Source: https://supreme.justia.com/cases/federal/us/250/525/
Timestamp: 2019-04-26 15:43:49+00:00

Document:
Article IV, § 2, par. 1, of the Constitution was intended to prevent discrimination by the several states against citizens of other states in respect of the fundamental privileges of citizenship. P. 250 U. S. 537.
The Fourteenth Amendment recognizes a distinction between citizenship of the United States and citizenship of one of the states, and its purpose in declaring that no state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States is not to transfer to the Federal government the protection of civil rights inherent in state citizenship, but to secure those privileges and immunities that owe their existence to the federal government, its national character, its Constitution, or its laws. P. 250 U. S. 537. Slaughter-House Cases, 16 Wall. 36.
These privileges and immunities provisions do not prevent a state from taxing the privilege of succeeding by will or inheritance from a nonresident decedent to property within its jurisdiction. P. 250 U. S. 538.
Quaere whether these privileges and immunities clauses are applicable when the alleged discrimination (in a state inheritance tax law) is based not on citizenship, but on the residence or nonresidence of the decedent? Id.
The fact that a state tax on the succession to local property of a nonresident decedent is measured by the ratio in value of such property to the entire estate, including real and personal property in other states, does not make it a tax on the property beyond the jurisdiction, and thus obnoxious to the due process clause of the Fourteenth Amendment. P. 250 U. S. 539.
The difference between the relations to the resident and nonresident testators or intestates affords justification within the equal protection provision of the Fourteenth Amendment for measuring succession taxes in different ways. P. 250 U. S. 540.
The question of equal protection must be decided between resident and nonresident decedents as classes, rather than by the incidence of the tax in particular cases. P. 250 U. S. 543.
the graduation and exemption feature, this plan of apportionment, in cases of certain large estates of nonresidents embracing large real estate and other assets in other state, resulted in greater taxes for the transfer of their property in New Jersey than would have been assessed for transfer of an equal amount of property of a decedent dying resident in the state. Held that such taxes did not infringe the privileges and immunities provision of Article IV of the Constitution, or the like provision, or the equal protection or due process clauses, of the Fourteenth Amendment.
90 N.J.L. 707; 2 id. 514, affirmed.
Appeals. 90 N.J.L. 707. In the Hill case, the judgment of the Supreme Court of New Jersey (91 N.J.L. 454) was affirmed by the Court of Errors and Appeals (92 N.J.L. 514).
"First. When the transfer is by will or by the intestate laws of this state from any person dying seized or possessed of the property while a resident of the state."
"Second. When the transfer is by will or intestate law, of property within the state, and the decedent was a nonresident of the state at the time of his death."
The taxes thus imposed were at the rate of 5 percent upon the clear market value of the property, with exemptions not necessary to be specified, and were payable to the treasurer for the use of the State of New Jersey.
entire estate of such nonresident decedent wherever situated.
"Property transferred to any child or children, husband or wife, of a decedent, or to the issue of any child or children of a decedent, shall be taxed at the rate of one percentum on any amount in excess of five thousand dollars, up to fifty thousand dollars; one and one-half percentum on any amount in excess to [of] fifty thousand dollars, up to one hundred and fifty thousand dollars; two percentum on any amount in excess of one hundred and fifty thousand dollars, up to two hundred and fifty thousand dollars, and three percentum on any amount in excess of two hundred and fifty thousand dollars."
subject to tax as aforesaid, in this state of a nonresident decedent if all or any part of the estate of such decedent, wherever situated, shall pass to persons or corporations taxable under this act, which tax shall bear the same ratio to the entire tax which the said estate would have been subject to under this act if such nonresident decedent had been a resident of this state, and all his property, real and personal, had been located within this state, as such taxable property within this state bears to the entire estate, wherever situated; provided, that nothing in this clause contained shall apply to any specific bequest or devise of any property in this state."
An amendatory act, approved April 23, 1915 (P.L.1915, p. 745; 1 Supp.Comp.Stat. N.J. p. 1542), repeated the provision last quoted, and made no change in the act pertinent to the questions here presented.
It is this method of assessment in the case of nonresident decedents which is the subject matter in controversy.
James McDonald died January 13, 1915, owning stock in the Standard Oil Company, a New Jersey corporation, valued at $1,114,965, leaving an entire estate of $3,969,333.25, which included some real estate in the State of Idaho. Of the entire estate, $279,813.17 went to pay debts and expenses of administration. Mr. McDonald was a citizen of the United States and a resident of the District of Columbia, and left a will and a codicil which were admitted to probate by the Supreme Court of that District. The executors are Lawrence Maxwell, a citizen of Ohio, and the Fulton Trust Company, a New York corporation. The principal beneficiaries under the will are citizens and residents of states of the United States other than the State of New Jersey. Under the will, the wife takes by specific legacies; the other beneficiaries are specific and general legatees not related to the deceased and a son and two grandchildren, who take the residuary estate.
and citizen of the state of Minnesota, leaving a widow and nine children. Under the laws of Minnesota, the widow inherited one-third of the real estate and personal property, and each of the children two twenty-sevenths thereof. The entire estate descending amounted to $53,814,762, which included real estate located outside of New Jersey, and principally in Minnesota and New York, valued at $1,885,120. The only property the transfer of which was subject to taxation in New Jersey was stock in the Northern Securities Company, a New Jersey corporation, valued at $2,317,564.68. The debts and administration expenses amounted to $757,571.20.
The amount of the assessment in the McDonald case was $29,071.68. In the Hill case, the tax assessed amounted to $67,018.43. Following the statute, the tax was first ascertained on the entire estate as if it were the estate of a resident of the State of New Jersey, with all the decedent's property both real and personal located there; the tax was then apportioned and assessed in the proportion that the taxable New Jersey estate bore to the entire estate.
The thing complained of is that applying the apportionment formula fixed by the statute, in the cases under review, results in a greater tax on the transfer of property of the estates subject to the jurisdiction of New Jersey than would be assessed for the transfer of an equal amount, in a similar manner, of property of a decedent who died a resident of New Jersey. The cause of this inequality is said to arise because of imposing the graduated tax, provided by the statute, upon estates so large as these. If a resident, in the case of a wife or children, the first $5,000 of property is exempt, the next $45,000 is taxed at the rate of 1%, the next $100,000 at the rate of 1 1/2%, the next $100,000 at the rate of 2%, and the remainder at the rate of 3%. The contention is that, applying the apportionment rule provided in the case of nonresident estates, a larger amount of tax is assessed.
The correctness of the figures deduced from the application of the statute as made by the counsel for plaintiff in error is contested, but, in our view, the differences are unimportant unless the state is bound to apply the same rule to the transmission of both classes of estates.
should equal but no exceed the rate imposed in the case of resident decedents. . . ."
"In the case of the estates of nonresident decedents, it is open for the law of the domicile to provide, as testators sometimes do, that such taxes shall be a general charge against the estate. Our legislature must be assumed to have had in mind its lack of jurisdiction over legacies under a nonresident's will, and in order to protect the New Jersey executor, administrator, or trustee who paid the tax, authorized its deduction from 'property for distribution.' This phrase suffices to reach not only a distributive share of a resident's estate in the case of intestacy, but the whole of the New Jersey property of a nonresident when turned over to the executor or administrator at the domicile of the decedent. The provision for both cases -- legacies and property for distribution -- demonstrates that the legislature did not mean to provide, as counsel contends, for a legacy duty only."
This language correctly characterizes the nature and effect of the tax as imposed under the amendment of 1914, but that act, under which the present cases arise, instead of reaching "the whole of the New Jersey property of a nonresident when turned over to the executor or administrator at the domicile of the decedent," now confines the transfer tax upon the property of nonresident decedents to real estate and tangible personal property within the state, the stock of New Jersey corporations, and the stock of national banks located within the state.
held to be the creation of statutory law that it is quite unnecessary to cite the decisions which have maintained the principle. While this is confessedly true, the assessment of such taxes is, of course, subject to applicable limitations of the state and federal constitutions; it is with the latter class only that this Court has to do.
(1) Taking up, then, the objections raised under the federal Constitution, it is said that the law (a) denies to citizens of other states the privileges and immunities granted to citizens of the State of New Jersey, in violation of par. 1, § 2, Art. IV, of the federal Constitution, which reads, "The citizens of each state shall be entitled to all privileges and immunities of citizens in the several states;" (b) abridges the privileges and immunities of plaintiffs in error, the deceased persons whom they represent, and those taking by will or intestacy under them, as citizens of the United States, in contravention of § 1 of the Fourteenth Amendment.
"It appears to be conceded that the Constitution secures in each state to the citizens of all other states the right to remove to, and carry on business therein; the right by the usual modes to acquire and hold property, and to protect and defend the same in the law; the right to the usual remedies for the collection of debts and the enforcement of other personal rights, and the right to be exempt, in property and person, from taxes or burdens which the property, or persons, of citizens of the same state are not subject to."
Paul v. Virginia, 8 Wall. 168, 75 U. S. 180; Ward v. Maryland, 12 Wall. 418, 79 U. S. 430.
of one of the states. It provides: "No state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States." What those privileges and immunities were was under consideration in Slaughterhouse Cases, 16 Wall. 36, 83 U. S. 72-79, where it was shown (pp. 83 U. S. 77-78) that it was not the purpose of this amendment, by the declaration that no state should make or enforce any law which should abridge the privileges and immunities of citizens of the United States, to transfer from the states to the federal government the security and protection of those civil rights that inhere in state citizenship, and (p 83 U. S. 79) that the privileges and immunities of citizens of the United States thereby placed beyond abridgment by the states were those which owe their existence to the federal government, its national character, its constitution, or its laws. To the same effect is Duncan v. Missouri, 152 U. S. 377, 152 U. S. 382.
We are unable to discover in the statute before us, which regulates and taxes the right to succeed to property in New Jersey upon the death of a nonresident owner, any infringement of the rights of citizenship either of the states or of the United States, secured by either of the constitutional provisions referred to. We have held that the protection that they afford to rights inherent in citizenship are not infringed by the taxation or transfer of property within the jurisdiction of a state passing by will or intestacy, where the decedent was a nonresident of the taxing state, although the entire succession was taxed in the state where he resided. Blackstone v. Miller, 188 U. S. 189, 188 U. S. 207.
and not upon citizenship. La Tourette v. McMaster, 248 U. S. 465.
jurisdiction in such a way as to really amount to taxing that which is beyond its authority that such exercise of power by the state is held void. In cases of that character, the attempted taxation must fail. Looney v. Crane Co., 245 U. S. 178; International Paper Co. v. Massachusetts, 246 U. S. 135. To say that to apply a different rule regulating succession to resident and nonresident decedents is to levy a tax upon foreign estates is to distort the statute from its purpose to tax the privilege which the statute has created into a property tax, and is unwarranted by any purpose or effect of the enactment as we view it.
by the provisions of the respective state constitutions requiring uniformity and equality of taxation."
And upon examining (pp. 170 U. S. 296-297) the classification upon which the provisions of the Illinois statute were based, the Court found there was no denial of the equal protection of the laws either in discriminating between those lineally and those collaterally related to decedent and those standing as strangers to the blood or in increasing the proportionate burden of the tax progressively as the amount of the benefit increased.
exclude the conception of judgment and discretion, and which would be so obviously arbitrary and unreasonable as to be beyond the pale of governmental authority."
"The validity of the tax must be determined by the laws of New York. The Fourteenth Amendment does not diminish the taxing power of the state, but only requires that, in its exercise, the citizen must be afforded an opportunity to be heard on all questions of liability and value, and shall not, by arbitrary and discriminatory provisions, be denied equal protection. It does not deprive the state of the power to select the subjects of taxation. But it does not follow that, because it can tax any transfer (Hatch v. Reardon, 204 U. S. 152, 204 U. S. 159), it must tax all transfers, or that all must be treated alike."
and merchandise within this state, or of shares of stock of corporations of this state, or of national banking associations located in this state."
Simple contract debts owing by New Jersey debtors to nonresidents and some other kinds of property of nonresidents are exempt, although it is settled that, for the purpose of founding administration, simple contract debts are assets at the domicile of the debtor (Wyman v. Halstead, 109 U. S. 654, 109 U. S. 656), and that the state of the debtor's domicile may impose a succession tax (Blackstone v. Miller, 188 U. S. 189, 188 U. S. 205; Baker v. Baker, Eccles & Co., 242 U. S. 394, 242 U. S. 401).
In our opinion, there are substantial differences which, within the rules settled by this Court, permit the classification which has been accomplished by this statute. St. Louis Southwestern Ry. Co. v. Arkansas, 235 U. S. 350, 235 U. S. 367, and cases cited.
in 216 U.S. Western Union Telegraph Co. v. Foster, 247 U. S. 105, 247 U. S. 114. New Jersey cannot tax the property of Hill or McDonald outside the state, and cannot use her power over property within it to accomplish by indirection what she cannot do directly. It seems to me that that is what she is trying to do, and therefore that the judgment of the Court of Errors and Appeals should be reversed.
It seems to me that, when property outside the state is taken into account for the purpose of increasing the tax upon property within it, the property outside is taxed in effect, no matter what form of words may be used. It appears to me that this cannot be done even if it should be done in such a way as to secure equality between residents in New Jersey and those in other states.
New Jersey could not deny to residents in other states the right to take legacies which it granted to its own citizens, and therefore its power to prohibit all legacies cannot be invoked in aid of a principle that affects the foreign residents alone. In Kansas City, Fort Scott & Memphis Ry. Co. v. Kansas, 240 U. S. 227, 240 U. S. 235, the state could have refused incorporation altogether and therefore could impose the carefully limited condition that was upheld.
THE CHIEF JUSTICE, MR. JUSTICE VAN DEVANTER, and MR. JUSTICE McREYNOLDS concur in the opinion that I express.

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