[Congressional Record Volume 143, Number 76 (Thursday, June 5, 1997)]
[Extensions of Remarks]
[Page E1135]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


   H.R. 531--A BILL TO AMEND THE GENERATION-SKIPPING TRANSFER TAX LAW

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                           HON. AMO HOUGHTON

                              of new york

                    in the house of representatives

                         Thursday, June 5, 1997

  Mr. HOUGHTON. Mr. Speaker, my colleague, Mr. Matsui and I, introduced 
H.R. 531 on February 4, 1997. The legislation will add two amendments 
to the generation-skipping tax [GSTT] law which we believe were 
unintentionally omitted by Congress at the time the original provisions 
were enacted. The changes recommended by H.R. 531 were adopted by 
Congress as section 11074 of the Balanced Budget Act of 1995 which was 
eventually vetoed by the President. The legislation concentrates on the 
``predeceased parent exclusion'' of the GSTT law, which provides that 
GST tax is not applied to direct gifts or bequests made by a 
grandparent to a grandchild where the grandchild's parent--the 
transferor's child--is deceased at the time of the transfer. When this 
situation occurs, there is no generation-skipping, since the child--
grandchild's parent--is dead; therefore, it is not appropriate to add 
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 as 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 
grandniece and grandnephew in the situation where the individuals 
siblings and nieces and nephews are all deceased at the time of 
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 trusts 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 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 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 proposed legislation has substantial support from charities, both 
large and small, and of all types, such as: social services providers, 
museums, libraries, hospitals, and universities, from around the 
country. We urge our colleagues to join us in support of this 
legislation.

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