How does HB2005 affect the Kansas estate (pick-up) tax, and which forms and thresholds apply?
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This page answers the general question as of 2003. Ezel answers yours, under current Kansas tax law, with citations.
Plain-English summary
This notice explains what HB2005 (effective May 22, 2003) means for the Kansas estate (pick-up) tax. Sections 45-48 amended the existing estate tax for clarification; New Sections 50-66 added administrative and enforcement provisions; New Section 49 retroactively repealed the separate succession tax.
How the pick-up tax works. The Kansas estate tax equals 100% of the maximum federal credit allowable for state death taxes — it "picks up" that credit. By statute, Kansas incorporates federal law as it existed on December 31, 1997.
Why the 2001 federal cuts don't flow through. The June 2001 federal package phased down and (for 2010) eliminated the federal estate tax, raised the exclusion, and phased out the IRC §2011 state death-tax credit. Because Kansas is locked to 1997 federal law, none of that automatically applies to Kansas:
- Kansas filing thresholds (1997 law): $700,000 for deaths in 2002-2003, $850,000 (2004), $950,000 (2005), and $1,000,000 for 2006 and after — not the higher federal thresholds.
- Credit: Kansas still requires 100% of the state death-tax credit, with no percentage phase-out.
Forms.
- Deaths on/after July 1, 1998 and before June 6, 2002: Kansas Form K-706 (Revised 7/00).
- Deaths on/after June 6, 2002 and before May 22, 2003: Kansas Form K-707.
- Deaths on/after May 22, 2003: Kansas Form K-706 (Revised 2003), filed with a completed April 1997 version of federal Form 706 (in addition to any current federal 706 filed with the IRS).
A federal return must be completed because the tax is based on federal law; if no federal 706 was required, a pro forma federal 706 is completed and attached. When completing the April 1997 federal 706, the estate uses the 1997-law IRC §2010 exclusion/unified-credit amounts (the notice provides the table: e.g., $229,800 unified credit / $700,000 exclusion for 2002-2003, rising to $345,800 / $1,000,000 for 2006 and after) and does not reduce the state death-tax credit by any percentage.
What this means for you
If you're administering a Kansas estate, don't assume the generous post-2001 federal exclusions apply — Kansas is frozen at 1997 federal law, so its filing threshold can be much lower (as little as $700,000) and it still collects the full state death-tax credit. Pick the correct Kansas form by date of death, and for deaths on or after May 22, 2003 be prepared to complete an April 1997 federal Form 706 alongside the current federal return.
Common questions
Q: Do the 2001 federal estate-tax cuts reduce Kansas estate tax?
A: No. Kansas is tied to federal law as of December 31, 1997, so the higher exclusions and the credit phase-out do not flow through.
Q: What is the Kansas filing threshold?
A: Under 1997 law: $700,000 for 2002-2003, $850,000 (2004), $950,000 (2005), and $1,000,000 for 2006 and later.
Q: Which Kansas form do I file?
A: K-706 (rev. 7/00) for deaths 7/1/1998-6/6/2002; K-707 for deaths 6/6/2002-5/22/2003; K-706 (rev. 2003) with an April 1997 federal Form 706 for deaths on/after 5/22/2003.
Q: What if the estate didn't have to file a federal 706?
A: A pro forma federal Form 706 must still be completed and attached, since the Kansas tax is computed from federal law.
Citations and references
- 2003 House Bill 2005, Sections 45-48, New Sections 49-66 -- estate tax amendments (effective May 22, 2003).
- Internal Revenue Code Sec. 2010 -- applicable exclusion / unified credit (1997 federal law).
- Internal Revenue Code Sec. 2011 -- federal credit for state death taxes (1997 federal law).
- Kansas Forms K-706 (Rev. 7/00), K-706 (Rev. 2003), and K-707; April 1997 version of federal Form 706.
Subject
Implications of 2003 Session HB2005 for the Kansas Estate (Pick-Up) Tax
Source
- Landing page: Kansas Department of Revenue Policy Information Library
- Original document: Notice 03-08
Original ruling text
Notice
Notice Number: 03-08
Tax Type: Estate Tax
Brief Description: Implications of 2003 Session HB2005 for the Kansas Estate (Pick-Up) Tax
Keywords:
Approval Date: 06/20/2003
Body:
Office of Policy & Research
NOTICE 03-08
Implications of 2003 Session HB2005 for the
Kansas Estate (Pick-Up) Tax
During the 2003 Session, the Kansas Legislature reviewed the manner in which taxes are imposed on decedent’s
estates. At issue was the question of whether to retain, alter or repeal the estate tax (pick-up tax) and the succession
tax.
In the final days of the 2003 Session, the Kansas Legislature passed HB2005, which is effective May 22, 2003.
Sections 45 through 48 of the bill amend the existing estate tax law to provide clarification. New Sections 50 through
66 add administrative and enforcement provisions to the estate tax. New Section 49 of the bill provides for the
retroactive repeal of the succession tax that was imposed on the estates of decedent’s dying on or after June 6, 2002.
This Notice discusses the implications of HB2005 for the Kansas estate (pick-up) tax.
Kansas Estate Tax
The Kansas estate tax is based on federal law. By statute, Kansas has incorporated by reference federal law as it
existed on December 31, 1997.
Federal law as it existed on December 31, 1997 provides that when estate taxes are paid to a state, a credit for all or a
portion of that tax is allowed against the federal tax shown on the United States Estate (and Generation Skipping
Transfer) Tax Return, federal Form 706. The Kansas estate tax is equal to 100% of the maximum federal credit
allowable for state death taxes paid. In effect, the Kansas estate tax return picks up the maximum allowable credit
amount. This is why the Kansas estate tax is referred to as a “pick-up tax”.
2001 Changes In Federal Estate Tax Law
A major feature of the federal tax package adopted in June of 2001 is the phasing down and eventual elimination of
the federal estate tax. Under this law, the federal estate tax will be gradually reduced over the next decade until it is
eliminated in calendar year 2010.
The 2001 changes in federal law fall into two primary categories. First, the accelerated increase in the Internal
Revenue Code §2010 applicable exclusion amount has the effect of increasing the federal filing threshold to
$1,000,000 effective for the estates of decedent’s dying on or after January 1, 2002. In accordance with federal law
this amount will increase to $1,500,000 for deaths occurring in 2004, $2,000,000 for deaths occurring in 2006, and
$3,500,000 for deaths occurring in 2007.
Second, under the new federal law the federal credit for state death taxes found in Internal Revenue Code §2011 is
phased out. In accordance with federal law, for deaths occurring in 2002 the amount of the credit is decreased by 25%,
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for deaths occurring in 2003 by 50%, and for deaths occurring in 2004 by 75%. For deaths occurring in 2005 or later
years the credit is eliminated and replaced with a deduction.
2001 Changes In Federal Estate Tax Law
Do Not Affect The Kansas Estate Tax
Many believe the Kansas estate tax law is in total conformity with federal law, and that the 2001 changes to federal
law automatically flow through to Kansas. This is not the case. By statute, Kansas has incorporated by reference
federal law as it existed on December 31, 1997. Therefore, under current law, the Kansas estate tax is not affected by
the 2001 changes to federal law.
The 1997 federal law Kansas has incorporated by reference does not recognize the accelerated filing thresholds found
in current federal law. Instead, the state filing threshold is $700,000 for deaths occurring in 2002 and 2003, $850,000
for deaths occurring in 2004, $950,000 for deaths occurring in 2005, and $1,000,000 for deaths occurring in 2006 or
thereafter.
Similarly, the 1997 federal law Kansas has incorporated by reference does not include a provision that provides for a
phase-out of the federal credit for state death taxes. Instead, 100% of the amount of the credit is to be paid.
Forms Required For
Estates of Decedents Dying Before May 22, 2003
If the gross value of the estate is in excess of the filing threshold established by the 1997 federal law Kansas has
incorporated by reference for the year of the decedent’s death:
Estates of decedents dying on or after July 1, 1998 and prior to June 6, 2002 should file Kansas Form K-706
(Revised 7/00).
Estates of decedents dying on or after June 6, 2002 and prior to May 22, 2003 should file Kansas Form K-707.
These forms, and instructions, are available on the Department of Revenue’s web site at: www.ksrevenue.org
Because the estate (pick-up) tax is based on federal law, a federal return must be completed. Kansas Form K-706
(Revised 7/00) or Form K-707 may be used with the version of the federal form that corresponds to the decedent’s
date of death. If the estate filed a federal Form 706, a copy must be attached. If the estate was not required to file a
federal Form 706, a pro forma federal Form 706 must be completed and attached.
If the estate files a pro forma federal Form 706 with Kansas Form K-706 (Revised 7/00) or Form K-707, the estate
may make any elections that are available under federal law. These elections may be made regardless of whether a
federal Form 706 is actually filed with the Internal Revenue Service. However, if the estate files a federal Form 706
with the Internal Revenue Service, the election(s) made on that form will be used for Kansas estate tax purposes.
Forms Required For
Estates of Decedents Dying On or After May 22, 2003
The changes made by HB2005 make it necessary for the Department of Revenue to redesign the form used in
reporting the estate tax imposed on the estates of decedents dying on or after May 22, 2003. This process is underway,
and it is anticipated the new form [Form K-706 (Revised 2003)] will be available on-line around July 1, 2003. Please
check the Department’s web site at: www.ksrevenue.org for updated information.
Because the estate (pick-up) tax is based on federal law, a federal return must be completed. In deciding which version
of the federal return to require for the estates of decedents dying on or after May 22, 2003, the Department noted the
differences that presently exist between the 1997 federal law and forms and current federal law and forms. It also
noted that additional differences are likely to arise as federal law continues to change. In light of these differences, the
Department determined estates should file the federal Form 706 that most closely reflects the federal law that existed
on December 31, 1997.
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Therefore, all estates of decedents dying on or after May 22, 2003 must complete the April 1997 version of
federal Form 706 and file it with the Kansas Form K-706 (Revised 2003). The April 1997 version of federal
From 706 that must be completed and filed with the estate’s Form K-706 (Revised 2003) is in addition to any
current federal Form 706 that is filed with the Internal Revenue Service.
When completing the April 1997 version of the federal Form 706 the estate may make any elections that are available
under federal law as it existed on December 31, 1997. These elections may be made regardless of whether a federal
Form 706 is actually filed with the Internal Revenue Service. These elections are also independent of any election
made on a federal Form 706 that is actually filed with the Internal Revenue Service.
When completing the April 1997 version of the federal Form 706 the estate should use the applicable Internal
Revenue Code §2010 exclusion amount allowed for the year of death under federal law as it existed on December 31,
1997. These amounts, which are referred to on page 1, line 11, of the federal return as the “maximum unified credit
against estate tax” are shown in the following table:
Unified Credit
Applicable
Unified Exclusion
Year Credit Amount
2002 229,800 700,000
2003 229,800 700,000
2004 287,300 850,000
2005 326,300 950,000
2006 and after 345,800 1,000,000
The amount of the federal credit for state death taxes determined on the April 1997 version of federal Form 706
should not be reduced by any percentage. Instead, 100% of the amount of the recalculated credit should be used in
determining the amount of Kansas tax due.
Supporting Materials Required
All materials that are required by federal law to be filed in support of the federal Form 706 must be completed and
must accompany the April 1997 version of federal form 706 that is filed with the Kansas return.
If the estate filed a federal Form 706 with the Internal Revenue Service, a copy of the federal return, together with a
copy of all materials filed in support of the federal Form 706, must also accompany the Kansas return.
For More Information
To obtain additional copies of this or any other notice call the Kansas Department of Revenue’s voice mail forms
request line at (785) 296-4937 or download them from our web site: www.ksrevenue.org. If you have any questions
about this notice or Kansas estate tax, please contact our Estate Tax Unit.
Kansas Estate Tax
Kansas Department of Revenue
915 SW Harrison St.
Topeka, KS 66625-2222
In Topeka call: 368-8222
Outside Topeka call toll free: 1-877-526-7738
Fax: (785) 296-4993
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Date Composed: 06/20/2003 Date Modified: 06/20/2003
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