1. The Wisconsin emergency tax on inheritances, Wis.Stat. 1947,
§ 72.74(2), as applied by the Supreme Court of Wisconsin in this
case, is a tax on property rated and measured in part by tangible
property situated in other states. Pp.
338 U. S.
252-256.
2. Insofar as it is measured by tangible property outside
Wisconsin, the tax violates the Due Process Clause of the
Fourteenth Amendment.
Frick v. Pennsylvania, 268 U.
S. 473. Pp.
338 U. S.
256-257.
254 Wis. 24, 35 N.W.2d 404, reversed.
The Supreme Court of Wisconsin sustained a levy of certain taxes
on the estate of appellant's testator under Wis.Stat. 1947, §
72.74(2), notwithstanding a claim that it violated the Due Process
Clause of the Fourteenth Amendment because it was based in part on
tangible property located outside the State. 254 Wis. 24, 35 N.W.2d
404. On appeal to this Court,
reversed, p.
338 U. S.
257.
Page 338 U. S. 252
MR. JUSTICE CLARK delivered the opinion of the Court.
This is an appeal from a decision of the Supreme Court of
Wisconsin, 254 Wis. 24, 35 N.W.2d 404, arising from an order of the
County Court of Milwaukee County, levying certain death taxes on
the estate of Fred A. Miller, deceased, under the applicable
statutes of Wisconsin. The question for decision is the validity of
the Wisconsin emergency tax on inheritances, § 72.74(2), Wis.Stat.
1947, when tested in the light of the Due Process Clause of the
Fourteenth Amendment to the Constitution of the United States.
The decedent died testate on December 19, 1943, a resident of
Wisconsin. At death, his gross estate was $7,849,714.84. Property
located in Wisconsin was valued at $6,869,778.61; the remainder of
$979,936.23 consisted of real and tangible personal property
situated in the States of Illinois and Florida. [
Footnote 1]
The Commissioner of Internal Revenue assessed net federal taxes
against the estate in the sum of $3,076,131.19, inclusive of the
80% of the basic federal tax subject to credit for state estate
taxes as provided by § 301(b) of the United States Revenue Act of
1926, 44 Stat. 70, as amended, 26 U.S.C. § 813(b). This 80% credit
was the sum of $630,709.62.
Page 338 U. S. 253
Wisconsin has a triad of death taxes known as (1) normal
inheritance tax, (2) estate tax, and (3) emergency tax.
The normal Wisconsin inheritance tax, as levied by §§ 72.01 to
72.24, Wis.Stat. 1947, was in this case $220,682.12. It is levied
only on property within the Wisconsin, and is not in controversy
here.
To take advantage of the credit provisions of the Revenue Act of
1926, the Wisconsin legislature also enacted an estate tax in the
amount of 80% of the basic federal tax subject to credit, less
"the aggregate amount of all estates, inheritance, transfer,
legacy, and succession taxes paid to any state or territory or the
District of Columbia, in respect to any property in the estate of
said decedent."
Wis.Stat. (1947) § 72.50. Wisconsin normal inheritance taxes, as
well as out of state taxes, are deducted from the federal credit.
The estate tax on this estate was computed at $352,701.79. However,
this provision of the Wisconsin statutes is not under explicit
attack here.
The only statute, the validity of which is involved in this
appeal, is § 72.74(2) of the Wisconsin statutes known as the
Emergency Tax on Inheritances. The section under scrutiny
provides:
"In addition to the taxes imposed by sections 72.01 to 72.24 and
72.50 to 72.61, an emergency tax for relief purposes,
rehabilitation of returning veterans of World War II, construction
and improvements at state institutions and other state property,
and for post-war public works projects to relieve post-war
unemployment is hereby imposed upon all transfers of property which
are taxable under the provisions of said sections and which are
made subsequent to March 27, 1935, and prior to July 1, 1949, which
said tax shall be equal to 30 percent of the tax imposed by said
sections. "
Page 338 U. S. 254
As is apparent, computation of the additional emergency tax
involves only four factors: (1) the amount of the 80% federal
credit, (2) the taxes paid to other jurisdictions, (3) Wisconsin
normal inheritance taxes, and (4) the 30% rate imposed. In applying
the yardstick of this section to the decedent's estate, the
Wisconsin authorities took the total of the 80% federal credit,
that is $630,709.62, and first deducted from it the taxes paid to
states other than Wisconsin-Illinois ($35,616.26) and Florida
($21,709.45) -- and Wisconsin's normal inheritance tax
($220,682.12), which left $352,701.79. The tax due was then
calculated by taking 30% of the latter amount, plus 30% of the
normal inheritance tax. The result, $172,015.20, was levied as the
emergency inheritance tax due.
It will be seen that, as the taxing formula is reduced, the
normal inheritance tax is no longer a factor in the computation.
For, while 30% thereof is added to 30% of the estate tax to give
the emergency tax, the normal inheritance tax has already been
subtracted in the computation of the basic estate tax. Hence, in
extending the formula of the emergency tax, the inheritance taxes
cancel. [
Footnote 2] What is
left, other than out of state taxes, is simply 80% of the basic
federal tax, rated and measured by the entire estate, regardless of
situs, and therefore including the property located in Illinois and
Florida.
The court below thought that the presence of 87.52% of Mr.
Miller's property within Wisconsin justified its statement that the
state taxed only Wisconsin property. And the state argues that the
"other 20%" over the federal basic estate tax 80% credit "more than
absorbs, or is, on any mathematical basis, attributable to" the
12.48% of property outside Wisconsin. But Wisconsin made but
Page 338 U. S. 255
80% of the federal tax its own, and, as it did not apportion
that 80% to property within the state, the presence of property
therein is simply a fortuity which cannot help the taxing
jurisdiction.
See Owensboro National Bank v. Owensboro,
173 U. S. 664,
173 U. S. 683
(1899). The same must be said of deductions for out of state taxes,
which have no necessary relation to the proportion of property
outside Wisconsin. [
Footnote
3]
Page 338 U. S. 256
We think it clear that the order entered by the Supreme Court of
Wisconsin authorized a tax on property rated and measured in part
by tangible property, the situs of which was outside Wisconsin.
This Wisconsin may not do. In
Frick v. Pennsylvania,
268 U. S. 473
(1925), Pennsylvania levied an inheritance tax based upon real and
personal property wherever located. Mr. Frick's art collection was
located in New York. In a unanimous opinion, this Court ruled that
Pennsylvania's statute,
"insofar as it attempts to tax the transfer of tangible
personalty having an actual situs in other states, contravenes the
due process of law clause of the Fourteenth Amendment, and is
invalid."
Wisconsin's statute may be more sophisticated than
Pennsylvania's, but, in terms of ultimate consequences, this case
and the
Frick case are one. It is quite unnecessary to
know in either case what property is located within the taxing
jurisdiction in order to compute the challenged exaction.
Nor are we inclined to discard the
Frick rule. We have
consistently upheld the domicile's levy when it was based upon
intangible property with technical title without the jurisdiction.
Blodgett v. Silberman, 277 U. S. 1 (1928).
And the economic effects of tax burdens in the federal system
cannot control our results, limited as we are to the words of the
Fourteenth Amendment.
State Tax Commission of Utah v.
Aldrich, 316 U. S. 174,
316 U. S. 181
(1942), citing Holmes, J., dissenting in
Baldwin v.
Missouri, 281 U. S. 586,
281 U. S. 595
(1930). But when a state reaches beyond its borders and fastens
upon tangible property, it confers nothing in return for its
exaction. Since the state of location has all but complete dominion
over the physical objects sought to be measured for tax,
See Green v. Van
Buskirk, 7 Wall. 139,
74 U. S. 150
(1869);
Curry v. McCanless, 307 U.
S. 357,
307 U. S. 363
(1939), and cases cited, no other state can offer a
quid pro
quo. A state is not equipped with
Page 338 U. S. 257
the implements of power and diplomacy without its boundaries
which are at the root of the Federal Government's undoubted right
to measure its tax upon foreign property.
United States v.
Bennett, 232 U. S. 299
(1914);
see Burnet v. Brooks, 288 U.
S. 378 (1933). And if the state has afforded nothing for
which it can ask return, its taxing statute offends against that
due process of law it is our duty to enforce. [
Footnote 4]
We hold that Wisconsin's emergency inheritance tax is invalid
insofar as it is measured by tangible property outside Wisconsin.
The judgment must be reversed, and the cause remanded for
proceedings not inconsistent with this opinion.
Reversed.
MR. JUSTICE BLACK dissents. He agrees that the Court's holding
logically follows from its interpretation of the due process clause
in the
Frick case, but believes that, so interpreted, the
clause gives a more expansive control over state tax legislation
than the due process clause justifies.
MR. JUSTICE DOUGLAS took no part in the consideration or
decision of this case.
[
Footnote 1]
The record does not reveal the exact nature of the property, and
we have held that whether the property is "tangible" within the
meaning of
Frick v. Pennsylvania, 268 U.
S. 473 (1925),
infra is a federal question.
Blodgett v. Silberman, 277 U. S. 1 (1928).
In this case, however, the parties and the court below agree that
the property is clearly "tangible" within the
Frick rule.
We accept that assumption.
[
Footnote 2]
The formula is as follows:
30% x Wisconsin normal inheritance tax + 30% (80% federal basic
tax - Wisconsin normal inheritance tax - taxes paid in Illinois and
Florida). This reduces to:30% (80% federal basic tax - taxes paid
in Illinois and Florida).
Deductions authorized in the computation of the normal
inheritance tax are thus of no significance.
The State's table of computation reads:
(1) Wisconsin Normal Inheritance Taxes . . . . . . . . . .
$220,682.12
(2) Wisconsin Estate Tax:
80 % of U.S. Estate Tax . . . . . . . . . $630,709.62
Less:
(a) Wisconsin Normal
Taxes (1) above . . . . $220,682.12
(b) Illinois Inheritance
Taxes . . . . . . . . . 35,616.26
(c) Florida Inheritance
Taxes . . . . . . . . . 21,709.45
Total State Taxes . . . . . . . . . . . . 278,007.83
-----------
Difference is Wisconsin Estate Tax. . . . . . . . . . .
352,701.79
(3) Wisconsin Emergency Tax:
Wisconsin Normal
Taxes (1) above . . . . . 220,682.12
Wisconsin Estate Tax
(2) above . . . . . . . . 352,701.79
-----------
Total . . . . . . . . . . . $573,383.91
Emergency Tax is 30%. . . . . . . . . . . . . . . . . .
172,015.20
-----------
Total Wisconsin Inheritance Taxes . . . . . . . . . . . . .
$745,399.11
[
Footnote 3]
A different question might be presented, however, if the statute
in question authorized computation to begin with 87.52%, rather
than all of the 80% federal credit. We intend to intimate no
opinion as to that situation.
[
Footnote 4]
Of course, we have refused to be governed by this consideration
when so to do would have placed a premium upon the avoidance of all
state taxes.
New York ex rel. New York C. & H. R. Co. v.
Miller, 202 U. S. 584,
202 U. S. 597
(1906);
Southern Pacific Co. v. Kentucky, 222 U. S.
63 (1911);
cf. Northwest Airlines v. Minnesota,
322 U. S. 292
(1944).
See Commonwealth v. Pennsylvania Coal Co., 197 Pa.
551, 47 A. 740 (1901);
Norfolk & W. R. Co. v. Board,
97 Va. 23, 32 S.E. 779 (1899).