.

will, the inheritance tax, including interest, on the transfer

of property which passes by will other than absolutely and in

fee, and which is not part of the residuary estate, shall be

paid out of the residuary estate and charged in the same manner

as a general administration expense of the estate. The payment

shall be made by the personal representative and, if not so

paid, shall be made by the transferee of the residuary estate.

(d) In the absence of a contrary intent appearing in the

inter vivos trust, the inheritance tax, including interest, on

the transfer of property which passes other than absolutely and

in fee by inter vivos trust, and which is not part of the

residue of the inter vivos trust, shall be paid out of the

residue of the trust and charged in the same manner as a general

administration expense of the trust. The payment shall be made

by the trustee and, if not so paid, shall be made by the

transferee of the residue of the trust.

(e) In the absence of a contrary intent appearing in the

will or other instrument of transfer, the inheritance tax, in

the case of a transfer of any estate, income or interest for a

term of years, for life or for other limited period, shall be

paid out of the principal of the property by which the estate,

income or interest is supported, except as otherwise provided in

subsection (c) or (d). The payment shall be made by the personal

representative or trustee and, if not so paid, shall be made by

the transferee of such principal.

(e.1) In the absence of a contrary intent appearing in the

will or other instrument of transfer creating the trust or

similar arrangement, and in the absence of a contrary intent

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appearing in the will or other instrument of transfer of the

surviving spouse which expressly refers to the trust or similar

arrangement, the inheritance tax, including interest, due at the

death of a surviving spouse with respect to a trust or similar

arrangement to which section 2113(b) is applicable shall be paid

out of the residue of the principal of the trust or similar

arrangement and charged as a general administration expense of

the trust or similar arrangement. The payment shall be made by

the trustee or other fiduciary in possession of the property

and, if not so paid, shall be made by the transferee of the

residue of the trust or similar arrangement.

(f) In the absence of a contrary intent appearing in the

will or other instrument of transfer and except as otherwise

provided in this section, the ultimate liability for the

inheritance tax, including interest, shall be upon each

transferee.

Section 2145. Estate Tax Return.--(a) The person or persons

required by section 2136 to make the inheritance tax return

shall be initially liable for payment of the estate tax.

(b) The personal representative of every decedent or, if

there is no personal representative, any other fiduciary charged

by law with the duty of filing a Federal estate tax return,

within one month of the filing or receipt of the return shall

file with the register or, if the decedent was a nonresident,

with the register who issued letters, if any, in this

Commonwealth, or otherwise with the department, a copy of the

decedent's Federal estate tax return and of any communication

from the Federal Government making any final change in the

return or of the tax due. The assessment of estate tax shall be

made by the register or department within three months after the

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filing of the documents required to be filed and, if not so

made, shall be made within an additional period as the court,

upon application of any party in interest, including the

personal representative, shall fix.

death but shall not become delinquent until the expiration of

nine months after decedent's death. Any estate tax occasioned by

a final change in the Federal return or of the tax due shall not

become delinquent until the expiration of one month after the

person or persons liable to pay the tax have received final

notice of the increase in the Federal estate tax.

(d) No discount shall be allowed in paying the estate tax.

(e) If the estate tax is not paid before the date it becomes

delinquent under subsection (c), interest on the unpaid tax

shall be charged after the date of delinquency at the rate

established in section 2143.

(f) The estate tax shall be apportioned and ultimately borne

in accordance with the provisions of 20 Pa.C.S. Ch. 37 (relating

to apportionment of death taxes) unless otherwise provided by

this article or in the instrument of transfer.

(g) When the decedent was a resident, the estate tax shall

be paid to the register. When the decedent was a nonresident,

the estate tax shall be paid to the register who issued letters,

if any, in this Commonwealth; otherwise, it shall be paid to the

department.

Section 2146. Deduction and Collection of Tax by Personal

Representative or Other Fiduciary.--Subject to the provisions of

sections 2144 and 2154, every personal representative or other

fiduciary (other than a trustee of a pension, stock-bonus,

profit-sharing, retirement annuity, deferred compensation,

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disability, death benefit, or other employe benefit plan) in

charge of or in possession of any property, or instrument

evidencing ownership of property, the transfer of which is

subject to a tax imposed by this article other than a tax on a

future interest not yet delinquent, shall deduct the tax from

the property, if money, or shall collect the tax from the

transferee. Any delivery of property or instrument by the

fiduciary to a transferee, except in accordance with a decree of

distribution of the court or pursuant to a duly executed notice

of election filed under section 2154, shall not relieve him of

personal liability for a tax imposed by this article. No

personal representative or other fiduciary in charge of or in

possession of any property subject to this article shall be

compelled to pay or deliver it to the transferee except upon

payment to him of the tax due other than tax on a future

interest not yet delinquent. If the transferee neglects or

refuses to pay the tax, the personal representative or other

fiduciary may sell the property subject to the tax, or so much

of the property as is necessary, under direction of the court.

All money retained by the personal representative or other

fiduciary, or paid to him on account of the taxes imposed by

this article, shall be remitted by him before the tax becomes

delinquent or, if received after the tax becomes delinquent,

shall be remitted by him promptly upon its receipt.

Section 2147. Duties of Depositories.--When money is

deposited or invested in a financial institution located in this

Commonwealth in the names of two or more persons, other than

husband and wife, or in the name of a person or persons in trust

for another or others, and one of the parties to the deposit or

investment dies, it shall be the duty of the financial

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institution, within ten days after knowledge of the death, to

notify the department, giving the name of the deceased person,

the date of the creation of the joint or trust deposit or

investment, the amount invested or on deposit at the date of

death with the financial institution and the name and address of

the survivor or survivors to the account. No notification shall

be required in regard to the account when the deposit at the

time of death does not exceed three hundred dollars ($300).

Section 2148. Compromise by Department.--The department,

with the approval of the Attorney General, may compromise in

writing, with the person liable, the tax, including interest on

the tax, payable on any transfer of property included in the

estate of any decedent who it is alleged was a nonresident at

the time of his death. A copy of the compromise agreement shall

be filed with the register who issued letters, if any, in this

Commonwealth; otherwise, it shall be filed with the department.

The compromise agreement shall constitute a final determination

of the matters covered by it and the payment of the tax, as

fixed by the agreement, shall discharge all persons and property

from liability with respect to the tax.

Section 2149. Interstate Compromise and Arbitration of

Inheritance Taxes.--When the register or the department alleges

that a decedent was a resident of this Commonwealth at the time

of his death, and the taxing authorities of another state or

territory make a like claim on behalf of their state or

territory, a written agreement of compromise or a written

agreement to submit the controversy to a board of arbitrators

may be made under Part VIII.

Section 2150. Extension of Time for Payment.--The department

may, for reasonable cause, extend the time for payment of any

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part of the inheritance tax and may, if deemed necessary for the

protection of the interest of this Commonwealth, require the

transferee in present possession or, if a trust is involved, the

trustee to file a bond in the name of the Commonwealth with

sufficient surety, in an amount not exceeding twice the tax

computed when the bond is given at the highest rate possible in

the specific contingencies involved (reduced by the amount of

any partial payment made) and conditioned for the payment of the

tax at such postponed due date, together with interest from the

due date to the payment date. No bond shall be required under

this section if the trustee or one of the trustees is a bank and

trust company or a trust company incorporated in this

Commonwealth or a national banking association having its

principal office in this Commonwealth. The bond required shall

be filed in the office of the register.

Section 2151. Bond for Delinquent Tax.--The court, in its

discretion, at any time after a tax imposed by this article

becomes delinquent, upon application of the department, may

require any person liable for a tax imposed by this article to

give a bond for its payment. The bond shall be in the name of

the Commonwealth, in such amount and with such surety as the

court approves and conditioned for the payment of the tax, plus

interest at the same rate as the interest rate on deficiencies

provided for in section 2143, commencing on the date the tax

became delinquent, within a time certain to be fixed by the

court and specified in the bond. The bond required shall be

filed in the office of the register.

Section 2152. Evidence of Payment of Tax for Real Estate in

Another County.--When any tax is imposed and paid under this

article on real estate located in a county other than that of

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the register who received payment, the register shall, upon

request, immediately forward to the register of the county where

the real estate is located a certificate of the payment of the

tax on the real estate which shall be entered of record in his

office. The register of the county where the real estate is

located shall be entitled to a fee of two dollars ($2) for

entering the record of payment to be paid as a part of the

administration expenses of the decedent's estate.

Section 2153. Penalties.--(a) Any person who willfully

fails to file a return or other report required of him under the

provisions of sections 2136 and 2145 shall be personally liable,

in addition to any liability imposed elsewhere in this article,

to a penalty of twenty-five per cent of the tax ultimately found

to be due or one thousand dollars ($1,000), whichever is less,

to be recovered by the department as debts of like amount are

recoverable by law.

(b) Any financial institution which fails to give the notice

required by section 2147 shall be liable to a penalty of one

hundred dollars ($100) to be recovered by the department as

debts of like amount are recoverable by law.

required of him under the provisions of this article, in

addition to any liability imposed elsewhere in this article,

commits a misdemeanor of the third degree.

Section 2154. Payment of Tax for Small Business Transfers.--

(a) Notwithstanding the provisions of section 2142, the

inheritance tax due under this article on the transfer of a

small business interest may be paid by the qualified transferee

in consecutive quarterly installments beginning immediately

following the expiration of nine months after the decedent's

20180HB2054PN3010 - 45 -

death. The tax may be paid in twenty consecutive quarterly

installments.

(b) The tax shall be paid in consecutive quarterly

installments due on March 31, June 30, September 30 and December

31 of each year, provided the return required by section 2136 is

timely filed, along with a notice of election executed by the

qualified transferee and joined in by the personal

representative which shall relieve the personal representative

or other fiduciary of liability for the collection and payment

of tax under section 2146. The notice of election shall be

completed on a form prescribed by the department containing at

least the following information:

(1) The name of the decedent and date of death.

(2) The name or names of the personal representative or

other fiduciary.

(3) The name or names of the qualified transferees filing

the election.

(4) A description and estimated valuation of the business

interest on which tax is due.

(5) A statement that the qualified transferees assume full

personal responsibility for the tax.

Each notice of election shall be affirmed before an officer

empowered to administer oaths. The installment payment of tax

shall bear interest at the rate of nine per cent per annum.

which the installment payment of tax has been elected is sold,

exchanged or otherwise disposed of prior to the expiration of

five years following the date of death and that portion equals

or exceeds fifty per cent of the total value of the small

business interest received by the qualified transferee, the

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transferee shall immediately provide written notice of the sale,

exchange or disposition to the department, and the full amount

of the tax then outstanding on that portion shall become due and

payable at the expiration of sixty days following the date of

sale, exchange or other disposition.

(d) For purposes of this section, the term "small business

interest" means an interest in an operating trade or business

entity the principal purpose of which is not the management of

investments or income producing assets owned by the entity which

has employed an average of less than fifty full-time employes

during the twelve months immediately preceding the date of death

and which meets one of the following criteria:

(1) An interest as a proprietor in a trade or business

carried on as a proprietorship.

(2) An interest as a partner in a partnership carrying on a

trade or business if:

(i) twenty per cent or more of the total capital interest in

the partnership is included in determining the gross estate of

the decedent; or

(ii) the partnership had ten or less partners.

(3) Stock in a corporation carrying on a trade or business

if:

(i) twenty per cent or more in value of the voting stock of

the corporation is included in determining the gross estate of

the decedent; or

(ii) the corporation had ten or less shareholders.

(e) Qualified transferee defined.--For purposes of this

section, the term "qualified transferee" means a legatee or

other transferee receiving:

(1) ten per cent or more of the value of a proprietorship

20180HB2054PN3010 - 47 -

qualifying as a small business interest as defined in subsection

(d);

(2) ten per cent or more of the total capital interest in a

partnership qualifying as a small business interest as defined

in subsection (d); or

(3) ten per cent or more in value of the voting stock of a

corporation qualifying as a small business interest as defined

in subsection (d).

PART VIII

UNIFORM ACT ON INTERSTATE COMPROMISE AND

ARBITRATION OF INHERITANCE TAXES

Section 2156. Short Title.--This part shall be known and may

be cited as the "Uniform Act on Interstate Compromise and

Arbitration of Inheritance Taxes."

Section 2157. Compromise Agreement and Filing, Interest or

Penalty for Nonpayment of Taxes.--When the department or the

the time of his death and the taxing authority of another state

makes a like claim on behalf of its state, the department may,

with the approval of the Attorney General, make a written

agreement of compromise with the other taxing authority and the

executor or administrator of the decedent that a certain sum

shall be accepted in full satisfaction of any and all

inheritance taxes imposed by this Commonwealth, including any

interest or penalties to the date of signing the agreement. The

agreement shall also fix the amount to be accepted by the other

state in full satisfaction of inheritance taxes. The executor or

administrator of the decedent is authorized to make the

agreement. The agreement shall conclusively fix the amount of

tax payable to the Commonwealth without regard to any other

20180HB2054PN3010 - 48 -

provision of the laws of this Commonwealth. Unless the tax

agreed upon is paid within sixty days after the signing of the

agreement, interest or penalties shall accrue upon the amount

fixed in the agreement, but the time between the decedent's

death and the signing of the agreement shall not be included in

computing the interest or penalties. In the event the aggregate

amount payable under the agreement to the states involved is

less than the maximum credit allowable to the estate against the

Federal estate tax imposed with respect to the estate, the

personal representatives shall also pay to the department so

much of the difference between the aggregate amount and the

amount of such credit as the amount payable to the department

under the agreement bears to the aggregate amount. A copy of the

agreement shall be filed in the office of the proper register,

and any existing appraisement shall be deemed modified according

to the agreement. In the event no appraisement has been made and

filed prior to the agreement, the department shall direct an

appraisement to be made and filed in the office of the proper

Section 2158. Arbitration Agreement.--When the department or

the register claims that a decedent was domiciled in this

Commonwealth at the time of his death and the taxing authority

of another state makes a like claim on behalf of its state, the

department may, with the approval of the Attorney General, make

a written agreement with the other taxing authority and with the

executor or administrator of the decedent to submit the

controversy to the decision of a board consisting of one or any

uneven number of arbitrators. The executor or administrator of

the decedent is authorized to make the agreement. The parties to

the agreement shall select the arbitrator or arbitrators.

20180HB2054PN3010 - 49 -

Section 2159. Arbitration Board.--(a) The board shall have

the power to administer oaths, take testimony, subpoena and

require the attendance of witnesses and the production of books,

papers and documents and issue commissions to take testimony.

Subpoenas may be signed by any member of the board. In case of

failure to obey a subpoena, any judge of a court of record of

this Commonwealth, upon application by the board, may make an

order requiring compliance with the subpoena, and the court may

punish failure to obey the order as a contempt.

(b) The board shall hold hearings at a time and place it may

determine, upon reasonable notice to the parties to the

agreement, all of whom shall be entitled to be heard, to present

evidence and to examine and cross-examine witnesses.

issuance of subpoenas, all questions arising in the course of

the proceedings shall be determined by a majority vote of the

board.

(d) The board shall, by a majority vote, determine the

domicile of the decedent at the time of his death. This

determination shall be final for the purpose of imposing and

collecting inheritance taxes but for no other purpose.

(e) The compensation and expenses of the members of the

board and its employes may be agreed upon among the members and

the executor or administrator and, if they cannot agree, shall

be fixed by any court having jurisdiction over probate matters

of the State determined by the board to be the domicile of the

decedent. The amounts so agreed upon or fixed shall be deemed an

administration expense and shall be payable by the executor or

administrator.

Section 2160. Filing of Determination of Domicile and Other

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