Existing law, the Personal Income Tax Law, in partial conformity with federal income tax law, imposes a tax on the taxable income of estates or of any kind of property held in trust. That law provides the taxable income of an estate or trust is computed in the same manner as in the case of an individual, except as provided, and the tax is paid by the fiduciary of the trust or estate. Existing law provides that, where the grantor or another person is treated as the owner of any portion of the trust, known as a “grantor trust,” then items of income, deductions, and credits against tax of the trust are included in computing the taxable income and credits of the grantor or other owner. Existing law, for taxable years beginning on or after January 1, 2023, includes the income of an incomplete gift nongrantor trust, as defined, in the gross income of the grantor to the extent the income of the trust would be taken into account in computing the grantor’s taxable income if the trust were treated as a grantor trust, except as provided.

This bill would amend the definition of incomplete gift nongrantor trust to specifically exclude a trust, or portion of a trust, that qualifies as a charitable remainder trust, as specified. The bill would include findings and declarations that this change does not constitute a change in, but is declaratory of, existing law.