Prior to passage of the Economic Growth and Tax Relief Reconciliation Act of 2001, many states imposed a credit tax as their death tax (as opposed to an inheritance or estate tax). The credit tax is tied directly to the maximum allowable state death tax credit under the federal estate tax. With gradual repeal of the state death tax credit between 2002 and 2005, many states have revised their laws to tie their death tax to the federal credit system in place prior to passage of the 2001 Tax Relief Act.
A few of the states previously relying on the credit tax system have not enacted new taxes to take the place of the credit tax. As a result, they will have no death taxes by 2005, unless they take steps to fill the void.
