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Should North Carolina do away with the state gift tax?

North Carolina currently levies a state gift tax. The gift tax is applied when assets such as money or
property are given from one person to another if the value of the gift exceeds certain allowable exclusion
amounts. The amount of the tax varies depending on the type of relationship between the donor and the
recipient and the size of the gift. There is no tax on gifts to spouses and the tax is lower on gifts to direct
descendents such as children and grandchildren than to those less closely related to the giver.

The gift tax raises approximately $18 million annually in general fund revenue. The primary purpose of the
state gift tax is to prevent the erosion of estate tax revenues. Without a gift tax, owners of large estates can
avoid estate tax liability by giving away significant portions of their estates over time. Eliminating or
significantly changing North Carolina's gift tax will have implications for the state's estate tax collections, the
ability of the state to finance services now and in the future and the fairness of the state's tax system. The
passage of Senate Bill 1756, which will now be considered by the House of Representatives, signals the
need for full consideration of the implications of this potential policy change. Read the new BTC Brief for a complete analysis of this issue.

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