The Recent Amendment to NYTL 954(a)(3) Concerning the Addback for Certain Taxable Gifts Made Within Three Years of a Decedent’s Death

The article explains the 2025 amendment to NYTL 954(a)(3), which extends the sunset for New York’s three-year gift addback to estates of decedents dying before January 1, 2032, and newly treats the incremental New York estate tax from such addbacks as an obligation of the decedent’s estate. By recharacterizing this amount as a debt, the amendment seeks to enable a federal deduction under IRC § 2053(a)(3) rather than the previously unavailable IRC § 2058 state death tax deduction pathway.

This change matters because the pre-amendment framework denied a federal deduction for tax attributable to property not included in the federal gross estate, increasing overall tax burdens for New York estates. The debt characterization is intended to be revenue neutral for New York while preventing prejudice to New Yorkers at the federal level.