[Congressional Record Volume 141, Number 38 (Wednesday, March 1, 1995)]
[Extensions of Remarks]
[Pages E470-E471]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


           AMENDMENTS TO THE GENERATION-SKIPPING TRANSFER TAX

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                           HON. AMO HOUGHTON

                              of new york

                    in the house of representatives

                        Wednesday, March 1, 1995
  Mr. HOUGHTON. Mr. Speaker, I am joined today by several of my 
colleagues, including Mr. Brewster, Mr. Shaw, and Mr. Jacobs, in 
[[Page E471]] introducing legislation to add two 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. This bill was sponsored in the 103d Congress by Mr. 
Brewster, and I have taken the liberty of including his statement of 
introduction, with minor changes, to introduce the bill in this 
Congress.
  The amendments concern the predeceased parent exclusion of the GSTT 
law. The exclusion 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. Where this 
situation occurs, there is no generation-skipping, since the child is 
dead; therefore it is not appropriate to add a GST tax on top of 
ordinary estate or gift taxes, and the predeceased parent exclusion 
properly excludes such transfers from the GST tax.
  Our bill would expand 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 would be treated the same as transfers by persons with 
lineal descendants. Accordingly, 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. 
In addition to other trusts, this provision particularly affects 
certain charitable trusts where the charity would have an interest for 
a period of years before distributing property to the individual 
beneficiaries. In the situation where the beneficiary's parent is dead, 
and was dead when the trust was created, there is certainly no 
generation skipping involved which would justify the levy of an 
additional tax. It is important to note, that these trusts are 
significant sources of financial support for many charities, and should 
not be discouraged, unintentionally, where not necessary for the policy 
of the underlying tax provisions. The bill would remove this obstacle.
  The terminations, distributions, and transfers to which this bill 
would apply are those occurring on or after January 1, 1995, 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 proposed legislation has substantial support from charities, both 
large and small, and of all types, for example, social service 
providers, museums, libraries, hospitals, and universities, from around 
the country. In September 1993 testimony before the Subcommittee on 
Select Revenue Measures of the Ways and Means Committee, the 
administration indicated they did not oppose the measure. We would 
welcome other Congressmen as cosponsors of this legislation.


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