In Re the Estate of Hitchman

Brachtenbach, J.

I dissent. The broad issue is whether a beneficiary is liable for inheritance tax in effect at the time of the decedent's death but which was repealed before the tax was due.

RCW 83.04.010 imposed an inheritance tax to be determined as provided in other parts of RCW Title 83. Initiative 402, codified as RCW 83.100, was passed by the voters in November 1981. It repealed all of RCW Title 83, effective January 1, 1982. RCW 83.100.900.

This controversy arose because the decedent died April 17, 1981, while the inheritance tax was in effect, but the tax was not due until January 17, 1982, RCW 83.44.010, after *470the effective date of the repeal.

The Initiative, in lieu of an inheritance tax, imposed a tax in an amount equal to the maximum federal credit allowed by 26 U.S.C. § 2011(b) (1979). The inheritance tax would be $14,459.22; under the Initiative the tax would he $4,596.31. Hence this lawsuit. The estate paid the lesser amount; the Department of Revenue refused to issue its release. After appropriate statutory procedures, RCW 83.28, and a hearing, the trial court held in favor of the estate. I would affirm.

The State advances three arguments: (1) The State acquired a vested right to the inheritance tax at the date of death. If Initiative 402 extinguished that "vested" right, it constituted a gift by forgiveness of public funds in violation of Const, art. 8, § 5. (2) The saving clause in the Initiative preserved the State's right to the inheritance tax. (3) The State's position is the only one consistent with the intent of the Initiative.

On the first issue, we must determine whether the State had a vested right to the tax as of the date of death. It relies upon RCW 83.44.010: "[a] 11 taxes imposed by the inheritance tax provisions of this title shall take effect and accrue upon the death of the decedent ..." Further, the State points to RCW 83.04.023 which creates a lien "from the date of death".

Thus, the question is whether the tax which took effect and accrued, in the words of the statute, could be modified or eliminated prior to the time that the accrued tax was due. The State leaps from the "take effect and accrue" language of the statute to the conclusion that its right to the tax was vested. It argues that such a vested right cannot be extinguished by the repeal of the inheritance tax statute.

To support the State's position it relies principally upon three cases. First, In re Estate of Colman, 187 Wash. 312, 60 P.2d 113 (1936). That case involved an attempt to amend a trust after the decedent's death so as to qualify for an inheritance tax exemption. Second, In re Estate of Ivy, 4 Wn.2d 1,T01 P.2d 1074 (1940) likewise involved an after-*471death ¡attempt to amend a trust and change the tax consequences. Third, In re Estate of Dunn, 31 Wn.2d 512, 197 P.2d 606 (1948) discusses In re Estate of Ivy, supra, but is not in point since it concerns the determination of what assets were taxable in succeeding estates.

It is true that those cases speak of the vested right of the State to the inheritance tax. However, there was no analysis of or necessity of determining the precise date of vesting.

There is another line of cases which, by analogy, I would find controlling. In In re Estate of Fotheringham, 183 Wash. 579, 49 P.2d 480 (1935), the death was in 1932. A valuation of assets dispute arose. While the case was pending in this court the Legislature amended the inheritance tax statute by changing the basis for valuation and the tax rates; the act specifically provided for application to all cases pending in the inheritance division and in the courts. This court held that the statute was constitutional and applied to the estate even though death had occurred 3 years earlier.

In re Estate of Button, 190 Wash. 333, 67 P.2d 876 (1937) involved an issue whether an increased gift tax rate under the 1935 amendment applied to an estate where the death was in 1933. In fact, the tax was imposed on a 1932 gift in contemplation of death. The court held the 1935 statute applied.

In re Estate of Elvigen, 191 Wash. 614, 71 P.2d 672 (1937) concerned a 1930 death. The tax was partially paid in 1931 based on existing law. An exemption was claimed but did not qualify under a 193.1 amendment. In 1935, while the matter was pending, the rates were increased. The court held the exemption had been validly eliminated retroactively and the 1935 rates applied to the unpaid tax arising from the 1930 death. See also In re Estate of Smith, 194 Wash. 215, 77 P.2d 780 (1938) and In re Estate of Nogleberg, 200 Wash. 652, 94 P.2d 488 (1939). The State argues that those cases do not concern vesting, but rather the constitutionality of retroactive changes. That may be correct but those cases undercut the State's position. *472Absent persuasive authority, which is not cited, I find it would indeed be too incongruous to allow the Legislature to increase tax rates, change exemptions and alter methods of valuation while denying the right to modify or eliminate the tax.

We have held: "[a]ssuming that the obligation did exist on that date, the legislature nevertheless had the power to extinguish it." Snow's Mobile Homes, Inc. v. Morgan, 80 Wn.2d 283, 287, 494 P.2d 216 (1972). Also, " [i]t is undoubtedly the rule that the state, through its legislature, may abolish or legislate out of existence a tax lien of any kind." North Spokane Irrig. Dist. 8 v. Spokane Cy., 173 Wash. 281, 283, 22 P.2d 990 (1933). In this case, we should hold the State did not have a vested right to collect inheritance taxes that had accrued at the date of decedent's death but were not yet due.

The State's right to an inheritance tax did not vest at the date of death so we should not consider the argument that the repeal violated Const, art. 8, § 5. We do note the lack of success of a similar argument in Fulton Found. v. Department of Taxation, 13 Wis. 2d 1, 108 N.W.2d 312, reh'g denied, 109 N.W.2d 285 (1961). There a gift tax had accrued and was past due when the statute was so amended that the gifts would be exempt. The court upheld the exemption stating:

A tax is not necessarily unconstitutional because it is retroactive. . . . This being true, it ought to follow that a general law retroactively granting exemptions from taxes recently accrued or paid is not an expenditure of public funds for a private purpose. . . .
There undoubtedly is a time limitation beyond which the legislature cannot proceed retroactively to exempt from tax so as to compel a refund of taxes already paid. However, it seems clear that such time limitation was not exceeded with respect to the application of the retroactive exemption to the unpaid gift taxes due on the 1948 transfers to the Foundation in the instant case.
*473In view of the foregoing, we determine that the application of the retroactive exemption . . . does not constitute an expenditure of public funds for a private purpose.

Fulton Found., at 14-14a.

The next question is the effect of the repealer and savings section of the Initiative, codified as RCW 83.100-.900(1), which repeals entirely the inheritance tax statutes. The Initiative also provided:

These repeals shall not be construed as affecting any existing right acquired under the statutes repealed or under any rule, regulation, or order adopted pursuant thereto; nor as affecting any proceeding instituted thereunder.

Codified as RCW 83.100.900(2).

The State's position is that it had an existing right under the repealed statutes and that there was a proceeding thereunder, i.e., the probate. The State's argument begs the question. Certainly it had an expectancy of collecting the tax when it was due, but before that due date the statute imposing the tax was repealed.

The words "existing right" and "any proceeding instituted thereunder" are not defined in the Initiative. Therefore we must ascertain the legislative intent of the voters and, as one aid, may look to the Official Voters Pamphlet as well as the enactment itself. Department of Rev. v. Hoppe, 82 Wn.2d 549, 512 P.2d 1094 (1973).

Several rules of statutory construction must be kept in mind. First,

It is a well established rule of construction that when a statute repeals another with a saving clause or proviso attached by which the right of some person or of the State is reserved, such proviso or saving clause must be strictly construed, and will not be held to embrace anything which is not fairly within its terms.

State v. Brady, 102 Tex. 408, 415, 118 S.W. 128 (1909). In United Business Comm'n v. San Diego, 91 Cal. App. 3d 156, 171, 154 Cal. Rptr. 263 (1979) (quoting 25 R.C.L. 940, § 193), the court noted:

*474And nothing less than a plain exception of existing cases or claims from the operation of the repealing act or a continuance of the same system of taxation under new regulations will save such cases or claims from the effect of the repeal.'"

Second, "the only rights within the protection of the saving statute [a general saving clause] . . . are 'vested rights,' . ." Pratt v. Hayes, 20 Ill. App. 2d 457, 465, 156 N.E.2d 290 (1959).

Finally, this court relied upon similar principles to hold that an express repeal of legislation destroys all rights and obligations not expressly saved. Lau v. Nelson, 89 Wn.2d 772, 774, 575 P.2d 719 (1978).

Perhaps most telling in ascertaining the intent of these undefined phrases in the saving clause is the official ballot title: "Shall inheritance and gift taxes be abolished, and state death taxes be restricted to the federal estate tax credit allowed?" (Italics mine.) Official Voters Pamphlet 6 (1981). That title coupled with a specific effective date of January 1, 1982, clearly indicates an intent to abolish all inheritance taxes not yet collected as of that date. Despite the unclear language of the saving clause, we should not attribute to the voters the complex legal theories argued for by the State about vested rights, constitutional restrictions and statutory accruals. Department of Rev. v. Hoppe, supra at 555. " [I]f there is [any] doubt as to the meaning of a taxing statute, it is to be construed in favor of the taxpayer and against the taxing body." Vita Food Prods., Inc. v. State, 91 Wn.2d 132, 134, 587 P.2d 535 (1978).

If the drafters of the Initiative intended the repealed statutes to apply to estates arising from deaths occurring prior to the effective date, it would have been extremely simple to have said so. When drafters of legislation have intended to preserve accrued but unpaid obligations or liabilities, they have said so, e.g., RCW 82.98.035: "[n]othing in this 1967 amendatory act shall be construed to affect any *475existing rights acquired or any existing liabilities incurred under the sections amended or repealed ..." (Italics mine.) RCW 82.98.040: "[s]uch repeals shall not be construed as affecting any existing right acquired, or obligation or liability incurred, under the provisions of the statutes repealed . . ." (Italics mine.) RCW 84.98.040: "[s]uch repeals shall not be construed as invalidating, abating, or otherwise affecting any existing right acquired or any liability or obligation incurred under the provisions of the statutes repealed ..." (Italics mine.)

I conclude that the saving clause did not preserve any unvested, undetermined tax obligation which was not yet even due and which would have been subject to events, such as claims, expenses, adjustments with the federal tax and perhaps litigation, all of which could have occurred after death, indeed after the effective date of the Initiative.

Finally, the State argues that only its interpretation is consistent with the intent of the voters and the substantive provisions of the Initiative. It looks to RCW 83.100.030(1) which defines the taxable event as the "transfer" of the net estate. "Transfer" is defined in RCW 83.100.020(13) as it is defined and used in section 2001 of the United States Internal Revenue Code of 1954, as amended or renumbered. In fact, "transfer" is not defined in 26 U.S.C. § 2001 (1979). The State then cites two federal Court of Appeals cases which establish that the "transfer" occurs at the date of death. Chickering v. Commissioner, 118 F.2d 254 (1st Cir. 1941); Walter v. United States, 341 F.2d 182 (6th Cir. 1965).

I doubt if many voters read 26 U.S.C. § 2001 (1979), much less the cases interpreting it. In any event, it is equally logical to say that the "transfer" which took place at this decedent's death was intended to be covered by the Initiative since that event had not yet even triggered a tax that was due before the effective date.

*476The trial court should be affirmed.

Rosellini, Stafford, and Pearson, JJ., concur with Brachtenbach, J.

Reconsideration denied January 25, 1984.