125 A. 661 | N.H. | 1924
Lead Opinion
One case is an appeal from a tax assessment; the other is an appeal from a refusal to abate an assessment previously made. No question as to procedure is raised. The cases are transferred upon sundry inquiries as to the law in concrete form as applicable to particular facts, which it does not appear to be necessary to examine in detail.
The substance of the questions raised are:
(1) Are the provisions of section 1, chapter 37, Laws 1919, in conflict with the constitution?
(2) Should the federal estate tax be considered in assessing the state tax?
(3) (a) Are shares of stock in non-resident corporations and deposits in banks outside the state, or (b) liberty bonds, to be considered in making the assessment?
I. The main controversy is as to the power of the legislature to enact s. 1, c. 37, Laws 1919. After the adoption of the constitutional amendment in 1903 "empowering the legislature to impose taxes not only upon polls and estates, but also upon other classes of property, including franchises and property when passing by will or inheritance," the legislature in 1905 adopted "An act imposing a tax on collateral legacies and successions."
Section one of the act was subsequently amended so that at the date of the legislation, in 1919, it read as follows: *343
"Section 1. All property within the jurisdiction of the state, real or personal, and any interest therein, belonging to inhabitants of the state, and all real estate within the state, or any interest therein, belonging to persons who are not inhabitants of the state, which shall pass by will, or by the laws regulating intestate succession, or by deed, grant, bargain, sale, or gift, made in contemplation of death, or made or intended to take effect in possession or enjoyment at or after the death of the grantor or donor, to any person, absolutely or in trust, except to or for the use of the father, mother, husband, wife, brother, sister, lineal descendant, adopted child, the lineal descendant of any adopted child, the wife or widow of a son, or the husband of a daughter, of a decedent, or to or for the use of educational, religious, cemetery, or other institutions, societies, or associations of public charity in this state, or for or upon trust for any charitable purpose in the state, or for the care of cemetery lots, or to a city or town in this state for public purposes, shall be subject to a tax of five per cent. of its value, for the use of the state; and administrators, executors, and trustees, and any such grantees under a conveyance made during the grantor's life, shall be liable for such taxes, with interest, until the same have been paid. An institution or society shall be deemed to be in this state, within the meaning of this act, when its sole object and purpose is to carry on charitable, religious, or educational work within the state, but not otherwise." Chapter 106, section 1, Laws 1915.
The section now under consideration is:
"Section 1. All property within the jurisdiction of the state, real or personal, and any interest therein, belonging to inhabitants of the state, and all real estate within the state, or any interest therein, belonging to persons who are not inhabitants of the state, which shall pass by will, or by the laws regulating intestate succession, or by deed, grant, bargain, sale, or gift, made in contemplation of death, or made or intended to take effect in possession or enjoyment at or after the death of the grantor or donor, absolutely or in trust, to or for the use of the father, mother, husband, wife, lineal descendant, adopted child, the lineal descendant of any adopted child, the wife or widow of a son, or the husband of a daughter, of a decedent, shall be subject to a tax, for the use of the state, of one per cent. of its value up to $25,000; of two per cent. of its value in excess of $25,000 up to $50,000; of two and one-half per cent. of its value in excess of $50,000 up to $100,000; of three per cent. of its value in excess of $100,000 up to $250,000; and of five per cent. of its value in excess *344 of $250,000; but no bequest, devise or distributive share of an estate which shall so pass to or for the use of a husband, wife or of any such person who is under twenty-one years of age at the time of the decedent's death shall be subject to such tax, except upon its value in excess of $10,000; and all such property which shall so pass to or for the use of any other person, except educational, religious, cemetery, or other institutions, societies or associations of public charity in this state, or for or upon trust for any charitable purpose in the state, or for the care of cemetery lots or to a city or town in this state for public purposes, shall be subject to a tax of five per cent. of its value, for the use of the state; and administrators, executors, trustees and any such grantees under a conveyance made during the grantor's life, shall be liable for such taxes, with interest, until the same shall have been paid. An institution or society shall be deemed to be in this state, within the meaning of this act, when its sole object and purpose is to carry on charitable, religious, or educational work within the state, but not otherwise." Chapter 37, section 1, Laws 1919.
From a comparison of the two sections, it appears that by the act of 1919 property passing to brothers and sisters of the decedent upon which no tax was previously imposed is declared subject to a tax of five per cent. of its value and a tax is imposed upon property passing to other relatives also previously free from tax; the rate varying according to the value of the property passing with exemptions of considerable amount in certain cases.
The amendment of 1903 probably resulted from the decision in Curry v. Spencer,
The state claims that the exaction by the state is an excise tax, if it is a tax; that in effect, rather than a tax, it is a provision for the disposition of property all of which belongs to the state at the death of the owner. *345
"If at the making of the social compact the right of property, as then understood and reserved, did not include any right of control over it at death, — if the property right was merely a life estate, remainder in the survivors united in the corporate organization called the government, — any power of testamentary disposition would be a grant from the many to the individual, a privilege which could be incumbered, limited, withdrawn, or regulated at will. If by natural right, or preexisting compact, the right of property enjoyment does, or does not, include the untrammeled power of disposition at death, the parties in revising or renewing the governmental compact may by mutual agreement add to, or detract from, the nature of the right. It might be agreed that all property on the death of the owner should be the property of the survivors. All inheritable quality might be taken from the conception of property as now understood. While such taking or such right of survivorship, if limited in amount and for use for public purposes, would possess some of the elements of a tax, it would lack fundamental elements of taxation as understood in this state from 1784 to 1903. It would be an application of property for public charges, but not a proportional division of public expense." Thompson v. Kidder,
"All men have certain natural, essential, and inherent rights, among which are the enjoying and defending life and liberty, acquiring, possessing, and protecting property." Bill of Rights, art. 2.
If in 1784 the power of testamentary disposition was no part of the conception of the property right, the state's contention would be well founded. The state has furnished nothing and nothing is found to sustain the idea that anyone claimed or believed in 1784 that when the owner died his property belonged to the state or its surviving members. The power to dispose of property by will was declared by the provincial statutes, which also provided for its disposition among the next of kin in case there was no will. Act May 14, 1718; 2 N.H. Laws (Batch.) 295.
"The Liberties of the Massachusetts Colonie in New England" of 1641 at a time when practically all of New Hampshire in existence was in union with Massachusetts contained the following declaration: "All our lands and heritages shall be free from all fines and licences upon Alienations, and from all hariotts, wardships, Liveries, Primer-seisins, yeare day and wast, Escheates, and forfeitures, upon the deaths of parents or Ancestors, be they naturall, casuall or Juditiall." 1 N.H. Laws (Batch.), pp. 748, 753.
Instead of understanding that upon death the property of the *346
decedent passed to the state, in the beginnings of New England it was solemnly declared that under no circumstances should the title to the decedent's property vest in the state. If in Massachusetts the power to take a part of a decedent's property is sufficiently established by constitutional authority "to impose and levy reasonable duties and excises" (Minot v. Winthrop,
The argument for the state attacks the decision in Curry v. Spencer,
We are not disposed to disturb the conclusions recognized here at least as legally sound for forty years in order to sustain the act in question. The discussion must begin with the proposition that except for the amendment to the constitution adopted in 1903 both the act of 1919 and that of 1905 would be without constitutional support. The act of 1905 adopted under the amendment of 1903 was attacked in Thompson v. Kidder,
It was then said, "but although the power to impose an inheritance tax is clear, it must be exercised so far as possible in accordance with all other provisions of the constitution. It must be an equal tax in the sense that it must affect all persons equally. In the present all property taxed is taxed at the same rate, and the difficulty found in some cases with exemptions of a certain amount of property and with a tax varying according to the amount of property does not appear." This difficulty is now presented. The state claims that the language used in submitting the amendment of 1903 to the people, "Do you approve of empowering the legislature to impose taxes not only upon polls and estates but also upon other classes property including franchises and property when passing by will or inheritance," had prior to 1903 acquired a peculiar meaning in the law as implying an inheritance tax. P.S., c. 2, s. 2, "words and phrases shall be construed according to the common and approved usage of the language, but technical words and phrases, and such others as may have acquired a peculiar and appropriate meaning in law, shall be construed and understood according to such peculiar and appropriate meaning," is relied upon. The chapter cited was first enacted as chapter 1 of the General Statutes in 1867 and was intended as a guide for the construction of the following statute law. It has no more weight in the construction of constitutional language than in the interpretation of a will. Morse v. Osborne,
In 1923 the justices of the court were constitutionally interrogated by the legislature as to the validity of a proposed law imposing a graduated inheritance tax upon collateral inheritances. See Opinion of the Justices, post.
Upon a review of the discussions in the convention of 1903 and consideration of the question submitted to the people, the justices were of the opinion that the people must have had in mind in voting for the amendment the rules of property taxation familiar by frequent exposition, i.e. that all taxation under the power granted should be at a uniform rate. It was not said that the tax was a property tax, but the possible incorrectness of the view that it was, then thought to have been held by the convention and the people, was suggested. Attention was called to the fact that proposals expressly providing for classified, graduated and progressive rates were rejected and the final proposition adopted described a property tax if the language used were given its ordinary signification. Journ. Conv. 1903, pp. 249, 250, 594, 595, 601, 625, 626, 628; House Journal, 1923, pp. 426, 429. It is now argued that the particular propositions permitting graduated rates were rejected because it was thought the general terms adopted included the authority desired to be granted. It perhaps can fairly be said that the purpose of the convention was to adopt language which would sustain an inheritance tax whether it should be considered a tax on property or upon privilege. Journal Conv. 1903, pp. 595, 596. It may also be argued that it was thought that the adoption of language expressly providing for absence of uniformity, a proposition entirely contrary to fundamental principles as here understood, would result in the defeat of the amendment, — a view, if entertained, entirely justified by the fact that the power when so expressed did not meet the approval of the people when submitted to them in 1912, 1920, and 1921. Legislative Manual, 1913, pp. 280, 310, 312; 1921, p. 324; 1923, pp. 55, 58. On the last submission in March, 1921, the proposition not only failed to receive the *349
constitutional majority of two-thirds necessary for its adoption but there was an actual majority against it. Whatever may be the correct deduction to be drawn from the debates in the convention the material question is what interpretation can fairly be put upon the action of the people. Harvard. College v. State,
It seems clear that the people must have understood that they were called to vote upon a question of taxation so related at least to property taxation as to lead to the understanding, no special exception being made, that the rules with which they were familiar in taxation of that character were to be applied so far as possible.
"Under our constitution, the power to tax is a power not to destroy the right of property by a discriminating process of classification or selection, but to equitably defray the expense of protecting the right of property and other rights." State v. Company,
"Since 1833, the legislative and judicial construction of the constitution has been that an equal division requires a proportional *350
valuation of all property . . . and the assessment of all at the same rate." Opinion of the Justices,
"By New Hampshire law, taxation is not extortion practised upon the people by an oppressor. . . . It is a division among themselves of the expense of their own government of themselves, — a division made by themselves through their own agents, in pursuance of their original contract." Edes v. Boardman,
The cases in which these questions were considered and decisions announced were mainly controversies between taxpayers and the towns in which they were taxed; cases in which the citizens generally were interested, and it is confidently asserted that taxation as understood here when the constitution was amended meant equal treatment to every one and meant, when property was the basis or measure of the tax, a uniform rate, and it was also understood that equality and uniformity were essential characteristics of every process which could be included under the term taxation.
The conclusion seems irresistible that in 1903 it was understood additional power of taxation was being granted and, no special exception of existing constitutional provisions being made, only such provisions can be disregarded as are necessarily in conflict with the power granted. This was the conclusion in Thompson v. Kidder, and to the views then expressed the court still adheres. An inheritance tax can be laid at a uniform rate upon all subjects, whether property or rights.
In Thompson v. Kidder the act was also attacked upon the ground that the tax was limited to property passing to collaterals, that *351
all property was not taxed. The objection was disposed of upon the ground that under the practical construction given the constitution only such property was taxable as was made so by the legislature. That the legislature had power by special provision, or by omitting certain property from the taxable list, to make reasonable exemptions of property from taxation. In other words, that the legislature had power to classify property into taxable and non-taxable. Canaan v. District,
Authority for no other classification exists under New Hampshire law. The only classification permitted in New Hampshire taxation is into taxable and non-taxable. That is the only one that can be made. In 1911 the justices, in answer to the house of representatives, upon the supposed authority of Thompson v. Kidder, expressed the opinion that an assessment might be made, at rates varying in accordance with relationship to the testator or ancestor. In the same opinion the justices cautioned the house that their opinion was in no sense an adjudication of the question. Opinion of the Justices,
Upon the argument it has been claimed that Thompson v. Kidder does not sustain the position taken by the justices on this point. Upon examination of the case the majority of the court are satisfied that the point is well taken. The only classification sustained in that case is between taxable and non-taxable. Any other classification for taxation of property or rights is contrary to the equality of right in the constitution as it has been interpreted since 1784. In Thompson v. Kidder the taxation of polls was referred to as a class of taxation permitted although not a proportional division of public expense, but it has never been understood that polls could be classified so as to be taxed at different rates. All taxed are taxed at the same rate. See Opinion of the Justices,
. . . One of two classes of physicians, differing only in respect to residence, cannot be subjected to the expense of obtaining a license from which the other is exempt. State v. Pennoyer,
It has been suggested that as the legislature had power to impose tax at a single rate, the act could be sustained if construed to impose a tax at the rate of one per cent. upon all the various classes. That would be so, if a legislative intention to impose such a tax could be found from the language used. A tax at five per cent., the highest rate, would be equally within the legislative power. But the court cannot choose for the lawmakers; to select one of the rates and apply it to all the classes would be an act of legislation not of construction. The legislature intended to substitute a new system as a whole, and as all the provisions cannot be carried into effect and as it is impossible to tell what part the legislature would have adopted independently, the whole section is void. Opinion of the Justices,
As the whole section is void, the question arises what effect, if any, the adoption of the void section had upon existing law, s. 1, c. 106, Laws 1915. It is universally held that a valid act is not affected by the enactment of a void amendment, even if there are words of express repeal, unless it is clear the legislature intended *354
such repeal. Sullivan v. Adams, 3 Gray 476; Childs v. Shower,
The legislature had power of course to repeal the existing law, if that was their intention, irrespective of the validity of the new provisions. The method adopted of striking out the existing section and inserting a new one with added matter does not leave the matter quite so clear as it would have been if the added matter had been independently enacted, but the fact that the former section was at once reenacted is weighty evidence that the legislative purpose was not to abandon the collateral tax which had been in force since 1905. The general purpose was to retain that and to add another. The validity of a progressive tax was subject to discussion in the state. In 1911, the house of representatives were told the justices were in doubt as to the constitutionality of such a law. The constitutional convention of 1912 submitted an amendment expressly authorizing taxation as provided in the act of 1919. This amendment was not adopted by the people. Conv. Journ. 1912, pp. 563, 612. Leg. Manual, 1913, pp. 280, 310, 312. There must therefore have been doubt in 1919 as to whether the amendments proposed to the statute would be of any effect and it is not probable that the legislature intended if these amendments did not take effect to destroy the law as it existed in 1919. Chapter 106, Laws 1915.
II. The federal estate tax is an excise upon the estate at the death of the owner. It is not a tax upon succession and receipt of benefits under the law or the will. "What this law taxes is not *355
the interest to which the legatees and devisees succeeded on death, but the interest which ceased by reason of the death. Knowlton v. Moore,
The state tax is imposed upon or measured by the amount passing to each legatee or heir. Laws 1915, c. 106, s. 1. If by virtue of federal legislation or for any other reason a less amount passes under the laws of this state, a less tax is imposed. Kingsbury v. Bazeley,
Whether the federal tax comes out of the residuum or diminishes pro rata the particular legacies is matter of local law. Edwards v. Slocum, 287 Fed. Rep. 651; S.C.,
If there is no will and the estate is divisible among several heirs, the share of each is necessarily depleted pro rata by the tax. If there is a will which so declares, as in the Klous case, the tax comes out of the residuum. If the will is silent upon the subject, it can be inferred the testator in this respect wished his property distributed as if no will had been made.
Accordingly, in the absence of testamentary provision, it was held in Fuller v. Gale,
III. (a) The tax upon stocks of foreign corporations and deposits in banking institutions outside the state.
The tax is imposed with reference to property within the jurisdiction of this state which passes by virtue of the laws of this state. If the title passes through the executors or the property in the course of administration comes within this jurisdiction, the statute applies. Mann v. Carter,
(b) Liberty bonds.
It is conceded that liberty bonds are in the statute authorizing them expressly made subject to state inheritance taxes, but it is *356 claimed, that congress is without power to authorize a state to impose property tax upon obligations of the United States. The argument under this and the preceding question appears to rest upon an understanding that the court has held or was about to hold that the inheritance tax in this state was purely a property tax. But the court has not so held.
The only case in which the court has found it necessary to define the nature of the tax is Carter v. Craig,
It was suggested in argument that in the Klous case no federal tax was assessable against the estate. If this suggestion is correct, the appeal should be dismissed, as the taxes assessed were all assessable under the law as it existed prior to the act of 1919.
In the Williams case, the appeal should be sustained and a reassessment made according to the rules herein stated. As has been said, no question of procedure has been raised. The existence or extent of the remedy of one who has paid an over-assessment has not been considered.
The technical order in each case is
Case discharged.
PEASLEE and PLUMMER, JJ., concurred: YOUNG, J., concurred in the result in the Klous case, but dissented in the Williams case. *357
Concurrence Opinion
Having read the briefs filed in these cases, including the oral argument for the state which was submitted in writing, I concur in the majority opinion that Laws 1919, c. 37, s. 1 is unconstitutional and that Laws 1915, c. 106, s. 1 stands unrepealed. Having been absent at the presentation of the oral arguments I refrain from expressing any opinion upon the remaining issues.