Opinion ID: 706916
Heading Depth: 3
Heading Rank: 2

Heading: NTU's Complaint and the Williams Packing Exception

Text: 39 The Supreme Court's decision in Williams Packing sets forth a second possible exception to the AIA; under this exception, suit may be brought in the face of the AIA when it is clear that under no circumstances could the Government ultimately prevail, and equity jurisdiction otherwise exists. 370 U.S. at 7, 82 S.Ct. at 1129. The exception is unavailing in this case, because NTU members have other adequate remedies to challenge section 13208. See, e.g., Younger v. Harris, 401 U.S. 37, 43-44, 91 S.Ct. 746, 750, 27 L.Ed.2d 669 (1971) ([T]he basic doctrine of equity jurisprudence [is] that courts of equity should not act ... when the moving party has an adequate remedy at law and will not suffer irreparable injury if denied equitable relief.) 40 Most of the affected NTU members can directly challenge the retroactive application of Section 13208. For example, the estate of the NTU member-testator who died between January 1 and February 25, 1993, can challenge the assessment of an estate tax liability that includes the retroactive rate increase through the estate's executor. See I.R.C. Sec. 6903(a) (1988) (A person, such as an executor, acting in a representative capacity, assumes the powers, rights, duties, and privileges of the principal under the Internal Revenue Code.). Beneficiaries of an estate for which no executor or representative has been appointed may sue to recover any taxes imposed by Section 13208. See I.R.C. Sec. 2203 (1988) ([A]ny person in actual or constructive possession of any property of the decedent is considered an executor if none is appointed, qualified, and acting within the United States.); DeNiro v. United States, 561 F.2d 653, 657 (6th Cir.1977) (Since no personal representative had been appointed [for a decedent's estate], the appellees, as 'executors' under Sec. 2203, should be permitted to seek the [estate tax] refund on behalf of the estate.). In addition, if the Government were to proceed against a legatee to collect estate taxes, the legatee would have standing to contest the assessment. See, e.g., I.R.C. Secs. 6901, 6902 (1988). 41 NTU members affected by Section 13208's gift tax provisions also have the right to challenge that tax. The federal gift tax is the donor's obligation, I.R.C. Sec. 2502(c) (1988), and, therefore, any donors subject to the retroactive gift tax under Section 13208 could contest their own gift tax liability. Donees would be subject to the gift tax liability only if the donor did not pay it, and would then have the ability to personally challenge the tax assessment. See, e.g., I.R.C. Secs. 6212, 6213(a), 6324(b), 6901(f), 7403(b) (1988). The only NTU members who could conceivably be left without individual standing to challenge the retroactive impact of Section 13208 are legatees of affected estates in which an executor has been appointed and that executor refuses to challenge the tax. In this instance, one or all legatees of that estate may receive less property because the government is receiving more taxes. Such legatees are not entirely without recourse, however, because the estate's executor is bound by a fiduciary duty to represent their interests. See, e.g., In re Estate of Lamson, 662 A.2d 287, 288 (N.H.1995) ([T]he executor owes a fiduciary duty to the estate and heirs....). Therefore, the legatees can request that the executor challenge Section 13208, and may have recourse to proceed against the executor if he or she refuses to do so. See, e.g., In re Estate of Ridl, 455 N.W.2d 188, 193 (N.D.1990) (The court noted that charges for overpaid taxes relating to improperly filed tax returns generally may be imposed against the personal representative of an estate for the breach of a fiduciary duty.); In re Estate of Estes, 654 P.2d 4, 13 (Ariz.Ct.App.1982) (The court found that an executor's erroneous overstatement of estate taxes and its subsequent refusal to seek a refund constituted a breach of the ... duty to preserve the property of the estate.); cf. In re Estate of Maurice, 433 Pa. 103, 249 A.2d 334, 336 (Pa.1969) (The court found that an undisputed overpayment of estate taxes requires the executor to prove that, in handling the federal estate tax matters, it used common skill, prudence and due care under the circumstances.). 42 Although this remedy may not be as ideal as the ability to challenge Section 13208 in one's own name, it is an available remedy. Given the fiduciary relationship between an executor and an estate's legatees, the opportunity to challenge Section 13208 through the executor is a significantly more practical alternative than the option found unacceptable in South Carolina, i.e., requiring the state to convince a taxpayer to raise its claims. South Carolina, 465 U.S. at 380, 104 S.Ct. at 1115; cf. In re LaSalle Rolling Mills, Inc., 832 F.2d 390, 394 (7th Cir.1987) (The court noted that a corporation that might have to rely on its owner-officers to remedy a tax assessment was in a far different situation than South Carolina, which would have been forced to rely on unidentified and unrelated individuals.). 6 Therefore, all of NTU's aggrieved members have some means to redress the injury from Section 13208. 43 In any event, it seems highly unlikely that NTU could meet the additional requirement of Williams Packing by demonstrating that the Government would not be able to prevail in any circumstance. Although we need not reach the merits of NTU's arguments, we note that there is persuasive precedent indicating that increases in federal estate and gift taxes have been found constitutional, even when applied retroactively. See, e.g., Milliken v. United States, 283 U.S. 15, 51 S.Ct. 324, 75 L.Ed. 809 (1931); cf. First Nat'l Bank v. United States, 190 Ct.Cl. 400, 420 F.2d 725 (In considering the validity of an excise tax, the court rejected plaintiffs' argument that the mere retroactive application of a tax ... can convert such tax to a direct levy on property.), cert. denied, 398 U.S. 950, 90 S.Ct. 1868, 26 L.Ed.2d 289 (1970). Therefore, it does not appear that NTU could show that there are no circumstances under which the Government could prevail on the merits.