Court Opinion

ID: 9707037
Source: CourtListenerOpinion
Date Created: 2023-08-26 01:59:18.896701+00
Date Added: 2024-06-11T18:22:27.275375
License: Public Domain

Dissenting Opinion by
Mr. Justice Jones:
With the views expressed in and the result reached by the majority opinion, I must respectfully disagree. The basis of my disagreement is that the majority opinion completely ignores the clear language of the taxing statute.
On June 15, 1961, the legislature enacted a new “Inheritance and Estate Tax Act”1 which, inter alia, *336exempted from inheritance taxation transfers of property passing from a decedent to or for the use of charities and charitable organizations.2
This appeal presents a narrow question; what is the proper method to calculate the inheritance tax where a decedent, by will, has directed the payment of specific and pecuniary legacies to certain individuals and then has created a trust of her residuary estate of which the ultimate beneficiary is a charitable organization? The resolution of that question depends upon the interpretation and construction of the language of the taxing statute. In my view, the majority opinion ignores the language of the taxing statute and relies upon case law which is based on the pre-1961 statutes the language of which is dissimilar to the language in the 1961 statute.
To illustrate, graphically, the instant problem and the opposing views of the several parties, the following illustration is helpful: A dies leaving a $100,000 estate; by will, A gives $10,000 to a friend and the residue to charity: A’s debts and administration expenses total $5,000. Under the 1961 statute, the $10,000 gift is taxable, but the gift to charity is exempt from tax.
The method of calculation adopted by the Commonwealth (appellee) and the Orphans’ Court of Allegheny County is as follows:
“Gross estate $100,000.
Deduct debts and expenses 5,000.
Net distributive estate $ 95,000.
Deduct pre-tax residue distributable to charity ($95,000 less $10,000) 85,000.
Balance subject to tax at 15% $ 10,000.
*337The tax on the $10,000 legacy would be $1,500, and therefore the net distribution to the charity would be as follows:
Gross estate $100,000.
Less:
Debts and expenses $ 5,000.
Legacy 10,000.
Tax on legacy 1,500. 16.500.
Net for charity 83.500. ’
The method of calculation urged by the Pittsburgh National Bank, Executor of Althea F. Remmel (appellant) is as follows:
“Transfer subject to tax (the pecuniary legacy) $10,000.
Deduct debts and expenses 5,000.
Net value subject to tax at 15% $ 5,000.
The tax on the $5,000 would be $750, and therefore the net distribution to the charity would be as follows:
“Total estate $100,000.
Less:
Debts and expenses P 5,000.
Legacy 10,000.
Tax on legacy 750. 15,750.
Net for charity $ 84,250. ??3
The crux of the problem is: what is the appropriate base or starting figure from which the deductions *338should be subtracted? The starting figure of the Commonwealth ($100,000) includes the property given to charity, while the estate’s starting figure ($10,000) excludes the property given to charity. The answer lies in the statute.
The title of the 1961 statute, providing “for the imposition of certain taxes upon the transfer of property passing from” a resident or nonresident decedent at the time of death, inter alia, defines and exempts from the tax, “transfers to certain persons or for certain purposes or of certain property”, and recites that it— “provide[s] for the valuation of property and interests in property, the transfer of which is subject to tax” and “define[s] and allow[s] deductions from the value of property, the transfer of which is subject to tax.,,4: (Emphasis supplied). As I read this title, the only property to be valued is clearly and exclusively property the transfer of which is subject to tax and not property the transfer of which is not subject to tax and the deductions to be allowed are to be subtracted only from the value of property the transfer of which is subject to tax and not from the value of property the transfer of which is not subject to tax or a combination of both.
Moreover, the arrangement and plan of this taxing statute is illuminating as to the legislative intent. Article II (72 P.S. §2485-201 et seq.) lists specifically the transfers of property which are subject to taxation while Article III (72 P.S. §2485-301 et seq.) lists sixteen types of transfers of property which are not subject to tax, including therein transfers of property *339to charities or for charitable purposes. The demarcation drawn in the statute between transfers which are and transfers which are not taxable reveals the intent of the legislature that, when the statute refers to “property the transfer of which is subject to tax”, only the transfers delineated and described in Article II as “Transfers Subject To Tax” are included within the term “property.”
The most significant, and for the purpose of this appeal the hey, section of the 1961 statute is §706 (72 P.S. §2485-706) ívhieh reads, inter alia, as follows: “The Secretary of Revenue shall have supervision over, and mahe or cause to be made, fair and conscionable appraisements of property, the transfer of which is subject to taw under this act. . . .’’[Italics supplied]. My reading of §706 indicates that that section clearly and unequivocally empowers the Secretary of Revenue to appraise only the property of the decedent the transfer of which is subject to tax under Article II, supra, and that it does not authorize the appraisement of any property the transfer of which is not subject to tax under Article III. That which the Commonwealth has done in the instant case directly contravenes the legislative mandate embodied in §706.
The steps leading to the assessment of the tax are specifically described in the statute: first, the Secretary of Revenue makes an appraisal of the “property, the transfer of which is subject to the taw.” (§706); second, the Register of Wills decides what shall constitute the allowable deductions (§707); third and lastly, the tax is assessed by the Register of Wills (§708). The latter step is simply mechanical in that it involves a subtraction of the allowable deductions (§707) from the appraised value of the property made under §706.
The approach of the majority opinion is that, in taking the first step leading to the assessment of the tax, the Secretary of Revenue appraises the value of *340all the decedent’s property regardless of whether such property is subject to taxation under the statute. The effect of the majority’s view is to rewrite §706 and to give the Secretary of Revenue the duty and authority to appraise decedent’s property, regardless of the taxability of the transfers of such assets. This, I submit, the Court cannot do.5
*341I am mystified by tbe unaccountable failure of tbe majority of tbis Court to meet squarely tbe only question raised on this appeal, i.e., tbe method of calculating tbe amount of tbe inheritance tax. Tbe majority opinion states “the crucial factor is not tbe exempt nature of tbe charitable gifts but rather their derivation from tbe residuary estate”, and concludes that it “is only tbe balance remaining in tbe residuary estate that decedent gave to tbe Foundation and there is no tax upon that gift” and that “tbe charitable gift must be viewed as a nontaxable transfer made from tbe net' distributive estate, not property which is excluded from tbe estate itself.” Such a tangential approach ignores tbe instant issue.
There can be no doubt that whatever tbe amount of tbe inheritance tax such tax must be paid out of tbe residue of tbe estate. Both tbe specific language of tbe decedent’s will and §718(a) of tbe 1961 statute (72 P.S. §2485-718 (a)) command such payment out of tbe residue. It is also true that, to tbe extent of such payment of inheritance tax, tbe amount eventually to be received by tbe charity will be diminished. Such facts have nothing to do with tbe present problem.
Tbe question involved is not who pays tbe inheritance tax but rather tbe method of calculating tbe amount of such inheritance tax. Strangely and unaccountably, tbe majority opinion on this subject is silent. Tbe estate seeks only that the exemption from taxation of transfers made by tbe decedent to tbe instant charity be honored in accordance with tbe statute. Tbe estate does not object to tbe payment out of tbe residue of tbis estate of the amount of an inheritance tax which is assessed by an appraisement only of property tbe transfer of which is subject to tax. Its *342objection is that the payment of a tax based upon an appraised value of property which includes transfers which are or which are not subject to the tax is offensive to the taxing statute.
At the risk of repetition, the statute not only specifically excludes from inheritance taxation transfers of property made by a decedent to charity but §706 expressly limits and restricts the appraisal of the value of the estate upon which the tax is to be calculated to “property, the transfer of which is subject to tax.” That the amount eventually to be received by the charity will be diminished by the payment of an inheritance tax properly arrived at under §706 is conceded. That the amount to be received by the charity will be further diminished by an assessment of a tax in violation of §706 constitutes the complaint of the estate.
The majority opinion stresses Foster Estate, 24 Pa. D. & C. 2d 182, as controlling. Foster was decided upon the basis of the language employed in statutes enacted prior to 1961 which statutes were repealed by the 1961 statute. Under the pre-1961 law, the inheritance tax was to be measured by “the clear value” of what the beneficiaries received and it was imposed upon the beneficiaries rather than upon the residue and, therefore, the debts and expenses and the tax lacked a common incidence. Under the statutory law in effect at the time Foster was decided, Foster was correct; by reason of the drastic changes effected by the 1961 statute, Foster is no longer apposite.
Believing that the calculation procedure advocated by the Commonwealth and upheld by the court below violates the clear language of the statute, I must register my objection to the adoption of such calculation procedure. Moreover, it is clear beyond any doubt that the legislature intended that transfers of property by decedent to charities or charitable organizations should not be subject to taxation, directly or indirect*343ly. The result reached by the majority not only violates the statutory language but completely ignores the clear legislative intent to favor charities.6
I would reverse the decree of the court below.

 Act of June 15, 1961, P. L. 373, §101 et seq., 72 P.S. §2485-101 et seq.

 Until 1956, such transfers of property to charities were taxable for inheritance tax purposes. The taxing statute was then *337amended to render sueb transfers nontaxable: Act of May 28, 1956, P. L. (1955) 1757, §1, as amended by tbe Act of July 11, 1957, P. L. 821, §1, 72 P.S. §2301.1. See: Tracy Estate, 403 Pa. 373, 170 A. 2d 93 (1961). Article III, §302 of tbe 1961 statute (72 P.S. §2485-302), continues sueb exemption.

 Tbis illustration is taken from brief of amicus curiae, Laing Estate, pp. 2, 3.

 The Statutory Construction Act (Act of May 28, 1937, P. L. 1019, §54, 46 P.S. 554) provides: “The title and preamble of a law may be considered in the construction thereof.” See: Swatara Twp. v. Automatic Bowling Centre, Inc., 419 Pa. 482, 487, 214 A. 2d 725 (1965); Commonwealth v. Derstine, 418 Pa. 186, 189, 210 A. 2d 266 (1965).

 The majority opinion relies upon Frick's Estate, 277 Pa. 242, 250, 121 A. 35, 38 (1923), Tack’s Estate, 325 Pa. 545, 549, 191 A. 155, 157 (1937) and Camp’s Estate, 298 Pa. 405, 148 A. 496 (1930). In Frick, decided under the Inheritance Tax Act of June 20, 1919, P. L. 521, the estate argued that, in ascertaining the “clear value” of the estate as the statute required, the Commonwealth erred in not deducting from the “gross value” of the estate the amount of inheritance taxes paid the Federal Government, other states, Quebec Province and Pennsylvania: the Court, noting that §2 of the 1919 statute specifically designated decedent’s debts and administration expenses as deductible but expressly forbid the deduction of such taxes, refused to permit to be done indirectly that which was directly forbidden by the statute. Frick is entirely inapposite. It should be noted, however, that in Frick, our Court quoted with ajtproval the language of New York Trust Co. v. Eisner, 256 U.S. 345, 349, 350: “where ‘the tax attaches to the estate before distribution—obviously it attaches to the whole estate, except so far as the statute sets a Umit’” (277 Pa. at p. 252). In the case at bar, the 1961 statute has set a limit. As to Gamp, we agree with amicus curiae’s analysis: “Camp enounces the rule that the deductions may not be apportioned to specific assets—or to specific interests in assets—reflected in the appraisement but must be subtracted from the conglomerate value established by the appraisement. A corollary of this rule is that residuary principal has first call on any tax-saving made possible by the deductions. [The estate’s] calculation procedure is completely consistent with the rule and its corollary: the deductions would be subtracted from the conglomerate value established by the appraisement, and the full benefit of the deductions would enure to residuary principal.” In Tack, the sole question was whether certain bonds of the Delaware River Bridge Joint Commission were exempt from inheritance taxation and the Court simply held such bonds were not exempt. Frick, Camp and Tack all were decided when the statute prescribed a method of appraisal vastly different from that pro*341vided in the 1961 statute and at a time when property transferred to charities was taxable and are clearly inapposite.

 Mr. Justice Simpson said in Frick’s Estate, 277 Pa. 242, at page 248, supra, that he shared the conviction “that the State should have, as part of its public policy, a refusal to tax any gift for a ‘purely public charity’, since no valid reason can be given for taxing the public for the benefit of the public.”