168 Iowa 511 | Iowa | 1915
John Peterson, a native of Sweden, but a naturalized citizen of the United States, died intestate in Plymouth County, Iowa, on March 13, 1909, unmarried, and without any direct heirs. His heirs were nephews and nieces, or their surviving spouses or children, w-ho took from one-fourth to one-eighteenth of his estate. One nephew and one niece are naturalized citizens in the states of Illinois and Wisconsin respectively. The other heirs are non-resident aliens, living in Sweden. The estate consisted of eighty acres of land, appraised at $8,800.00, and personal property valued at $5,386.42. The administrator of the estate tendered to the state treasurer the sum of $848.95 in full of the collateral inheritance tax due to the state, being five per centum of the valuation of the property, with interest, which the treasurer refused to receive, claiming that under the law the estate passing to non-resident aliens was subject to a twenty per centum tax.
Conceding that the law of this state in force at the time of testator’s death, and at the time of the hearing in the district court, exacted a twenty per centum tax upon property passing to collateral heirs who were non-resident aliens, counsel for these heirs, and for the administrator, insist that this law was and is invalid because of a treaty between the United States and the Kingdom of Sweden first concluded in the year 1793 between the proper authorities of the two governments, and afterwards revived, first in the year 1816, and again in 1827. As the treaty now stands, it reads as follows:
“Article I. (in part): The citizens and subjects of each of the two high contracting parties may, with all security for their persons, vessels, and cargoes, freely enter the ports,
“Article II. Swedish and Norwegian vessels, . . . shall be treated . . . upon the same footing as national vessels . . . with respect to the duties of tonnage, lighthouses, pilotage, and port charges, as well as to the perquisites of public officers, and all other duties or charges of whatsoever kind or denomination, levied in the name, or to the profit, of the government, the local authorities, or of any private establishment whatsoever.”
Article VI of the original treaty, revised by Article XVII of the present one, provides that, “The subjects of the contracting parties in the respective states may freely dispose of their goods and effects either by testament, donation or otherwise in favor of such persons as they think proper; and their heirs in whatever place they shall reside, shall receive the succession even ab mtestato either in person or by their attorney without having occasion to take out letters of naturalization. These inheritances as well as the capitals and effects, which the subjects of the two parties in changing their dwelling, shall be desirous of removing from the place of their abode, shall be exempted from all duty, called ‘droit de detraction’ on the part of the government of the two states, respectively. But it is at the same time -agreed that nothing contained in this article shall in any manner derogate from the ordinances- published in Sweden against emigration or which may hereafter be published, which shall remain in full force and vigor. The United States on their part or any of them shall be at liberty to make, respecting this matter, such laws as they think proper.”
Some of the propositions involved are not the subject of debate. It is conceded that the state has plenary power over the descent or succession of property within its borders, save as such right may be limited by some constitutional or treaty provision; that an inheritance tax is not fundamentally a tax upon property, but upon the right of succession or the right to receive property by will or descent; and that there is no provision, unless it be found in the treaty, requiring inheritance taxes to be uniform. In other words, it is practically agreed that our inheritance tax law is valid unless when properly construed it be found to conflict with the treaty rights and obligations.
Another possible construction of this treaty is that it applies only to a subject of one of the contracting parties resident in the territory of the other. If that be the proper interpretation, then it does not apply to this controversy for the reason that deceased was a naturalized citizen of this country when he died, and but for the first clause of the initial paragraph of Article VI of the treaty, a state inheritance or succession tax would be perfectly lawful. Treating the first paragraph as relating to subjects of either country residing at home, it is manifest that there is nothing therein which forbids the levy of inheritance or succession taxes, when the property passes ab intestato to the heirs of such subject, no matter whether they be residents or non-residents, aliens or subjects. The term “freely .dispose of” does not, as we view it, relate to property passing by descent. Such property is covered by the next sentence of the treaty, and in that there is no reference whatever to any taxes or duties. The only language with reference to property acquired by descent is found in the next sentence, relating to the duty called droit
Were we to give the treaty the broad significance claimed for it, it would give to subjects of the Kingdom of Sweden, whether residents or non-residents of this country, greater rights in the property of an intestate than are possessed by our own citizens; for no succession or inheritance taxes could be imposed upon any property passing to them ab intestato. There is, as we see it, no middle ground. Either property passing to non-resident Swedish aliens by descent or through inheritance is subject to a valid succession tax, or it is not; and the amount of the tax is not the criterion by which to determine the validity thereof. Appellants’ counsel practically concede that the property was subject to a five per centum tax notwithstanding the treaty, and, as we understand it, claim that all in excess of the five per centum is a duty of detraction inhibited by the clause of the treaty now being considered. As already stated, we do not regard this tax as a droit de detraction. It is not imposed upon the removal of the property, but upon the right to take or receive the same by descent or inheritance. Indeed, it is not in a strict sense a tax upon property at all. The tax is imposed before it reaches the heir or devisee, as the case may be, and the property passes after it has suffered a diminution to the amount of the tax; the portion exacted as a tax never reaches the person taking the estate. Such is the uniform holding of the cases. In re Anderson, 166 Iowa 617; Herriott v. Bacon, 110 Iowa 342; Knowlton v. Moore, 178 U. S. 41, 55; U. S. v. Perkins, 163 U. S. 625; Scholey v. Rew, 23 Wall. (U. S.) 331; Ferry v. Campbell, 110 Iowa 290; In re Stone, 132 Iowa 136. Such being its nature, there is no constitutional requirement that such taxes be uniform, or, in the absence of a treaty, that they be the same when the property passes to aliens as when it descends to citizens. The tax may be progressive in character and discriminatory in the sense that it may be collected from property passing to collateral heirs alone, property passing
Is there anything in the treaty in question which requires uniformity of this tax upon property passing to citizens of this country and to citizens of and subjects of the Kingdom of Sweden? The Supreme Court of Washington, in a learned opinion by Parker, J., thought there was, although two of the Justices dissented. See In re Stixrud, 109 Pac. 343. The doctrine of this opinion seems to be that the treaty guaranteed equality between citizens and aliens, and that the testamentary and inheritance rights secured thereby were such that they could not be impaired except as such rights and privileges of citizens might be impaired by the laws of their own country. No cases were cited which directly supported this proposition. On the contrary, in each of the cases relied upon in support of the rule, there was an express provision that alien heirs might succeed to and take possession of property passing by succession or by will, and dispose of the same, paying such duties only as the inhabitants of the country wherein the goods may be shall be subject to pay in like cases. Frederickson v. Louisiana, 23 How. (U. S.) 445; Schultze v. Schultze, 33 N. E. 201; In re Sala, 24 So. 674; Rixner’s Succession, 19 So. 597.
To the contrary of the holding of the Supreme Court of Washington is In re Strobel’s Estate, 39 N. Y. Supp. 169. See also In re Anderson’s Estate, supra.
In the Washington case, the treaty was construed as if it contained a clause usual to such conventions, “that in all
Doubtless no reference to succession or inheritance taxes was made because such were unknown to this country at the time the original treaty was negotiated, and although such taxes had become quite general either in Europe or in England when the treaty was last made, there was no change in its phraseology, and the matter was left open to state action. In the recent ease of McKeown v. Brown, 167 Iowa 489, which involved the treaty between this country and Great Britain, it was held that as the treaty expressly covers succession and inheritance taxes, and provides that no more should be exacted from subjects of Great Britain than from citizens or subjects of this country, the twenty per centum tax imposed by our statute on property passing to non-resident aliens was invalid, at least to the extent of the excess over five per centum assessed on property passing to citizens and subjects of this country.
Finding nothing in the treaty under consideration which exempts property within this jurisdiction passing to collateral heirs, be they citizens or aliens, from the collateral inheritance tax, and nothing providing for or guaranteeing uniformity therein, nothing to the effect that they shall be the same upon property passing to collateral heirs without regard to their citizenship, we are constrained to hold that there is nothing in our law in conflict with any of the treaty rights guaranteed to the citizens or subjects of the Kingdom of Sweden residing therein.
This is the pivotal point in the case, and although the conclusion is in conflict with the learned opinion of the Washington Supreme Court, hitherto mentioned, we are not convinced of the soundness of its conclusion, and although we
The distinction between this case (which is in many respects similar to In re Anderson, supra), and McKeown v. Brown, supra, is apparent.
The trial court was right in holding that the property was subject to the tax demanded by the state treasurer, and its order and judgment must be, and they are, — Affirmed.