Continental Illinois Bank & Trust Co. v. United States

SPARKS, Circuit Judge

(after stating the facts as above).

It is first contended by appellants that section 802(a) of the Revenue Aet of 1924, supra, is violative of article 1, § 8, el. 1, of the Constitution of the United States ² which provides that all duties, imposts and excises shall be uniform throughout the United States. It is admitted that such required uniformity is geographical and not intrinsic. It is not contended by appellants that the alleged lack of geographical uniformity appears upon the face of the- statute. They argue, however, that it arises by virtue of a decision of the United States Supreme Court in Crooks v. Harrelson, 282 U. S. 55, 51 S. Ct. 49, 75 L. Ed. 156, whieh held that a decedent’s real estate under the laws of Missouri was not subject to the payment of expenses of administration and for that reason could not be included in the gross estate of a resident of that State for the purpose of computing estate taxes. Hence appellants insist that the taxes laid under the section referred to are not geographically uniform because the enactment does not include a decedent’s real estate in Missouri.

With this contention we are not in accord. In Poe v. Seaborn, 282 U. S. 101, at page 117, 51 S. Ct. 58, 61, 75 L. Ed. 239, the Court said,

“ * * * Differences of state law, whieh may bring a person within or without the category designated by Congress as taxable, may not be read into the Revenue Act to spell out a lack of uniformity.”

In Knowlton v. Moore, 178 U. S. 41, at. page 106, 20 S. Ct. 747, 773, 44 L. Ed. 969, the subject of geographical uniformity was quite exhaustively treated, and Mr. Justice White there speaking for the Court used the following language:

“Though there is a provision that all duties, imposts, and excises shall be uniform— that is, to be laid to the same amount on the same articles in each state — yet this will not prevent Congress from having it in their power to eause them to fall very unequally and much heavier on some states - than on others, because these duties may be laid on articles but little or not at all used in some other states, and of absolute necessity for the use and consumption of others; in whieh case, the first would pay little or no part of the revenue arising therefrom, while the whole or nearly the whole of it would be paid by the last. * * ’ * ”

In Patton v. Brady, Executrix, 184 U. S. 608, 22 S. Ct. 493, 46 L. Ed. 713, the tax assessed was an excise on tobacco whieh was held valid. The Court quoted with approval the following language from the Head Money Cases, 112 U. S. 580, 5 S. Ct. 247, 252, 28 L. Ed. 798, “ ‘The tax is uniform when it operates with the same force and effect in every place where the subject of it is found.’ ”

In Florida v. Mellon, 273 U. S. 12, 47 S. Ct. 265, 266, 71 L. Ed. 511, it was contended that because the State of Florida did not impose an inheritance tax, the Federal Estate Tax Act was unconstitutional in that it allowed as a credit against the federal estate tax the inheritance taxes paid to the states, and that resident decedents of Florida were thus treated differently from decedents who were residents of other states whieh had inheritance tax laws. The Court held the act valid, saying,

“The contention that the federal tax is not uniform, because other states impose inheritance taxes while Florida does not, is without merit. Congress cannot accommodate its legislation to the conflicting or dissimilar laws of the several states nor, control the diverse conditions to .be found in the various states whieh necessarily work unlike results from the enforcement of the same tax. All that the Constitution (article 1, § 8, el. 1) requires is that the law shall be uniform in the sense that by its provisions the rule of liability shall be alike in all parts of the United States.”

In Phillips v. Commissioner, 283 U. S. 589, 51 S. Ct. 608, 613, 75 L. Ed. 1289, the Court said, in state laws; but such variations do not infringe tbe constitutional prohibitions against delegation of tbe taxing power or tbe requirement of geographical uniformity.” (Citing Florida v. Mellon, supra; Crooks v. Harrelson, supra; Poe v. Seaborn, supra; and comparing Head Money Cases, supra, and Clark Distilling Co. v. Western Maryland Ry. Co., 242 U. S. 311, 37 S. Ct. 180, 61 L. Ed. 326, L. R. A. 1917B, 1218, Ann. Cas. 1917B, 845.

“The extent.and incidence of federal taxes not infrequently are affected by differences

If, when tbe Federal Estate Tax Act was enacted, tbe laws of every state bad provided that all property of each decedent, real or personal, should be subject to tbe payment of tbe charges against bis estate and tbe expenses of administration and also be subject to distribution as part of bis estate, tbe question of geographical uniformity would not have arisen. But if tbe contention of appellants were sound, then tbe subsequent enactment of any state to tbe effect that resident decedents’ real estate should not be subject to tbe charges, or expenses of administration, or to distribution, as provided in tbe federal act, would render tbe federal act unconstitutional for lack of geographical uniformity. In other words, an admittedly constitutional federal enactment would be rendered unconstitutional by a subsequent state enactment. The time of such state enactment is not of importance, and tbe eases cited do not support appellants’ contention.

Appellants recognize tbe principle that without offense to tbe constitution, an excise may be based directly upon and related directly to state laws where those laws are of tbe essence of the thing taxed. See Flint v. Stone Tracy Co., 220 U. S. 107, 31 S. Ct. 342, 55 L. Ed. 389, Ann. Cas. 1912B, 1312. They contend, however, that tbe classification in tbe federal statute is not of tbe essence of tbe thing taxed. In this we think they are in error. The thing taxed is tbe transfer of the certain net estates. Tbe limitation is to tbe extent of tbe interest of tbe decedent in such estates which is subject to the payment of charges against bis estate and the expenses of its administration, and which is subject to distribution as part of bis estate. Tbe basis of tbe classification is tbe relation of tbe property to tbe estate, and it is of tbe essence of tbe thing taxed.

It is contended by appellants that tbe trial court erred in bolding that real estate in Illinois was properly included in tbe gross estate. This question was decided by this court adversely to their contention, March 10, 1933, in Ee Estate of Edward M. Marble (National Bank of the Republic of Chicago v. Commissioner of Internal Eevenue), 64 F.(2d) 745.

Cross-appellant contends that tbe trial court erred in permitting tbe Lawson estate to amend its petition, and in rendering judgment thereon for that estate in tbe sum of $9,165.19. It is disclosed by tbe record that tbe third ground of recovery was based on tbe alleged fact that there was included in tbe gross estate of Victor F. Lawson certain real estate which belonged to Iver Norman Lawson. Appellant bad in its claim for refund attacked tbe validity of tbe entire assessment, and under one paragraph of tbe claim bad asserted as a basis for such invalidity that tbe Commissioner bad wrongfully included “certain real estate and personal property” which belonged to Iver Norman Lawson. In tbe specific description of such property in tbe claim, however, only two tracts of real estate were described. By tbe order allowing tbe filing of the amended petition, within tbe period within which appellant might have filed an amended claim for refund, appellant was permitted to enlarge tbe description by including a third parcel. It is cross-appellant’s contention now that no recovery can be bad as to such third parcel in view of tbe fact that its specific description was omitted from tbe claim for refund. We consider tbe principles laid down in United States v. Memphis Cotton Oil Co., 288 U. S. 62, 53 S. Ct. 278, 77 L. Ed. 619; as determining this question adversely to such contention.

Judgment affirmed.

2 "Tlie Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide tor the common Deience and general Welfare of the United States; but all Duties, Imposts ' and Excises shall be uniform throughout the United States.”