People of Northwest Public Radio
Estate Tax Refunds
Wed June 12, 2013
Washington Estate Tax Refunds Go Out Friday, Unless Legislature Acts
Washington lawmakers have until the end of the month to pass a budget – if they hope to avoid a government shutdown. But there’s another costly deadline looming this week.
On Friday, the state will begin to mail out refund checks to comply with a Supreme Court ruling regarding the estate tax. That is unless the legislature acts in the next two days.
For Sharon Johnston, what happens or doesn’t happen in the state capitol this week could have major implications for her pocketbook.
“Twenty-thousand dollars is a lot of money,” she says.
Johnston is one of 24 beneficiaries to her father’s estate. He was a Christmas tree farmer. When his wife died in 2008, the heirs reluctantly paid more than $700,000 in estate taxes to the Washington Department of Revenue.
“We paid it because we felt it was the thing to do and knowing there was a good chance of getting that money back.”
That’s because there was a pending court challenge to the state taxing certain trusts after the death of a spouse. In 2012 the Washington Supreme Court, in what is known as the Bracken case, ruled these particular married couple trusts are not subject to the Washington estate tax.
“It is a technical glitch,” says state Representative Reuven Carlyle, a Seattle Democrat. He says the effect of the Supreme Court ruling is that married couples who set up a certain kind of trust are now exempt from paying the estate tax.
“I don’t think that’s what anyone intended,” he says.
So Carlyle – chair of the House Finance committee – is racing the clock to pass through the House, the Senate and get to the governor’s desk a Bracken “fix” before Friday morning. That’s when the first ten refund checks go in the mail so that the state doesn’t get sideways with the courts.
“I feel badly that those families feel that they’re entitled to a refund," Carlyle says, "but this is a very modest fix that is responsible governing.”
Responsible, says Carlyle, because the state is also under a Supreme Court order to increase funding to public schools. And the Bracken refunds would be paid out of the state’s Education Legacy Account.
But getting an estate tax bill through the legislature in two days would require the mostly Republican senate majority to agree this is a crisis.
“Well, if you want to avoid any refund checks, we’re in a very tight window,” says Senate Republican Leader Mark Schoesler.
He agrees the Bracken ruling probably needs to be addressed by the legislature. But adds, “It’s a difficult issue at a difficult time.”
As for Sharon Johnston, she says a $700,000 refund split 24 ways in her family would make life easier. Especially for her adult son. He just lost his wife to cancer and is disabled after a three-story fall off a roof.
“I think it can make a big difference between keeping your bills paid or not keeping your bills paid,” she says.
The Department of Revenue already has 70 refund requests pending worth $40 million to $50 million and more are expected.
Copyright 2013 Northwest News Network
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Estate tax - Washington Department of Revenue