In re McKee's Estate
| Decision Date | 24 March 1942 |
| Docket Number | 6822. |
| Citation | 3 N.W.2d 797,71 N.D. 545 |
| Court | North Dakota Supreme Court |
Syllabus by the Court.
The provisions of section 3, subdivision 2 (B) of chapter 267, Laws 1927, section 2 of chapter 251, of the Session Laws of 1933, exempting from an estate tax "The amount of all bequests, legacies, devises, or transfers *** to or for the use of any corporation, institution, society or association, whose sole object and purpose is to carry on charitable, educational or religious work," apply to bequests, legacies, devises, or transfers to any such corporation, institution, society, or association located without the State as well as to one located within the State.
Alvin C. Strutz, Atty. Gen., C. E. Brace, Asst. Atty. Gen., and T A. Thompson, Atty. for the Tax Department, of Bismarck, for appellants.
Hugo P. Remington, of Lisbon, for respondent.
This case involves the interpretation of section 3, subdivision (2) (B) of chapter 267, Laws 1927, section 2 of chapter 251, Session Laws of 1933, which provides that in determining the amount of tax imposed upon the transfer of the net estate of every decedent, exemption from taxation is allowed to the extent of: "The amount of all bequests, legacies devises, or transfers, except bona fide sales for an equivalent monetary consideration in contemplation of or intended to take effect in possession or enjoyment at or after the decedent's death, to or for the use of any public institution, for exclusively public purposes, or for any charitable, educational or religious purposes, or to or for the use of any corporation, institution, society, or association, whose sole object and purpose is to carry on charitable, educational or religious work, ***."
The specific question presented is the interpretation of the portion which is italicized.
To clarify the situation, we refer to some of the facts in the case. J. Albert McKee, a resident of this State, made bequests to the following corporations: National Jewish Hospital, Methodist Episcopal Board of Foreign Missions, and the Michigan University Religious Association.
It is not denied that these bequests are to be, and will be, used exclusively for charitable, educational, or religious purposes, which is the sole object and purpose of the corporations, and also that these bequests go to institutions outside of the State of North Dakota, the beneficiaries being foreign corporations.
The county judge ruled that in determining the net value of the estate for tax purposes, such bequests could not be deducted. The district court reversed, and from this decision the tax commissioner appeals.
Under the provisions of paragraph (2) of section 2 of the law involved, "the value of the net estate shall be determined by deducting from the value of the gross estate" certain exemptions; and the exemption sought in this case is the one heretofore set forth.
"Laws which exempt property from taxation will receive a strict construction." Engstad v. Grand Forks County, 10 N.D. 54, 56, 84 N.W. 577. Appellants urge that the administrator must show he has the right under this statute to deduct from the gross value of the estate the amount of the bequests set forth in this will; and urges that under proper construction of the law, "bequests to foreign religious or charitable organizations operating wholly without this state are not exempt."
The law levies no tax upon the legacy or the bequest. The exemption is not based upon the locality of the receiver or the place of distribution. The tax is placed upon the estate in North Dakota. In the great majority of cases, the legatee would not be concerned with such a tax. If it were a case where the imposition of the tax might affect the amount of the legacy, owing to the lack of assets, being a residuary legatee, or some such condition, then the legatee would be concerned with the levying of the tax. The exemption is granted the estate because of the interest which the testator had in charitable enterprises. If he desires to give part of his estate to an institution or person for purely charitable, religious, and educational purposes, then the estate does not pay any tax thereon; unless we construe the law as appellant contends.
Much emphasis is laid upon public policy; but the public policy of the State of North Dakota is determined by its own legislature. As this court said in Chaffee v. Farmers' Co-operative Elevator Company, 39 N.D. 585, 593, 168 N.W. 616, 618:
We have also shown there is no room for rules of construction where the words of the statute are plain and unambiguous. In such case See State of North Dakota ex rel. Farmers' State Bank et al. v. Wallace as Tax Commissioner et al., 48 N.D. 803, 811, 187 N.W. 728, 732.
If the language of the statute be such as to raise difficulties in ascertaining the legislative intent, then the history of such taxation in this State might become persuasive.
Respondent lays stress upon the apparent development of exemptions from inheritance taxes as shown by legislation. In 1917 the legislature enacted chapter 231, providing for the taxation of inheritance, bequests, and legacies, and therein made provision for certain exemptions, providing by subdivision 1 of section 4 of the Act that "All property transferred *** to corporations of this state organized under its laws solely for religious, charitable, or educational purposes, which shall use the property so transferred exclusively for the purposes of their organization within the state shall be exempt."
When this chapter was amended by chapter 225 of the Session Laws of 1919, these provisions for exemptions, confined within narrow bounds, were incorporated verbatim.
In 1927 the legislature repealed the laws dealing with taxes on inheritances, and substituted an entirely new system of legislation, chapter 267, known as the "Estate Tax Act"; and while the title states that the Act was intended also "to establish a tax on gifts, legacies, inheritances," etc., it is clear from the Act that no longer was a tax levied upon the legacy or the bequest, but the tax is levied upon the "net estate" of the decedent. This statute provides for the determination of the "gross estate of the decedent", and then proceeds to levy a tax "upon the net estate". In section 3, the Act provides how this net estate shall be determined. This section permits such an estate an exemption from taxation to "The amount of all bequests, legacies, *** to or for the use of the United States, District of Columbia, or any public institution, for exclusively public purposes, or for any charitable, educational or religious purposes, or to or for the use of any corporation, institution, society or association, whose sole object and purpose is to carry on charitable, educational or religious work, ***."
The legislature was familiar with the distinction between an inheritance tax and an estate tax. In the various inheritance tax statutes which had been enacted, there had been a broadening of the terms of the exemptions. At first, the exempt transfers to such corporations had two limitations-first, the corporation must be a corporation organized under the laws of this State; and, second, "the property so transferred" must be used "exclusively for the purposes of their organization within the state".
Heretofore, there had been no exemption allowed because of bequests to the United States or to the District of Columbia. But when the legislature saw fit to abolish the inheritance taxes, and to levy an estate tax instead, it still made it part of the public policy of the State to grant to the estate certain exemptions. It provided that the amount of bequests to the United States or to the District of Columbia could be deducted from the gross estate in order to determine the amount of the estate to be taxed. It also removed, in its legislative wisdom, the restrictions on corporations which had been laid in the inheritance taxes, and now permitted the representative of the estate to deduct the amount of all legacies and transfers made by the testator to any corporation, institution, society or association, whose sole object and purpose was to carry on charitable, educational or religious work. The legislature did not say that such corporation must be one organized under the laws of this State, nor did it say that the proceeds must be expended in the State.
Appellants however, urge that we must read such idea into the exemption; or, putting it this way, they urge that because the law does not state specifically that a foreign corporation is included, or does not state specifically that the money may be expended beyond the confines of the State, therefore, we must construe the public policy as meaning the legislature intended the corporation referred to must be a domestic corporation, and that the money must be...
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