Court Opinion

ID: 2739395
Source: CourtListenerOpinion
Date Created: 2014-10-02 16:22:00.139837+00
Date Added: 2024-06-11T10:30:27.743274
License: Public Domain

FILE                                                This opinion was flied for record
         IN CLERKS OFFICE
lllJPREME COURT, STATE OF WASIIINGTON                        ~~~,16~
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             OCT 0 2 2014
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                                                                   Suprarne Court Clark

     IN THE SUPREME COURT OF THE STATE OF WASHINGTON

     In re the Matter of the:                            )
                                                         )
     ESTATE OF HELEN M. HAMBLETON,                       )                 No. 89419-1
                                                         )
                  Deceased,                              )
                                                         )
     STEVE HAMBLETON, in his capacity as personal        )
     representative of the Estate of Helen M. Hambleton, )
                                                         )
                  Respondent,                            )
     v                                                   )               consolidated with
                                                         )
     STATE OF WASHINGTON, DEPARTMENT OF                  )
     REVENUE,                                            )
                                                         )
                          Appellant.                     )
     --------------------------- )
                                 )
     In re the Matter of the:                         )
                                                                           No. 89500-7
                                                      )
     ESTATE OF JESSIE CAMPBELL MACBRIDE,              )
                                                                              En Bane
                                                      )
                 Deceased,                            )
                                                                 Filed    OCT 0 2 2014
                                                      )                  --------
     THOMAS A. MACBRIDE Ill and PHILIP MACBRIDE, )
     Personal Representatives of the Estate of Jessie )
     Campbell Macbride,                               )
                                                         )
                         Appellants,                     )
     v                                                   )
                                                         )
     STATE OF WASHINGTON, DEPARTMENT OF                  )
     REVENUE,                                            )
                                                         )
                          Respondent.                    )
                                                         )
In re Estate of Hambleton, No. 89419-1
consolidated with
In re Estate of Macbride, No. 89500-7

      WIGGINS, J.-ln 2013, the legislature amended the Estate and Transfer Tax

Act, chapter 83.1 00 RCW, in response to our decision in In re Estate of Bracken, 175
Wash. 2d 549, 290 P.3d 99 (2012), in which we narrowly construed the term "transfer."

The amendment allows the Department of Revenue (DOR) to tax qualified terminable

interest property (QTIP) as part of a surviving spouse's estate. A QTIP trust is created

by a deceased spouse and gives the surviving spouse a life interest in the income or

use of trust property. See 26 U.S.C. § 2056(b )(7)(B)(i)-(ii). The advantage of QTIP

trusts is that no estate tax is paid on the death of the first spouse; the property is taxed

only upon the death of the surviving spouse.

       In these consolidated cases, the estates of Hambleton and Macbride

(collectively Estates) challenge the amendment on a variety of grounds. We reject

the Estates' challenges and reverse summary judgment in In re Estate of Hambleton,

No. 89419-1, and affirm the summary judgment in In re Estate of Macbride, No. 89500-

7.

                                       Background

       A brief discussion of the history of Washington's current estate tax law, the

Bracken decision, 175 Wash. 2d 549, and the facts of the consolidated cases, places this

case in context.

                        Washington Estate Tax Law Pre-Bracken

       For many years, Washington did not have an independent estate tax. Instead,

Washington participated in a federal tax sharing system, referred to as "pickup" taxes.

                                             2
In re Estate of Hambleton, No. 89419-1
consolidated with
In re Estate of Macbride, No. 89500-7

Bracken, 175 Wash. 2d at 557. Under the pickup tax system, the federal government

became the principal estate tax collector in exchange for sharing with states a

generous percentage of the amount collected.         /d.   In 2001, Congress passed

legislation that gradually eliminated the pickup tax system. /d. at 558. Our legislature

responded by "revis[ing] existing statutes to tie estate taxation to provisions of the

Internal Revenue Code as they existed [under the former pickup tax system], with

DOR continuing to collect the same amount of tax as before." /d. at 558-59. We

invalidated the revisions and instructed the legislature to either create a stand-alone

estate tax or remain under the former pickup tax system. /d. at 559; Estate of Hemphill

v. Dep't of Revenue, 153 Wash. 2d 544, 551, 105 P.3d 391 (2005).

      In 2005, the legislature answered by enacting a stand-alone estate tax, the

Estate and Transfer Tax Act (Act).     LAWS OF   2005, ch. 516, § 1.    The legislature

modeled the stand-alone tax after the federal estate tax regime. See Bracken, 175
Wash. 2d at 559. "It incorporates concepts and definitions from federal law and operates

almost entirely in tandem with taxable estate and tax calculation and reporting for

federal estate tax purposes."    /d.   For example, the "'Washington taxable estate'

means the federal taxable estate, less: [specified deductions]."     LAWS OF   2005, ch.

516, § 2(13).

       Under federal law, Congress provides a deduction for QTIP trust assets. QTIP

is property in a testamentary trust created by a deceased spouse for the benefit of the

surviving spouse. The result of the deduction is that "[t]he spouse who dies first

                                           3
In re Estate of Hambleton, No. 89419-1
consolidated with
In re Estate of Macbride, No. 89500-7

controls the final disposition of the property, while allowing the surviving spouse to use

the property or receive the income it generates, unreduced by front-end estate

taxation." Bracken, 175 Wash. 2d at 556. Typically, terminable interests, such as life

estates, do not qualify for the marital tax deduction.         See id. at 555.     However,

Congress created an exception for QTIP assets. The effect of the deduction is that

the property is ultimately taxed, but the property is not taxed when the first spouse

creates the life estate. /d. at 556. The transfer of property is taxed when the second

spouse dies and the ultimate beneficiaries become present interest holders. /d.

       Estate taxes are excise taxes. West      v.   Okla. Tax Comm'n, 334 U.S. 717, 727,

68 S. Ct. 1223, 92 L. Ed. 1676 (1948). Whether a tax is an excise tax or a direct tax

is significant because the Washington State Constitution imposes a uniformity

requirement on direct taxes, but the uniformity requirement does not apply to excise

taxes. CaNST. art. VII,§ 1; Dean v. Lehman, 143 Wash. 2d 12, 25-26, 18 P.3d 523 (2001 ).

A tax is an "excise" or "transfer" tax if the government is taxing "a particular use or

enjoyment of property or the shifting from one to another of any power or privilege

incidental to the ownership or enjoyment of property." Fernandez       v.   Wiener, 326 U.S.
340, 352, 66 S. Ct. 178, 90 L. Ed. 116 (1945).

       The 2005 Act imposed a tax on "every transfer of property located in

Washington" and applied prospectively to estates of decedents dying on or after May

17, 2005. LAWS OF 2005, ch. 516, §§ 3(1 ), 20. Therefore, a transfer (upon which the

excise tax operates) must occur on or after May 17, 2005.

                                            4
In re Estate of Hambleton, No. 89419-1
consolidated with
In re Estate of Macbride, No. 89500-7

                                  Estate of Bracken

      In Bracken, we held that DOR overstepped its authority by adopting regulations

that taxed QTIP assets when the deceased spouse died before the effective date of

the 2005 Act. Bracken, 175 Wash. 2d at 554; see LAWS OF 2005, ch. 516, § 20. In

Bracken, the deceased spouses made QTIP elections under federal law before

Washington enacted its stand-alone estate tax and the surviving spouses died after

the legislature passed the Act. See 175 Wash. 2d at 556, 561-62. The estate in Bracken

argued that the taxable transfer occurred when the first spouse died (before the Act

came into effect), while DOR argued that a taxable transfer occurred when the second

spouse died (after the Act came into effect). See id. at 561-63.

      We interpreted "transfer" narrowly and reasoned that the only "transfer"

occurred at the husbands' deaths when they created the QTIP trusts. See id. at 554,

563. Any transfers that occurred later upon the wives' deaths were fictional. /d. at

554. Therefore, DOR exceeded its authority under the Act, which requires a transfer,

by creating regulations that allowed taxation of fictional transfers. /d. According to

our interpretation in Bracken, the "real" transfers occurred before the 2005 estate law

was enacted. DOR could not tax these transfers because the legislature declared

that the Act was prospective only. See LAWS OF 2005, ch. 516, § 20. The court did

not reach alleged constitutional issues because it construed the estate tax to apply

only to real transfers. See 175 Wash. 2d at 563.

                                           5
In re Estate of Hambleton, No. 89419-1
consolidated with
In re Estate of Macbride, No. 89500-7

      The concurring/dissenting opinion disagreed with the majority's narrow

interpretation of "transfer."   See id. at 576 (Madsen, C.J., concurring/dissenting).

However, the concurring/dissenting opinion still agreed that the legislature did not

intend to tax the QTIP, but for reasons differing from the majority. /d. at 594 (Madsen,

C.J., concurring/dissenting) ("The 2006 regulations on their face and according to their

plain language effectuate the obvious purpose of the legislature's determination to

allow a state QTIP election: the surviving spouses' estates are not subject to state

estate taxation on federal estate QTIP elections that did not benefit the first spouses'

estates on any state estate tax returns by allowing a state marital deduction when the

first spouses died."). The concurring/dissenting justices noted that the legislature

could amend the statute if it intended a different result, so long as the amendments

did not offend the constitution. /d. at 594-95.

       The result of the Bracken decision was that the State could not tax the QTIP

trusts created by spouses dying before the Act was enacted because the spouse did

not make a state QTIP election. See id. at 554.

                                   2013 Amendments

       In 2013, the legislature responded to Bracken by amending the Act to tax QTIP

assets upon the death of the surviving spouse. LAWS OF 2013, 2d Spec. Sess., ch. 2,

§ 1. Disagreeing with Bracken's narrow interpretation of the term "transfer," the

legislature noted that under the federal estate tax code "transfer" is "construed broadly

and extends to the 'shifting from one to another of any power or privilege incidental to

                                            6
In re Estate of Hambleton, No. 89419-1
consolidated with
In re Estate of Macbride, No. 89500-7

the ownership or enjoyment of property' that occurs at death." /d. § 1(3) (quoting

Fernandez, 326 U.S. at 352). The legislature also found that Bracken

       (a) Creates an inequity never intended by the legislature because
       unmarried individuals did not enjoy any similar opportunities to avoid or
       greatly reduce their potential Washington estate tax liability; and (b) may
       create disparate treatment between QTIP property and other property
       transferred between spouses that is eligible for the marital deduction.

/d. § 1(4 ).   In response to its findings, the legislature broadened the meaning of

"transfer" to its "broadest possible meaning consistent with established United States

supreme court precedents .... " /d. § 1(5).

       The legislature intended for the amendments to "apply both prospectively and

retroactively to all estates of decedents dying on or after May 17, 2005." /d. § 9.

However, the amendments do "not affect any final judgment, no longer subject to

appeal, entered by a court of competent jurisdiction before the effective date of this

section[, June 14, 2013]." /d.§ 10.

       The amendment modified the definition of "transfer." The definition of "transfer"

now reads, '"Transfer' means 'transfer' as used in section 2001 of the internal revenue

code and includes any shifting upon death of the economic benefit in property or any

power or legal privilege incidental to the ownership or enjoyment of property. ... " /d.

§ 2(12) (italics indicate added language). Section 2001 of the Internal Revenue Code

(IRC) uses "transfer" in the following context: "A tax is hereby imposed on the transfer

of the taxable estate of every decedent who is a citizen or resident of the United

States." 26 U.S.C. § 2001 (a).

                                            7
In re Estate of Hambleton, No. 89419-1
consolidated with
In re Estate of Macbride, No. 89500-7

         The legislature also amended the definition of the "Washington taxable estate."

The amended definition is, in relevant part, "the federal taxable estate and includes,

but is not limited to, the value of any property included in the gross estate under

section 2044 of the internal revenue code, regardless of whether the decedent's

interest in such property was acquired before May 17, 2005 . ... "            LAWS OF   2013, 2d

Spec. Sess., ch. 2, § 2(14) (italics indicate added language). Section 2044 requires

that QTIP assets be included in the value of the surviving spouse's gross estate. See

26 U.S.C. § 2044(a).

         The legislature's amendments clarified the intent of the legislature to include

QTIP trusts created before 2005 in the surviving spouse's Washington taxable estate

(if the surviving spouse died after the Act's effective date).

         We now turn to the facts of the two cases before us.

                                       Estate of Hambleton

         Floyd Hambleton died on April 13, 2005, when there was no Washington estate

tax in effect. His will left a testamentary trust for the benefit of his wife that qualified

for the federal QTIP election. His estate made the federal QTIP election, but no such

election existed under state law. His wife, Helen M. Hambleton, died on October 11,

2006. Helen's 1 federal taxable estate included the value of the QTIP trust property,

but the estate did not include the property in its Washington taxable estate. DOR

1   For the sake of clarity, we refer to the spouses by their first names. We intend no disrespect.

                                                  8
In re Estate of Hambleton, No. 89419-1
consolidated with
In re Estate of Macbride, No. 89500-7

disallowed a $4.7 million QTIP deduction and filed findings fixing the tax due. DORis

seeking an additional $1,184,989.16 in taxes. The estate filed objections to findings

fixing the tax due and petitioned for declaratory and other relief. The parties agreed

to stay the matter pending our decision in Bracken.

      Following Bracken, the estate filed a motion for summary judgment, arguing

that the Washington taxable estate could not include the federal QTIP election. The

trial court granted summary judgment in favor of the estate, DOR appealed, and our

court accepted certification under RAP 4.2.

                                  Estate of Macbride

      Thomas Macbride died on October 20, 1999, leaving a QTIP marital deduction

trust for the lifetime benefit of his wife, Jessie C. Macbride. His estate made a federal

election under 26 U.S.C. § 2056(b)(7). Jessie later died on October 21, 2007. The

estate timely deposited funds with the State prior to filing either its federal or state

estate tax returns. The estate paid taxes on the QTIP under protest and then sought

a refund of $643,953, the taxes paid on the QTIP assets.                  The personal

representatives brought this action for a refund, but the superior court granted

summary judgment to DOR.

       The estate filed a notice of appeal, seeking review of the order denying

summary judgment in favor of petitioners, the order affirming agency action, and the

order denying a motion for reconsideration.       After this court accepted review of

Bracken (but before the court set a date for oral argument), DOR moved to stay

                                            9
In re Estate of Hambleton, No. 89419-1
consolidated with
In re Estate of Macbride, No. 89500-7

review.    The estate opposed the motion, and the Court of Appeals commissioner

denied the motion. In the ruling, the commissioner explained that Bracken was not

yet set for oral argument and the parties could seek to transfer the case to the

Washington Supreme Court after briefing was complete. Thereafter, neither party

sought transfer. After the Bracken argument was set, the commissioner asked the

parties to brief whether the Court of Appeals should stay review pending resolution of

Bracken. The record contains a response only from DOR. The commissioner stayed

the appeal until our court resolved Bracken, whereupon we granted DOR's motion to

transfer the case to this court and consolidate it with Hambleton.

                                         Analvsis

          The Estates challenge the 2013 amendments on a variety of grounds. The

constitutional arguments focus on the separation of powers doctrine, due process

clause (U.S. CONST. amend XIV), impairment of contracts clause (U.S. Const. art. I, §

10, cl. 2; WASH. CONST. art. I,§ 23), and article VII, section 1 of the state constitution.

The ex post facto clauses of the state and federal constitutions apply only to penalties

and, therefore, do not apply to taxes.    See In re Pers. Restraint of Yates, 180 Wash. 2d
33, 51, 321 P.3d 1195 (2014). The delegates to Washington's constitutional

convention of 1889 could have included an ex post facto clause applicable to civil

cases; they did not.    Hence, the Estates rely on other constitutional clauses. We

analyze this case under principles applicable to civil cases, not criminal cases.

                                            10
In re Estate of Hambleton, No. 89419-1
consolidated with
In re Estate of Macbride, No. 89500-7

      As a general rule, our state legislature possesses plenary power to tax except

as limited by the constitution. Be/as v. Kiga, 135 Wash. 2d 913, 919-20, 959 P.2d 1037

(1998). We presume that statutes are constitutional and place "the burden to show

unconstitutionality ... on the challenger." Amunrud v. Bd. of Appeals, 158 Wash. 2d 208,

215, 143 P.3d 571 (2006).

      The arguments unrelated to the constitution include estoppel, the statute of

limitations, and the existence of a final judgment. We review questions of law de novo,

as well as orders granting summary judgment.       Cost Mgmt. Servs., Inc. v. City of

Lakewood, 178 Wash. 2d 635, 641, 310 P.3d 804 (2013); Smith        v. Safeco Ins. Co., 150
Wash. 2d 478, 483, 78 P.3d 1274 (2003).

                                Separation of Powers

      We hold that the legislature did not intrude upon judicial power when it

retroactively amended the Estate and Transfer Tax Act.     The legislature was careful

not to affect the rights of any parties to a prior judgment, reopen a case, or interfere

with any judicial function. See Lummi Indian Nation v. State, 170 Wash. 2d 247, 263,

241 P.3d 1220 (2010).

       Our system of checks and balances incorporates the important concept of the

separation of powers. Hale   v. Wellpinit Sch. Dist. No. 49, 165 Wash. 2d 494, 503, 506,
198 P.3d 1021 (2009). The doctrine "preserves the constitutional division between

the three branches of government, ensuring that the activity of one does not threaten

or invade the prerogatives of another." State   v. Elmore, 154 Wash. App. 885, 905, 228

                                           11
       In re Estate of Hambleton, No. 89419-1
       consolidated with
       In re Estate of Macbride, No. 89500-7

....   P.3d 760 (201 0).   The legislature violates separation of powers principles when it

       infringes on a judicial function. Haberman v. Wash. Pub. Power Supply Sys., 109
Wash. 2d 107, 143, 744 P.2d 1032, 750 P.2d 254 (1987). The function of the judiciary is

       to say what the law is, whereas the legislature's function is to set policy and draft and

       enact law. Hale, 165 Wash. 2d at 506. It is important to note that although the separate

       and coequal branches fill different roles, the branches "must remain partially

       intertwined to maintain an effective system of checks and balances. The art of good

       government requires cooperation and flexibility among the branches." /d. at 507.

              In Hale, the late Justice Tom Chambers wrote for a unanimous court when we

       rejected the argument that the legislature's retroactive amendment violated the

       separation of powers doctrine. /d. at 509-10. The facts grew out of McClarty v. Totem

       Electric, 157 Wash. 2d 214, 137 P.3d 844 (2006). In McClarty, the court interpreted the

       term "disability" in a way that limited the reach of Washington's Law Against

       Discrimination (WLAD), chapter 49.60 RCW. See Hale, 165 Wash. 2d at 501. Just as

       the legislature responded to Bracken by retroactively changing the law, the legislature

       changed the definition of "disability" announced by the court in McClarty. /d. at 501;

       see LAWS OF 2007, ch. 317, § 1. The amendment applied retroactively to all causes

       of actions occurring before the McClarty opinion was filed and prospectively to all

       causes of action occurring after the legislature passed the amendment. Hale, 165
Wash. 2d at 502; LAWS OF 2007, ch. 317, § 1.

                                                   12
In re Estate of Hambleton, No. 89419-1
consolidated with
In re Estate of Macbride, No. 89500-7

      The practical effects of the McClarty decision and the amendments on the

parties in Hale were tangible. Hale was diagnosed with an anxiety disorder. Hale,
165 Wash. 2d at 499. After we decided McClarty, the trial judge granted summary

judgment in favor of Hale's employer, the Wellpinit school district, because Hale's

ailment did not qualify as a disability. See id.     Shortly thereafter, the legislature

amended the WLAD to include a broad definition of "disability." /d. at 500. Hale filed

a motion for reconsideration, which the trial court denied, reasoning that applying the

amendment retroactively would violate the separation of powers doctrine. /d. The

trial judge then certified the issue to our court. /d. We unanimously held that applying

the amendment retroactively to Hale did not intrude upon judicial powers. /d. at 510.

       Justice Chambers explained that although it is the court's obligation to

determine and carry out the intent of the legislature, the legislature is occasionally

disappointed with the court's interpretation. /d. at 509. By amending the statute, "the

legislature acted wholly within its sphere of authority to make policy, to pass laws, and

to amend laws already in effect." /d. He noted, "The legislature was careful not to

reverse our decision in McClarty nor did the legislature interfere with any judicial

function." /d. at 510. He praised the cooperation between the legislature and the

court, stating:

       [The court's interpretation of the statute and the legislature's responsive
       amendment] should serve as a model of how two separate and
       independent branches of government can work together in harmony and
       in the spirit of reciprocal deference to the other's important role and
       function in the art of governing.

                                           13
In re Estate of Hambleton, No. 89419-1
consolidated with
In re Estate of Macbride, No. 89500-7

/d.

      The court held similarly in Lummi Indian Nation, 170 Wash. 2d at 262-63. The

facts in Lummi Indian Nation arose out of Department of Ecology v. Theodoratus, 135
Wash. 2d 582, 957 P.2d 1241 (1998), and the legislature's subsequent amendment to

municipal water law. See Lummi Indian Nation, 170 Wash. 2d at 251. In Theodoratus,

we held that under a then-existing statute, private water rights not did vest until the

water was put to an "actual beneficial use." /d. at 255.      This was a departure from

the Department of Ecology's practice of issuing permits and certificates based upon a

showing of need and capacity. /d. We cautioned that the opinion did not consider

municipal water rights, which were treated differently under the law. /d. at 251, 255.

The legislature responded to our opinion by amending the municipal water law to

"explicitly define certain nongovernmental water suppliers as municipal and to make

that definition retroactive."   /d. at 251.

       The issue before the court in Lummi Indian Nation was whether the amendment

violated the separation of powers doctrine when its retroactive application narrowed

the applicability of our holding. /d. at 260. Writing again for a unanimous court, Justice

Chambers concluded that the retroactive amendments did not offend the separation

of powers doctrine. /d. at 262-63.      He relied heavily on Hale. See id. at 261-63.

               In Hale, we said that in order to decide whether the retroactive
       application of a statute violates separation of powers we must determine
       "whether the activity of one branch threatens the independence or
       integrity or invades the prerogatives of another." . . . Retroactive
       legislation that interferes with vested rights established by judicial rulings
       interferes with a judicial function or results in manifest injustice or

                                              14
In re Estate of Hambleton, No. 89419-1
consolidated with
In re Estate of Macbride, No. 89500-7

       threatens the independence, integrity, or prerogatives of the judicial
       branch may violate separation of powers.

              However, in Hale, we also firmly rejected the contention that just
       because an appellate court's statutory interpretation relates back to the
       time the statute was originally adopted, any retroactive amendment of
       that statute violates separation of powers. Indeed, it is wholly within the
       sphere of authority of the legislative branch to make policy, to pass laws,
       and to amend laws already in effect.

/d. at 262 (citations omitted) (internal quotation marks omitted) (quoting Hale, 165
Wash. 2d at 507). Applying these principles, the unanimous court found no separation

of powers violation. !d. at 263. "The legislature made no attempt to apply the law to

an existing set of facts, affect the rights of parties to the court's judgment, or interfere

with any judicial function."      /d.   Its actions did not threaten the independence or

integrity of the judiciary. /d.

       We apply the principles and reasoning announced in Hale to the facts before

us and hold that the retroactive amendment does not offend the separation of powers

doctrine. The sequence of events here is very similar to those in Hale. In Hale, the

employer's alleged discriminatory conduct occurred in 2002-03. Hale, 165 Wash. 2d at

499. In 2006, Hale filed suit against the employer. /d. On July 6, 2006, we issued

the McClarty decision, in which we interpreted "disability" narrowly. See McClarty,
157 Wash. 2d at 228. The trial judge granted partial summary judgment against Hale

because Hale was not disabled under the definition we adopted in McClarty. Hale,
165 Wash. 2d at 499. The following month, the legislature rejected our interpretation of

"disability," statutorily defined the term, and applied the amendment retroactively

                                               15
In re Estate of Hambleton, No. 89419-1
consolidated with
In re Estate of Macbride, No. 89500-7

(except for cases occurring between the dates when McClarty was announced and

the amendment was enacted). See id. at 500.

      Here, the estate of Hambleton objected to DOR's disallowing the QTIP

deduction and petitioned for declaratory relief. After we issued Bracken, the trial court

granted the estate summary judgment because there was no taxable transfer under

our narrow interpretation of "transfer." The legislature then amended the definition to

include QTIP transfers and applied the amendment retroactively. The sequence of

events is identical to those in Hale. 2

       The court unequivocally allowed a retroactive amendment to change our

interpretation of a statute in Hale. We will not overrule the rules announced in Hale

and Lummi Indian Nation. Therefore, we hold the same today. The 2013 amendment

does not offend the separation of powers doctrine. The legislature was careful to draft

the law so that it "does not affect any final judgment, no longer subject to appeal,

entered by a court of competent jurisdiction before the effective date of this section[,

June 14, 2013]." LAWS OF 2013, 2d Spec. Sess., ch. 2, § 10. Like in Hale and Lummi

Indian Nation, the legislature was threatening neither the independence nor the

2The sequence of events is slightly different in Macbride, but this does not change our
analysis. The trial court granted DOR summary judgment well before the Bracken opinion
was filed. The case was pending before the Court of Appeals when Bracken became law.
And, the case was still pending when the legislature enacted the 2013 amendments. As in
Hale, this case was pending before the courts when a decision by our court was released.
The legislature retroactively changed the law. And, we apply the change in law to cases
pending in the courts.

                                           16
In re Estate of Hambleton, No. 89419-1
consolidated with
In re Estate of Macbride, No. 89500-7

integrity of the court, nor was it invading the court's prerogative. See Hale, 165 Wash. 2d

at 510; Lummi Indian Nation, 170 Wash. 2d at 263.

       It is additionally important to note that the legislature is not prohibited from

passing amendments that directly impact cases pending in our court system. 3 Wash.

State Farm Bureau Fed'n v. Gregoire, 162 Wash. 2d 284, 304, 174 P.3d 1142 (2007)

("Nor is the legislature prohibited from 'pass[ing] a law that directly impacts a case

pending in Washington courts.' 'Litigation often brings to light latent ambiguities or

unanswered questions that might not otherwise be apparent.' The legislature violates

separation of powers principles by prescribing new rules to be applied to pending

litigation only when doing so infringes on a judicial function by 'imped[ing] upon the

court's right and duty to apply new law to the facts of this case,' 'dictat[ing] how the

court should decide a factual issue,' or 'affect[ing] a final judgment.'" (alterations in

original) (citations and internal quotation marks omitted) (quoting Port of Seattle v.

Pollution Control Hr'gs Bd., 151 Wash. 2d 568, 625-26, 90 P.3d 659 (2004) and United

States v. Morton, 467 U.S. 822, 835 n.21, 104 S. Ct. 2769, 81 L. Ed. 2d 680 (1984)).

When a legislature makes clear that an act is intended to apply retroactively, "an

appellate court must apply that law in reviewing judgments still on appeal that were

rendered before the law was enacted, and must alter the outcome accordingly." Plaut

3 The Estates are really arguing this appeal as a matter of fairness. None of their
constitutional arguments dictate that they get the relief they seek. The decision to
retroactively amend the statute was a policy decision, properly in the sphere of the legislature.

                                               17
In re Estate of Hambleton, No. 89419-1
consolidated with
In re Estate of Macbride, No. 89500-7

v. Spendthrift Farm, Inc., 514 U.S. 211, 226, 115 S. Ct. 1447, 131 L. Ed. 2d 328 (1995).

In Plaut, the Court reasoned:

      [The judiciary is a] department composed of "inferior Courts" and "one
      supreme Court." Within that hierarchy, the decision of an inferior court
      is not (unless the time for appeal has expired) the final word of the
      department as a whole. It is the obligation of the last court in the
      hierarchy that rules on the case to give effect to Congress's latest
      enactment, even when that has the effect of overturning the judgment of
      an inferior court, since each court at every level, must "decide according
      to existing laws."

/d. at 227 (quoting United States v. Schooner Peggy, 5 U.S. (1 Cranch) 103, 109, 2 L.

Ed. 49 (1801 )).

      The legislature did not violate the separation of powers doctrine when it passed

the retroactive amendment to the Act.

                                      Due Process

       Applying a rational basis standard, the 2013 amendment's retroactive

application does not violate due process of law. See United States v. Carlton, 512
U.S. 26, 30-31, 114 S. Ct. 2018, 129 L. Ed. 2d 22 (1994 ). The legislature has a

legitimate purpose for the retroactive amendment, and the period of retroactivity is

rationally related to that purpose. /d.

       States must not "deprive any person of life, liberty, or property, without due

process of law . . . . "   U.S. CONST. amend. XIV, § 1; CONST. art. I, § 3.         This

constitutional protection guards against arbitrary and capricious government action.

Amunrud, 158 Wash. 2d at 219. Our analysis follows that of the federal constitution

because the state constitution does not afford broader due process protection than

                                           18
In re Estate of Hambleton, No. 89419-1
consolidated with
In re Estate of Macbride, No. 89500-7

the Fourteenth Amendment to the United States Constitution.                 See In re Pers.

Restraint of Dyer, 143 Wash. 2d 384, 394, 20 P.3d 907 (2001 ); State      v.   Morgan, 163 Wn.

App. 341, 352,261 P.3d 167 (2011). We use a rational basis standard for examining

the 2013 amendment:

       The due process standard to be applied to tax statutes with retroactive
       effect ... is the same as that generally applicable to retroactive economic
       legislation:

          "Provided that the retroactive application of a statute is supported by
          a legitimate legislative purpose furthered by rational means,
          judgments about the wisdom of such legislation remain within the
          exclusive province of the legislative and executive branches ....

              "To be sure, ... retroactive legislation does have to meet a burden
          not faced by legislation that has only future effects .... The retroactive
          aspects of legislation, as well as the prospective aspects, must meet
          the test of due process, and the justifications for the latter may not
          suffice for the former .... But that burden is met simply by showing
          that the retroactive application of the legislation is itself justified by a
          rational legislative purpose."

Carlton, 512 U.S. at 30-31 (emphasis added) (most alterations in original) (internal

quotation marks omitted) (quoting Pension Benefit Guar. Corp. v. R.A. Gray & Co.,

467 U.S. 717, 729-30, 104 S. Ct. 2709, 81 L. Ed. 2d 601 (1984 )); see WR. Grace &

Co.   v. Oep't of Revenue, 137 Wash. 2d 580, 602-03, 973 P.2d 1011 (1999) (Our court
applied the same standard when examining the retroactive application of a business

and occupation tax.).

       Applying the rational basis standard, the Court in Carlton held that the

retroactive application of revisions to the IRC did not violate the due process clause.

Carlton, 512 U.S. at 28-29. As background, the IRC created a deduction for "half the

                                             19
In re Estate of Hambleton, No. 89419-1
consolidated with
In re Estate of Macbride, No. 89500-7

proceeds of 'any sale of employer securities by the executor of an estate' to 'an

employee stock ownership plan."' /d. at 28 (quoting former 26 U.S.C. § 2057(b) (1982

ed. & Supp. IV)). In order to receive the deduction, the sale of securities had to take

place before an estate filed its tax return. /d. The estate in Carlton bought and sold

the securities for the purpose of taking advantage of the § 2057 deduction. /d. The

transaction reduced the taxable estate by $2,501,161. /d. One week after the estate

took advantage of the deduction, the Internal Revenue Service (IRS) announced that

it would treat the deductions as available only to "estates of decedents who owned

the securities in question immediately before death." /d. at 29. Almost a year later,

Congress amended the statute to conform to the IRS' policy. The amendment was to

be applied retroactively, "as if it had been contained in the statute as originally

enacted" a year prior. /d. The IRS disallowed the estate's deduction, and the estate

in Carlton argued that this violated its due process rights. /d. The Court found no due

process violation. /d. at 32-33.

      First, there was a legitimate purpose. Congress enacted the amendment to

correct a mistake that "would have created a significant and unanticipated revenue

loss." /d. at 32. This purpose was neither arbitrary nor illegitimate. /d. Second, the

means were rationally related to the purpose. /d. at 32-33. The period of retroactivity

extended slightly longer than one year. /d. at 33. The amendments were introduced

in Congress shortly after the problem was discovered, and it took time to pass national

legislation. See id. at 32-33. In reaching its conclusion in Carlton, the Court noted

                                          20
In re Estate of Hambleton, No. 89419-1
consolidated with
In re Estate of Macbride, No. 89500-7

that it "repeatedly has upheld retroactive tax legislation against a due process

challenge." /d. at 30.

        Courts have upheld retroactive periods that are short and limited to that

required by the practicalities of producing legislation and have upheld longer

retroactive periods as well. See United States v. Oarusmont, 449 U.S. 292, 297, 101
S. Ct. 549, 66 L. Ed. 513 (1981 ); WR. Grace, 137 Wash. 2d at 586-87; Mont. Rail Link}

Inc.   v. United States, 76 F.3d 991, 993-94 (9th Cir. 1996); Enter. Leasing Co. of
Phoenix   v. Ariz. Oep}t of Revenue, 221 Ariz. 123, 125-29, 211 P.3d 1 (Ct. App. 2008).
Our court found that a retroactive period spanning more than seven years did not

violate the due process clause in WR. Grace. 137 Wash. 2d at 586-87.

        The facts in WR. Grace involved the legislature's amending an unconstitutional

business and occupation tax. The amendment limited taxpayer relief to a tax credit

and applied retroactively. /d. at 586. A challenger sought relief from taxes it paid

seven years before the amendment was enacted.            See id. at 587. We found that

there was a "rational legislative purpose" and the "retroactive application of the ...

remedial legislation [did] not offend constitutional principles." /d. at 603.

        Similarly, an amendment to the Railroad Retirement Tax Act, 26 U.S.C. § 3231,

which applied retroactively for seven years, passed constitutional muster because it

served a legitimate purpose (i.e., preventing a loss of government revenue and

protecting employees who relied on receiving higher retirement benefits) and the

period of retroactivity bore "a rational relation to [the] underlying legislative purpose."

                                            21
In re Estate of Hambleton, No. 89419-1
consolidated with
In re Estate of Macbride, No. 89500-7

Mont. Rail Link, Inc., 76 F.3d at 993-94. "A shorter period of retroactivity would have

been arbitrary and irrational." /d. at 994. 4

       Here, the retroactive application of the 2013 amendments meets the rational

basis standard. See Carlton, 512 U.S. at 30-31. As stated in§ 1 of the amendment,

the purpose is to "restore parity between married couples and unmarried individuals

[by not allowing married individuals to avoid or greatly reduce their potential

Washington estate tax liability], restore parity between QTIP property and other

property eligible for the marital deduction, and prevent the adverse fiscal impacts of

the Bracken decision .... "      LAWS OF    2013, 2d Sp. Sess., ch. 2, § 1(5). Like the

legitimate purpose in Carlton, the purpose of the 2013 amendment is largely

economic. Carlton, 512 U.S. at 32. According to the DOR fiscal note, the legislation

was anticipated to

       increase revenues to the education legacy trust account by an estimated
       $118.4 million in Fiscal Year 2014. The estimated revenue increase
       reflects the retroactive clarifications of the definitions of "transfer" and
       "Washington taxable estate" to conform to the Department's
       interpretation, thereby eliminating any refund claims resulting from the
       recent court decision, other than for the Estate of Bracken. It also reflects
       other changes made to existing estate tax law.

4 The Estates' briefs suggest that Carlton creates a threshold on the period of retroactivity.
Our court has allowed periods of retroactivity extending beyond one year, as have other
jurisdictions. WR. Grace, 137 Wash. 2d at 586-87; Mont. Rail Link, Inc., 76 F.3d at 993-94;
Enter. Leasing Co., 221 Ariz. At 127 ("We do not interpret our precedents as creating a
talismanic cutoff of one year.").

                                                22
In re Estate of Hambleton, No. 89419-1
consolidated with
In re Estate of Macbride, No. 89500-7

Agency Fiscal Note to Engrossed H.B. 2075, at 3, 63d Leg., 2d Spec. Sess. (Wash.

2013) (prepared by DOR). Preventing unanticipated and significant fiscal shortfall is

a legitimate purpose for amending tax legislation. Carlton, 512 U.S. at 32.

        The period of retroactivity is also rationally related to preventing the fiscal

shortfall. It provides the necessary funds, and the length of retroactivity is directly

linked with the purpose of the amendment, which is to remedy the effects of Bracken.

The amendment applies to all estates since our State enacted the Act. This period of

retroactivity is not arbitrary.   However, any period less than eight years would be

arbitrary. It would allow some estates to escape the tax while similarly situated estates

would be subject to it. Additionally, the eight-year period of retroactivity is not far

outside other retroactive periods that courts have accepted. See WR. Grace, 137
Wash. 2d at 586-87; Mont. Rail Link, Inc., 76 F.3d 993-94; Enter. Leasing Co., 211 P.3d
1. Therefore, the retroactive period meets the due process clause's rational basis

test.

        The Estates make two failing arguments regarding the due process clause.

First, the Estates argue that the 2013 amendments impose a wholly new tax, making

the Carlton standard inapplicable. The Ninth Circuit rejected this argument in Quarty

v. United States, 170 F.3d 961, 966-67 (9th Cir. 1999). The parties were attempting

avoid the application of Carlton and, instead, invoke precedent from the 1920s. /d. at

966. The 1920s cases considered retroactive application of the first gift tax, which

violated due process. /d. The Ninth Circuit quoted Carlton:

                                            23
In re Estate of Hambleton, No. 89419-1
consolidated with
In re Estate of Macbride, No. 89500-7

         "Those cases were decided during an era characterized by exacting
         review of economic legislation under an approach that 'has long since
         been discarded.' To the extent that their authority survives, they do not
         control here. Blodgett and Untermyer, which involved the Nation's first
         gift tax, essentially have been limited to situations involving 'the creation
         of a wholly new tax,' and their 'authority is of limited value in assessing
         the constitutionality of subsequent amendments that bring about certain
         changes in the operation of the tax laws."'

Quarty, 170 F.3d at 966-67 (citations omitted) (quoting Carlton, 512 U.S. at 34 (quoting

Ferguson v. Skrupa, 372 U.S. 726, 730, 83 S. Ct. 1028, 10 L. Ed. 2d 93 (1963); United

States   v. Hemme, 476 U.S. 558, 568, 106 S. Ct. 2071, 90 L. Ed. 2d 538 (1986))). The
court concluded, "[A] new tax is imposed only when the taxpayer has 'no reason to

suppose that any transactions of the sort will be taxed at all."' /d. at 967 (quoting

Darusmont, 449 U.S. at 298, 300).

         The 2013 amendments did not create a wholly new tax. Washington has long

received revenue from estate taxes, and the taxpayers had "reason to suppose" that

the state would tax shifting interests in assets upon death.           See id.    Therefore,

Carlton's rational basis test applies. See id.

         The Estates' second unsuccessful argument is that applying the amendments

retroactively is unconstitutional because it impairs a vested right acquired under

existing law. Appellant's Suppl. Br. at 27 ("the existing law here being, in effect, no

estate tax at all, or rather the 'pickup' tax Washington instituted in 1981 "). "A statute

may not be applied retroactively to infringe a vested right." In re Pers. Restraint of

Carrier, 173 Wash. 2d 791, 810, 272 P.3d 209 (2012). We recently stated:

                                              24
In re Estate of Hambleton, No. 89419-1
consolidated with
In re Estate of Macbride, No. 89500-7

      This notion finds root in the due process clauses of the Fifth and
      Fourteenth Amendments. While due process generally does not prevent
      new laws from going into effect, it does prohibit changes to the law that
      retroactively affect rights which vested under the prior law. We have said
      that

          [a] vested right, entitled to protection from legislation, must be
          something more than a mere expectation based upon an anticipated
          continuance of the existing law; it must have become a title, legal or
          equitable, to the present or future enjoyment of property, a demand,
          or a legal exemption from a demand by another.

/d. at 811 (alteration in original) (citations omitted) (quoting Godfrey v. State, 84 Wash. 2d
959, 963, 530 P.2d 630 (1975)). For example, we declined to apply an amendment

retroactively when the legislature was silent as to retroactivity and a party had a vested

interest. In re F.D. Processing, Inc., 119 Wn.2d 452,460,463,832 P.2d 1303 (1992).

       Here, DOR correctly notes that the Estates do not explain what vested right the

remainder beneficiaries held in the QTIP that was impacted by the amendment. The

remaindermen had vested rights in the trust property upon the death of the first

spouse.    This interest became a vested present interest upon the death of the

surviving spouse, and the legislature is taxing the shift in interest. The estate tax does

not deprive the remaindermen of their interest in the property or change the nature of

their interest. It simply taxes the transfer of assets.

       On a related note, in Carlton, the Supreme Court stated,

       Tax legislation is not a promise, and a tax payer has no vested right in
       the Internal Revenue Code. Justice Stone explained in Welch v. Henry,
       305 U.S. [134, 146-47, 59 S. Ct. 121, 83 L. Ed. 87 (1938):]

          ''Taxation is neither a penalty imposed on the taxpayer nor a liability
          which he assumes by contract. It is but a way of apportioning the

                                            25
In re Estate of Hambleton, No. 89419-1
consolidated with
In re Estate of Macbride, No. 89500-7

          cost of government among those who in some measure are privileged
          to enjoy its benefits and must bear its burdens. Since no citizen
          enjoys immunity from that burden, its retroactive imposition does not
          necessarily infringe due process .... "

Carlton, 512 U.S. at 33 (alteration in original). Similarly, the Estates here do not have

a vested right in Washington's pre-2005 pickup tax scheme.

      There is no due process violation because the 2013 amendments serve a

legitimate purpose and the period of retroactivity is rationally related to that purpose.

                                Impairment of Contract

      The 2013 amendments do not violate the impairment of contracts clause

because the amendments are not a substantial impairment to a contract and the

legislative amendment was reasonably necessary.

       Both the federal constitution and Washington State Constitution protect citizens

from state laws that impair the obligation of contracts. CONST. art. I, § 23; U.S. CONST.

art. I, § 10, cl. 1; see Wash. Fed'n of State Emps. v. State, 101 Wash. 2d 536, 539, 682
P.2d 869 (1984) ("[Const. art. I, § 23] is substantially the same as U.S. Const. art. 1,

§ 10 and is to be given the same effect."). Like many other constitutional rights, the

clause's protections are not absolute; "its prohibition must be accommodated to the

inherent police power of the State 'to safeguard the vital interests of its people."'

Energy Reserves Grp., Inc. v. Kan. Power& Light Co., 459 U.S. 400,410, 103 S. Ct.
697, 74 L. Ed. 2d 569 (1983) (quoting Home Bldg. & Loan Ass'n v. Blaisdell, 290 U.S.
398, 434, 54 S. Ct. 231, 78 L. Ed. 413 (1934)).

                                            26
In re Estate of Hambleton, No. 89419-1
consolidated with
In re Estate of Macbride, No. 89500-7

      As a threshold matter, we inquire into "whether the state law has, in fact,

operated as a substantial impairment of a contractual relationship." /d. at 411 (quoting

Allied Structural Steel Co. v. Spannaus, 438 U.S. 234, 244, 98 S. Ct. 2716, 57 L. Ed.
2d 727 (1978)). "The impaired relationship must be a 'contract' in the usual sense of

the word 'signifying an agreement of two or more minds, upon sufficient consideration,

to do or not to do certain acts."' Haberman, 109 Wash. 2d at 145 (quoting Crane v. Hahlo,

258 U.S. 142, 146, 42 S. Ct. 214, 66 L. Ed. 514 (1922)). However, in 1931, the United

States Supreme Court applied the contracts clause to a trust deed. Coolidge v. Long,

282 U.S. 582, 595, 51 S. Ct. 306, 75 L. Ed. 562 (1931 ). "A contract is impaired by a

statute which alters its terms, imposes new conditions or lessens its value." Caritas

Servs., Inc. v. Dep't of Soc. & Health Servs., 123 Wash. 2d 391, 404, 869 P.2d 28 (1994 ).

We look for a substantial impairment. Margo/a Assocs. v. City of Seattle, 121 Wash. 2d
625, 653, 854 P.2d 23 (1993). An impairment may be substantial if a party relied on

the supplanted clause. Caritas, 123 Wash. 2d at 405. However, "a party who enters into

a contract regarding an activity 'already regulated in the particular [way] to which he

now objects' is deemed to have contracted 'subject to further legislation upon the

same topic'." Margo/a Assocs., 121 Wash. 2d at 653 (quoting Veix v. Sixth Ward Bldg. &

Loan Ass'n, 310 U.S. 32, 38, 60 S .Ct. 792, 84 L. Ed. 1061 (1940)).

       If the threshold is met and the contract is between private parties, we determine

whether the enactment was reasonably necessary. Carlstrom v. State, 103 Wash. 2d
391, 394, 694 P.2d 1 (1985). "The contracts clause does not prohibit the states from

                                           27
In re Estate of Hambleton, No. 89419-1
consolidated with
In re Estate of Macbride, No. 89500-7

repealing or amending statutes generally, or from enacting legislation with retroactive

effects." Haberman, 109 Wash. 2d at 145.

      Here, the threshold inquiry is not met and the amendments were reasonably

necessary. There was no substantial impairment of the trust because it was reasonable

for the Estates to expect that the estate tax law would change. See Coolidge, 282 U.S.

at 595. Additionally, the 2013 amendments meet the "reasonably necessary" standard

for contracts where the State is not a party. The purpose of the amendments is to provide

revenue to fund education. See    LAWS OF   2013, 2d Spec. Sess., ch. 2, § 1(1). "'[T]he

State ... has an affirmative paramount duty to make ample provision for funding the

'basic education' .... " McCleary   v. State, 173 Wash. 2d 477, 517, 269 P.3d 227 (2012)
(second alteration in original) (quoting Seattle Sch. Dist. No. 1 v. State, 90 Wash. 2d 476,

520, 585 P.2d 71 (1978)). Imposing a tax on the Estates prevented the fiscal shortfall

created by Bracken. Therefore, the 2013 amendments do not unconstitutionally impair

contracts.

                                  Article VII, Section 1

       We hold that the amendments do not violate article VII, section 1 of the

Washington State Constitution. Article VII, section 1 provides, "All taxes shall be

uniform upon the same class of property within the territorial limits of the authority

levying the tax and shall be levied and collected for public purposes only."        This

uniformity requirement applies only to property tax and not excise tax. Dean, 143
Wash. 2d at 25-26 ("Excise taxes also fall beyond the breadth of the uniformity

                                            28
In re Estate of Hambleton, No. 89419-1
consolidated with
In re Estate of Macbride, No. 89500-7

requirement."). Because the estate tax is an excise tax, the 2013 amendments do not

violate article VII, section 1 of the Washington Constitution.

      A tax is an "excise" or "transfer" tax if the government is taxing "a particular use

or enjoyment of property or the shifting from one to another of any power or privilege

incidental to the ownership or enjoyment of property." Fernandez, 326 U.S. at 352. An

estate tax is an excise tax because the tax is "not levied on the property of which an

estate is composed. Rather it is imposed upon the shifting of economic benefits and

the privilege of transmitting or receiving such benefits." West, 334 U.S. at 727.

       Transfers are broadly construed at death under federal estate tax law-the

system upon which the Act is based. For example, the United States Supreme Court

stated:

       [T]he [federal] estate tax as originally devised and constitutionally
       supported was a tax upon transfers. But the power of Congress to
       impose death taxes is not limited to the taxation of transfers at death. It
       extends to the creation, exercise, acquisition, or relinquishment of any
       power or legal privilege which is incident to the ownership of property,
       and when any of these is occasioned by death, it may as readily be the
       subject of the federal tax as the transfer of the property at death.

Fernandez, 326 U.S. at 352 (citations omitted). The First Circuit Court of Appeals has

stated that the estate tax is not "in a strict sense a tax upon a 'transfer' of the property

by the death of the decedent. It is an excise tax upon the happening of an event,

namely, death, where the death brings about certain described changes in legal

relationships affecting property." Chickering v. Comm'r of Internal Revenue, 118 F.2d
254, 257-58 (1st Cir. 1941 ).

                                            29
In re Estate of Hambleton, No. 89419-1
consolidated with
In re Estate of Macbride, No. 89500-7

       Following these general principles, taxing QTIP assets upon the death of a

surviving spouse qualifies as an excise tax. The surviving spouse had the economic

benefit of using the income from QTIP assets during his or her life. And, upon the

surviving spouse's death, the remainder beneficiaries of the trust gained a present

interest in the assets and income. The death of the surviving spouse brought about

"changes in legal relationships affecting property."          /d. Therefore, the Estate and

Transfer Tax Act is an excise tax and not subject to article VII, section 1.

                               Equitable & Collateral Estoppel

       DOR is not equitably estopped from applying the 2013 amendments to the

estate of Macbride. 5 The elements of equitable estoppel are:

       (1) a party's admission, statement or act inconsistent with its later claim;
       (2) action by another party in reliance on the first party's act, statement
       or admission; and (3) injury that would result to the relying party from
       allowing the first party to contradict or repudiate the prior act, statement
       or admission.

5 Neither of the Estates raises the issue of judicial estoppel. "'Judicial estoppel is an equitable
doctrine that precludes a party from asserting one position in a court proceeding and later
seeking an advantage by taking a clearly inconsistent position."' Anfinson v. FedEx Ground
Package Sys., Inc., 174 Wash. 2d 851, 861, 281 P.3d 289 (2012) (internal quotation marks
omitted) (quoting Arkison v. Ethan Allen, Inc., 160 Wash. 2d 535, 538, 160 P.3d 13 (2007)).
Three factors guide judicial estoppel: "(1) whether 'a party's later position' is 'clearly
inconsistent with its earlier position'; (2) whether 'judicial acceptance of an inconsistent
position in a later proceeding would create the perception that either the first or the second
court was misled'; and (3) 'whether the party seeking to assert an inconsistent position would
derive an unfair advantage or impose an unfair detriment on the opposing party if not
estopped."' Arkison, 160 Wash. 2d at 538-39 (internal quotation marks omitted) (quoting New
Hampshire v. Maine, 532 U.S. 742, 750-51, 121 S. Ct. 1808, 149 L. Ed. 2d 968 (2001 )).
Judicial estoppel is not applicable. The parties have not taken inconsistent positions, nor
have they misled the court. It was the legislature that changed the law that applies to the
cases.

                                                30
In re Estate of Hambleton, No. 89419-1
consolidated with
In re Estate of Macbride, No. 89500-7

Kramarevcky v. Dep't of Soc. & Health Servs., 122 Wash. 2d 738, 743, 863 P.2d 535

( 1993). Assertions of equitable estoppel against the government are not favored;

parties must demonstrate that equitable estoppel is necessary to prevent a manifest

injustice and that the exercise of governmental functions will not be impaired as a

result of the estoppel.   /d.   Generally, we "should be most reluctant to find the

government equitably estopped when public revenues are involved." /d. at 744.

      The estate of Macbride bases its estoppel argument on the fact that had it

transferred its appeal to our court alongside Bracken, the 2013 amendment would not

apply to it. However, the estate fails to prove the second element with clear, cogent,

and convincing evidence, in that the estate failed to prove reliance on DOR's

statements. See City of Seattle v. St. John, 166 Wash. 2d 941, 948-49, 215 P.3d 194

(2009).

      DOR moved to stay proceedings pending our decision in Bracken. It reasoned

that the current case and Bracken involved the same legal issues and that our decision

in Bracken would likely resolve the estate of Macbride's appeal and make any further

proceedings moot. Even if the motion is a statement or assertion, the estate did not

rely upon it. Instead, the estate filed a response that opposed DOR's motion to stay.

Given these facts, equitable estoppel does not apply.

      Additionally, collateral estoppel does not prevent DOR from relitigating issues.

Before a court will invoke collateral estoppel,

      the party asserting the doctrine must prove: (1) the issue decided in the
      prior adjudication is identical with the one presented in the second action;

                                           31
In re Estate of Hambleton, No. 89419-1
consolidated with
In re Estate of Macbride, No. 89500-7

      (2) the prior adjudication must have ended in a final judgment on the
      merits; (3) the party against whom the plea is asserted was a party or in
      privity with the party to the prior adjudication; and (4) application of the
      doctrine does not work an injustice.

Nielson v. Spanaway Gen. Med. Clinic, Inc., 135 Wash. 2d 255, 262-63, 956 P.2d 312

(1998). However, an issue may not be precluded if "a new determination is warranted

in order to take account of an intervening change in the applicable legal context or

otherwise to avoid inequitable administration of the laws." RESTATEMENT (SECOND) OF

JUDGMENTS § 28(2)(b) (1982).        Here, the applicable law has been amended.

Therefore, review is warranted to take account of this change. See id.

                                 Statute of Limitations

      The statute of limitations does not prevent the 2013 amendments from applying

to the estate of Hambleton.       Under RCW 83.1 00.095(3), "[n]o assessment or

correction of an assessment for additional taxes ... may be made by the department

more than four years after the close of the calendar year in which a Washington return

is due ...." DOR issued its assessment of taxes due on November 18, 2008, only

two years after Helen Hambleton passed away. In the assessment, the amount owing

was "attributable to the [e]state's exclusion of . . . '§2044 property' from the

Washington taxable estate." Clerk's Papers at 17-18. The estate filed its Washington

State estate tax return on January 11, 2008. Therefore, DOR issued its assessment

well within the four year statute of limitations. See RCW 83.1 00.095(3). The estate

offers no support as to why a new or corrected assessment is needed.                 The

assessment has always included QTIP trust property. The estate has had notice of

                                           32
In re Estate of Hambleton, No. 89419-1
consolidated with
In re Estate of Macbride, No. 89500-7

the amount due since 2008. Therefore, the 2013 amendments are not barred by the

statute of limitations. See RCW 83.1 00.095(3).

                                   Final Judgment

      The estate of Hambleton argues that the trial court's ruling was final at the time

the legislature enacted the 2013 amendment, so the amendment should not apply to

it. See LAWS OF 2013, 2d Spec. Sess., ch. 2, § 10 ("[The] act does not affect any final

judgment, no longer subject to appeal, entered by a court of competent jurisdiction

before the effective date of this section."). We disagree. The estate arrives at this

conclusion by arguing that DOR had no basis in law upon which to appeal the order

granting summary judgment because DOR appealed the order before the

amendments were enacted. This reasoning is unpersuasive.

      Generally, "[w]hen a new law makes clear that it is retroactive, an appellate

court must apply that law in reviewing judgments still on appeal that were rendered

before the law was enacted, and must alter the outcome accordingly." Plaut, 514 U.S.

at 226.   Therefore, despite the existence of a "final" trial court ruling, retroactive

amendments may apply to cases pending on appeal.

      A party may appeal final trial court judgments. RAP 2.2(a)(1 ). However, parties

may not frivolously appeal or appeal simply for purposes of delay.        RAP 18.9(c).

Appellate courts will, on motion from the opposing party, dismiss frivolous appeals and

appeals brought for purposes of delay. RAP 18.9(c).

                                          33
In re Estate of Hambleton, No. 89419-1
consolidated with
In re Estate of Macbride, No. 89500-7

      Here, the trial court entered its order granting summary judgment on April 19,

2013 and DOR filed a notice of appeal on May 16, 2013. The estate of Hambleton

did not move under RAP 18.9(c) to dismiss the appeal, and the appeal was still

pending when the legislature enacted the 2013 amendment. Therefore, the retroactive

amendment applies to the case.

                                    Conclusion

      No barriers prohibit the retroactive application of the 2013 amendment to the

Estates of Hambleton and Macbride. No genuine issues of material fact exist in the

cases, and judgment may be entered as a matter of law.

      We reverse the order granting summary judgment to the estate of Hambleton,

and remand for the entry of judgment in accordance with this opinion. We affirm the

denial of summary judgment to the estate of Macbride and affirm the order affirming

agency action and granting judgment as a matter of law to DOR.

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In re Estate of Hambleton, No. 89419-1
consolidated with
In re Estate of Macbride, No. 89500-7

      WE CONCUR.

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