The Estate contends the
creation of “classes” for the determination and collection of inheritance tax
that base both the amount of exemption and tax rate on the relationship between a decedent and a
transferee violates Indiana’s Constitution Article 1, Sections 1, 12, 23, and
Article 4, Section 22. (See Appellant’s Br. at 6.) The Department, however,
claims that the Indiana Supreme Court found the inheritance tax classification
scheme constitutional over ninety years ago in Crittenberger v. State Savings & Trust Company, 127 N.E. 552
(Ind. 1920). (See Appellee’s Br. at
1, 5-7.)
Courts should
not pass upon constitutional questions and declare statutes invalid unless a
decision upon that very point becomes necessary to the resolution of a cause. See Indiana Wholesale Wine & Liquor Co.
v. State ex rel. Indiana Alcoholic Beverage Comm’n, 695 N.E.2d 99, 107
(Ind. 1998) (citation omitted). Thus, even if the quality of litigation is
sufficient to support a constitutional determination, a court should avoid
constitutional issues when it can sustain a judgment on non-constitutional
grounds. See id. As such, the Court
must first determine whether Crittenberger resolves any of the claims in this
case.
In
Crittenberger, the Indiana Supreme Court determined that a statute, which
exempted certain educational and charitable bequests and devises from
inheritance tax, comported with Article 1, Section 10 (the uniformity and
equality of assessment and taxation clause) of our Constitution. Crittenberger, 127 N.E. at 555-56. In
reaching that conclusion, the Indiana Supreme Court explained that the right to
take property by descent or devise is a right owing its existence to the
authority of legislative enactment and is not a natural right; thus, the right
is subject to legislative abrogation and regulation. Id. at 556 (footnote added). In other
words,
the
Legislature may make [the inheritance tax] applicable to one class of persons
or corporations and inapplicable to another class, provided the tax is uniform
as to the class upon which it operates. The state[] may tax the right or
privilege of taking property by descent or devise, discriminate between
relatives, and between these and strangers, and grant exemptions, and [is] not
precluded from this power by the provisions of the [] state Constitution[]
requiring uniformity and equality of taxation.
Id.
(emphasis added) (citations omitted).
Crittenberger,
therefore, clearly provides that inheritance tax classification schemes that
distinguish between lineal relatives, collateral relatives, and strangers are
both equitable and reasonable when the classifications and statutory schemes
operate on the classes uniformly. See id.
at 555-56 (citations omitted). Consequently, the Supreme Court’s holding in
Crittenberger resolves the Estate’s Article 1, Section 1 and Article 1, Section 23 claims
in favor of the Department.
Accordingly, the Court
turns to the Estate’s remaining constitutional claims.
Article 1,
Section 12
Article 1,
Section 12 of the Indiana Constitution provides: “All courts shall be open; and
every person, for injury done to him in his person, property, or reputation,
shall have a remedy by due course of law. Justice shall be administered freely,
and without purchase; completely, and without denial; speedily, and without
delay.” IND. CONST.
art. 1, § 12. The Estate claims Indiana’s inheritance tax classification scheme
violates this constitutional provision by producing inequitable administration
costs and remedies through its imposition of varying inheritance tax
liabilities based on arbitrary familial distinctions. (See Appellant’s Br. at 6-9, 11 (arguing that Floyd’s beneficiaries,
as Class B and Class C transferees, paid 458% more in tax than they would have
as Class A transferees).)
The remedies
clause of Article 1, Section 12 prescribes procedural fairness, guaranteeing a
“‘remedy by due course of law’ for injuries to ‘person, property, or
reputation.’” McIntosh v. Melroe Co., a
Div. of Clark Equipment Co., Inc., 729 N.E.2d 972, 975 (Ind. 2000)
(citation omitted). This constitutional assurance of a remedy for injury,
however, does not create any new substantive right to recover for a particular
harm. Id. at 977 (citation omitted).
“‘Rather, the clause promises that, for injuries recognized elsewhere in law,
the courts will be open for meaningful redress.’” Id. (citation omitted).
The
Legislature has provided the Estate with four alternative remedies by which to
challenge the determination and collection of inheritance tax. See Sibbitt v. Indiana Dep’t of State
Revenue, 563 N.E.2d 146, 147-48 (Ind. Ct. App. 1990), trans. denied. The Estate has taken advantage of one of those
remedies, the claim for refund process. See
supra pp. 2-3 (noting that the Estate has, and currently is using, the
claim for refund process to challenge its purportedly improper inheritance tax
liability); IND. CODE §
6-4.1-10-1 et seq. (2009).
In so doing, the Estate
has been able to present to both the probate court and this Court its claims
via written motions, written briefs, and oral argument. Consequently, the
Estate has not demonstrated that the inheritance tax classification scheme
violates Section 12 by imposing inequitable administration costs and remedies.
Article 4,
Section 22
Article 4,
Section 22 prohibits the enactment of “local” or “special” laws regarding,
among other things, “the assessment and collection of taxes for State, county,
township, or road purposes.” IND. CONST.
art. 4, § 22. The Estate contends that the inheritance tax classifications
constitute prohibited special laws because they are not based on consanguinity
or any other “uniquely meaningful” or inherently distinguishable
characteristic. (See Oral Argument
Tr. at 19-20; Appellant’s Br. at 7, 10-11.) The Court disagrees.
“The
determination of whether a law is special or general is a threshold question in
determining its constitutionality under” Article 4, Section 22. Alpha Psi Ch. of Pi Kappa Phi Fraternity,
Inc. v. Auditor of Monroe Cnty., 849 N.E.2d 1131, 1136 (Ind. 2006)
(citation omitted). “A statute is ‘special’ if it ‘pertains to and affects a
particular case, person, place, or thing, as opposed to the general public.’” Municipal City of South Bend v. Kimsey,
781 N.E.2d 683, 689 (Ind. 2003) (citation omitted). “A statute is ‘general’ if
it applies ‘to all persons or places of a specified class throughout the
state.’” Id. (citation omitted).
Contrary to the Estate’s contention, therefore, the statutes classifying
beneficiaries for the determination and collection of inheritance tax are not
special laws; rather, they are general laws because they apply to beneficiaries
throughout the entire state in the same manner. Accordingly,
the Estate has not shown that Indiana’s inheritance tax classification statutes
are special laws in violation of Section 22.
