134 A. 778 | Conn. | 1926
The questions of law upon which our advice is requested under the facts as stipulated concern the order and decree of the Court of Probate for the district of Stamford approving the succession or inheritance tax as computed by the Tax Commissioner of Connecticut, and ordering the executors to pay the same to the treasurer of the State of Connecticut. Most of the items upon which the tax was imposed were *201 intangible personal property; as to a few items tangible personal property.
Our present Succession Act, Chapter 190 of the Public Acts of 1923, does not differ in material degree from our earlier Succession Acts; the decisions under the earlier Acts are therefore equally applicable to the Act of 1923. It is "not a tax upon property, but upon the right or privilege of succession to the property of a decedent." Corbin v. Townshend,
The justification for the imposition of this tax upon personal property having its situs outside the jurisdiction of this State, and thus involving a power of jurisdiction in that State in respect to this tax, we state inGallup's Appeal,
We dwell upon these familiar decisions in order to especially emphasize three features underlying our Succession Act, and indeed every Succession Act: (1) the succession to real estate within the State and personal property everywhere is governed by the law of the State of the decedent's domicil; (2) the State exercises this right in virtue of the privilege it accords to its citizens or its domiciled residents of either disposing of their property by will, or in the event of intestacy having it descend in accordance with the statute law of the State; (3) a succession tax is not an ad valorem tax, nor to be considered upon the same basis as that tax; it is a privilege tax, an excise tax, such as a franchise tax. The decisions and the legal literature upon this subject not infrequently fail to distinguish the succession tax as wholly apart from the ad valorem tax. The taxable situs of the former depends for its jurisdiction upon the domicil of the decedent, the latter upon the situs of the property taxed. The attempt to rest the jurisdiction of each upon the situs of property taxed requires a departure from the underlying principle of the succession tax, — the right to receive from *204 the decedent, as we hold, or as many jurisdictions hold, the right to transmit from the decedent.
It is not easy to reconcile the decisions of the Supreme Court of the United States upon this point, as well as their application; its latest utterance as applied to a transfer or inheritance tax upon shares of stock is: "The tax here is not upon property, but upon the right of succession to property." Rhode Island HospitalTrust Co. v. Doughton,
The statutes of over four-fifths of the States purport to impose a transfer or succession tax upon all property of resident decedents, whether tangible or intangible, except realty located outside the State. The decisions of the States upheld these taxes and the decisions of the United States Supreme Court as a rule sustain the State decisions. This was the condition of the law until the decision in Frick v. Pennsylvania,
The succession tax which is questioned in this case is not upon tangible property, as in the Frick case, but upon intangible property. The plaintiffs seek to apply by analogy the doctrine of that case. It must be conceded that the Frick case did not so rule, but expressly excluded from its ruling intangible property. It said (pp. 492, 494): "The tax which it [Pennsylvania] imposes is not a property tax but one laid on the transfer of property on the death of the owner. . . . Here the tax was imposed on the transfer of tangible personalty having an actual situs in other States. . . . Counsel for the State cite and rely on Blackstone v.Miller,
Ad valorem taxes upon intangible property, outside the State imposing the tax, as upon a debt, were held in State Tax on Foreign-held Bonds, 82 U.S. [15 Wall.] 300, 320, to be taxed only in the State of the domicil of the creditor. "Debts," says Mr. Justice Field, "owing by corporations, like debts owing by individuals, *208
are not property of the debtors in any sense; they are obligations of the debtors, and only possess value in the hands of the creditor. With them they are property, and in their hands they may be taxed." Later, in Blackstone v. Miller,
The law of Connecticut is in accord with these decisions. In Bridgeport Projectile Co. v. Bridgeport,
The appellants are seeking an adjudication from this court that intangibles are taxable at the domicil of the debtor irrespective of whether the debt is there represented by specialties or used in the domicil of the debtor in the business of the creditor-owner. This would be in direct variance to the decisions of the United States Supreme Court as well as of our own State. We are bound to follow these decisions regardless of whether we accede to the correctness of the rule announced by them. If we were not bound to follow these and might decide this case having regard solely to right principle we could reach no other conclusion. Those who advocate the imposition of an inheritance or succession tax upon debts at the domicil of the debtor claim that a debt has a situs in the domicil of the debtor because that is the only place where control lies, that is, where the debt can be enforced. Three considerations weigh most strongly against this view: (1) The debt is enforceable wherever the debtor can be reached. This is seen in an action of garnishment in a State other than that of the domicil of the debtor.Harris v. Balk,
Then these writers urge that the right to tax is given in return for the service rendered and the only service rendered in the case of the transfer, succession or inheritance tax is in the domicil of the debtor where the tax must be enforced. Again there is a confusion of the ad valorem tax on property and the succession or inheritance tax. The service rendered by the State of the decedent's domicil is the granting to him of the right to dispose of his property, or to have it disposed of by law after his decease. That is the service upon which this tax rests and upon none other. The succession tax is not imposed in return for the protection given to the property or person of the decedent.
The Act granting the right of transfer must be within the control of the State imposing the succession tax. The fallacy in the reasoning vesting jurisdiction in the State having the control of the property with the right of transfer has resulted in the confusion of thought against which Chief Justice White warned in Knowlton
v. Moore,
The rule the executors seek to have established is that intangibles have not only a taxable situs independent of the domicil of the creditor, but also at the domicil of the debtor, and further, that this is the onlysitus at which they can be taxed. The proposed rule is unsupported by decision. A succession or inheritance tax imposed in the domicil of the decedent on the right of transfer is a simple and certain tax, and one easily ascertained. If in place of this the tax be imposed in the jurisdiction where the item of property has a situs it compels a difficult determination and one which will have to be made in as many different States as the several items of intangible property of the estate are situated, involving a system fruitful in complexity, unfairness, confusion and expense. True, double taxation of the right of transfer, in the domicil of the decedent owner, and in the domicil of the debtor, may result, but in practice it will be far less than in the proposed system of transfer taxation according tositus. Nonresident ad valorem taxes on intangible property are being gradually abolished by the enactment of reciprocal statutes designed to avoid double taxation of such kinds of intangible property. The movement will be apt to include, ere long, within its restriction, succession or inheritance taxes. These statutes, with which our own statute, Chapter 239 of the Public Acts of 1925, must be classed, are a recognition of the principle that the only taxable situs of intangibles is at the domicil of the decedent owner.
We pass to the consideration of the specific items of intangible property which in this proceeding are claimed to have been taxed under the Connecticut Succession Act in violation of the due process clause of the Fourteenth Amendment. The certificates of stock in the Canada, New York and New Jersey corporations could be subjected to a transfer tax in the jurisdictions *213
of their incorporation (Frick v. Pennsylvania,
The largest item in controversy is that arising from the succession tax computed upon decedent's interest in a partnership located and doing business in New York City. The partnership was organized under the Limited Partnership Act of New York. It was subject to the law of New York in practically the same way a corporation organized under that law would have been subject. The stockholder is not the owner of the property of the corporation; Rhode Island HospitalTrust Co. v. Doughton,
The limited partnership is classed with corporations in a requirement of reports and franchise taxes. *215 Whitney Realty Co. v. Secretary of State,
The bonds which were in New York and had long been there were United States bonds and treasury certificates, except two items of mortgage bonds, appraised at $521.67, due the decedent either from residents or corporations of Connecticut. Unquestionably Connecticut could lay a succession tax upon these mortgage bonds just as it could upon the certificate of stock in a corporation of Connecticut though the certificate had been for a long time in another jurisdiction.Bullen v. Wisconsin,
The executors claim that the bequests to New York charitable and educational corporations should under Connecticut law be exempt from our succession tax. No corporations of these classes are exempt under our statute then in force, § 1 of Chapter 190 of the Public Acts of 1923, unless they are located within our State and receive State aid. The corporations named in these bequests are located outside our State and are not recipients of State aid. Subsequently, in Chapter 47 of the Public Acts of 1925, our law was changed to include within its exemption bequests to corporations wherever situated. The decisions of this court upon which the executors rely have no application to the 1923 Act.
The net taxable estate upon which the computation of the Tax Commissioner should be made is reached by deducting from the net taxable estate $2,400,694.79, the value of the United States bonds and treasury certificates $615,121.17, the cash in New York $287.48, together with the $19,166.04, being the transfer tax paid to the State of New York upon the stocks of *218 corporations and the limited partnership of William Openhym Sons, organized under the laws of the State of New York and deductible under the authority of Frick v. Pennsylvania, supra, at page 497, provided it had not already been deducted by the Tax Commissioner in fixing the net taxable estate at $2,400,694.79. Otherwise the computation as made by the Tax Commissioner is correct.
The Superior Court is advised that the questions upon which the advice of this court is desired, we answer as follows: 2, 6, 7, 8, 9, yes; 1, 4, 5, 10, 13, 14 and 15, no; 3, all; and 12, yes as to the items contained in 4, 5 and 10.
No costs will be taxed in this court in favor of any party.
In this opinion the other judges concurred.