House Bill No. 384

Introduced By ellis, feland, kitzenberg, rehbein, tash, baer, lawson, denny, sliter, wells, mood, mesaros, hargrove, bitney, ahner, molnar, prouse, bohlinger, beaudry, adams, curtiss, soft, story, wagner, brainard, bergman, simon, taylor, stovall, hibbard, cobb, keenan, jore, holland, knox, anderson, mercer, ohs, grimes, jenkins, masolo, bankhead, mills, hayne, devaney, beck, m. hanson, kasten, barnett, grinde, smith, boharski, thomas, aklestad, rose, mcgee, sprague, arnott, bookout, estrada, glaser, emerson, burnett, foster, mahlum, marshall, devlin, depratu, mcnutt

A Bill for an Act entitled: An Act excluding from inheritance taxes any interest in and the real property and tangible personal property of closely held businesses that are transferred to the lineal descendants of the decedent's grandparents; amending sections 72-16-101, 72-16-453, and 72-16-455, MCA; and providing an immediate effective date and a retroactive applicability date.

Be it enacted by the Legislature of the State of Montana:

Section 1.  Exemption for closely held business property. (1) The value of any interest in a closely held business represented by real property and tangible personal property and all real property and tangible personal property of a closely held business, as defined in 72-16-453, that is transferred to the lineal descendants of the decedent's grandparents is exempt from the tax imposed under parts 1 through 8.

(2) Property owned by a closely held business is considered as being owned proportionately by or for its shareholders, partners, or owners.

(3) For the purposes of this section, "tangible personal property" means property, other than intangible property as defined in 72-16-101, that is owned by a closely held business. The term does not include an ownership interest in the closely held business.

Section 2.  Section 72-16-101, MCA, is amended to read:

"72-16-101.   Definitions. In parts 1 through 8, the following definitions apply:

(1)  The words "county "County treasurer", "public administrator", and "county attorney" shall be taken to mean the treasurer, public administrator, and county attorney of the county in which the district court has jurisdiction of the proceedings.

(2)  The word "decedent" shall include "Decedent" includes the testator, intestate, grantor, bargainor, vendor, or donor.

(3)  The words "estate" "Estate" and "property" shall be taken to mean the real and personal property or interest therein in the property passing or transferred to individual legatees, devisees, heirs, next of kin, grantees, donees, or vendees and not as the property or interest therein in the property of the decedent, grantor, donor, or vendor and shall include include all personal property within or without outside of the state.

(4)  "Intangible" or "intangible property", when used without other qualifications, shall be taken to include includes but is not limited to all moneys money, stocks, bonds, notes, securities, leaseholds, contracts, and credits of all kinds, secured or unsecured.

(5)  The terms "joint" "Joint" and "jointly" refer to ownership of property by two or more persons having as one of the incidents of such the ownership the right of survivorship in the surviving owner or owners upon the death of one of the owners. This definition does not affect the concept of property owned as tenants in common, and this type of ownership shall continue continues to be recognized where when applicable.

(6)  The word "transfer" shall be taken to include "Transfer" includes the passing of property or any interest therein in the property, in possession or enjoyment, present or future, by inheritance, descent, devise, succession, bequest, grant, deed, bargain, sale, gift, or appointment in the manner herein prescribed in parts 1 through 8 to each individual or corporation."

Section 3.  Section 72-16-453, MCA, is amended to read:

"72-16-453.   Closely held business defined -- qualification. (1) For the purposes of [section 1] and 72-16-452, the term following definitions apply:

(a) "Closely held business" means:

(i) a trade or business carried on as a sole proprietorship;

(ii) a partnership carrying on a trade or business if the partnership had 15 or fewer partners; or

(iii) a corporation carrying on a trade or business if the corporation had 15 or fewer shareholders.

(b) "interest "Interest in a closely held business" means:

(a)(i)  an interest as a sole proprietor in a trade or business carried on as a proprietorship;

(b)(ii)  an interest as a partner in a partnership carrying on a trade or business if:

(i)(A)  20% or more of the total capital interest in the partnership is would be taxable under Title 72, chapter 16, part 3, except for [section 1], as a transfer from the decedent; or

(ii)(B)  the partnership had 15 or fewer partners;

(c)(iii)  stock in a corporation carrying on a trade or business if:

(i)(A)  20% or more in value of the voting stock of the corporation is would be taxable under Title 72, chapter 16, part 3, except [section 1], as a transfer from the decedent; or

(ii)(B)  the corporation had 15 or fewer shareholders.

(2)  Determination for qualification under subsection (1)(b) must be made as of the time immediately before the decedent's death.

(3)  Stock or a partnership interest held by a husband and wife as joint tenants or tenants in common is treated as owned by one shareholder or one partner, as the case may be.

(4)  Property owned directly or indirectly by or for a corporation, partnership, estate, or trust is considered as being owned proportionately by or for its shareholders, partners, or beneficiaries. For the purposes of this subsection, a person is a beneficiary of a trust only if he the person has a present interest in the trust.

(5)  All stock and all partnership interests held by the decedent or by any member of his the decedent's family within the meaning of section 267(c)(4) of the Internal Revenue Code is treated as being owned by the decedent."

Section 4.  Section 72-16-455, MCA, is amended to read:

"72-16-455.   Partnership interests and stock not readily tradable. (1) If the personal representative elects the benefits of this section, at such the time and in such the manner as the department may prescribe:

(a)  for the purposes of 72-16-453(1)(b)(i)(1)(b)(ii)(A) or (1)(c)(i) (1)(b)(iii)(A), whichever is appropriate, and for the purposes of 72-16-456, any capital interest in a partnership and any nonreadily tradable stock, which after the application of 72-16-453(2) through (5) is treated as owned by the decedent, shall must be treated as taxable under Title 72, chapter 16, part 3, in determining the value of a transfer from the decedent;

(b)  the personal representative shall must be treated as having selected under 72-16-452(3) the date prescribed by 72-16-441 for the payment of the tax without interest; and

(c)  section 72-16-461 does not apply.

(2)  For the purposes of this section, "nonreadily tradable stock" means stock for which at the time of the decedent's death there was no market on the stock exchange or in an over-the-counter market."

Section 5.  Codification instruction. [Section 1] is intended to be codified as an integral part of Title 72, chapter 16, part 3, and the provisions of Title 72, chapter 16, part 3, apply to [section 1].

Section 6.  Effective date -- retroactive applicability. [This act] is effective on passage and approval and applies retroactively, within the meaning of 1-2-109, to estates of persons who die after December 31, 1996.

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