In re the Accounting of Hamlin

Mary E. Daniels, a resident of Erie county, died January 3d, 1917, leaving a will executed July 8th, 1907, which will was admitted to probate on January 16th, 1917. The executors named therein duly qualified.

The testatrix, by her will, bequeathed to her daughter certain articles of personal property and made bequests of money to nine individuals aggregating one hundred sixty thousand dollars, amongst whom were George B., Mary and Grace Wellington, cousins, each of whom was given a legacy of $25,000. The residue and remainder of the estate was bequeathed and devised to trustees, for Grace E. Hamlin and Chauncey J. Hamlin, with remainder to the children of Chauncey J. Hamlin of whom there are three, all minors.

The executors of the will having paid to each of the legatees named in the will the amount of the legacies given them, after deducting from each legacy the amount of transfer or inheritance taxes, together with a proportionate amount of the Federal estate tax, on the 6th day of April, 1918, filed their account with the surrogate of Erie county.

The account disclosed, so far as the Federal tax is

Objections were filed on behalf of the three legatees in the $25,000 class to such deduction made against each of them, upon the grounds (1) that said sum was not chargeable against them, but if chargeable should not exceed in amount $250 against each; (2) that under the act of Congress no apportionment of the Federal tax can be made, but that the whole thereof is payable by the executors out of the estate, but in the event that an apportionment is to be made, the method of apportionment applied is erroneous. The objections were overruled and a decree entered confirming the account of the executors.

From such part of the decree as approved, allowed and confirmed the action of the executors, in apportioning pro rata the Federal tax and dismissing the objections filed to the account, the respondents legatees appealed to the Appellate Division. The latter court reversed the decree of the surrogate so far as appealed from ( 185 App. Div. 153 ) and remitted the matter to the Surrogate’s Court with directions to strike from the account the amount of the Federal tax charged against each of their legacies, the court unanimously holding that the tax was payable from the estate and the legacies were not chargeable with any part of the same.

The sole question presented for determination arises under the objections filed to the account of the executors, viz.: Was any portion of the Federal tax chargeable against the legacies of the respondents? If so, what proportion of the same.

The act of Congress in force at the time of the death

Section 6336|b provides: “ Taxing percentages based on value of net estate. A tax (hereinafter in this title referred to as the tax) equal to the following percentages of the value of the net estate to be determined as provided in section two hundred and three, (Sec. 6336|d) is hereby imposed upon the transfer of the net estate of every decedent dying after the passage of this Act * * *.” Then follows a table of percentages, viz.: “ One per- ■ centum of the amount of such net estate not in excess of $50,000,” and eight several specific percentages, of the amounts by which such net estate exceeds a stated sum but does not exceed a sum mentioned and one additional rate, “ ten percentum of the amount by which such net estate exceeds $5,000,000.”

The act then provides the manner in which the value of the gross estate and the net value of the estate shall be determined. (Sections 6336|c, 6336|d.) The latter section in substance is as follows:

“ Net value of estate, how determined. For the purpose of the tax the value of the net estate shall be determined (a) In the case of a resident, by deducting from the value of the gross estate (1) Such amounts for funeral expenses, administration expenses, claims against the estate, unpaid mortgages, ■ losses incurred' during the settlement of the éstate * * * support during the settlement of the estate of those dependent upon the decedent, and such other charges against the estate as are allowed by the laws of the jurisdiction, whether within or without the United States, under which the estate is being administered; and (2) An exemption of $50,000.”

The tax becomes due one year after a decedent’s death. (Section 6336|e.) The executors were required

In 1898 the Congress for the purpose of meeting existing conditions enacted a law known as the War Revenue Law (Act of Congress of June 13, 1898, chapter 448). That law imposed various taxes, amongst which was one under the heading “ Legacies and Distributive Shares of Personal Property.” (Sections 29, 30.) Section 29 of the law provided: “ That any person or persons having in charge or trust as administrators, executors or trustees, any legacies or distributive shares arising from personal property, where the whole amount of such personal property as aforesaid shall exceed the sum of $10,000 in actual value, passing, after the passage of this act, from any person possessed of such property, either by will ór by the intestate laws of any State or Territory, or any personal property or interest therein, transferred by deed, grant, bargain, sale or gift, made or intended to take effect in possession or enjoyment after the death of the grantor or bargainor, to any person or persons, or to any body or bodies, politic or corporate, in trust or otherwise, shall be. and hereby are, made subject to a

In 1916 when the Congress was again confronted with the necessity of providing revenue, we may assume that the framers of a proposed law would in the first instance recall the law of 1898, and the decision of the United States Supreme Court in the Knowlton case, to the end that any proposed legislation should be within constitutional limitations and consonant with the decision of the court. Had the Congress of 1916 intended to impose a tax upon legacies or distributive shares, the task would be lightened by practically following the act of 1898, as construed by the court, with any changes deemed advisable in the rate of the tax imposed. That the Congress did intend by the law of 1916 to impose a tax on the net value of the estate of a decedent at a flat rate dependent upon the amount of the same, rather than upon legatees or distributees, is evident by a comparison

As bearing upon the intention of the legislature of this state in the enactment of a statute we may consider such historical or other facts as are reasonably within the scope of judicial cognizance. (People v. Charles Schweinler Press, 214 N. Y. 395 .) It is also permissible in an interpretation of an act of Congress to refer to the reports of a committee, including the bill as introduced, changes made in the frame of the bill in the course of its passage and statements made by the committee chairman in charge of it, under proper qualifications. (United States v. St. Paul, M. & M. Ry. Co., 247 U. S. 310 , 318.) Within the limitations of the rules prescribed, an examination

On July 6th, when the proposed measure was under consideration in the committee of the whole, while Mr. Kitchin, the chairman of the ways and means committee, was explaining the nature of the estate tax, he was asked by a member of the House if he recalled how the proposed tax rate compared with the inheritance tax rates in the state of New York, to which inquiry Mr. Kitchin replied: “ No, 1 do not know. We levy an entirely different system of inheritance taxes. We levy the tax on the transfer of the flat or whole net estate. We do not follow the beneficiaries and see how much this one gets and that one gets, and what rate should be levied on lineal and what on collateral relations, but we simply levy on the net estate. This also prevents the Federal Government, through the Treasury Department, going into the courts contesting and construing wills and statutes of distribution.”

The Senate recommended additional classifications to those contained in the House bill, which were subsequently adopted and are found in the present act.

The plain intent and obvious meaning of the act of Congress under consideration, especially when considered in connection with the facts surrounding the enactment of the same, indicate clearly that the act imposes an “ estate tax ” as distinguished from an inheritance tax, that the tax is' payable by the estate rather than by the legatees, as determined by the Appellate Division.

The appellants admit that the act does not contain an express direction as to. how the estate tax shall be apportioned, but argue that the language of certain sections thereof and amendments disclose an intention that the tax should be apportioned pro rata. In support of the suggestion counsel cites section 6336|i, which reads: “ If the tax herein imposed is not paid within sixty days after it is due, the collector shall, unless there is reasonable cause for further delay, commence appropriate proceedings in any court of the United States, in the

To hold that the Congress by the language of the sections referred to intended by implication to provide that the tax imposed by the act was one upon legacies, the tax to be paid by legatees, would not only violate the clearly expressed intention of the Congress, but require us to ignore the historical facts surrounding consideration of the measure by the Congress. • When the Congress provided that the tax was imposed upon the value of the net estate, the manner in which said value should be determined, and that the executor should pay the tax, and in section 633,6|i, above quoted, said “it being the purpose and intent of this title that so far as is practicable and unless otherwise directed by the will of the> decedent the tax shall be paid out of the estate before its distribution,” the conclusion is inevitable that the tax was not imposed on legacies, the tax to be paid by the legatees rather than by the executor out of the estate before distribution. Had the Congress desired to provide for an apportionment of a tax amongst legatees it might readily have used language adopted by that body in 1901 (U. S. Statutes at Large, vol. 39, chapter 806, section 11) when it amended section 30 of the act of 1898 reviewed in the Knowlton Case (infra) by adding thereto: “ Any tax paid under the provisions of sections 29 and 30

Dissenting, as we do, from the argument of counsel for appellants in his application of the sections quoted, it would not be profitable to analyze the sections at length. As stated by Mr. Kitchin, chairman of the ways and means committee, the basis of the tax “ prevents the Federal Government through the Treasury Department, going into the courts contesting and construing wills and statutes of distribution.” Much might be written upon the application of the sections quoted, as to the intention of the Congress to insure the payment of the tax, the administrative features of the sections and cases illustrated where the sections would or would not apply, but such questions are not before us in this case, and discussion thereof should be avoided until such time as a case involving the same is presented.

Counsel for appellants also calls attention to amendments made to the law of 1916 by the act of Congress of February, 1919, which in effect provide that the value of the gross estate of the decedent shall include “ to the extent of the amount receivable by the executor as insurance under policies taken out by the decedent upon his own fife; and to the extent of the excess of $40,000 of the amount receivable by all other beneficiaries as insurance under policies taken out by the decedent upon his own life ” (Section 6336|c, new section 402); also amendment to section 6336!j, new section 408, which provides: “ If any part of the gross estate consists of proceeds of policies of insurance upon the life of the decedent receivable by a beneficiary other than the executor, the executor shall be entitled to recover from such beneficiary such portion of the total tax paid as the proceeds in excess of $40,000, of such policies bear to the net estate. If there is more than one such beneficiary the executor shall be entitled to

I have not deemed it necessary to refer to the power of the Congress to enact the law under consideration. To one interested in such question the careful and exhaustive opinion of Mr. Justice White in the Knowlton Case (supra) will be of interest. As to the equity of requiring payment of the tax by the residuary legatees and relieving the remaining legatees from any contribution to the same the question is susceptible of conflict of opinion. The Congress has spoken and it is our function to interpret, not to legislate.

The order of the Appellate Division should be affirmed, with costs payable out of the estate.

Hiscock, Ch. J., Chase, Cardozo, Pound, McLaughlin and Andrews, JJ., concur.

Order affirmed.