State v. Davies, 2-377A79
| Decision Date | 21 August 1978 |
| Docket Number | No. 2-377A79,2-377A79 |
| Citation | 379 N.E.2d 501,177 Ind.App. 288 |
| Parties | STATE of Indiana, Indiana State Department of Revenue and Indiana State Board of Tax Commissioners, Appellants (Defendants below), v. Carrie K. DAVIES and Joseph N. Thomas, Co-Executors of the Estate of Harry S. Davies, Deceased, Appellees (Plaintiffs below). |
| Court | Indiana Appellate Court |
Fred M. Cuppy and Gerald K. Hrebec, J. Philip Klingeberger, Gary, for appellees.
Defendants-appellants, State of Indiana, Indiana State Department of Revenue, and Indiana State Board of Tax Commissioners (the State), appeal from a judgment reversing a denial by the Indiana Department of Revenue of a request for an estate tax refund, claiming lack of jurisdiction and trial court error in exempting from Indiana estate tax the intangible personal property of a non-resident decedent because of reciprocity.
We affirm.
The undisputed facts are:
Harry S. Davies died a resident of the State of Florida with a gross estate for federal tax purposes of Two Million, Nine Hundred Five Thousand, Three Hundred Twenty-four and 64/100 ($2,905,324.64) Dollars. The portion of the gross estate located in the State of Indiana totaled One Million, Seven Hundred Forty-one Thousand, One Hundred Thirty-seven and 14/100 ($1,741,137.14) Dollars.
On August 20, 1973, the State (Indiana) assessed and certified to Carrie K. Davies and Joseph N. Thomas (Davies and Thomas), co-executors of the estate, the inheritance and estate tax payable to the State of Indiana in the amount of Thirty-six Thousand, Four Hundred Forty-four and 55/100 ($36,444.55) Dollars. Davies and Thomas paid the assessed tax on August 23, 1973, and on October 15, 1974, requested a refund of Thirty-four Thousand Five Hundred Eighty-eight and 19/100 ($34,588.19) Dollars, which was denied by the State on November 18, 1974.
On February 13, 1975, Davies and Thomas filed suit in the Marion Probate Court appealing the denial of their request for an estate tax refund. The trial court judge reversed the denial and ordered the State to refund Thirty-four Thousand, Five Hundred Eighty-eight and 19/100 ($34,588.19) Dollars.
The errors raised by the State may be resolved as two issues:
1. Did the Marion Probate Court have jurisdiction under the prevailing statutes to allow a refund of Indiana Estate Tax paid by the estate of a non-resident decedent?
2. Does Ind. Code 6-4-1-26, the Indiana Reciprocal Exemption Statute, apply to Indiana estate tax?
PARTIES' CONTENTIONS Initially, the State contends that Ind. Code 6-4-1-21, appeal from appraisal and determination of tax, (hereinafter the Rehearing Statute) provides the sole method of appealing the denial of a refund request and because Davies and Thomas failed to comply with the time requirements of that statute, the trial court lacked subject matter jurisdiction. Davies and Thomas respond that the Rehearing Statute is not exclusive, and provides a statutory remedy which is merely an alternative to Ind. Code 6-4-1-17 (hereinafter the Refund Statute).
As to the second issue, the State alleges that Ind. Code 6-4-1-26, the Indiana Reciprocal Exemption Statute (hereinafter Exemption Statute) applies only to the inheritance taxes. Davies and Thomas counter that the Exemption Statute applies to inheritance taxes And estate tax and, alternatively, that the amount of estate tax paid to the State of Florida should serve as a credit in the computation of Indiana estate tax.
CONCLUSION The Marion County Probate Court was vested with jurisdiction to order a refund of estate tax 1 when Davies and Thomas complied with the statutory requirements of the Refund Statute. 2
Our first task is to compare the Rehearing Statute (Ind. Code 6-4-1-21) 3 with the Refund Statute (Ind. Code 6-4-1-17) 4 to determine if the trial court acquired jurisdiction of the refund action under the Refund Statute. Or, differently stated, did the refund action fail because it was not brought under the Rehearing Statute as the exclusive remedy?
The Rehearing Statute in pertinent part provided:
Any person not satisfied with such appraisement and determination of the tax, as made by the state board of tax commissioners (department of state revenue), may appeal within ninety (90) days, from date of the certification of such board (department), to the probate court of Marion County, on paying or giving security to pay all costs, together with whatever tax shall be fixed by the court. . . .
The apparent thrust of this statute is to afford the taxpayer a method of contesting the tax determination at the appraisal and assessment stage. Its unambiguous language gives no hint that it is to be the taxpayer's exclusive remedy, nor does the State cite any authority for such a conclusion . . . and we find none! The explicit language is to afford a method by which the taxpayer may proceed to contest the tax, which does not appear to conflict with the Refund Statute (Ind. Code 6-4-1-17), which in pertinent part provided:
The state board of tax commissioners (department of state revenue) is authorized and empowered To order the refund and repayment, without interest, Of all taxes heretofore or hereafter erroneously wrongfully or illegally imposed on estates Given its plain and ordinary meaning, Ind. Code 1-1-4-1; Bowen v. Review Board (1977), Ind.App., 362 N.E.2d 1178, the Refund Statute enables the taxpayer to pay the tax as assessed and subsequently request a refund if the tax was "erroneously, wrongfully or illegally imposed . . . or in any manner wrongfully collected" whether by mistake of fact or mistake of law, provided the application for refund is made within three years after payment. This broad, sweeping language effectively eliminates any possibility that the Rehearing Statute constitutes the exclusive method for challenging a tax determination. By its very terms, the Refund Statute encourages the taxpayer (including a nonresident) to pay the assessment and subsequently request a refund.
. . . and of all such taxes that are excessive in amount or in any manner wrongfully collected by the state of Indiana, whether such taxes were imposed through mistake of fact or mistake of law and whether or not such taxes were paid voluntarily and without protest, and notwithstanding any claim heretofore filed for such refund. From any order of the state board of tax commissioners (department of state revenue) with reference to any such refund or repayment, The claimant shall have a right to appeal by filing an original action against such board (department); such action, . . . In the case of a nonresident decedent, to be filed in the probate court of Marion County, Indiana. . . . Provided, however, That an application for the refunding of such tax shall have been made to said state board of tax commissioners (department of state revenue) by or on behalf of the person entitled thereto within three (3) years after the payment . . . .
Applying the rule that statutes relating to the same subject matter are to be construed in pari materia, Indiana Alcoholic Beverage Commission v. Baker (1972), 153 Ind.App. 118, 286 N.E.2d 174, we conclude these two statutes provide alternative methods by which the taxpayer may obtain relief. That is, the taxpayer may withhold payment of the tax and challenge the tax assessment or pay the tax and subsequently request a refund.
While these statutes have not been construed by Indiana courts, our conclusion is reinforced by decisions from other jurisdictions. 5
In Boe v. Steele Co. (1945), 74 N.D. 58, 19 N.W.2d 921, an executor paid the estate tax assessment without protest, however, upon learning of a subsequent judicial decision altering the amount of estate tax legally due, the executor filed an application for refund. 6
In granting the refund, the Supreme Court of North Dakota construed the rehearing and refund statutes with the following language:
The provisions for refundment of overpayment of taxes are inserted in statutes not only as a matter of fairness and justice, but as an inducement to the taxpayer to pay the tax promptly. The provision for refundment . . . is inconsistent with any legislative intention that the order making the assessment should become final and conclusive upon the amount of the tax actually and legally due so as to bar the right of a party to refundment unless the order for assessment is attacked by, and reversed or modified on, appeal. The provision attaches no condition to the right to a refund except alone the fact that an overpayment has been made.
Likewise in Rogers v. Oklahoma Tax Commission (1952), Okl., 263 P.2d 409, the tax commissioner incorrectly included two insurance policies in the value of the gross estate for estate tax purposes. The executrix made no protest to the assessment, but In granting the refund the court noted that failure to protest the estate tax assessment did not preclude relief under the Refund Statute, on the contrary, the Refund Statute provided a separate vehicle by which the executrix could proceed. E.g. State v. Matthews (1971), 29 Colo.App. 143, 480 P.2d 593; Beals v. State (1909), 139 Wis. 544, 121 N.W. 347.
subsequently submitted a claim for refund 7 alleging assessment under mistake of law.
Thus the failure to appeal the assessment under the Rehearing Statute did not deprive the Probate Court of jurisdiction. It had jurisdiction to grant a refund under the Refund Statute.
Next we must analyze the claim advanced by Davies and Thomas to see if it fell within the scope of the Refund Statute, i. e., whether the refund was for tax "erroneously, wrongfully or illegally imposed . . ."
The State takes a narrow view of the Refund Statute. It directs our attention to Kelshaw v. Superior Court of San Luis...
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