This case concerns the validity of an estate tax assessment in the amount of $194.24, plus interest of $33.51, making a total assessment of $227.75. The Department of Revenue of Alabama made the assessment basing its computation on the estate tax levied by the Federal Government
The taxpayer took an appeal from the tax assessment to the Circuit Court of Mobile County. The Circuit Court set the assessment aside on the theory that the corpus of two trusts was improperly included in the estate for estate tax purposes. The State then brought this appeal.
The question of whether the corpus of the two trusts should have been included in the estate for estate tax purposes is a close one. It may very well be that these two trusts should not have been included in the estate; but, due to the peculiar nature of our estate tax law, that question is not before us on this appeal. The proper place, as we see it, to adjudicate the correctness of the inclusion of the two trusts in the estate for estate tax purposes is in a Federal Court.
Our estate tax law adopts the valuation made by the Bureau of Internal Revenue for estate tax purposes and merely assesses an estate tax equal to the credit granted the taxpayer by the United States. For a thorough understanding of the problem we must look first to the Federal legislation and then to our statutes on estate taxes.
In 1926 the federal revenue law was amended to allow the various states an opportunity to claim an 80% share of the federal estate tax.—Revenue Act 1926, § 301(b), 44 Stat. 70. This amendment gave the taxpayer a credit of 80% of the basic tax if the taxpayer had paid such tax to a state. The current provision for this 80% credit by a taxpayer for taxes paid to a state now appears in 26 U.S.C.A. § 813(b).
A good discussion of the federal estate tax credit clause appears in 13 N.C. Law Review 271. The author of the treatise indicates that the states were quick to take advantage of the opportunity offered them; and, that most of the states have passed legislation aimed at the recovery of the credit allowed the taxpayer by the federal government. These state statutes, that have been passed upon, have been universally held to be constitutional. See Annotations: 63 A.L.R. 1096; 102 A.L.R. 500; 147 A.L.R. 467.
Alabama's Constitution was amended in 1931 to permit our legislature to pass legislation aimed at capturing for the state treasury the 80% credit allowed by the federal government.—Amendment XXIII, Alabama Constitution of 1901. Our legislature enacted a statute to implement this Constitutional provision.—See Gen. Acts of Alabama, Regular Session 1935, p. 434. This act is now Chapter 19 of our Code and is found in Alabama Code 1940, Title 51, §§ 432-449. Section 432 is:
Section 434 of Title 51, supra, requires the Alabama taxpayer to file a duplicate copy of his federal estate tax return with the Alabama Department of Revenue and concludes:
The last sentence of § 444 of Title 51, provides: "The department of revenue may adopt the valuation arrived at by the federal authorities, as the basis for the tax hereunder."
We conclude that the above Alabama statutes evince the clear purpose that the Alabama Department of Revenue can only assess an estate tax equal to the credit granted the taxpayer by the federal government; and, that the trial court was in error in holding otherwise on the premise that the federal authorities improperly included certain claimed erroneous items in the estate for estate tax purposes.
This conclusion is consonant with decisions in some other jurisdictions.
The Supreme Court of Washington had before it on two occasions the same question that is before us on this appeal. That question is whether the state taxing authorities properly adopted the federal valuation for estate tax purposes under a statute similar to our estate tax statute. In both cases the Court held that the federal valuation was properly adopted by the state. Wittwer v. Pemberton, 188 Wn. 72, 61 P.2d 993, 65 P.2d 218; In re Ward's Estate, 183 Wn. 604, 49 P.2d 485, 102 A.L.R. 496.
The court in the Wittwer case, quoting from the In re Ward's Estate case, stated, 61 P.2d at page 994:
On the basis of these considerations we conclude the holding below was laid in error.
Reversed and remanded.
LIVINGSTON, C. J., and GOODWYN and SPANN, JJ., concur.