Opinion ID: 2229012
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Heading: constitutionality of nebraska estate tax

Text: Delegation of Legislative Power. Being and remaining liable until the state estate tax is paid, see § 77-2102, and in her initial attack on the constitutionality of the Nebraska estate tax, the personal representative of the West estate contends that the Nebraska Legislature, in adopting a state estate tax determinable in reference to the amount of federal estate tax liability, has delegated to the United States the power to raise state revenue by taxation. See, Neb. Const. art. VIII, § 1 (The necessary revenue of the state and its governmental subdivisions shall be raised by taxation in such manner as the Legislature may direct); Neb. Const. art. III, § 1 ([T]he legislative authority of the state shall be vested in a Legislature ...). With the possible exceptions of Nevada and South Dakota, the several states of the United States have adopted a system of death tax statutes which, in substance and at a minimum, impose a state estate tax equal to the credit allowed for state death taxes in fixing the federal estate tax. See Estate of Fasken, 19 Cal.3d 412, 563 P.2d 832, 138 Cal.Rptr. 276 (1977). The state estate tax has been characterized as a pickup tax, or, as described in Estate of Fasken, supra , Each state according to the [ Treichler v. Wisconsin, 338 U.S. 251, 70 S.Ct. 1, 94 L.Ed. 37 (1949)] formula may properly levy a pick-up tax which is calculated by first apportioning the federal state death tax credit according to the ratio of property which lies within its borders, and then reducing that apportioned credit by its inheritance tax. The balance of the apportioned credit constitutes the pick-up tax. 19 Cal.3d at 428, 563 P.2d at 841-42, 138 Cal.Rptr. at 285-86. In Anderson v. Tiemann, 182 Neb. 393, 155 N.W.2d 322 (1967), this court considered the constitutionality of certain income tax statutes of Nebraska enacted pursuant to an amendatory constitutional provision, namely, Neb. Const. art. VIII, § 1B: When an income tax is adopted by the Legislature, the Legislature may adopt an income tax law based upon the laws of the United States. In Anderson, taxpayers, challenging the constitutionality of the income tax law as an unlawful delegation of legislative power contrary to the Nebraska Constitution, pointed to the specific language in the income tax law: Any term used in [the state income tax law] shall have the same meaning as when used in a comparable context in the laws of the United States relating to federal income taxes, unless a different meaning is clearly required. Any reference to the laws of the United States shall mean the provisions of the Internal Revenue Code of 1954, and amendments thereto, other provisions of the laws of the United States relating to federal income taxes, and the rules and regulations issued under such laws, as the same may be or become effective, at any time or from time to time, for the taxable year.  (Emphasis in original.) 182 Neb. at 395, 155 N.W.2d at 325. This court, in Anderson v. Tiemann, supra , held that Nebraska statutes imposing income taxation by reference to future income tax laws of the United States were constitutional and not an unlawful delegation of legislative power to the United States, and stated: It is conceded that the Nebraska Legislature may lawfully adopt by reference an existing law or regulation of another jurisdiction including the United States. Lincoln Dairy Co. v. Finigan, 170 Neb. 777, 104 N.W.2d 227. 182 Neb. at 396, 155 N.W.2d at 325. The constitutional amendment with which we are dealing does not require, but only authorizes, the Legislature to base a state income tax law upon the laws of the United States. In connection with a state income tax law, we think it permits the Legislature to use all, part, or none of the laws of the United States as it may determine from time to time appropriate insofar as it may be lawful and practicable to do so. It does not preclude the Nebraska Legislature from repealing its own present enactment or adopting a completely different method of imposition of its income tax, and the Legislature retains the complete legislative power to make all such decisions. The adoption of a state income tax based upon present and future federal income tax laws does not constitute a waiver of the sovereignty of the state, nor an abdication of its functions, nor constitute a violation of the requirements of a representative form of government. 182 Neb. at 399-400, 155 N.W.2d at 327. Although Anderson v. Tiemann, supra , dealt with Nebraska statutes imposing an income tax and the present appeal deals with imposition of a state estate or excise tax, we believe that much of the rationale in Anderson applies to the delegation argument made by the personal representative of the West estate. Whether the Nebraska estate or excise tax, § 77-2101.01, is imposed on the transfer of every Nebraska resident's estate is a matter of legislative prerogative exercisable only by the Nebraska Legislature and not exercisable by any other legislature, such as the U.S. Congress. Although the Nebraska estate tax is correlative in operation with the federal estate tax law, inasmuch as the amount of the Nebraska estate tax is computed, and eventually determined, by reference to the state death tax credit used in fixing federal estate tax liability, the Nebraska estate tax is, nevertheless, authorized and imposed in a statute enacted by the Nebraska Legislature and does not exist independent of such legislative act of the Nebraska Legislature. As stated in Anderson v. Tiemann, 182 Neb. 393, 396, 155 N.W.2d 322, 325 (1967): [T]he Nebraska Legislature may lawfully adopt by reference an existing law or regulation of another jurisdiction including the United States. Similar to the rationale employed in Anderson v. Tiemann, supra , we conclude that § 77-2101.01 specifies a tax which, although referable to federal law for computation of the amount payable to the State of Nebraska, remains subject to the power of the Nebraska Legislature, which determines whether such tax exists or will continue to exist. Courts of other jurisdictions have reached a conclusion similar to ours, when those courts were called upon to consider a delegation argument against a state tax statute which, in defining terms or computing the amount of state tax, refers to federal statutes or regulations. For example, in City Natl. Bk. v. Iowa State Tax Comm., 251 Iowa 603, 102 N.W.2d 381 (1960), the Iowa Supreme Court held that the phrase taxable income, used in the Iowa income tax statute, which referred to the Internal Revenue Code of 1954 for the definition of taxable income, was not an unconstitutional delegation of state power to tax, and expressed: [I]t is quite apparent that the only purpose in the reference to the federal statutes is for a definition of adjusted gross income and to broaden the definition of gross income in our prior law to include such income as that on capital gains under the federal definition. No attempt is made to make the construction or interpretation of such definitions by federal authorities the law in Iowa, and they are not given power to determine or fix the Iowa tax. In other words, the reference is not for the purpose of fixing such tax.... 251 Iowa at 617, 102 N.W.2d at 389. See, also, First Federal Savings & Loan Assn. v. Connelly, 142 Conn. 483, 493, 115 A.2d 455, 459 (1955) (defining net earning by reference to federal income tax law was not an unconstitutional delegation of power to tax; This is not a delegation of legislative power but an incorporation by reference of the federal law into the state law); Parker Affiliated Cos., Inc. v. Department of Revenue, 382 Mass. 256, 266, 415 N.E.2d 825, 831 (1981) (incorporation of federal tax law into state statute on income taxation was not an unconstitutional delegation of power to tax; `[Federal] action may influence the amount of the tax payable, but the taxing power has not been delegated to [the Federal government]'). Therefore, we hold that, while § 77-2101.01 sets out the method for computing the amount due as the Nebraska estate tax and refers to the federal estate tax law in specifying the computation, existence of the Nebraska estate tax results only from, and depends entirely on, the power of the Nebraska Legislature to enact legislation imposing a tax on the estate of every Nebraska residenta legislative power exercisable irrespective of, and independent from, federal estate tax law, but exercised with correlated reference to federal law as a practical matter of convenience to the estate and economy for the state. The Nebraska Legislature, not the United States, has statutorily dictated that the credit for state death taxes in the federal estate tax scheme is the basis for computing the Nebraska estate tax. Therefore, § 77-2101.01 is not an unconstitutional delegation of legislative power. Separation of Powers. Next, in questioning the constitutionality of the Nebraska estate tax, the personal representative of West's estate proposes that, inherent in the procedure for determination of Nebraska death taxes, there is a conflict of interest statutorily demanded of a county attorney, namely, the county attorney must represent both the county and the State of Nebraska concerning matters immediately affecting the inheritance tax and ultimately bearing upon the Nebraska estate tax. See § 77-2018.03 (In all matters involving the determination of inheritance tax ... [i]t shall be the duty of the county attorney to represent the county and the State of Nebraska in such matters as its attorney). See, also, State ex rel. Nebraska State Bar Assn. v. Richards, 165 Neb. 80, 84 N.W.2d 136 (1957) (county attorney has the duty to represent the county and the state in inheritance tax matters). Such double duty required of the county attorney, the personal representative argues, constitutes legislative direction of a lawyer's conduct and, therefore, intrudes into the province of the Supreme Court of Nebraska, which is responsible for supervision of a lawyer's professional conduct. The personal representative does not suggest in what manner death taxes were increased, or would be increased, or how any taxpayer's liability for death taxes was, or would be, enhanced or otherwise adversely affected by the dual duty of the county attorney in representation of both the state and county regarding matters pertinent to death taxes payable under Nebraska law. For standing to contest constitutionality of a statute, the contestant must be one who is, or is about to be, adversely affected by the statute in question and must show that, as a consequence of the statute's alleged unconstitutionality, the contestant is deprived of a constitutionally protected right. See State v. Irwin, 208 Neb. 123, 302 N.W.2d 386 (1981). See, also, State v. Michalski, 221 Neb. 380, 393, 377 N.W.2d 510, 519 (1985) (To be in a position to challenge the constitutionality of a statute, a party must be adversely affected by the provisions at issue). Whatever may be the onus imposed on a county attorney as a result of the statutory duty to represent both the state and county in matters affecting death tax liability, the personal representative of West's estate has failed to demonstrate that the county attorney's dual duty has caused, or will cause, any legally recognizable prejudice or injury pertaining to the estate's potential liability for the Nebraska estate tax. Without an adverse effect regarding the West estate's potential liability for the Nebraska estate tax, the personal representative of the West estate does not qualify as one with standing to contest the constitutionality of § 77-2101.01. Apportionment Contention. In her brief, the personal representative states: The third area of unconstitutionality does not apply on the particular facts of this case, which is to say in this particiular [sic] case, there was not apportionment between the states.... To show how the Nebraska state proration and apportionment between the states rule would, or could be, assume these facts for our hypothetical situation.... Brief for Appellant at 20. The personal representative then sets out a hypothetical case involving an estate containing real estate in Nebraska and Colorado and a problematic conflict between the states concerning their respective state estate taxes and the federal credit allowable for state death taxes. However, the West estate does not contain any property located outside the State of Nebraska and taxable under the death tax statute(s) of another state. In the West estate, all the federal estate tax, as well as the credit for state death taxes, is based on property entirely situated in and taxable by Nebraska. The personal representative of West's estate admits that the basis for alleged unconstitutionality is purely hypothetical. Courts will not decide a question concerning the constitutionality of a statute unless such question has been raised by a litigant whose interests are adversely affected by the questioned statute. A court has no power to summarily pass upon the constitutionality of a legislative act, but has power only to decide justiciable disputes. A court's power to declare a statute unconstitutional may be invoked only when the challenged statute affects a litigant's right under the Constitution. See State ex rel. Nebraska Nurses Assn. v. State Board of Nursing, 205 Neb. 792, 290 N.W.2d 453 (1980). See, also, Ritums v. Howell, 190 Neb. 503, 209 N.W.2d 160 (1973). `The province of a court is to decide real controversies and to determine rights actually controverted, and The judicial power does not extend to the determination of abstract questions.' Mullendore v. School Dist. No. 1, 223 Neb. 28, 36, 388 N.W.2d 93, 99 (1986) (citing and quoting from Fremont Cake & Meal Co. v. Wilson & Co., 183 F.2d 57 (8th Cir.1950)). Any problem arising out of interstate apportionment of the federal credit for state death taxes, if that were the consequence of § 77-2101.01, is not a justiciable controversy in the present proceedings, but is purely a conjectural question and, as such, need not be answered.