[Congressional Record Volume 140, Number 51 (Tuesday, May 3, 1994)]
[Extensions of Remarks]
[Page E]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


[Congressional Record: May 3, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
           AMENDMENTS TO THE GENERATION-SKIPPING TRANSFER TAX

                                 ______


                         HON. BILL K. BREWSTER

                              of oklahoma

                    in the house of representatives

                          Tuesday, May 3, 1994

  Mr. BREWSTER. Mr. Speaker, I am joined today by several of my 
colleagues, including Congressmen Houghton, Gephardt, Kopetski, and 
Shaw, in introducing legislation to add two minor amendments to the 
generation-skipping transfer tax [GSTT] law which we believe were 
unintentionally omitted by Congress at the time the original provisions 
were enacted.
  As it currently stands the predeceased parent exclusion of the GSTT 
law applies to direct gifts or bequests from a grandparent to a 
grandchild where the grandchild's parent--the transferor's child--is 
deceased at the time of the transfer. In this situation, since the 
grandparent's child is dead, there is no generation-skipping; 
therefore, it would be wrong to collect GST tax on top of ordinary 
estate or gift taxes, and the predeceased parent exclusion properly 
excludes such transfers from GST tax.
  Our bill expands the predeceased parent exclusion to apply to gifts 
by persons without lineal descendants and to trust gifts.
  First, gifts or bequests by a childless individual to collateral 
descendants will be treated the same as transfers by persons with 
lineal descendants. Thus, the exclusion would be extended to apply to 
transfers made by a childless individual to his or her grandnieces and 
grandnephews in the situation where that individual's siblings and 
nieces and nephews are all deceased at the time of the transfer.
  Second, the bill applies the predeceased parent exclusion to 
transfers made through a trust. Under current law, the predeceased 
parent exclusion is limited, unintentionally, we believe, to direct 
gifts and bequests, and does not apply to trust gifts even if the 
parent of the receiving beneficiary was deceased at all relevant times. 
While many trusts are affected, this provision particularly impacts 
certain charitable trusts where the charity would have an interest for 
a period of years before distributing property to the individual 
beneficiaries. Where the beneficiary's parent is dead, and was dead 
when the trust was created, there is obviously no generation-skipping 
going on which would warrant the levy of an additional tax. These 
trusts are important sources of financial support for many charities, 
and should not be discouraged, unintentionally, where not necessary for 
the policy of the underlying tax provisions. Our bill takes away this 
needless discouragement.
  The terminations, distributions, and transfers to which this bill 
would apply are those occurring after the date of enactment which would 
be generation-skipping transfers as defined in section 2611 of the 
Internal Revenue Code and subject to the GST tax, except for the 
application of the predeceased parent exclusion as amended by this 
legislation.
  The administration has reviewed the proposal and given testimony 
before the Subcommittee on Select Revenue Measures of the Ways and 
Means Committee that it does not oppose this measure in that the 
policies underlying the special rules for transfers to grandchildren 
would support these proposed expansions of the predeceased parent 
exclusion. The legislation is also supported by members of the real 
property, probate and trust Law section of the American Bar 
Association, and has substantial support from charities, both large and 
small, and of all types--for example, social service providers, 
museums, libraries, hospitals, and universities--from all across the 
country.
  A companion bill is being introduced in the Senate by Senators Boren, 
Danforth, Pryor, Wallop, Baucus, and Grassley and several other members 
of the Senate Finance Committee. We would welcome other Congressmen as 
cosponsors of this legislation.

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