Case Title: Comptroller v. Phillips

Citation: 384 Md. 583

Docket Number: 46/04

State: maryland

Court: Maryland Supreme Court

Date: 2005-01-13T00:00:00Z

Document:
In the Circuit Court for Talbot County
Case No. 20-C-03-004819
IN THE COURT OF APPEALS
OF MARYLAND
No. 46
September Term, 2004
COMPTROLLER OF THE TREASURY
v.
BLAINE T. PHILLIPS, EXECUTOR OF THE
ESTATE OF DONALD P. ROSS, JR.
Bell, C.J.
Raker
Wilner
Cathell
Harrell
Battaglia
Greene,
JJ.
Opinion by Raker, J. 
Filed:   January 13, 2005
1I.R.C. § 2011 (2004) provides in part as follows:
“(a) In general. — The tax imposed by section 2001 [the estate
tax] shall be credited with the amount of any estate, inheritance,
legacy, or succession taxes actually paid to any State or the
District of Columbia, in respect of any property included in the
gross estate (not including any such taxes paid with respect to
the estate of a person other than the decedent).”
In this case, we determine whether the Comptroller of the Treasury may impose
Maryland estate tax on an estate that has no federal estate tax liability due to its utilization
of the federal credit for tax on prior transfers.  The Maryland Tax Court and the Circuit Court
for Talbot County held that the Comptroller may not assess Maryland estate tax in such
circumstances.  We affirm.
I.
Background
Since 1926, the federal government has shared estate tax revenue with states through
an eighty percent credit for state death taxes, now codified as I.R.C. § 2011 (2004).1  See
Page v. Comptroller, 270 Md. 725, 729, 313 A.2d 691, 693 (1974).  The General Assembly
enacted the Maryland estate tax in 1929, 1929 Md. Laws Chap. 275, to take advantage of this
federal revenue sharing.  See Page, 270 Md. at 729, 313 A.2d at 693.  As such, the Maryland
estate tax, unlike the Maryland inheritance tax, is linked directly to the federal estate tax.  In
Comptroller v. Jameson, 332 Md. 723, 633 A.2d 93 (1993), we provided an overview of the
interplay between these three taxes:
“The United States imposes a federal estate tax which is payable
nine months after death.  On the federal estate tax return, estates
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are permitted to claim a credit, up to a specified amount, for
state death taxes actually paid to any of the fifty states.  This
credit is a method of revenue sharing in which the federal
government is diverting some federal estate tax revenue to the
states. 
“The Maryland inheritance tax is a tax imposed on the privilege
of receiving property.  See Maryland Code (1988) § 7-202 of the
Tax-General Article. . . . The Maryland inheritance tax is not
integrated with the federal estate tax; in other words, the
calculation of the Maryland inheritance tax is not dependant
upon the federal estate tax system in any way.
“On the other hand, the Maryland estate tax is completely
integrated with the federal estate tax.  The structure of the
Maryland estate tax is referred to as a ‘pick-up’ tax.  This means
that, if the federal credit for state death taxes allowable by the
Internal Revenue Code exceeds the Maryland inheritance tax, an
estate must pay Maryland estate tax to pick up the difference
between the credit and the state inheritance tax.  Stated more
succinctly, the inheritance tax is deducted from the federal estate
tax credit to determine the amount of Maryland estate tax.  By
providing for full use of the federal credit for state death taxes,
the Maryland estate tax statute shifts taxes that would otherwise
be paid to the federal government to the state treasury. . . .”
Id. at 725-26, 633 A.2d at 94 (citations omitted).  
II.
Facts
Appellant is Comptroller of the Treasury of Maryland, an official charged with, inter
alia, the duty to assess and collect Maryland estate tax.
2Representation per stirpes is defined for intestate succession in Md. Code (1974, 2001
Repl. Vol., 2004 Cum. Supp.), § 1-210 of the Estates and Trusts Article, and for wills in §
1-210.1.  Specifically, § 1-210.1(b) defines per stirpes distribution to the issue of one specific
person as follows:
“(1) On the occurrence of the event designated by the will, the
property to be distributed shall be divided into as many equal
shares as there are children of the person whose issue are to take
by representation or per stirpes, excluding those children who
were not living at the time of the occurrence of the event and did
not leave issue who were living at the time of the occurrence of
the event.
(2) Distribution of the shares shall be made as follows:
(i) One share shall be distributed to each child, who was living
at the time of the occurrence of the event; and
(ii) One share shall be distributed among the issue of each child
who was not living but who left issue who were living at the
time of the occurrence of the event in the same manner
distribution is to be made to the issue of one specified person as
provided by this subsection.”
Put more simply, per stirpes means “proportionately divided between beneficiaries according
(continued...)
-3-
Appellee is executor of the estate of Donald P. Ross, Jr. (“decedent”), a Delaware
resident who died on June 30, 2000.  The majority of decedent’s estate was located outside
Maryland, but he left a one-third, undivided interest in real property known as 6523 Shingle
Row Road in Royal Oak, Talbot County.  The date-of-death value of this interest was
$1,750,000.  Decedent also left a one-third interest in the tangible property located at that
address.  The date-of-death value of the tangible property for federal estate tax purposes was
$29,053.67.
Pursuant to decedent’s will, his interest in the Maryland tangible property passed to
his issue, per stirpes.2  The residue of decedent’s estate, which included his interest in the
2(...continued)
to their deceased ancestor’s share.”  Black’s Law Dictionary 1181 (8 th ed. 2004).
-4-
Maryland real property, passed to a trust established on November 1, 1999 (the “1999
Trust”). Under the terms of the 1999 Trust, the residue of the estate was distributed
immediately into two new trusts: the “Marital Trust” and the “Residuary Trust.”  The amount
of property to be set aside in the Marital Trust was specified as follows in the 1999
Declaration of Trust:
“Trustee shall set aside, as the “Marital Trust,” property with the
smallest aggregate value needed to reduce Trustor’s federal
estate tax to the lowest possible amount after taking into account
all credits and deductions against such tax available to Trustor’s
estate, except to the extent that the use of any such credit (other
than the unified credit) would increase state death taxes.”
Accordingly, sufficient assets were distributed from the 1999 Trust into the Marital Trust to
reduce decedent’s federal estate tax liability to zero.  Among these assets was the Maryland
real property.
Decedent’s mother, Wilhelmina duPont Ross, predeceased her son by only five days.
From her estate, decedent inherited assets valued at $5,030,307.86.  Because Wilhelmina
Ross predeceased decedent by less than two years, decedent’s estate was entitled to a
3I.R.C. § 2013 (2004) provides in part as follows:
“(a) General rule. — The tax imposed by section 2001 [the
estate tax] shall be credited with all or a part of the amount of
the Federal estate tax paid with respect to the transfer of
property . . . to the decedent by or from a person . . . who died
within 10 years before, or within 2 years after, the decedent’s
death. . . .”
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$2,263,471.57 credit for tax on prior transfers under I.R.C. § 2013 (2004).3  This credit
exceeded all federal estate taxes owed on the inherited assets.
On behalf of decedent’s estate, appellee filed a United States Estate (and Generation-
Skipping Transfer) Tax Return (“Form 706”) on October 1, 2001.  On Form 706, appellee
made, inter alia, the following entries:
         “10. Gross Estate Tax: 2,484,021.57
* * * 
13. Allowable unified credit: 220,550.00
* * * 
15. Credit for state death taxes: 0.00
* * * 
19. Credit for tax on prior transfers: 2,263,471.57
* * * 
21. Net estate tax: 0.00"
Appellee filed a Maryland Estate Tax Return (“Form MET 1”) on the same date.  On
Form M ET 1, appellee made, inter alia, the following entries:
“8. Maximum credit for state death taxes (from line 15, federal
Form 706): 0
* * * 
10. Percentage of Maryland estate to total gross estate: 13.18
4Md. Code (1988, 2004 Repl. Vol.), § 13-410 of the Tax-General Article mandates
that a “tax collector shall mail a notice of assessment under this title to the person or
governmental unit against which an assessment is made.”
5Md. Code (1988, 2004 Repl. Vol.), § 13-510(a)(1) of the Tax-General Article
authorizes a person aggrieved by a tax assessment to appeal to the Tax Court.
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* * * 
11. Maryland apportioned credit (line 10 times line 8): 0.00
* * * 
12. Maryland estate tax liability (from line 8 or line 11,
whichever is applicable): 0.00”
Decedent’s estate did not remit any Maryland estate tax to appellant.
On October 18, 2001, appellant sent a Deficiency Notice to appellee, indicating a
Maryland estate tax liability of $48,451.09 plus interest.  Appellee filed a Protest, setting out
a legal argument in support of his computation of zero Maryland estate tax liability.
Appellant subsequently sent appellee an Assessment for the deficient tax plus interest,4 and
appellee appealed to the Maryland Tax Court (an administrative agency).5  The Tax Court
held a hearing on November 14, 2002 and issued an oral decision reversing the Assessment,
finding that no Maryland estate tax was due.  The Tax Court issued an order to this effect on
April 1, 2003.  
Appellant sought judicial review in the Circuit Court for Talbot County.  Judge
William S. Horne held a hearing on November 21, 2003 and issued an opinion affirming the
Tax Court on December 8, 2003.  Appellant next appealed to the Court of Special Appeals.
Before that court could consider the case, we granted certiorari on our own initiative to
resolve an area of confusion in Maryland estate tax law.  381 Md. 677, 851 A.2d 596 (2004).
6In addition, appellee claims that it would be unconstitutional for the Comptroller to
assess Maryland estate tax when the “Maryland portion” of the estate’s assets did not
generate any federal estate tax.  Appellee raised this issue before the Tax Court and Circuit
Court.  Both found it unnecessary to address the issue, because they ruled for appellee on the
statutory issue.  As we affirm the Circuit Court’s upholding of the Tax Court’s decision on
the statutory issue, we too do not address this constitutional issue.  See Telnikoff v.
Matusevitch, 347 Md. 561, 579, 702 A.2d 230, 239 n.15 (1997) (noting “the established
principle that a court will not decide a constitutional issue when a case can properly be
disposed of on a non-constitutional ground”).
-7-
On appeal, appellant raises one issue: whether the Maryland Comptroller may assess
state estate tax against an estate that has no federal estate tax liability due to its utilization of
the federal credit for tax on prior transfers.6   
III.
Standard of Review
This case raises only an issue of law, as the parties agreed to a stipulation of facts
before the Tax Court.  When this Court reviews an administrative agency’s decision, we
employ the same statutory standards as would the Circuit Court; the inquiry is whether the
administrative agency erred, not whether the Circuit Court erred.  See Spencer v. Board of
Pharmacy, 380 Md. 515, 523-24, 846 A.2d 341, 346 (2004).  Under the Maryland
Administrative Procedure Act, Md. Code (1984, 2004 Repl. Vol.), § 10-222 of the State
Government Article, we determine the correctness of the agency’s legal conclusions and may
substitute our judgment for that of the agency.  Id. at § 10-222(h)(3)(i)–(iv); see Charles
County v. Vann, 382 Md. 286, 295, 855 A.2d 313, 319 (2004).  Specifically, in reviewing
questions of law answered by the Tax Court, we have said that “a reviewing court is under
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no statutory constraints in reversing a Tax Court order which is premised solely upon an
erroneous conclusion of law.”  Comptroller v. Gannett, 356 Md. 699, 707, 741 A.2d 1130,
1135 (1999) (quoting Ramsay, Scarlett & Co. v. Comptroller, 302 Md. 825, 834, 490 A.2d
1296, 1301 (1985).  We  have held, though, that agency legal interpretations of the statute
it administers are entitled to some deference.  See Vann, 382 Md. at 295-96, 855 A.2d at 319.
Determining whether the Comptroller may assess estate tax in this case depends upon
an interpretation of the Maryland statute defining the relationship between federal and state
estate taxes: Md. Code (1988, 1997 Repl. Vol., 2001 Cum. Supp.), § 7-304 of the Tax-
General Article.  The cardinal rule of statutory construction is to ascertain and effectuate the
intent of the Legislature.  Collins v. State, 383 Md. 684, 688, 861 A.2d 727, 730 (2004).  In
ascertaining legislative intent, we first examine the plain language of the statute.  Melton v.
State, 379 Md. 471, 476-77, 842 A.2d 743, 746 (2004).  We do not examine the plain
language in isolation.  Rather, we consider the particular and broad objectives of the
legislation and the overall purpose of the statutory scheme.  See Handy v. State, 357 Md. 685,
705, 745 A.2d 1107, 1117 (2000) (quoting Rose v. Fox Pool, 335 Md. 351, 359, 643 A.2d
906, 910 (1994) and cases cited therein).  If the plain language of the statute is unambiguous
and is consistent with the statute’s apparent purpose, we give effect to the statute as it is
written.  See Melton, 379 Md. at 477, 842 A.2d at 746.  When there is more than one
reasonable interpretation of a statute, the statute is ambiguous.  Melton, 379 Md. at 477, 842
A.2d at 746.  If the statutory language is ambiguous or unclear, we look to legislative history,
7Pursuant to 2002 Md. Laws, Chap. 440 § 17, Md. Code (1988, 2004 Repl. Vol.), §
7-304 of the Tax-General Article now includes “Subject to § 7-309 of this subtitle” at the
beginning of subsections (a) and (b)(2).  As part of the same amendment, the General
Assembly rewrote § 7-309, “Effect of Change in Federal Estate Tax Law,” to maintain the
Maryland estate tax even were the federal estate tax repealed.  Section 7-309 was again
amended in 2004.  2004 Md. Laws, Chap. 430 § 4.  The revised § 7-304 and, by extension,
the new § 7-309 are not applicable to the case sub judice, because decedent died in June
2000, and the 2002 amendment only applies to decedents dying after December 31, 2001.
2002 Md. Laws, Chap. 440 § 30.  We could imagine an argument that the use of “allowable”
in § 7-309(b)(1)(i) and (2)(i) as amended in 2002 is relevant for interpreting “allowable” in
§ 7-304.  We will not decide or even consider this argument as neither party has raised it —
to do otherwise would be unfair to the parties, who have had no opportunity to brief this
issue.  See Md. Rule 8-131.
-9-
prior case law, and statutory purpose.  Deville, 383 Md. 217, 223, 858 A.2d 484, 487 (2004).
The statute must be construed as a whole so that no word, clause, sentence, or phrase is
rendered surplusage, superfluous, meaningless or nugatory.  Rose, 335 Md. at 359, 643 A.2d
at 909-910.
IV.
Positions of the Parties
The parties present divergent interpretations of § 7-304.  Section 7-304 provides:7
“(a) ‘Federal credit’ defined. — In this section, ‘federal credit’
means the maximum credit for death taxes paid to any state that
is allowable under § 2011 of the Internal Revenue Code against
the federal estate tax of a decedent as reduced by the proportion
that the amount of the estate not included in the Maryland estate
bears to the amount of the entire estate of the decedent.
“(b) In general. — (1) Except as otherwise provided in this
subsection, the Maryland estate tax is the amount, if any, by
which the federal credit exceeds the total of death taxes other
than the Maryland estate tax that:
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(i) are imposed by a state on property included in the
Maryland estate;
(ii) are allowable in computing the federal credit; and
(iii) except as provided in § 13-906 of this article, have
actually been paid out of the Maryland estate and received by
the appropriate unit of this State.
    (2) The Maryland estate tax may not exceed the amount
whose timely payment in accordance with federal law would
reduce the amount of the federal estate tax payable out of the
Maryland estate had this subtitle not been enacted.
“(c) Failure to take full federal credit. — The Maryland estate
tax is not affected by a failure to take or preserve the federal
credit.”
According to appellant, § 7-304(c) mandates that an estate must pay state estate tax
regardless of whether the estate claimed the federal credit for state death taxes.  Appellant
views § 7-304(c) as dictating that appellee’s choice to take the federal credit for tax on prior
transfers instead of the credit for state death taxes has no bearing on the Maryland estate tax.
In other words, the Maryland estate tax is based on the potential state death taxes credit,
rather than the actual state death taxes credit taken.
First, appellant asserts that the plain meaning of § 7-304(c) is that the estate’s choice
to take another credit on the federal Form 706 is irrelevant for Maryland estate tax purposes.
Second, appellant argues that “allowable” in § 7-304(a) means potential, further indicating
that § 7-304(c) should be interpreted as making irrelevant whether the estate actually took
the federal credit.  Finally, appellant cites as support a statement we made in Jameson about
the meaning of § 7-304(c): “The plain meaning of this sentence is that Maryland estate tax
is calculated based upon what the maximum federal credit available to the estate is; not on
8The provision we reviewed in Comptroller v. Jameson, 332 Md. 723, 633 A.2d 93
(1993), was Md. Code (1957, 1983 Repl. Vol.) Art. 62A, § 2.  We noted that the provision
was recodified subsequently without substantive change as § 7-304(c).  Jameson, 332 Md.
at 738, 633 A.2d at 100 n.7.
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what the executor of the estate chooses to claim as a federal credit.”  332 Md. at 738, 633
A.2d at 100.8  Appellant maintains that this sentence evinces our adoption of appellant’s
position that the executor’s choice is irrelevant for determining whether to assess Maryland
estate tax.
Appellant argues that § 7-304(b)(2) does not contradict its interpretation of the statute.
Appellant sees § 7-304(b)(2) as a counterpart to § 2011(e) of the Internal Revenue Code.
Section 2011(e) states: “The credit provided by this section shall not exceed the amount of
the tax imposed by section 2001, reduced by the amount of the unified credit provided by
section 2010.”  I.R.C. § 2011(e) (2004).  In other words, § 2011(e) mandates that the state
death taxes credit may not exceed the federal estate tax.  According to appellant, § 7-
304(b)(2) plays the same role; when the calculation of the state death taxes credit is greater
than the federal estate tax, the Comptroller cannot assess a state estate tax greater than the
federal estate tax.  
Appellee responds by interpreting § 7-304 to impose Maryland estate tax only when
federal estate tax liability exists.  Appellee interprets the statute as creating a distinction
between: (1) the amount “allowable” as the federal credit under the § 7-304(a)’s definition,
and (2) the maximum estate tax that the Comptroller may impose under § 7-304(b)(2).  While
the calculation of the Maryland estate tax is determined by employing § 7-304(b)(1)’s
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arithmetic formula using the “allowable” amount of the federal credit, § 7-304(b)(2) adds that
the Comptroller may not impose the estate tax unless the state death taxes credit reduces the
federal estate tax.  In other words, § 7-304(b)(2) mandates appellee’s position that the
Comptroller may not assess a Maryland estate tax when the estate owed no federal estate tax
even without taking the state death taxes credit.  Appellee’s interpretation of § 7-304(c) is
based on his interpretation of § 7-304(b)(2).  He asserts that § 7-304(c)’s instruction to
disregard an estate’s failure to take the credit only applies when federal estate tax liability
exists.
V.
A. Purpose of the Statute
While the specific issue we address in this case is a matter of first impression in
Maryland, we have reviewed § 7-304 and its predecessor on a number of occasions.  See,
e.g., Comptroller v. Jameson, 332 Md. 723, 633 A.2d 93 (1993); Page v. Comptroller, 270
Md. 725, 313 A.2d 691 (1974); Comptroller v. Davidson, Co-Exec., 234 Md. 269, 199 A.2d
360 (1964); Cross v. Downes, 164 Md. 216, 164 A. 758 (1933).  We will review in depth our
decision in Jameson, as our analysis in that case of the purpose and structure of the Maryland
estate tax is instructive.  
In Jameson, the estate failed to file its Maryland estate tax return by the filing
deadline.  The estate did file its federal estate tax return and claimed the state death taxes
9Under § 7-304(b)(1), Maryland death taxes other than the estate tax are deducted
from the federal credit to determine the Maryland estate tax.  
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credit.  Subsequently, the estate filed its two Maryland inheritance tax returns and paid the
taxes due.  Months later, and more than two years overdue, the estate filed its Maryland
estate tax return.  As the state inheritance taxes exceeded the state death taxes credit taken,
the estate calculated that it owed no Maryland estate tax.9  The Comptroller, though, assessed
the estate for interest on the unpaid estate tax covering the time until the inheritance tax was
paid, as there was estate tax liability until the inheritance taxes reduced the liability to zero.
332 Md. at 726-28, 633 A.2d at 94-95.  We held that the Comptroller could collect interest
on the late payment of state estate tax, even though the subsequent payment of state
inheritance taxes eliminated the original estate tax liability.  Id. at 740, 633 A.2d at 101.
In reaching this holding, we analyzed the structure and purpose of what is now § 7-
304.  As quoted supra, we defined the Maryland estate tax as a “pick-up” tax with its purpose
to “shift[ ] taxes that would otherwise be paid to the federal government to the state
treasury.”  Id. at 726, 633 A.2d at 94.  See generally Estate of Fasken, 563 P.2d 832 (Cal.
1977) (en banc) (detailing in great depth the history of the federal state death taxes credit and
state estate taxes designed to “pick-up” the credit).  We noted that the Maryland statute
provides for “full use” of the federal credit.  Jameson, 332 Md. at 726, 663 A.2d at 94.  Thus,
the Maryland estate tax is not an additional tax.  Rather, it takes full advantage of federal
revenue sharing by capturing the maximum amount of estate tax revenue that the federal
government authorizes.  See Robert A. Rombro & Bonnie A. Travieso, Maryland Death
10The Office of the Attorney General has long recognized that the Maryland estate tax
is a pick-up tax, rather than an additional tax.  In 1933, Judge William L. Henderson, then
Assistant Attorney General, described the Maryland estate tax as “Maryland’s right to share
with the Federal Government in the tax imposed upon the Maryland estate.”  18 Op. Att’y
Gen. 511, 512.  In 42 Op. Att’y Gen. 432, 433 (1957), the Attorney General and Assistant
Attorney General cited Judge Henderson’s description and concluded, “Thus, the Maryland
and federal estate taxes are viewed as a single entity.”
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Taxes, in 1 Maryland Taxes § 5.52 (MICPEL 2001) (noting that “The Maryland estate tax
is not an additional tax imposed on the taxpayer, since it only causes to be paid to the state,
rather than the federal government, the difference between the inheritance tax paid to any
state and the maximum credit allowable by the federal statute with respect to death taxes paid
to any state”); H. Vernon Eney, Death and Taxes — Maryland Style, 17 Md. L. Rev. 101, 111
(1957) (noting that “The Maryland estate tax is, therefore, not an additional tax at all since
it is carved out of the Federal estate tax”).10
Applying Jameson to the case sub judice, we conclude that appellant’s position is
inconsistent with the purpose of § 7-304.  Maryland’s estate tax is integrated completely with
the federal estate tax; it is a “pick-up” tax calculated by subtracting the other state death taxes
from the federal state death taxes credit.  This integrated structure reflects the credit’s
purpose of diverting some federal estate tax revenue to the states and § 7-304's purpose of
capturing that revenue.  
Appellant would assess Maryland estate tax even when an estate has no federal estate
tax liability and, consequently, has not taken the federal credit for state death taxes.  In other
words, in situations in which an estate has no federal liability, appellant would transform
11Neither party refers us to any case law or legislative history explaining the use of the
word “allowable” in the statute.  It appears that § 7-304 uses “allowable” to correspond with
I. R. C. § 2011 (2004), which establishes the credit.  Section 2011 defines and limits the
“credit allowed.”  For example, § 2011(b)(1) states that “the credit allowed by this section
shall not exceed” amounts listed in a table of the maximum credit for estates of varying sizes.
By using the term “allowable,” the Maryland legislature made clear that § 7-304 refers to the
credit as defined by the federal definition and limitations.  Thus, corresponding to I.R.C. §
2011(b)(1), “[i]f, because of the size of the estate, no credit was allowed on the federal estate
tax return, no Maryland estate tax is imposed.”  Allan J. Gibber, Gibber on Estate
(continued...)
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Maryland’s estate tax from a revenue sharing instrument that does not increase the estate’s
tax burden into a new tax.  That position is inconsistent with the integrated relationship
between the federal and state taxes.  Simply put, Maryland cannot benefit from revenue
sharing when there is no revenue to share.  In the absence of statutory authorization, the
Comptroller may not transform § 7-304 into a tax increase.  To hold otherwise would ignore
the Maryland estate tax’s purpose of accepting the federal government’s offer to share
revenue.
B. Statutory Provisions
Appellant’s reading of “allowable” in § 7-304(a) as “potential” is contrary to the plain
language of the statute.  There is no reason to believe that the word “allowable” is meant to
remove the federal state death taxes credit and the Maryland estate tax from the role of
revenue sharing instruments.  Appellant only can reach this strained result by viewing
“allowable” as an isolated word.  The entire phrase reads: “‘federal credit’ means the
maximum credit for death taxes paid to any state that is allowable under § 2011 of the
Internal Revenue Code against the federal estate tax of a decedent.” 11  The plain meaning of
11(...continued)
Administration, § 8.63 (MICPEL 2001).
12This provision remains almost unchanged from the 1929 statute creating the
Maryland estate tax.  The wording in that statute was as follows:
(continued...)
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this phrase is that calculating the Maryland estate tax under § 7-304(b)(1)’s formula requires
using as much of the federal state death taxes credit as federal law permits.  The purpose of
the provision is to ensure that the State picks up the entire amount made available to it by the
federal credit.  When no federal estate tax is owed, because the estate has taken the tax on
prior transfers credit or for any other reason, then there is no state death taxes credit
“allowable.”  
Our reading of § 7-304(a) is compelled by the phrase “against the federal estate tax
of a decedent.”  Appellant’s interpretation of § 7-304(a) ignores this phrase.  This phrase
indicates that the federal credit should not be viewed as an abstract figure; instead, it must
be seen as a sum redistributed from the federal estate tax.  See Riethmann Trust v. Dir. of
Revenue, 62 S.W.3d 46, 48 (Mo. 2001) (en banc) (holding that near identical language in the
Missouri statute “suggests that in order to be obligated to pay the state’s tax, some federal
tax must be assessed”).
As with § 7-304(a), we can understand § 7-304(b)(2) by looking at its plain language.
Section 7-304(b)(2) states, “The Maryland estate tax may not exceed the amount whose
timely payment in accordance with federal law would reduce the amount of the federal estate
tax payable out of the Maryland estate had this subtitle not been enacted.” 12  The plain
12(...continued)
“. . . provided, however, that such ‘Maryland Estate Tax’ hereby
imposed shall in no case exceed the extent to which its payment
will effect a saving or diminution in the amount of the ‘Federal
Estate Tax,’ payable by or out of the ‘Estate’ of the ‘Decedent’
had this Article not been enacted.”
1929 Md. Laws, Chap. 275.  The provision was altered for the first time in 1978 when the
legislature changed “payment will” to “timely payment in accordance with federal law
would.”  1978 Md. Laws, Chap. 109.  This change was part of the legislature’s attempt,
discussed infra, to prevent estates’ failures to meet federal filing deadlines from impacting
the state estate taxes due.  The provision was reworded and recodified into § 7-304(b)(2) of
the Tax-General Article without substantive change in 1988.  1988 Md. Laws, Chaps. 2 and
110.
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language of this subsection is that the Maryland estate tax may not be greater than the
additional federal estate tax an estate would owe were there not a state death taxes credit.
Thus, the subsection mandates a calculation of what the federal estate tax liability would be
without the credit for state death taxes.  That the federal estate tax liability without the credit
for state death taxes is reduced by another credit is irrelevant under this subsection.  In this
case, in the absence of a state death taxes credit, the estate would have owed no federal estate
tax.  Accordingly, § 7-304(b)(2) precludes appellant from assessing appellee M aryland estate
tax. 
Unlike §§ 7-304(a) and (b)(2), § 7-304(c) is ambiguous.  Appellant reads § 7-304(c)
as stating that an estate’s decision to take another federal credit instead of the credit for state
death taxes does not affect the Maryland estate tax.  Appellee reads the section as stating that
when an estate has federal estate tax liability, its failure to take or preserve the federal credit
does not affect the Maryland estate tax.  Viewed without reference to the legislative history,
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both parties’ interpretations are reasonable.  We, thus, look to the legislative history of § 7-
304(c).
In this pursuit, we are aided again by Jameson.  In Jameson, we analyzed the meaning
and purpose of § 7-304(c) in response to one of the Jameson estate’s arguments.  The
Jameson estate argued that since it had not paid the Maryland inheritance taxes at the time
it paid its federal estate tax, a tax preparer had to enter zero as the amount of federal state
death taxes credit available.  The estate continued that as there was no federal credit
“allowable,” it owed no Maryland estate tax and could not be ordered to pay interest.  332
Md. at 737-38, 633 A.2d at 100.
Our response to the estate’s argument was based on our determination that § 7-304(c)
was passed to prevent such attempts to avoid estate tax through the timing of filing the
respective inheritance and estate tax forms.  We disagreed with the estate’s argument about
the effect of the timing of payment, holding that the General Assembly directly rejected the
argument through its enactment of what is now § 7-304(c).  We stated as follows:
“Although the above creative reasoning may have at one time
had some merit, a 1978 amendment to Article 62A, § 2 clearly
rejected this approach.  See Acts of 1978, ch. 109.  In House Bill
220, which became chapter 109, the legislature closed this
potential loophole.”
Id. at 738, 633 A.2d at 100.  After quoting the language of § 7-304(c), we noted that the plain
meaning of the provision is that the Maryland estate tax is calculated based on the maximum
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federal credit available to the estate, not based on “what the executor of the estate chooses
to claim as a federal credit.”  Id.  
That our observation was limited to the timing of estates filing returns is clear from
the following few sentences, in which we discussed the legislative history of 1978 Md. Laws,
Chap. 109.  For example, we quoted a House Ways and Means Committee finding that the
provision would ensure that “‘the State will never again reimburse an individual who fails
to submit the claim for the federal tax credit on time.’”  Id.  Thus, Jameson provides no basis
for interpreting § 7-304(c) to authorize Maryland estate tax when an estate has no federal
estate tax liability without utilizing the state death taxes credit.  
A review of the available legislative history of the 1978 amendment makes clear that
§ 7-304(c) was adopted to address timing problems.  There is no indication in the committee
bill file for House Bill 220, which became Chapter 109, that the committee even considered
the issue of when there is no federal estate tax liability without utilizing the state death taxes
credit.  Instead, the file makes clear that the bill aimed to prevent the timing of the estate’s
filings from having any impact on the state estate tax.  In a letter to the Chairman of the
House Ways and Means Committee, an official from the Comptroller’s office explained the
rationale for the bill:
“An incident occurred whereby I. R. S. disallowed a credit due
to a technicality of timely filing under the Federal regulations.
“Since the credit was not allowed by I. R. S., the personal
representative filed with the State of Maryland, for refund of the
tax that was paid.
13The bill file contains an identical letter, dated March 10, 1978, addressed to the
Chairman of the Senate Finance Committee.
-20-
“The Maryland Tax Court upheld the refund of the taxes paid.
“The Attorney General’s office recommended the changes
suggested in House Bill 220.  The amount of the Maryland
Estate tax payable under this section is not altered, diminished,
or affected in any way by the failure of the estate’s
representative to properly take and preserve the maximum state
death tax credit allowable under Federal law.”
Letter from B. T. Stehley, Chief of the Miscellaneous Revenue Division, Comptroller of the
Treasury, to the Chairman of the House Ways and Means Committee (Feb. 2, 1978).13  Thus,
the bill’s purpose was to address a specific case requiring the State to refund the state estate
tax, because the estate’s representative had made a filing error in the federal returns – i.e. had
failed to “preserve the federal credit” as stated in § 7-304(c).  
That § 7-304(c) prevents estates’ timing failures from having an effect on the
calculation of the Maryland estate tax is further supported by a review of the “Committee
Findings” section of the House Ways and Means Committee’s report summarizing House
Bill 220.  We quoted these Committee Findings in part in Jameson.  332 Md. at 738, 633
A.2d at 100.  The entire Committee Findings consisted of two sections: (1) a “Present
Situation” section which briefly summarized the integrated relationship between the federal
and state estate taxes and quoted part of Stehley’s letter, and (2) a “With Bills Passage”
section which stated in full:
-21-
“Failure of an individual to file for the Federal tax credit will in
no way alter, diminish or affect the amount of the Maryland
Estate Tax due.
“In other words, the State will never again reimburse an
individual who fails to submit the claim for the tax credit on
time.”
House Ways and Means Committee, House Bill 220 (1978).  The first sentence paraphrases
the wording of the amendment.  The second sentence defines that wording as preventing an
estate’s untimely filings from costing the State revenue from the federal government.  In sum,
§ 7-304(c) provides no support for appellant’s position that an estate is liable for state estate
tax even when the estate is not liable for federal estate tax.
After interpreting each provision, we must ensure that our construction of § 7-304 as
a whole does not render any of its parts superfluous or meaningless.  Considering all the
provisions together, § 7-304 is a coherent whole.  Together, § 7-304(a), (b), and (c) provide
that the Maryland estate tax picks up the entire amount that the federal credit on state death
taxes redistributes to the State —  no more, no less.  Subsection (a) states that Maryland picks
up the full amount of the federal credit; (b)(1) provides the formula for calculating the tax,
subtracting other death taxes; (b)(2) limits the Maryland estate tax to the federal credit; and
(c) ensures that an estate’s failures cannot cost the State revenue.  
After reviewing the purpose and the meaning of the statute, we reject appellant’s
position.  Accordingly, we hold that when an estate has no federal estate tax liability, without
14At least one Maryland commentator has reached the same conclusion.  Allan J.
Gibber wrote, 
“The other federal deductions and credits are first utilized to
determine if any federal tax is due.  It is not necessary to first
utilize the allowable state credit before reducing the tax by the
unified credit.  The Maryland estate tax is only imposed if by
reason of the credit there would be a reduction of federal taxes.”
Gibber, supra note 11, § 8.63.
15Mo. Rev. Stat. § 145.011 (2004) provides as follows:
“A tax is imposed on the transfer of every decedent's estate
which consists in whole or in part of property having a tax situs
within the state of Missouri. The Missouri estate tax shall be the
maximum credit for state death taxes allowed by Internal
Revenue Code Section 2011 but not less than the maximum
credit for state death taxes allowable to the estate of a decedent
against the federal estate tax by Section 2011 or any other
(continued...)
-22-
utilizing the federal credit for state death taxes, the Comptroller may not assess the estate
Maryland estate taxes.14 
Our holding is consistent with the holdings of other states addressing this issue.  The
facts in each of these cases are near identical to the facts of this case.  In each case, a
decedent inherited assets from a relative or friend less than two years before the decedent
died.  The decedent’s estate representative claimed a credit for tax on prior transfers on the
federal estate tax return, resulting in zero federal estate tax liability.  With no liability, the
estate did not claim the federal credit for state death taxes.  The Comptroller then assessed
the estate state estate tax.
In Riethmann Trust v. Dir. of Revenue, 62 S.W.3d 46 (2001) (en banc), the Missouri
Supreme Court applied a statute with similar wording to the M aryland statute 15 and reached
15(...continued)
provision of the laws of the United States.”
16We also find persuasive the Missouri Supreme Court’s response to the State’s
argument that the state death taxes credit must be taken before the tax on prior transfers
credit, because the state death taxes credit is listed above the tax on prior transfers credit on
the federal estate tax form, Form 706.  The court responded that the order on the form is
irrelevant, as the federal government “does not care” which credit an estate takes, and the
order on the federal form reveals nothing about the state legislature’s intent.  Riethmann
Trust v. Dir. of Revenue, 62 S.W.3d 46, 49 (2001) (en banc).
17Mich. Comp. Laws § 205.232(1) (2003) provides as follows:
(continued...)
-23-
the same result as we do.  Based on the state estate tax’s purpose of picking up the federal
credit, the court concluded that “the overall tax liability of the estate is not increased by
Missouri law; the state only gets to take a piece of the federal tax pie.”  62 S.W.3d at 47.  The
court then held that the term “allowable” meant “the amount of credit permitted against the
actual federal estate tax payable after all other credits are taken . . .” Id. at 48.  
The court offered a series of rationales for its holding.  First, the clear legislative
purpose was to ensure “the state shared in the federal tax pie,” not to create a new tax.  Id.
Second, as cited supra, by augmenting “allowable” with “against the federal estate tax,” the
legislature expressed its intent that federal tax must be assessed in order for their to be a state
estate tax.  Id.  Third, under Missouri law, an ambiguous statute imposing a tax normally is
construed in favor of the taxpayer and against the State.  Id.16
In In re Estate of Lacks, 662 N.W.2d 54 (2003), the Michigan Court of Appeals also
reached the same conclusion based on a statute with similar language.17  After noting that
17(...continued)
“A tax is imposed upon the transfer of the estate of every person
who at the time of death was a resident of this state. The tax is
equal to the maximum allowable federal credit under the
internal revenue code for estate, inheritance, legacy, and
succession taxes paid to the states. This tax shall be reduced by
the amount of all estate, inheritance, legacy, and succession
taxes paid to states other than Michigan, which amount shall not
exceed an amount equal to the proportional share of that
maximum allowable federal credit that the gross value of all real
and tangible personal property located in states other than this
state bears to the gross value of all property included in the
decedent's gross estate wherever located.”
18At the time of Dickinson v. Maurer, 229 So.2d 247 (1969), Article IX, § 11 of the
Florida Constitution of 1885 provided in part:
“. . . but the power of the Legislature to levy such Inheritance
taxes, or Estate taxes in this State, shall exist only so long as,
and during the time, a similar tax is enforced by the United
States against Florida Inheritances or Estates and shall only be
exercised or enforced to the extent of absorbing the amount of
any deduction or credit which may be permitted by the laws of
the United States . . . as a deduction or credit against such
similar tax of the United States applicable to Florida
Inheritances or Estates.”
Id. at 247.
-24-
Michigan’s estate tax was a pick-up tax and that the federal credit for tax on prior transfers
is unrelated to the credit for state death taxes, Id. at 56, 58, the court held that “respondent’s
position that state estate tax should be computed before and independent of federal
deductions or credits is clearly contrary to our state and federal estate tax scheme.”  Id. at 58.
In Dickinson v. Maurer, 229 So.2d 247 (1969), the Florida Supreme Court reviewed
the State’s constitutional provision authorizing Florida estate pick-up taxes18 and the statute
19At the time of Dickinson, Fla. Stat. Ann. § 198.02 provided as follows:
“A tax is imposed upon the transfer of the estate of every person
who, at the time of death, was a resident of this state, the amount
of which shall be a sum equal to the amount by which the credit
allowable under the applicable federal revenue act for estate,
inheritance,  legacy and succession taxes actually paid to the
several states shall exceed the aggregate amount of all
constitutionally valid estate, inheritance, legacy and succession
taxes actually paid to the several states of the United States
(other than this state) in respect to any property owned by such
decedent or subject to such taxes as a part of or in connection
with his estate.”
Id. at 247-48.
20While the statute was similar to the Maryland statute, the court relied primarily upon
the constitutional provision, which has no parallel in Maryland law.  
21The court reviewed Wash. Rev. Code § 83.100.020(3), which, at the time the
decision was written, stated in part: “‘Federal credit’ means the maximum amount of the
credit for estate death taxes allowed by [I.R.C.] section 2011 for the decedent’s net estate .
. .”  Estate of Turner v. Dep’t of Revenue, 724 P.2d 1013, 1014 (1986) (en banc).
-25-
implementing the provision.19  The court held that these provisions were intended to avail
Florida of the federal credit’s revenue sharing “without increasing by one jot or one title the
total tax burden” on Florida estates.  Id at 249 (citation omitted).20
Similarly, in Estate of Turner v. Dep’t of Revenue, 724 P.2d 1013 (1986) (en banc),
the Washington Supreme Court held that a voter initiative authorizing the Washington estate
tax was intended as a pick-up tax, and, thus, the state estate tax applied only to estates
required to pay federal estate tax.21  Id. at 1016.  To hold otherwise, the court reasoned,
would defeat the revenue sharing purpose of the pick-up tax and would increase the estate’s
tax obligations.  Id.  See also New York Trust Co. v. Doubleday, 128 A.2d 192, 197 (Conn.
22The Connecticut statute is clearer in its intent than Maryland or the other referenced
states’ statutes as it specifically identifies the state estate tax liability as eighty per cent of the
federal liability.  New York Trust Co. v. Doubleday, 128 A.2d 192, 197 (Conn. 1956).
-26-
1956) (holding that a widow who had no federal estate tax liability because of the federal
marital deduction had no state estate tax liability, since “our statute incorporates within itself
the provisions of the federal estate tax statute, governing the computation of the federal estate
tax, including all of the provisions of the latter statute for exemptions and deductions”).22
But see Estate of Eberbach v. Dep’t of Revenue, 512 N.E.2d 902, 905 (Ind. Tax Ct. 1987)
(holding that the State could not assess estate tax when the federal prior transfers credit
eliminated all federal estate tax liability, but partially relying upon the Indiana statute’s use
of the word “allowed” instead of “allowable”).
We have found one contrary case, but it is distinguishable.  In Estate of Kelly v.
Commissioner of Revenue, 1991 WL 278273, the Minnesota Tax Court held that an estate
was liable for Minnesota estate tax even though the tax on prior transfers credit had
eliminated all federal estate tax liability.  The Tax Court relied upon the Minnesota statute’s
use of (1) “not less than” in declaring the intent of the statute to be that Minnesota obtain the
benefit of “not less than the maximum credit allowed for state death taxes under the federal
estate tax law,” and (2) “allowed” in its intent section juxtaposed to “allowable” in the
section imposing the tax.  Id. at 3-4.  We are not persuaded that the relied upon language
supports the Minnesota Tax Court’s conclusion.  In any case, the Maryland statute does not
contain the language relied upon by the Minnesota Tax Court.
-27-
JUDGMENT 
OF 
THE 
CIRCUIT
COURT FOR TALBOT COUNTY
AFFIRMED.  COSTS TO BE PAID BY
THE APPELLANT.