In imposing transfer or inheritance taxes, a state may
distinguish between property which has borne its fair share of tax
burden in the decedent's lifetime and property of the same kind,
and passing to the same class of transferees, which has not. P.
254 U. S.
The additional tax imposed in New York (Cons.Laws, c. 60; Laws
1917, c. 700) on the transfer of certain kinds of securities held
by a decedent at his death on which neither the general property
tax nor the alternative stamp tax has been paid during a fixed
period prior thereto is based upon a reasonable classification of
property, and does not violate the equal protection clause of the
Fourteenth Amendment. Id.
This tax is neither a property tax nor a penalty. P.
254 U. S.
226 N.Y. 384 affirmed.
The case is stated in the opinion.
Page 254 U. S. 123
MR. JUSTICE BRANDEIS delivered the opinion of the Court.
The New York Tax Law (Consolidated Laws, c. 60) provides
(Article 1, § 9) that personal property shall be assessed and taxed
to the owner at the place where he resides, but exempts (Article
15) from such taxation certain bonds and other obligations, called
in the act investments, on which there has been paid an optional
tax at a lower rate, which payment is evidenced by a stamp affixed.
The Tax Law also provides (Article 10) for an inheritance or
transfer tax which varies, among other things, according to the
relationship of the beneficiary to the decedent. By § 221-b, added
by Laws of 1917, c. 700, § 2, an additional tax equal to 5 percent
of the appraised value of the investment is imposed on the transfer
of investments held by the decedent at his death, on which neither
the general property tax nor the stamp tax above described has been
paid during a fixed period prior thereto, provided that the estate
is larger than the exemptions to relatives and charities.
Watson, a resident of New York City, held at his death in 1917,
certain bonds on which neither the general property tax nor the
stamp tax had been paid. The transfer tax appraiser, appointed by
the Surrogate's Court, reported that there was payable by the
executors in respect to those bonds the additional transfer tax
prescribed by the Act of 1917. The Surrogate disallowed the tax on
the ground that the statute violated the state constitution, and
his decision was affirmed by the Appellate
Page 254 U. S. 124
Division of the Supreme Court, 186 App.Div. 48. The Court of
Appeals of New York held that the act violated neither the state
nor the federal Constitution, 226 N.Y. 384, and the case comes here
on writ of error. The contention is that the tax imposed denies to
Watson's estate equal protection of the laws.
The occasion and the purpose of the statute are shown by the
Court of Appeals. An owner of investments is not required either to
list them for assessment locally under the general property tax law
or to present them for stamping under the investment tax law.
Whether the investments of a resident are taxed during his life
depends either upon his own will or upon the vigilance and
discretion of the local assessors. This condition led to loss of
revenue by the state and to inequality in taxation among its
citizens. To remedy both evils, this additional transfer tax was
imposed upon investments of a decedent which had wholly escaped
taxation. It is insisted that the tax is discriminatory because
under it other property of the same kind bequeathed to persons
standing in the same relationship to the decedent will not be
taxed. But the power to classify for purposes of taxation is fully
established. The executors admit, as they must, that a
classification is reasonable if made with respect to the kind of
property transferred, or to the amount or value of property
transferred, or to the relationship of the transferees, or to the
character of the transferee, for instance, as engaged in charity.
Magoun v. Illinois Trust & Savings Bank, 170 U.
, 170 U. S. 300
Billings v. Illinois, 188 U. S. 97
Campbell v. California, 200 U. S. 87
their list does not exhaust the possibilities of legal
classification. See Beers v. Glynn, 211 U.
, 211 U. S. 484
Keeney v. New York, 22 U. S. 525
Maxwell v. Bugbee, 250 U. S. 525
Compare New York v. Reardon, 204 U.
. Any classification is permissible which has a
reasonable relation to some permitted end of governmental action.
Page 254 U. S. 125
is not necessary, as the plaintiff in error seems to contend,
that the basis of the classification must be deducible from the
nature of the things classified -- here, the right to receive
property by devolution. It is enough, for instance, if the
classification is reasonably founded in "the purposes and policy of
taxation." Pacific Express Co. v. Seibert, 142 U.
, 142 U. S. 354
Kidd v. Alabama, 188 U. S. 730
188 U. S. 732
Clement National Bank v. Vermont, 231 U.
, 231 U. S.
-137; Farmers' Bank v. Minnesota,
232 U. S. 516
232 U. S.
-530. And what classification could be more
reasonable than to distinguish, in imposing an inheritance or
transfer tax, between property which had during the decedent's life
borne its fair share of the tax burden and that which had not?
It does not follow, as is also argued, that the act in question
imposes a property tax, merely because its existence may induce
owners of investments to present them for taxation under the
investment tax law. Nor is it to be deemed a law imposing a penalty
merely because the decedent's estate may, under it, be required to
pay more in taxes than the deceased would have paid if he had
presented his property for taxation under the investment tax law.
Whether this additional transfer tax would be obnoxious to the
Fourteenth Amendment if it could be deemed a property tax or a
penalty we have no occasion to consider.
The judgment of the Surrogate's Court, entered on the remittitur
from the Court of Appeals of New York, is
* Connecticut (Gen.Stat. 1918, § 1190) and Louisiana
(Constitution 1898, Arts. 235, 236; Act 45 of 1904) also impose a
special inheritance tax on the transfer of property which has not
borne its share of taxation during a period prior to the owner's
death. The latter statute has been frequently before the courts.
Succession of Mathias Levy,
115 La. 377, 385, aff'd,
Cahen v. Brewster, 203 U. S. 543
Succession of Pritchard,
118 La. 883; Succession of
122 La. 836.