Estate of Rankin

EAGEN, Chief Justice,

dissenting.

I emphatically dissent.

The majority today ignores the clear and unambiguous language of Section 316 of the Inheritance and Estate Tax Act of June 16, 1961, P.L. 373, art. III, as amended, 72 P.S. § 2485-316 (Supp.1979-80) [Hereinafter: 72 P.S. § -], violates fundamental principles of tax law by making 72 P.S. §316 dependent upon the practicalities confronting a particular person, and reaches a horrendous result which will foster much unnecessary litigation.

This appeal presents the question whether the amount of an employee’s contribution to a retirement plan, which he had a right to withdraw upon termination of employment, is subject to tax under 72 P.S. §§ 2485-101 et seq. upon the employee’s death, or whether such contributions are exempt from tax under 72 P.S. § 2485-316. I agree with the trial court that, in the circumstances of this case, the exemption is not available and, hence, I would affirm.

Wayne E. Rankin, the decedent, had been an employee of Trans World Airlines [Hereinafter: TWA] for some thirty-four years and was a company vice-president when he died on October 10, 1975, at the age of fifty-nine. He had not been in active service for about six months prior to his death because of illness for which he received disability payments from his employer. Rankin was a participant in the TWA Retirement Plan [Hereinafter: the plan], to which both employer and employee contributed. Under the terms of the plan, these contributions were held in separate accounts for each participant or member and, upon retirement, the total contributions were combined to pay a member a monthly sum for life. If, however, a member died before *76retirement (which is what happened here), his designated beneficiary received only the member’s contributions plus accrued interest thereon in a lump sum.1 An employee’s contributions were fully vested upon the completion of ten years of service with TWA, the attainment of age forty-five, or total disability. A member could not assign his interest in the plan, nor could his contributions be withdrawn (after July 1, 1968) while he was still employed. The contributions were, however, immediately payable to him, with interest, upon termination of employment.2

Upon Rankin’s death, his retirement plan contributions amounting, with interest, to $16,781.80 were paid to his widow who was his designated beneficiary and the executrix of his estate. ■ It is the taxability of this payment which is here at issue.3

I agree with the auditing judge that this decedent’s benefits did not come within the terms of the exemption provided by 72 P.S. § 2485-316. That section provides, in pertinent part:

*77“Payments under pension, stock-bonus, or profit-sharing and retirement annuity plans, to distributees designated by decedent or designated in accordance with the terms of the plan, other than the estate of the decedent, are exempt from inheritance tax to the extent that decedent before his death did not otherwise have the right to possess (including proprietary rights at termination of employment), enjoy, assign or anticipate the payments so made . . . .”

This Court recently reviewed the background of this exemption in Ravdin Estate, 484 Pa. 562, 400 A.2d 591 (1978), and I need not repeat the discussion of the statutory history of 72 P.S. § 2485-316 and of the case law which the section codified which appears in that case. It suffices here to note, as the Court did there, that to escape taxation pursuant to the exemption of 72 P.S. § 2485-316, the decedent “in his lifetime must not have had the legal right to obtain the entire fund,” and that “the degree of dominion which the deceased employee during his lifetime could exercise over the fund has always been the touchstone of taxability.” Id., 484 Pa. at 570, 400 A.2d at 595 [Footnote and citations omitted]. The application of these principles to the present case is plain. As the auditing judge correctly observed, when the rather awkward statutory language is stripped of its double negative, its meaning becomes clear, viz., that payments made by an employee under a retirement plan are taxable on his death to the extent that the decedent before his death had the right to enjoy the payments so made, including proprietary rights at termination of employment. Here, the decedent had the right after resigning to receive all his contributions to the plan plus accrued interest. This “proprietary right” constitutes precisely the sort of “substantial present economic benefit,” Huston Estate, 423 Pa. 620, 624, 225 A.2d 243, 245 (1967), that by the very terms of the statute keeps decedent’s interest in the plan outside the scope of the exemption. See Dorsey Estate, 366 Pa. 557, 79 A.2d 259 (1951); Robeson Estate, 34 Pa. D. & C.2d 296 (O.C. Northampton Co. 1964); Eastlack Estate, 9 Fiduc.Rep. 303 *78(O.C. Phila. Co. 1959); Luttringer Estate, 56 Lane. 533 (O.C. 1959).4

Appellant contends that the factual situation presented by this case compels a contrary result. It is emphasized that, for six months prior to his death, Rankin was unable to work and was receiving disability payments from his employer under a separate plan and that, had he resigned during this period of time, these and other benefits attributable to the employment relationship would have ceased. In this case, it is urged that decedent’s right to receive his contributions upon resignation was “illusory” since no one in decedent’s position would have considered obtaining immediate enjoyment on his retirement plan contributions when so much else would be lost. I must disagree because the presence of a “substantial present economic benefit,” Huston Estate, supra [emphasis added], under the statute is not dependent upon the practicalities of the moment. The plain language of 72 P.S. § 2485-316 is concerned with the decedent’s power to acquire the funds and the injecting of considerations not spelled out in the statute will contravene the legislature's direction that statutory provisions exempting persons and property from taxation are to be strictly construed. Statutory Construction Act of 1972, 1 Pa.C.S.A. § 1928(b)(5) (Supp.1978). See, e. g., Metropolitan Pittsburgh Nonprofit Housing Corporation v. Board of Property Assessment, Ap*79peals and Review, 480 Pa. 622, 891 A.2d 1059 (1978), and cases cited therein.5

The opinion of the court will, hence, foster unnecessary-litigation because our courts will have to examine the practicalities which confronted each decedent in his lifetime.

. Death benefits were paid to the beneficiary through a separate life insurance policy.

. This last provision is made clear by Sections 5.1 and 5.2 of The Plan. These sections provide, in relevant part, as follows:

“5.1 If the Service of a Member is terminated before his retirement and while he is living but such termination occurs on or after either his completion of ten years of Service or attainment of his 45th birthday or his becoming Disabled, he may elect at any time prior to his Normal Retirement Date to receive his Accumulated Contributions: .
“5.2 If the Service of a Member terminates prior to his completion of ten years of Service or attainment of his 45th birthday or his becoming Disabled, he shall be paid his Accumulated Contributions and shall cease to be a Member.”

. The Commonwealth filed an appraisement which asserted Rankin’s contributions to the plan and accrued interest were subject to tax. The executrix appealed this appraisement to the trial court, and the auditing judge, after hearing, dismissed the appeal. Exceptions to this adjudication were dismissed by an equally-divided court en banc, and this direct appeal followed pursuant to Section 202(3) of the Appellate Court Jurisdiction Act, Act of July 31, 1970, P.L. 673, No. 223, art. II, 17 P.S. § 211.202(3) (Supp. 1979-80), since superseded by Section 722(3) of the Judicial Code, 42 Pa.C.S.A. § 722(3).

. Thus, this case is quite unlike Ravdin Estate, supra, in which the decedent had no right to withdraw his contributions from a retirement plan while he lived even if he resigned from the partnership that sponsored the plan. In Ravdin, the Court noted that the decedent there could obtain the fund only upon disability or his attainment of (and retirement at) age fifty-nine and one half, “neither of which events were subject to his control.” Ravdin Estate, supra, 484 Pa. at 571, 400 A.2d at 596. In the case at bar, in contrast, the decedent’s right to receive his contributions took effect upon his own volitional act of resignation. Hence, what the Court said in the similar factual context of Dorsey Estate, supra, is applicable here: “[Ijn view of the depositor’s right to withdraw in his lifetime the total amount of the fund credited to him ... he had substantial ownership of his entire share of the fund and accordingly [it was] his own property to the extent that it represented contributions from his salary . . . .” Dorsey Estate, supra, 366 Pa. at 561-62, 79 A.2d at 261. [Emphasis in original.]

. I note in passing that no analogy is to be drawn between the 72 P.S. §§ 2485-101 et seq. treatment of proceeds from retirement plans and its exemption for life insurance benefits. 72 P.S. § 2485-316, the subject of this appeal, shows clearly that different treatment is to be accorded the two when it states that “proceeds of life insurance otherwise exempt under 72 P.S. § 2485-303 shall not be subject to inheritance tax because they are being paid under a pension, stock-bonus, profit-sharing or retirement annuity plan.” 72 P.S. § 2485-303 is equally categorical in its provision, allowing exemption of insurance proceeds in all cases except where insurance is payable to the decedent’s estate:

“All proceeds of insurance on the life of the decedent, unless payable to the estate of the decedent, are exempt from inheritance tax. Proceeds payable to an inter vivos or testamentary trustee or other beneficiary designated in the decedent’s will or in an inter vivos instrument of transfer are exempt from inheritance tax within the meaning of this section.”

Thus, one’s right to borrow a part of the paid-up value of an insurance policy, or to use the policy as collateral, would not defeat the exemption even though these powers might well constitute a “substantial present economic benefit.” Cf. Dorsey Estate, supra, 366 Pa. at 562, 79 A.2d at 261.