Opinion
No. 11144.
1946-03-20
In re ROBINSON'S ESTATE.
Marshall, Melhorn, Wall & Bloch, of Toledo, and Rex W. Hanna, of Kenton, for executrix. Hugh S. Jenkins, Atty. Gen., Aubrey A. Wendt, Asst. Atty. Gen., and Parker L. Snyder, of Columbus, for exceptor, Department of Taxation.
Proceeding in the matter of the estate of Alice B. Robinson, deceased, wherein the Department of Taxation of the State of Ohio, through its commissioner, filed exceptions to the order and finding by the Probate Court of Hardin County, determining the additional tax in the estate.
Exceptions overruled.Marshall, Melhorn, Wall & Bloch, of Toledo, and Rex W. Hanna, of Kenton, for executrix. Hugh S. Jenkins, Atty. Gen., Aubrey A. Wendt, Asst. Atty. Gen., and Parker L. Snyder, of Columbus, for exceptor, Department of Taxation.
LADY, Judge.
The department of taxation of the state of Ohio, through its commissioner, C. Emory Glander, on January 2, 1946, filed exceptions to the order and finding of November 6, 1945 by the Probate Court of Hardin County, determining the additional tax in this estate.
In the finding and order of November 6, the court found the maximum credit allowable against the Federal Estate Tax to be $31,332.98; and, since the total amount of inheritance tax found due from the estate under Section 5332, General Code, is $17,715.70, found the amount of additional tax due under Section 5335-1 et seq., General Code, to be $13,617.28.
The reasons for the exceptions to this determination as stated in exceptor's pleading are:
1. The court erred in finding that the maximum credit allowable against the Federal estate tax is $31,332.98, whereas the maximum credit allowable against said tax is not less than $42,310.41.
2. The court erred in determining that the amount of additional tax due under Sections 5335-1, 5335-2, 5335-3 and 5335-4 of the General Code of Ohio is $13,617.28, whereas the court should have found the additional tax due under said Code sections to be not less than $24.594.70.
3. The court has placed an erroneous construction and interpretation on Sections 5335-1, 5335-2, 5335-3 and 5335-4 of the General Code of Ohio, which construction and interpretation if permitted to stand would render such sections violative of Article I, Section 2, and Article II, Section 1 of the Constitution of the state of Ohio and the Fourteenth Amendment to the Constitution of the United States of America.
4. Other errors apparent in the record which are prejudicial to the Department of Taxation.
The facts of the case, in so far as pertinent to the matter, may be briefly stated.
Alice B. Robinson died August 10, 1939. The Federal Estate Tax was determined November 25, 1943. The gross basic tax as determined by the Collector of Internal Revenue was $52,888.01, a credit for gift tax was allowed and deducted from the amount leaving a gross basic tax of $39,166.22. The 80% credit for estate and inheritance tax purposes was computed on this amount the exact credit being $31,332.98. The dispute in the amount of tax due arises over the deduction of the gift tax; since computation of the inheritance tax credit on the gross basic tax before the gift tax credit would result in an additional tax materially greater than if the computation were made after the gift tax credit is taken.
The single question presented here is: Should the Federal gift tax credit be considered in the computation of Additional Inheritance Tax under favor of Sections 5335-1, 5335-2, 5335-3, and 5335-4, General Code of Ohio?
Section 5335-1, General Code, provides as follows:
‘In addition to the tax levied under section 5332 of the General Code of Ohio, there is hereby levied an additional tax upon the transfer at death of the estates of resident decedents of an amount equal to eighty per centum of the tax imposed by title III of the act of congress approved February 26, 1926, known as the ‘Revenue Act of 1926,’ the rates contained in the said act of Congress being as follows: * * *'.
Section 5335-2, General Code, provides as follows:
‘The rules and regulations for determining the amount of the net estate upon which the tax imposed by section 5335-1 shall be based, shall in so far as applicable be the same rules and regulations adopted by the Commissioner of Internal Revenue for determining the net estate under the act of congress known as the ‘Revenue Act of 1926.”
Section 5335-3, General Code, provides:
‘The tax imposed on any estate by section 5335-1 shall be credited with the amount of the tax levied on successions from such estate under the provisions of section 5332 at the rates provided in section 5335 and with the amount of any estate, inheritance, legacy or succession taxes actually paid to any state or territory of the United States or the District of Columbia in respect of any property included in the gross estate. In no event shall the tax payable under section 5335-1 exceed the amount, if any, by which the maximum credit allowable to the estate against the United States estate tax exceeds the credit provided for in the preceding sentence of this section.’ (Emphasis ours)
I am unable to read but one meaning in these statutes and that is that the General Assembly provided for the state additional tax, which is, in effect, an estate tax, based on the Federal Estate Tax law then in effect, and then, by General Code, 5335-3, limited the amount of state tax collectible in any event to the amount of the credit allowed against the Federal estate tax.
It is apparent that it was the legislative intent to empower the state taxing authorities to collect all of the tax which the Federal government allowed as a credit, which is what the states were in effect invited to do by this arrangement in the Federal laws. See In re Knowles' Estate, 295 Pa. 571, 145 A. 797, 63 A.L.R. 1086.
It is the opinion of this court that the words ‘In no event * * *’ appearing in the last sentence of General Code 5335-3 give to the additional estate tax statutes an elastic effect making the statutes applicable to any set of circumstances that might arise under the Federal estate tax laws; and that the words, ‘maximum credit allowable to the estate against the United States estate tax * * *,’ are words of limitation and thus limit the amount of the state additional tax to whatever credit is allowed by the Collector of Internal Revenue who computes the Federal Estate tax liability.
It therefore follows that the ‘maximum credit allowable’ under General Code, § 5335-3, is the amount allowed against the Federal tax, which in this case is $31,332.98 and that the state additional tax is $13,617.28.
We do not believe that this interpretation in any way violates either the Constitution of the state of Ohio or of the United States.
It is therefore our opinion that the court's original finding should not be disturbed and the exceptions are overruled.