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TITLE 34PUBLIC FINANCE
PART 1COMPTROLLER OF PUBLIC ACCOUNTS
CHAPTER 3TAX ADMINISTRATION
SUBCHAPTER MINHERITANCE TAX
RULE §3.228Payment of Tax, Penalty and Interest, Refunds (Date of Death on or after September 1, 1983)

(a) Payment of tax.

  (1) Payment of the tax arising from the transfer of property at death is due nine months after the date of death unless an extension to pay on a later specified date has been granted by the comptroller.

  (2) Payment of tax arising from the disposition of property or failure to use property for a qualified use under the Internal Revenue Code, §2032A, is due six months after the event which caused the additional tax to be imposed unless an extension to pay on a later specified date has been granted by the comptroller.

  (3) Payment of the tax arising from a generation-skipping transfer is due on the original due date of the federal tax on generation-skipping transfers unless an extension to pay on a later specified date has been granted by the comptroller.

  (4) Payment of the tax to the comptroller can be by personal check made payable to the treasurer of the State of Texas. However, the comptroller may require payment by cashier's check or United States money order where warranted.

  (5) If a payment is insufficient to cover all taxes, interest, and/or penalty due, the payment will be applied first against penalty, then interest, and then to the payment of tax.

(b) Penalty.

  (1) If any tax is not paid on or before the due date or approved extension date, a penalty of 5.0% of the unpaid tax is due and payable. If the tax is not paid within 30 days after the due date or approved extension date, an additional penalty 5.0% of the unpaid tax is due and payable.

  (2) Penalty will not be imposed if it is shown that late payment of tax is due to reasonable cause and not due to willful neglect. The burden of proving reasonable cause is on the personal representative of the estate.

  (3) Estates, trustees, or distributees that have been granted an extension of time to pay are required to pay on the extended date to avoid assessment of penalty.

(c) Interest. Interest at the rate of 10% per annum is due on any inheritance tax on the transfer of property at death not paid within nine months from the date of death or on any generation-skipping transfer tax not paid on the original due date, regardless of extensions granted. Interest will be waived where the computed amount is less than $5.00. Interest on payments made in installments is calculated on the total balance of the tax remaining unpaid. Any legislative changes in the interest rates will be reflected in the remaining tax payments from the effective date of the change.

(d) Extension of time to pay.

  (1) General information.

    (A) If a request for extension of the date of payment of the federal estate or generation-skipping transfer tax is not made to the Internal Revenue Service on or before the original due date, all corresponding state inheritance taxes are due on or before the original due date.

    (B) If an extension request made on or before the original due date is denied by the Internal Revenue Service or the comptroller, all tax and interest must be paid within 10 days after the date of denial to avoid the imposition of penalties.

    (C) The comptroller must be notified immediately of any changes to, or cancellation of, the Internal Revenue Service payment extension. If the Internal Revenue Service payment extension is cancelled prior to its conclusion, the inheritance tax liability must be paid within 10 days of the cancellation.

    (D) If any installment due is not paid on or before the extended payment date, the total amount remaining unpaid, including penalty and interest on the delinquent tax, becomes due and payable immediately.

    (E) Interest shall be due from the original due date of the tax, regardless of any extension to pay granted.

    (F) The four-year limitation period for assessment of the tax begins on the due date of each payment.

    (G) The amount of each state inheritance tax payment must be at least in the same proportion to the total inheritance tax liability as the federal estate tax payment is to the total federal estate tax liability and is due at the same time the federal estate taxes are due or the federal estate tax payment is made, whichever is earlier.

  (2) Extensions before July 21, 1987.

    (A) For inheritance tax due before July 21, 1987, if the due date for paying the federal estate tax is extended by the Internal Revenue Service, then the state inheritance tax shall be due and payable on the date specified by the Internal Revenue Service, except as provided by paragraph (1)(G) of this subsection.

    (B) The amount of state taxes deferred will be determined by multiplying the percentage of estate taxes extended by the total amount of state inheritance taxes due.

    (C) At a minimum, payments will consist of equal annual payments of principal, and of interest computed at 10% of the unpaid tax balance for the entire period of the extension payout.

    (D) A copy of the Supplemental Form 706 filed yearly with the Internal Revenue Service, or other such documentation showing the adjusted estate tax and federal credit balances, or any other changes in the financial condition of the estate, must also be filed with the comptroller at the time they are required to be filed with the Internal Revenue Service.

  (3) Extension on or after July 21, 1987.

    (A) For inheritance tax due on or after July 21, 1987, the state tax is not extended when the payment of the federal estate tax is extended. However, if the federal estate tax is extended, an estate may request an extension from the comptroller.

    (B) The extension request to the comptroller must be made on or before the original due date or extended due date and include the following (estimates should be made if exact amounts are unknown):

      (i) the original due date and any extended due dates;

      (ii) the amount of inheritance tax still due;

      (iii) the amount of inheritance tax originally due;

      (iv) the amount of federal estate tax still due;

      (v) the amount of federal estate tax originally due;

      (vi) the value of the gross estate;

      (vii) the value of real estate in Texas on the date of the extension request;

      (viii) the provisions of any extension or payout agreement granted by or requested from the Internal Revenue Service; and

      (ix) the proposed terms of the extension being requested.

  (4) Denial of loan applications. Copies of the loan applications and letters stating the reasons the loan was denied may be required from at least two financial institutions refusing to loan enough money to pay the state inheritance taxes.

  (5) Federal deductions. Interest expense which is allowed as a deduction under federal estate tax law indirectly reduces the state inheritance tax liability through a reduction of the allowable federal credit for state death taxes. Estates which pay their inheritance tax liability by the original due date, but are granted an extension to pay by the Internal Revenue Service, may apply for a refund annually after the federal interest deduction has been determined. Estates which are paying both state inheritance tax and federal estate tax liabilities under an extended payment plan may reduce the annual payment to the state by an amount directly proportional to the reduction in federal payments allowed by the Internal Revenue Service. A copy of the supplemental Form 706 filed with the Internal Revenue Service showing the adjusted federal and state tax will form the basis for the adjustment to the inheritance tax payments.

(e) Refunds.

  (1) Any personal representative, trustee, or distributee who has overpaid inheritance tax to the state may file a claim for refund with the comptroller within four years from the date the tax is due and payable or within six months after any deficiency determination becomes final, whichever period is last to expire. Failure to file within the time limits constitutes a waiver of any demand for the alleged overpayment.

  (2) A claim for refund will be considered by the comptroller only if it is in writing and specifically sets out the grounds upon which it is based. No specific form is required for the refund claim but the written request should contain sufficient information to specify the amount of refund claimed, the grounds upon which it is based, the name of the person overpaying the tax and, in the case of an estate, the name and date of death of the decedent. If requested by the person overpaying the tax, a hearing may be granted (see §§1.1-1.42 of this title (relating to Practice and Procedure)).

  (3) If a refund is approved, the refund check will be made payable to the estate, trustee, transferee, or distributee unless an assignment is made by a representative of the estate specifically instructing the comptroller to make payment to an individual.

  (4) In a comptroller's final decision on a claim for refund on estates of decedents with a date of death on or after January 1, 1982, interest will be allowed at the rate of 10% per year on the amount found to be erroneously paid. Interest accrues from 60 days after the date of payment or the due date of the tax return, whichever is later. Interest continues to accrue to the date of allowance of credit on account of the comptroller's final decision or to a date within 10 days prior to the date of the refund warrant. The exact date will be determined by the comptroller. Any claim for refund, whether made before or after December 4, 1986, will stop accruing interest on December 4, 1986.

(f) Waivers. For estates of decedents with a date of death on or after September 1, 1983, the statutory, or automatic lien, imposed on all estate assets at the date of death has been repealed. Lien releases (waivers) for an automatic lien will therefore not be necessary and will not be issued for estates with a date of death on or after September 1, 1983.


Source Note: The provisions of this §3.228 adopted to be effective December 28, 1987, 12 TexReg 4700; amended to be effective July 11, 1989, 14 TexReg 3145.

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