Estate of EMELINE CHILDS, Deceased. EMELINE CHILDS DWIGHT et al., Appellants,
v.
HARRY B. RILEY, as State Controller, etc., Respondent.
Supreme Court of California. In Bank.
Burr & Smith and A. J. Cathcart for Appellants.
James W. Hickey, Inheritance Tax Attorney, and Raymond G. LaNoue, Assistant Inheritance Tax Attorney, for Respondent.
CARTER, J.
This appeal presents a controversy in relation to the rate and method of computation of the inheritance tax payable by reason of property transfers to appellants at death and prior thereto designed to take effect in enjoyment or possession at death. It is conceded by appellants and respondent that both the transfers before death and at death are subject to inheritance tax, those before death taking effect in possession or enjoyment at or after death. (Stats. 1935, p. 1266, sec. 2 (3) [Deering's Gen. Laws, 1937, Act 8495].)
The three appellants are adult daughters of the deceased. The taxable transfers made to them by the deceased prior to her death were as follows: First, in June, 1920, when each of the appellants received property of the value of $15,000; second, on December 13, 1926, when each appellant received property valued at $7,000; and third, on June 20, 1927, when each appellant received property valued at $92,163.51. Thus each appellant received by reason of the ante death transfers, property of a total value of $114,163.51. The deceased died on September 24, 1935, and each of the appellants received by her will, after deductions were made, property of the value of $36,909.58. In the probate proceeding on deceased's estate, and pursuant to the report of the Inheritance Tax Appraiser, the court below, by its order here appealed from, fixed the inheritance tax on the transfer of the property to each appellant at $6,225.12. In computing this tax with reference to the exemptions and the rate bracket applicable, the court chose as the figure upon which to make its calculation the total amount of the transfers received by each appellant before and at decedent's death, or the sum of $151,073.09. The four transfers were thus treated as one or as one taxable unit. One exemption of $10,000 was allowed to each appellant, and the rate applied was 1% on the first $25,000, 2% on the next $25,000, 4% on the next $50,000, 7% on the next $14,163.51, and 7% on the next $36,909.58.
It is appellants' contention that the transfer at death of $36,909.58 should have been treated separately from the inter *240 vivos transfers and taxed according to the rates provided for in the Inheritance Tax Act of 1935 in effect at the time of decedent's death (Stats. 1935, p. 1266); that the inter vivos transfers should have been aggregated, a $10,000 exemption allowed, and the rates fixed at 1%, 2%, 4% and 7% on the amounts above mentioned; and that on the transfer at death an additional exemption of $5,000 should have been allowed and a rate of 2% on $25,000, and 3% on $11,909.58 applied. The total tax on all the transfers to each appellant would thus be $1,826.39 less than that fixed by the court. The basis of appellants' theory is that the rates and exemptions provided for in the 1935 Inheritance Tax Act could apply only to the transfer at death, and that the transfers inter vivos must be treated as separate transfers and governed by the law in effect prior to 1935. The rates under the 1935 act are 2% on the first $25,000, 3% on the next $25,000, 4% on the next $50,000, and 7% on the next $100,000.
[1a] In general, appellants endeavor to raise the question as to whether taxable transfers inter vivos and at death may be aggregated and treated as one transfer occurring at death, with the result that the law with reference to rates and exemptions in force at the time of death is applied, rather than that in effect when the transfers inter vivos were made. This includes the further question of whether only one exemption should be allowed. If all the transfers are considered as a single transfer, then, of course, only one exemption would be permitted and the aggregation of the transfers would raise the total value of the property transferred to a point where it, or at least a portion thereof, might reach the higher tax rate brackets, inasmuch as under the general scheme of the inheritance tax laws the rate of the tax increases as the value of the property transferred becomes greater.
Appellants cite and rely upon the cases of Riley v. Havens,
Let us first ascertain precisely what was done by the trial court in the case at bar. It did not, in computing the tax, impose on the transferees all of the tax burden which might have resulted from the aggregation of the transfers, nor did it follow exclusively either the 1935 Inheritance Tax Act or the prior acts. The exemption under the 1935 act, when the transferee is an adult child, is $5,000, rather than the $10,000 allowed by the court. (Stats. 1935, p. 1266, sec. 6.) The rate of taxation under that act for an adult child is 2% on the first $25,000, 3% on the next $25,000, 4% on the next $50,000, and 7% on the next $100,000. (Stats. 1935, p. 1266, secs. 4 and 5.) The rates under the 1917 act are 1% on the first $25,000, 2% on the next $25,000, 4% on the next $50,000, and 7% on the next $100,000. The court applied the exemption provided for by the 1917 Inheritance Tax Act (Stats. 1917, p. 880, secs. 4, 5 and 6 [Deering's Gen. Laws, 1917 Supp. Act 8442]), and as to the rates, it applied the 1917 act to the transfers inter vivos and the 1935 act to the $36,909.58 transferred at death, that rate being 7% because the aggregation forced that transfer into the higher rate bracket. In respect to that rate, the result would have been the same upon the application of either of the acts because it is the same under both. However, as appellants point out, the court did aggregate the transfers to the extent of accomplishing two results, of which appellants complain. First, that only one exemption was allowed, to-wit, $10,000, whereas, if the tax on the transfers inter vivos and at death had been computed separately, an exemption of $10,000 would have been allowed on the inter vivos transfers under the 1917 act, and one of $5,000 on the transfer at death under the 1935 act. Second, that the aggregation caused all of the $36,909.58 transfer at death to fall in the higher rate bracket calling for a 7% tax, rather than computing the tax on that transfer separately and at the primary or lower bracket rates. They concede that the rates applied on the transfer at death should be calculated on the rates provided for in the 1935 act. Appellants then conclude that because of the above mentioned results, the court *242 gave retroactive effect to the 1935 act, which would render such act unconstitutional. Whether such effect was given, regardless of whether it is proper or improper, depends first upon what changes, if any, were made in the law between the date of the first transfer and the effective date of the 1935 act. We have seen that the rates on the first two $25,000 brackets were increased by the 1935 act from 1% and 2% respectively, to 2% and 3%. The third and fourth brackets of $50,000 and $100,000 respectively remained unaltered at 4% and 7%. The exemption was reduced from $10,000 to $5,000. In respect to the right to aggregate the transfers in computing the tax, section 2 (9) of the 1917 act provided as follows: "When more than one transfer within the meaning of any of the preceding subdivisions (subdivisions dealing with transfers at death and inter vivos) of this section has been made, either before or after the passage of this act, by a decedent to one person, the tax shall be imposed upon the aggregate market value of all of the property so transferred to such person in the same manner and to the same extent as if all of the property so transferred were actually transferred by one transfer." (Emphasis added.) The 1917 act was repealed and a new inheritance tax act was enacted in 1921. (Stats. 1921, p. 1500 [Deering's Gen. Laws, 1923, Act 8443].) Section 2 (the section which contains the provision with reference to aggregation) of the 1921 act was amended in 1925 (Stats. 1925, p. 473) and in 1929. (Stats. 1929, p. 1834.) At no time however was the wording of the above quoted portion of section 2 altered or added to in any respect. The rates of taxation and exemptions were not changed until the adoption of the 1935 act. The 1921 act was repealed by the 1935 act, but the 1935 act contains a provision identical with the above quoted provision from the 1917 act with respect to aggregation, with the addition, however, at the end thereof of the words: "... made at the date of the transferor's death and with the value, rates and exemptions as of that date." (Stats. 1935, p. 1266, sec. 2 (10).) [2] It should be observed that although both the 1917 and 1921 acts were repealed, the repealing acts were embraced within the new acts covering the same subject matter as the repealed acts. Under such circumstances it cannot be doubted that the new acts were reenactments and that there was a continuation in the new acts of those provisions of the repealed acts which were carried over without alteration into the former. Therefore, *243 the provision above quoted concerning aggregation remained in force and has continuously been the law since its original adoption in 1917. (Estate of Martin,
[4] It is clear, therefore, that at the time all the transfers here involved were made, there was statutory authority to aggregate the market value of all the property so transferred, and to impose a tax based on such aggregated value to the same extent and in the same manner as if there had been only a single transfer. That authority has existed continuously since the enactment of the 1917 act, which was prior to the first transfer here involved. Disregarding the provision in the 1935 act, specifying that the aggregated value of all transfers shall be taxed as a single transfer at death, and according to the rates and exemptions then in effect (such provision was not in the 1917 act), it remains only to ascertain what effects may reasonably be said to flow from such aggregation. Certainly it is obvious that the authority to aggregate and impose a tax the same as on a single transfer carries with it at least two results, namely, that several transfers being treated as one and taxed accordingly necessarily means that but one exemption shall be allowed, and that such aggregation would also necessarily result in the aggregate value being such that a higher tax rate bracket would be reached or at least approached. If these results did not follow, the aggregation provision as enacted in 1917 would be meaningless. We see no other purpose to be accomplished by it. [5] In respect to exemptions, section 6 (6) of the 1935 act provides:
"In computing the tax upon transfers subject to tax ... the exemptions ... shall be deducted from the aggregate amount of property transferred, and the transfer of the remainder *244 of the property after making such deduction shall be taxed at the rates at which it would have been taxed had no exemption ... been allowed." The import of this provision is that only one exemption is to be allowed on a transfer, and where under the authority to aggregate, several transfers are made one in legal effect, the rule of only one exemption still applies. (See Estate of Brown,
[7, 8] As we understand appellants' argument, they assert that the 1917 provision, by reason of the 1935 addition thereto must necessarily be considered as retroactive as to rates and exemptions and therefore unconstitutional, and that when so considered, the whole authority to aggregate transfers is wiped out. If the portion added in 1935 is unconstitutional because retroactive, it is apparent from what has heretofore been said that it may be separated from the balance of the provision without stripping it of meaning or effect. This would be in accord with the well established rule that a portion of a statute may be declared unconstitutional without affecting the remainder of the act when the result of the deletion of the unconstitutional portion will not make the statute meaningless and it can be said to have been the intention of the legislature to have the act stand with such deletion. The 1935 act contains the customary declaration of legislative intent that the unconstitutionality of a part of the act shall not invalidate the remainder. (Stats. 1935, p. 1266, sec. 24.) Moreover the conclusion urged by appellants does not necessarily follow. The portion of the provision authorizing aggregation and appearing before the 1935 addition, has been, as we have seen, the law ever since 1917 and still was the law after the adoption of the 1935 act. [9] The portion of an amended statute which remains the same as it was prior to the amendment, continues to be the law from the time of its original enactment and any changes or additions are considered as having been enacted at the time of the amendment. (Carter v. Stevens,
We are not concerned here with a case in which a change in the law subsequent to some of the transfers has resulted in increasing the amount of the tax computed on the total value of all of the property so transferred. In such a case it might be claimed that such change could not affect the prior transfers. But as pointed out heretofore, the rate on the level reached by the aggregation in this case is the same in both the 1917 and 1935 acts. Appellant is not injured and we are not disposed to pass upon a hypothetical case. Nor are we concerned with what formula would have to be applied, that is, the rates and exemptions to be applied, if the rates and exemptions here applicable had been changed between the times of the various transfers, when the transfers are aggregated, because there was no such change. However, there is no difficulty concerning the formula even in such event. The aggregation would fix the rate bracket in which each transfer would fall and the rate at the time of the transfer could be applied. Any changes in exemptions could be apportioned.
The order is affirmed.
Gibson, C.J., Traynor, J., Shenk, J., Pullen, J., pro tem., and Edmonds, J., concurred.