Source: https://supreme.justia.com/cases/federal/us/338/251/
Timestamp: 2019-04-19 02:56:00+00:00

Document:
1. The Wisconsin emergency tax on inheritances, Wis.Stat. 1947, § 72.74(2), as applied by the Supreme Court of Wisconsin in this case, is a tax on property rated and measured in part by tangible property situated in other states. Pp. 338 U. S. 252-256.
2. Insofar as it is measured by tangible property outside Wisconsin, the tax violates the Due Process Clause of the Fourteenth Amendment. Frick v. Pennsylvania, 268 U. S. 473. Pp. 338 U. S. 256-257.
254 Wis. 24, 35 N.W.2d 404, reversed.
The Supreme Court of Wisconsin sustained a levy of certain taxes on the estate of appellant's testator under Wis.Stat. 1947, § 72.74(2), notwithstanding a claim that it violated the Due Process Clause of the Fourteenth Amendment because it was based in part on tangible property located outside the State. 254 Wis. 24, 35 N.W.2d 404. On appeal to this Court, reversed, p. 338 U. S. 257.
This is an appeal from a decision of the Supreme Court of Wisconsin, 254 Wis. 24, 35 N.W.2d 404, arising from an order of the County Court of Milwaukee County, levying certain death taxes on the estate of Fred A. Miller, deceased, under the applicable statutes of Wisconsin. The question for decision is the validity of the Wisconsin emergency tax on inheritances, § 72.74(2), Wis.Stat. 1947, when tested in the light of the Due Process Clause of the Fourteenth Amendment to the Constitution of the United States.
The Commissioner of Internal Revenue assessed net federal taxes against the estate in the sum of $3,076,131.19, inclusive of the 80% of the basic federal tax subject to credit for state estate taxes as provided by § 301(b) of the United States Revenue Act of 1926, 44 Stat. 70, as amended, 26 U.S.C. § 813(b). This 80% credit was the sum of $630,709.62.
Wisconsin has a triad of death taxes known as (1) normal inheritance tax, (2) estate tax, and (3) emergency tax.
The normal Wisconsin inheritance tax, as levied by §§ 72.01 to 72.24, Wis.Stat. 1947, was in this case $220,682.12. It is levied only on property within the Wisconsin, and is not in controversy here.
"the aggregate amount of all estates, inheritance, transfer, legacy, and succession taxes paid to any state or territory or the District of Columbia, in respect to any property in the estate of said decedent."
Wis.Stat. (1947) § 72.50. Wisconsin normal inheritance taxes, as well as out of state taxes, are deducted from the federal credit. The estate tax on this estate was computed at $352,701.79. However, this provision of the Wisconsin statutes is not under explicit attack here.
"In addition to the taxes imposed by sections 72.01 to 72.24 and 72.50 to 72.61, an emergency tax for relief purposes, rehabilitation of returning veterans of World War II, construction and improvements at state institutions and other state property, and for post-war public works projects to relieve post-war unemployment is hereby imposed upon all transfers of property which are taxable under the provisions of said sections and which are made subsequent to March 27, 1935, and prior to July 1, 1949, which said tax shall be equal to 30 percent of the tax imposed by said sections. "
As is apparent, computation of the additional emergency tax involves only four factors: (1) the amount of the 80% federal credit, (2) the taxes paid to other jurisdictions, (3) Wisconsin normal inheritance taxes, and (4) the 30% rate imposed. In applying the yardstick of this section to the decedent's estate, the Wisconsin authorities took the total of the 80% federal credit, that is $630,709.62, and first deducted from it the taxes paid to states other than Wisconsin-Illinois ($35,616.26) and Florida ($21,709.45) -- and Wisconsin's normal inheritance tax ($220,682.12), which left $352,701.79. The tax due was then calculated by taking 30% of the latter amount, plus 30% of the normal inheritance tax. The result, $172,015.20, was levied as the emergency inheritance tax due.
It will be seen that, as the taxing formula is reduced, the normal inheritance tax is no longer a factor in the computation. For, while 30% thereof is added to 30% of the estate tax to give the emergency tax, the normal inheritance tax has already been subtracted in the computation of the basic estate tax. Hence, in extending the formula of the emergency tax, the inheritance taxes cancel. [Footnote 2] What is left, other than out of state taxes, is simply 80% of the basic federal tax, rated and measured by the entire estate, regardless of situs, and therefore including the property located in Illinois and Florida.
We think it clear that the order entered by the Supreme Court of Wisconsin authorized a tax on property rated and measured in part by tangible property, the situs of which was outside Wisconsin.
"insofar as it attempts to tax the transfer of tangible personalty having an actual situs in other states, contravenes the due process of law clause of the Fourteenth Amendment, and is invalid."
Wisconsin's statute may be more sophisticated than Pennsylvania's, but, in terms of ultimate consequences, this case and the Frick case are one. It is quite unnecessary to know in either case what property is located within the taxing jurisdiction in order to compute the challenged exaction.
We hold that Wisconsin's emergency inheritance tax is invalid insofar as it is measured by tangible property outside Wisconsin. The judgment must be reversed, and the cause remanded for proceedings not inconsistent with this opinion.
MR. JUSTICE BLACK dissents. He agrees that the Court's holding logically follows from its interpretation of the due process clause in the Frick case, but believes that, so interpreted, the clause gives a more expansive control over state tax legislation than the due process clause justifies.
The record does not reveal the exact nature of the property, and we have held that whether the property is "tangible" within the meaning of Frick v. Pennsylvania, 268 U. S. 473 (1925), infra is a federal question. Blodgett v. Silberman, 277 U. S. 1 (1928). In this case, however, the parties and the court below agree that the property is clearly "tangible" within the Frick rule. We accept that assumption.
30% x Wisconsin normal inheritance tax + 30% (80% federal basic tax - Wisconsin normal inheritance tax - taxes paid in Illinois and Florida). This reduces to:30% (80% federal basic tax - taxes paid in Illinois and Florida).
Deductions authorized in the computation of the normal inheritance tax are thus of no significance.
A different question might be presented, however, if the statute in question authorized computation to begin with 87.52%, rather than all of the 80% federal credit. We intend to intimate no opinion as to that situation.
Of course, we have refused to be governed by this consideration when so to do would have placed a premium upon the avoidance of all state taxes. New York ex rel. New York C. & H. R. Co. v. Miller, 202 U. S. 584, 202 U. S. 597 (1906); Southern Pacific Co. v. Kentucky, 222 U. S. 63 (1911); cf. Northwest Airlines v. Minnesota, 322 U. S. 292 (1944). See Commonwealth v. Pennsylvania Coal Co., 197 Pa. 551, 47 A. 740 (1901); Norfolk & W. R. Co. v. Board, 97 Va. 23, 32 S.E. 779 (1899).

References: § 72
 v. 
 § 72
 § 72
 § 301
 § 813
 § 72
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v.