Ward v. Oklahoma Tax Commission

• Decision Date: 04 June 1957
• Docket Number: Nos. 36305,36306,s. 36305
• Citation: Ward v. Oklahoma Tax Commission, 322 P.2d 172 (Okla. 1957)
• Parties: Earl WARD, C. D. Mitchell, and Baylis L. Graham, as Co-Administrators of the Estate of William A. Graham, Deceased, et al., Plaintiffs in Error, v. OKLAHOMA TAX COMMISSION, Defendant in Error.
• Court: Oklahoma Supreme Court

Page 172

322 P.2d 172

1957 OK 141

Earl WARD, C. D. Mitchell, and Baylis L. Graham, as Co-Administrators of the Estate of William A Graham, Deceased, et al., Plaintiffs in Error, v. OKLAHOMA TAX COMMISSION, Defendant in Error.

Nos. 36305, 36306.

Supreme Court of Oklahoma.

June 4, 1957.

Rehearing Denied Jan. 28, 1958.

Application for Leave to File Second Petition for Rehearing

Denied March 4, 1958.

Syllabus by the Court

1. Neither the State of Oklahoma, nor one of its cities or counties, is a charitable or educational institution within the contemplation of sec. 989(f)(I) of the Estate Tax Act (Tit. 68 O.S.1951 § 989 et seq.) exempting such institutions from payment of the tax levied by said Act; nor, is either of said governmental units an institution engaged in carrying out beneficial, charitable, educational, or religious purposes within the contemplation of sec. 1043 of the Gift Tax Act (Tit. 68 O.S.1951 § 1041 et seq.) exempting such institutions from payment of the tax levied by said Act.

2. Section 17 of the Public Improvements Trust Act (H.B. 883, 24th Legislature; Tit. 60 O.S.1955 Supp., § 381 et seq.) prescribing retroactive operation for sec. 2 (Ibid., § 382) of said Act is unconstitutional as a violation of Art. V, sec. 53, of the Oklahoma Constitution when sought to be applied to legacies to the State of Oklahoma and a city and county thereof prescribed in the will of a testator dying before the passage of said Act.

Appeals from the Oklahoma Tax Commission.

Consolidated appeals from orders of the Oklahoma Tax Commission assessing gift and estate taxes against the estate of William A. Graham, deceased. Affirmed.

Wilkerson & Wilkerson, Pryor, Conner, Winters, Randolph & Ballaine, Earl M. Knight, Tulsa, Harve N. Langley, Lincoln Battenfield, Pryor, J. Ralph Moore, City Atty., Pryor, and William M. Thomas, Jr., County Atty., Pryor, for plaintiffs in error.

R. F. Barry, E. J. Armstrong, W. F. Speakman, Oklahoma Tax Commission, Oklahoma City, for defendant in error.

BLACKBIRD, Justice.

Consolidated herein is one appeal by the executors of the estate of W. A. Graham, deceased, from an order of the Oklahoma Tax Commission (hereinafter referred to merely as the 'Commission') assessing gift taxes, and another appeal by the same appellants (hereinafter referred to as 'the estate') from an order of said Commission assessing estate taxes.

Prior to his death in the City of Pryor, or Pryor Creek, in Mayes County, Oklahoma, on March 28, 1952, W. A. Graham, hereinafter referred to as 'testator', made a gift in 1950, of $100,000 to said City to apply on the cost of its construction, or purchase, of a municipally owned electric distribution system. The gift was contingent upon the City's voting bonds to defray the rest of such cost. When such bonds were thereafter voted and issued in the amount of $180,000, the testator purchased them, and subsequently made them an additional gift to the City. In a gift tax return filed with the Commission by the estate, on behalf of the testator, the value of these gifts to the City was claimed to be exempt from gift tax. This contention was rejected by the Commission and it assessed additional gift taxes by an order from which the estate has lodged one of the appeals herein considered.

In his will, the testator, after making specific bequests to certain nieces, nephews and others, bequeathed the residue of his estate, of the value of $2,949,943.08 for estate tax purposes, to the above-named City, to Mayes County, and to the State of Oklahoma, all of which will hereinafter be referred to collectively as 'residuary beneficiaries.' In its Oklahoma estate tax return, the estate treated the value of these residuary legacies as subject to estate tax, and, in the Commission's assessment of such tax totalling $219,931.35, their value was included. The estate protested said assessment, and after said protest was rejected, following a hearing before the Commission, the estate lodged the second of the appeals considered herein.

The estate contends that the Legislature did not intend that such taxes be levied upon the value of gifts, bequests or devises to the State or its political subdivisions. The argument for the asserted exemption is based upon various sections of both the Estate and Gift Tax Acts and the statute we will hereinafter refer to as the 'Public Improvements Trust Law' (H.B. 883; Tit. 60 O.S.1955 Supp. §§ 381-397, both incl.). The pertinent portion of the levying section of the Estate Tax Act, Tit. 68 O.S.1951 § 989, supra, reads as follows:

'A tax, at the rates prescribed in Section 2 of this Act [Section 989a of this title], is hereby levied upon the transfer of the net estate of every decedent, whether in trust or otherwise, to persons, associations, corporations, or bodies politic, of property, real, personal, or mixed, whether tangible or intangible or any interest therein or income therefrom, by will or the intestate laws of this State, * * *. Provided, however, that nothing in this Act shall be construed as subjecting to payment of such tax the escheat of property to the State for the benefit of its common schools. * * *'

In using the phrase 'bodies politic' and in then exempting from the tax, only property which has escheated to the State for the benefit of its common schools, the Legislature clearly made known its intention that an estate tax be levied on all bequests and devises to the State and its political subdivisions. The Supreme Court of Nebraska, in the case of In re Rudge's Estate, 114 Neb. 335, 207 N.W. 520, 521, held that the use of the phrase 'body politic or corporate', in Nebraska's statute levying a succession tax, indicated that the Legislature intended to impose a tax upon the value of property bequeathed or devised to the State of Nebraska. There the court said, 207 N.W. at page 522:

'(5) In considering the interpretation which should be placed upon our own statute, we are inclined to follow the rules adopted by the United States Supreme Court and the Supreme Courts of New York and Kentucky. The language of our statute, designating those whose legacies are subject to the tax, is broad and comprehensive and is sufficient to include the state and any of its governmental subdivisions or agencies. The language, 'to any person or persons or to any body politic or corporate,' would necessarily include the state and all of its governmental agencies created by it. Had the Legislature desired to relieve legacies to the state, or to its governmental agencies, from the inheritance tax, we think that it would have so stated in the exemption clause of the statute. It possessed, but failed to exercise, that power. We are of the opinion that under the statute the legacy to the trustees of Wyula Cemetery is subject to the inheritance tax.'

Another section of the Estate Tax Act, cited by the estate for the asserted exemption is sec. 989f(I), thereof, which, prior to its amendment in 1955, read as follows:

'(I) All transfers, gifts or bequests made in good faith to, or in trust for the use, benefit or support of any charitable, educational or religious institution incorporated or operating under the laws of this State or to, or in trust for, the education, support and relief of the poor, indigent, blind or crippled of this State shall be exempt and shall be deducted from the gross estate.'

To hold that the State or one of its cities and towns is a 'charitable [or] educational * * * institution incorporated or operating under the laws of this State * * *' would not be in keeping with the rule, repeatedly announced and applied by this court, that statutory exemption provisions are strictly construed against the taxpayer (See In re Noble's Estate, 183 Okl. 148, 80 P.2d 243); and such holding would in fact do violence to the above-quoted paragraph. In using the language therein found, the Legislature obviously was referring to private, rather than political corporations, which latter are referred to in the levying section of the Estate Tax Act (Tit. 68, § 989, supra) as 'bodies politic.' As to the question of whether the residuary beneficiaries are charitable institutions within the purview of the Oklahoma Estate Tax Act, we think the opinion of the Vermont Supreme Court, in the case of In re Estate of Taft, 110 Vt. 266, 4 A.2d 634, 638, 120 A.L.R. 1382, is persuasive. There, in holding that a legacy to a municipality was not exempt from Vermont inheritance taxes on the theory that the legatee was a charitable institution, the court said:

'This statute, in effect, provides, in clear and unmistakable terms, that every distributee, other than those specifically named in the list of exemptions therein set out, shall be subject to such tax. Appellants do not dispute this but contend that the city of Burlington is so named as being exempt in this case. They argue that certain duties which our laws require the city to perform, such as taking care of its poor, are charitable in their nature and that while all duties required of the city are not of this class, a part of them being so, the city is, therefore, a charitable institution created by the laws of this State and having its principal office herein and so intended by the Legislature to be included in the list of exemptions set out in this statute. Appellants have cited several cases from other jurisdictions in support of this contention. However, in none of these cases is a statute like the one we are considering given an interpretation, and hence these cases are of very little, if any, aid in a determination of the question before us. But a careful reading of the statute in question refutes this claim of appellants. The first two words of this statute, viz., 'each person' as here used are broad enough to include cities and towns. That the Legislature so intended is made clear from what immediately follows, that is, the setting out a specific list of recipients who are not to be required to pay the...