Corbin v. Baldwin , 92 Conn. 99 ( 1917 )

Five beneficiaries under Mr. Hotchkiss' will claim exemption from the payment of the succession tax, by virtue of the statute which exempts "all property passing to or in trust for the benefit of any corporation or institution located in this state which receives State aid." The question for decision is whether each of these beneficiaries is a "corporation or institution . . . which receives State aid." Public Acts of 1915, Chap. 332, § 3.

Each of these beneficiaries has been receiving from the State an exemption from ordinary taxation. The only basis upon which their claim is supported in the majority opinion, is that the exemption from ordinary taxation accorded them is the receipt by them of State aid. The issue is thus a narrow one: Does the term "State aid," as used in the succession tax law of 1915, include aid rendered by way of exemption of property from taxation? The court relies for its conclusion upon (1) the ordinary meaning of State aid; (2) our judicial definition of the term; (3) the absence of anything in our statutes indicating that the use of this term is other than its ordinary one; (4) the history of our succession tax; and (5) the existence of a public policy in favor of the exemption of legacies to these institutions and corporations from the succession tax.

We will take up these points in order. The court quotes our definition of State aid from Beach v. Bradstreet,85 Conn. 344, 353, 82 A. 1050 — "State aid is support or assistance furnished by the State," and says that the qualifying word "State" is of no significance, save as indicating the source of the aid. Hence, it is argued, any form of support or assistance furnished by the State, whether by money grant, or by excusing the corporation or institution from the payment of taxes, falls within the ordinary and natural use of language under the term "State aid."

As it seems to us, the word "State" in the term "State aid," and in the definition of Beach v. Bradstreet, is all-important, for there can be no State aid unless the State furnished the support or assistance. The opinion quotes a part of our definition in Beach v.Bradstreet. We shall get a clearer view of the definition if we have it before us entire. "The ordinary definition of aid is help, support, or assistance . . . furnished by the State to its institutions, organizations, or individuals for a public purpose. It is a term of our statutes, applied to pecuniary assistance furnished by the State to towns, schools, etc., and for internal improvements — all recognized public purposes." Our definition called for (1) support or assistance, (2) furnished by the State, (3) for a public purpose. To furnish, is to provide for, to give. It presupposes the giving of pecuniary assistance or support directly. One would not, in the natural use of language, speak of furnishing assistance to A, when what was done was not to give A something but to relieve A from paying a public obligation due the State. Affirmative and not merely negative action is required. The definition in Beach v. Bradstreet was intended to include aid furnished by the State, either in a pecuniary way, or by way of support furnished through appropriations made to that end. This becomes doubly clear when we read this definition in connection with the statute there under consideration. Since the State cannot furnish either pecuniary assistance, or support, unless there be an existing appropriation under law for a particular purpose, the furnishing of support is in reality the furnishing of pecuniary assistance. The definition of Beach v. Bradstreet does not include as "State aid" the indirect assistance afforded one by relief from the payment of taxes. When that opinion was rendered no such claim was made before the court and the court had no thought of it.

The majority opinion meets the contention of the Tax Commissioner — that the use of the term "State aid" in our statutes is in the sense of pecuniary assistance, or support, — by the statement that it finds scant proof of such an accepted statutory use of this term from its use in the indices of our statutes and in the two sections of the statutes to which it alludes in the opinion. If these instances were all that the statutes revealed, certainly their conclusive character could not be maintained. The contention of the Tax Commissioner rests upon a much broader base than this.

We shall not attempt an exhaustive review of our statutes, but will point out the use of this term in the body and title of our statutes, in the heading and marginal notes, and in the indices of our statutes, sufficiently to establish that the recognized statutory use of this term conforms to our view of its meaning. In the Revision of 1902 we find four references to State aid in the body of statutes. Sections 183, 184, 1368 and 3019. In the Public Acts of 1913, Chap. 25; Public Acts of 1911, Chap. 187; and Public Acts of 1903, Chap. 161, references to State aid are made in the body of the statute. In all of these instances in which this term appears in the body of the statute, it refers to pecuniary assistance. The term is used in the heading of § 3019, of § 2889, and of § 2242, of the General Statutes, and in each instance it refers to pecuniary assistance. This term is found in the title of the Public Acts of 1913, Chapters 25 and 172; Public Acts of 1911, Chap. 183; Public Acts of 1909, Chap. 82; Public Acts of 1907, Chapters 145 and 232; and Public Acts of 1905, Chap. 226. In each of these instances the statutes refer to pecuniary assistance.

The marginal notes to the following statutes contain this term, and the statutes refer to pecuniary assistance. Public Acts of 1915, Chap. 335; of 1913, Chapters 167 and 172; of 1911, Chap. 187; of 1907, Chap. 216; of 1903, Chap. 102. In the index to the Revision of 1902, under the term "State Aid," one half of the references are to direct pecuniary aid, and one half to support furnished by the State through appropriations made to that end. In the indices of the Public Acts of 1913, 1911 and 1907, this term is used in reference to statutes affording direct pecuniary aid. Neither in the Revision of 1902, nor in any Public Act thereafter, is the term "State aid" used in the sense of an exemption from taxation. We have made an examination of the statutes preceding 1902, but necessarily it has not been a completely exhaustive one, and in no single instance have we found that "State aid" was used in the statutes in the sense in which my brethren use it. No instance of such a statutory use was pointed out to us by counsel for the beneficiaries, and none has been found by the court. Under these circumstances, no conclusion is permissible but that the use of the term "State aid" in the Public Acts of 1915 was that which had always obtained in our statutes, viz: assistance furnished by the State by direct pecuniary grant, or support furnished by the State through an appropriation duly made.

Our Private Acts show that the property of many corporations and institutions devoted to charitable purposes is, by their respective charters, exempt from taxation in whole or in part, while the property of many other corporations devoted alike to charitable purposes is not exempt. Under the court's interpretation of "State aid," bequests and devises to all of these institutions and corporations which are not exempt from taxation and which do not receive from the State assistance either in money-grant or support, are subject to the succession tax. So that under our law not every corporation or institution devoted to charitable ends is exempt from the payment of ordinary taxes as the court assumes, nor from the payment of the succession tax. This inequality, which the court finds so glaring an injustice, is not relieved by the court's extension of the meaning of "State aid" to exemptions from taxation. Again, some of these corporations and institutions are exempt in whole and some in part, indicating differences in legislative policy toward these institutions and corporations. By the court's interpretation of "State aid," these differences are ignored, and the least exemption from taxation carries with it complete exemption from the payment of the succession tax. The court ignores a settled legislative public policy and recognizes a public policy which has never existed. Again, some of these institutions are made exempt from taxation provided the town of their domicil so votes. These inequalities and inconsistencies, consequent upon the court's interpretation, would be avoided if "State aid" is accorded its settled statutory meaning. If it is held to include exemptions from taxation, these will be perpetuated.

Is it likely that the General Assembly intended that corporations and institutions to which it had accorded a partial exemption from taxation should, by reason of this exemption, receive complete exemption from the payment of any and all succession taxes upon bequests and devises to them, no matter how large?

The history of exemption in our succession tax legislation, far from supporting the theory that a tax exemption is "State aid," is persuasive that "State aid," as used in the Succession Tax Act of 1915, was not intended to include aid by way of a tax exemption. Our first Succession Tax Act made all property within the jurisdiction of the State subject to this tax, other than property passing by will or by the intestate law to or for the use of some charitable purpose, or purpose strictly public within the State. Public Acts of 1889, Chap. 180, § 1. Chapter 201 of the Public Acts of 1897 repealed the Act of 1889, and enacted a succession tax law which omitted this exception. Under this Act all property devoted to a charitable purpose was subject to the succession tax. So the law remained until the passage of Chapter 148 of the Public Acts of 1911, which provided that all gifts by will to or for the benefit of any corporation or institution located in this State, "which receives state aid by appropriations provided for by the general statutes, . . . shall be exempt from the payment of any succession tax." For the first time in the history of our Succession Tax Acts, the receipt of State aid was made a condition of exemption. When the Act of 1911 was passed, State aid was given to some seventeen hospitals through appropriations made by public act. Public Acts of 1909, Chap. 118, and General Statutes, § 2852. In the session of 1911, these grants to hospitals were made through the Special Laws, and these appropriations to our hospitals comprised then, as now, the greater part of all State aid by way of appropriations by direct gift, or by support furnished. It would be futile to claim that State aid by appropriations includes aid by way of exemption from taxation.

In Chapter 231 of the Public Acts of 1913, the Act of 1911 was repealed, and it was provided that any property passing by will or inheritance in trust for any charitable purpose should be exempt from the succession tax. There has thus been nothing up to this time to indicate that the receipt of an exemption from taxation was State aid, or that it was intended in any of these Acts to include, within the exemption from the succession tax, property exempt from ordinary taxes. The Act of 1913 indicates a return to the early policy of exemption of the 1889 Act.

Chapter 332 of the Public Acts of 1915, recast the succession tax law, repealed the Act of 1913, and reenacted the Act of 1911, except that it omitted the words "by appropriations provided for by the general statutes." The reason for the omission is apparent. Up to the passage of this Act it must be conceded that there were only two forms of State aid known to our statute law, viz: one by direct gift, and one by the furnishing of support by means of an appropriation made for that purpose. State aid by way of an exemption from taxation was unknown to our law. Prior to the session of 1911, State aid, as we have pointed out, had been furnished certain designated hospitals by direct appropriation, and with the session of 1911, and thereafter, these appropriations were made in the Special Laws. A re-enactment, in 1915, of the Act of 1911, would have omitted from its benefits the very institutions to whom State aid had been the most generously extended. At this time it was understood that while the majority of the appropriations for State aid were made in the Special Laws, some also were made by the Public Acts, and some aid was extended by way of support made through appropriations of public moneys for that purpose. Under these circumstances, the General Assembly, desiring that bequests to all corporations or institutions receiving State aid should be exempt from the payment of the succession tax, could not limit the beneficiaries to those receiving State aid by appropriations, otherwise those receiving State aid by way of support would have been excluded; but by making the receipt of State aid the condition of exemption, it would include the two classes which had, up to that time, been the sole recipients of State aid. The reason supporting this form of exemption is found in the fact that increased payments by the State will be avoided by the exemption to institutions receiving State aid, but, in the case of institutions and corporations to whom the State makes no payment or furnishes no support, no such reason exists for making the exemption.

We do not think it is of any practical importance whether the rule of strict or liberal construction of this Act is adopted, since with either construction the result must be the same. Since the court has adopted the liberal rule of construction, it is well to instance the rule which the authorities make applicable to a case where an exemption is claimed from a general scheme of taxation. "Such exemptions are neither presumed nor allowed, unless there appears from the language of the statute or charter to be a clear intention on the part of the legislature to make an exception to the general rule." Cooley on Taxation (2d Ed.) 204;Ford v. Delta Pine Land Co., 164 U.S. 662,17 Sup. Ct. 230; In re Hickok's Estate, 78 Vt. 259, 62 A. 724. "Statutes purporting to grant exemptions from general taxation are to be strictly construed." Cooley on Taxation (2d Ed.) 205.

We agree with the Attorney-General when he says: "If the General Assembly had intended to exempt all property passing to corporations or institutions exempt from taxation, it is fair to assume that it would have expressed that intent by express language as in the New York statute . . . and in the laws of Vermont." My brethren say that it is inconceivable that the General Assembly did not in words limit the meaning of State aid if such was its intent. Until the passage of the Act of 1915, State aid, as used in our statutes, had a recognized meaning, and its use in other statutes will be presumed to be with a similar meaning unless the contrary appears. There is nothing in the Act of 1915 which tends to show that it was intended, by the use of State aid in this Act, to add to its statutory meaning assistance resulting from a tax exemption.

The Special Commission on Taxation, in its report to the General Assembly in 1917, described the tax laws enacted in 1915, as "greater both in number and importance than the General Assembly had ever before made at a single session." Among the sixteen principal changes enumerated, the "whole inheritance tax law was recast. . . . The exemptions of trusts for charitable purposes within the State, other than gifts to municipal corporations of this State for public purposes, were repealed." If this committee had thought that bequests to corporations and institutions which were tax exempt were not subject to the succession tax, it cannot be doubted that it would have pointed out that, in spite of the repeal of the 1913 provision, the greater number of trusts for charitable purposes were not affected by this repeal. Unquestionably the committee were of the opinion that under the Act of 1915 all gifts to corporations or institutions, except those receiving aid in the way of money or support, were by the Act made subject to the succession tax. The committee further reported: "We recommend the exemption from succession taxes of all testamentary gifts to corporations created under the laws of Connecticut for charitable purposes." Would it have so reported if it had been of the opinion that all corporations exempt from taxation were in receipt of State aid? The significance of the conclusion of the committee is the greater from the fact that its chairman was former CHIEF JUSTICE BALDWIN.

Contemporaneous construction of this Act is of great weight. So far as we can learn, the claim that tax exemption is State aid has never before been raised in any proceeding, and no official has ever acted in the view that a charitable corporation which was tax exempt was for that reason in receipt of State aid.

The majority opinion finds, in the legislative history of the exemption from ordinary taxes, of property dedicated by gift to public charitable uses, a policy of Colony and State that no part of such gifts shall be depleted through the levy of a tax or the imposition of other State burden upon it; and the court finds in a present proposal to make any of these gifts subject to the succession tax, "a new and radical departure in policy in striking contrast with that which heretofore has characterized our governmental history." We fear the strong sympathy of the court with the charitable purposes of these corporations and institutions which claim an exemption from the payment of the succession tax, has momentarily caused it to forget that between 1897 and 1911 such gifts were subject to the succession tax, and between 1911 and 1913 they were so subject unless the corporations or institutions to which they were given were the recipients of State aid through appropriations under the general statutes. There was no "new and radical departure" — merely a return to a former policy of taxation.

We refrain from expressing our view upon the wisdom of imposing a succession tax upon bequests to any corporations or institutions devoted to charitable purposes. We regard that decision as within the legislative function. The General Assembly enact statutes, the judiciary do not. That Connecticut had, as a rule, exempted corporations and institutions devoted to charitable purposes from the payment of ordinary taxes, indicated a public policy as to this class of exemptions. It did not indicate a public policy as to a totally different form of raising revenue by means of death charges. Our first succession tax law was passed in 1889; necessarily our public policy as to succession taxes originated after this date. It was no part of a policy originating long before the succession tax law was passed. We have held that succession taxes are death duties, charges upon the right or privilege of devolution and not taxes upon property or person. Nettleton's Appeal, 76 Conn. 235,56 A. 565; Gallup's Appeal, 76 Conn. 617,57 A. 699; Warner v. Corbin, 91 Conn. 532, 100 A. 354, Since succession taxes are a totally different concept from the ordinary tax, it follows that a public policy concerning the ordinary tax has no relation to a succession tax. The history of our succession tax laws furnishes an unanswerable argument to the contention that the public policy of the State has been and is against making all gifts to corporations and institutions devoted to public purposes subject to the succession tax. After an experience of ten years in exempting from the payment of the succession tax all property of such corporations and institutions devoted to charitable purposes, the exemption was repealed and so remained for fourteen years. This change in our policy was taken with deliberation.

The General Assembly enacted the 1897 statute through its knowledge that the living often failed to pay their just share of the cost of government, and that it was justice to the State that in the final settlement of the estate of the dead the debt of the deceased to the State should, at least in part, be paid before payments should be made to the objects of his bounty, even though these were charitable trusts. We have approved of this as a legitimate reason for succession taxes, and so have the United States Supreme Court. Hopkins' Appeal,77 Conn. 644, 649, 60 A. 657; Plummer v. Coler,178 U.S. 115, 20 Sup. Ct. 829. That the General Assembly of 1897 intended an entire reversal of the early policy, is perfectly clear from a reading of the Acts of 1889 and of 1897. The fact that bequests to all corporations and institutions devoted to charitable purposes were, under the Act of 1897, for fourteen years subject to the succession tax, is conclusive of the existence during that time of a public policy favorable to the imposition of a succession tax upon charitable trusts of this character. The change in 1911, exempting bequests only to those corporations and institutions which receive State aid "by appropriations provided for by the general statutes," indicated a change in public policy, to the end that bequests to such of these corporations and institutions as received State aid by appropriations through the general statutes, should be exempt from the payment of succession taxes. The change in 1913 indicated a reversal to the early policy exempting gifts to all institutions and corporations devoted to charitable purposes. The change in 1915 indicated a partial reversal of the policy of exemption of 1913. There was no indication in the language used, or in the title or history of this Act, that it was the public policy to make gifts to every corporation and institution which was exempt from taxation, free from the payment of the succession tax.

The Tax Commission report, to which we have referred, accompanied its recommendation that all charitable trusts be made free from the succession tax, by a bill carrying out this recommendation. The General Assembly of 1917 enacted several of the recommendations of this Commission, but re-enacted the part relations to the exemption of gifts to corporations and institutions receiving State aid, just as it appeared in the Act of 1915. The General Assembly thus refused to follow the recommendation of the Commission and exempt from the succession tax "all property passing to or in trust for the benefit of any corporation incorporated under the laws of this state solely for charitable purposes." So that the latest expression of the public policy of the State is a refusal to adopt the policy which the majority opinion holds to be the established public policy of the State.

Under the court's ruling, a bequest to any corporation or institution which is exempt from ordinary taxation, in whole or in part, is free from the succession tax. And this holds, whether the corporation or institution be devoted to charitable purposes or not. Surely the General Assembly never intended to exempt gifts to business corporations from the succession tax, although the corporation might be exempt from the payment of ordinary taxes. Under the court's construction of this Act, its effect, instead of restricting the exemptions of 1913, would enlarge them beyond those known in any of our succession tax laws. The General Assembly which passed the 1915 Act faced a serious financial situation. The expenses of the State far outran its revenue. The Governor of the State recommended, and the General Assembly passed, much taxation legislation enlarging the old, and discovering new, sources of revenue. In that crisis it would indeed have been strange had Governor and General Assembly intentionally released from the operation of the succession tax gifts to corporations which are tax-exempt but which do not receive State aid, when the amount involved was a very substantial sum. The Tax Commission of 1917 reported, as their estimate from their recommendation that bequests to Connecticut charitable corporations be made exempt from the payment of succession taxes, the following: "Reduction of Succession Taxes charged to Connecticut charitable corporations, probably on the average about $200,000." This is State history, and it tends strongly to show that the General Assembly did not intend, by the Act of 1915, to include under State aid, tax exemptions granted corporations and institutions.

We concur in the decisions upon the other points involved in these appeals.

In this opinion RORABACK, J., concurred.