authority is derived from the State, which under the police power, regulates the pursuits of its people as it sees proper. And where an act of Congress undertook to regulate the sale of naphtha and illuminating oils, and made the violation of the regulations a misdemeanor, it was said to be a mere police regulation, which could have no constitutional operation within the limits of the States, and was only effective where the legislative authority of Congress excludes all State legislation, as in the District of Columbia.2 A State may impose a license tax on exchange and money brokers, even where their business is confined to foreign bills of exchange, and such a tax does not conflict with the power of Congress to regulate commerce.3 § 81. Succession or Collateral Inheritance Tax.-The right to take property by devise or descent is not a natural right; it is a creature of the law; but for the regulations prescribed by States, upon the death of the owner, his dominion and control over his property would cease. In most countries, the owner is allowed by will, executed in a prescribed form, to direct what persons shall succeed him in the ownership of his property, and should he fail to make this disposition, the law directs what kindred shall succeed. The taking property by devise or descent, being a privilege accorded by the State to certain persons, the State may prescribe the terms of the taking. The amount paid for this privilege is called a succession tax, or a collateral inheritance tax, as the person taking is a lineal descendant of the testator or intestate or of the collateral kindred. This form of tax was in use among the Romans in the days of Augustus, and is used at the present day in this country, both by the State and federal governments. This tax, like the tax on licenses, on deeds, suits and notarial seals, is not affected by the provision that taxation shall be equal and uniform and ad valorem. It may be a specified tax, or it may be, and generally is, regulated by the value of the property which is devised or descends. A certain per centum on the value of the property is levied, increasing in a uniform scale, as the degree of kindred is removed from the decedent. The tax is still a tax on the privilege, and not a tax on the property in consequence of its being imposed in the form of a percentage on the value of the property.5 Such tax, when imposed on aliens and not on citizens, violates no provision of 1 License Tax Cases, 5 Wall. 462; Pervear v. Commonwealth, Ib. 475. 3 Nathan v. Louisiana, 8 How. 73, 80. See Woodruff v. Parham, 8 Wall. 123, and Hinson v. Lott, Id. 148, as to discrimination against citizens of other States. 4 Eyre v. Jacob, 14 Gratt. 422-431. 5 14 Gratt. 428; Pullen v. Wake Co. 66 N. C. 361. the Constitution of the United States.1 It is a tax which vests immediately upon the death of the owner of the property, and if the law imposing the tax should be repealed before its collection, but after the death of the owner, the right of the State to collect it cannot be resisted. But, on the other hand, if the law imposing the tax is passed after the death of the owner, but before the parties entitled have received the property, the tax cannot be collected; when the property vested in the heirs or devisees at the death of the owner, it was not subject to any tax; they took at that time; the civil privilege was exercised by vesting of title in them at that time. On the same principle, where, by a treaty made between the United States and France, in 1853, by which Frenchmen were placed, as regards property, upon the same footing as citizens of the United States as to rights of property and taxes thereon; a person died in 1848; at that time in Louisiana a tax of ten per cent. was imposed on the value of all property inherited in that State by any person not domiciled there, and not being a citizen of any State or territory of the United States; the brother of the decedent, a French subject residing in France, was held liable to the tax. The property vested in him in 1848, upon the death of his brother, who resided in Louisiana, and the tax vested at the same time, which the treaty did not divest. It is a sound rule of construction never to consider laws as applicable to cases which arose previous to their passage, unless the legislature have, in express terms, declared such to be their intention. So where a person died unmarried and without lawful issue, but having collateral heirs and an illegitimate son, who was legitimized by an act of the legislature giving to him all the benefits and rights of a child born in lawful wedlock, and the act was not approved so as to become a law until the day after the death of the decedent, it was held that the right of the State to the collateral inheritance tax had vested, and was not divested by the act. Where the situs of the property and that of the decedent and heirs or devisees is the same, there can be no question of the authority to impose the tax, but where the situs of these is different, it is often questionable as to the authority of the respective States to impose the tax. The State where decedent is domiciled may impose the tax upon all personal property situate within its limits, or which can only be 1 Mager v. Grimer, 8 How. 491. 2 Armand's Heirs v. His Exrs. 3 La. R. 33; Quenart's Heirs v. Canenge, Ib. 561. 3 Succession of Oyon, 6 Rob. (La.) 504; Succession of Blanchard, 17 La. Ann. 392; Succession of Dufour, 18 La. Ann. 392. 4 Provost v. Greneaux, 19 How. 1; Succession of Deyrund, 9 Rob. (La.) 358. 5 Galbraiths v. Commonwealth, 14 Penn. St. 258. reduced to possession through its courts, though the evidence of it may be in another jurisdiction. The State which is not the domicile of the decedent may impose the tax as to all chattels in its limits, on all negotiable instruments in its limits, and all debts which can only be collected through its courts. In Pennsylvania the tax was imposed on all estates, real and personal and mixed, of every kind whatsoever, passing from any person who may die seized or possessed of such estate being within this commonwealth. S., a native of New Jersey, afterwards domiciled in Philadelphia, and at the time of his death domiciled in Paris, bequeathed 30,000 francs to one Briel, a native and resident of France. The executor resided in Philadelphia and took out letters there. The estate consisted of a bond secured by mortgage on property in Philadelphia, bills and notes of persons residing there, and stock in Pennsylvania and New Jersey corporations. The estate was held liable to the collateral inheritance tax, the court seeming to rely upon the words of the statute: "It is not the person, but the estate within this commonwealth on which the tax is levied." 2 A testator bequeathed certain legacies, and gave the residue of his estate to collaterals. He resided in Pennsylvania, and owned real estate in Minnesota. His executors, under authority conferred upon them, sold the lands and mixed the proceeds with other funds of the estate. The personal estate was sufficient to pay the debts and pecuniary legacies. The tax was claimed on proceeds of the sale of the land in Minnesota. It was held not liable. Sharswood, J.: "The test is to consider the nature of the thing devised or descended, and to ascertain its condition at the time of its passing from the person who died seized or possessed thereof at the time of his death." This land was in Minnesota, and passed directly to the devisees, and vested in them in fee upon the death of the testator; its conversion did not change its character as to the tax. Where property is devised by will to one person, with power to appoint in favor of others, in determining whether the property is subject to a collateral inheritance tax, in the hands of the appointees, we look to the relation which they sustain to the testator, and not to the appointor. A testator devised his estate in trust for his daughter, for and during her natural life, and at her death to such person as she should appoint; she appointed in favor of her brothers and sisters. They were held not liable to the tax; they did not take under her will; she only designated those who took un 1 Ante, § 45, 46, and authorities cited. 2 Commonwealth v. Smith, 5 Penn. St. 142. der her father's will. So where A. McDonald, domiciled in Maryland, bequeathed the interest on $20,000 to his sister M. McDonald, during her life, with power of appointment by will as to one-half; M. McDonald, domiciled in Pennsylvania, by will appointed in favor of S. Duffield, her sister, resident in Pennsylvania, and directed the executors of her brother to pay the amount; it was held that S. Duffield took under the will of her brother, and not under that of her sister. The fund was in Maryland at the first testator's death; it was not an estate of which any one was seized or possessed in the State of Pennsylvania. The court in this case repudiated the doctrine of the English courts, that such an estate would be liable in equity to the creditors of the appointors as against the appointee. And where a testator in his lifetime executed a deed for land to his nephew, and retained possession of it for a while, and then delivered the deed to a third person to be delivered to his nephew when called for, and it was. not called for until after the testator's death, and in his will he devised the same land to his nephew, stating that he had directed it to be conveyed to him, but to make it certain and effectual he made the devise, the court held that this was such a transmission and delivery of the title of the land in the lifetime of the testator that it was not subject to the collateral inheritance tax.3 But a bond due to the testator, and devised to A., upon the condition that A. makes no charge for board or services rendered, and which the executors are directed to cancel, is liable to the collateral inheritance tax; the conditions are not such as to constitute it the payment of a debt. The appraisement of the estate is conclusive as to the value or amount upon which the tax is placed.5 The tax is paid upon the balance of the estate upon the audit of the personal representatives, after payment of charges of administration and debts; this balance is theoretically in cash. The tax is not upon the specific articles of which the estate is composed; it is on the estate of the decedent. Such a tax is valid if a part or the whole of the estate should be in United States bonds; it is not a tax on the bonds, but upon the civil privilege of succeeding to the estate. This tax on the succession is sometimes made in the form of a tax on the admission of the will to probate, or qualification of the administrator where there is no will, when it is called a probate 1 Commonwealth v. Williams, 13 Penn. St. 29. 3 Stinger v. Commonwealth, 26 Penn. St. 422. 4 Tyron's Appeal, 10 Penn. St. 220. 5 Stinger v. Commonwealth, 26 Penn. St. 422. Strode v. Commonwealth, 52 Penn. St. 181, 189. tax. Sometimes both are imposed; a tax on the privilege of probate, to be paid as a condition of exercising the right of personal representative, and also a tax on the amount of property passing to collateral kindred. When the statute makes no express provision on the subject, the succession tax on the collateral inheritance is payable when settlement is made with the legatees, although the estate has not been fully administered. By express provision of statute, the United States succession tax is to be paid at the time the successor becomes entitled in possession to his succession, or to the receipt of the income and profits thereof, and is to be paid by the executor, trustee, or other person having control of the funds. When the statute is silent on the subject, the personal representative is not liable for the tax; it is a tax on the exercise of a privilege by the party who succeeds to the property. The tax on suits, deeds and notarial seals is of the same nature as the succession tax, and its collection is usually enforced by making the payment of the tax a condition precedent to the bringing of the suit, recording of the deeds, or validity of the notarial act. § 82. Income. The gross revenue of an individual, whether it arises from rents of real estate, interest, on money loaned, dividends on stock, or compensation for personal services rendered in any trade, profession or occupation, constitutes his income. A tax upon all persons in proportion to their income is said to be the most equitable mode of taxation. But such tax is never imposed upon all persons, nor upon the gross income; it is usually upon the annual income of certain persons, in excess of a certain amount, allowing deductions of various kinds. The income referred to in a statute is that of the current and not of the previous year. A tax on the capital stock of a bank, making a dividend of one per centum yearly, from the 1st of January, 1841, to the 1st of January, 1846, inclusive, was held not to apply to a dividend declared by the bank on the 30th of December, 1840, on the business of the last six months, although not paid until January, 1841. "New burdens ought always to be prospective, not merely from the date of the tax act, but also from the time of the 1 4 Mees. & Wel. 171, and 1 C. M. & R. 530; 8 Bligh, 44; ante, § 45, and authorities. Acts of Virginia Legislature, 1874 and 1875, p. 286, §§ 12 & 13. 3 Atty. Gen. v. Pierce, 6 Jones' Eq. (N. C.) 144. 4 Davidge & Kimball, Int. Rev. Laws, p. 244, §§ 281, 282 and p. 490. 5 Walker on Science of Wealth, 350; Bronson, J., in People v. Suprs. of Niagara, 4 Hill, 20. 6 Davidge & Kimball, Int. Rev. Laws, pp. 224, 225; Acts of Legislature of Virginia, 1874 and 1875, p. 285. Similar statutes are in force in other States. 7 State v. Elfe, 3 Strobh. (S. C.) 395. |