Death and Taxes: Could the U.S. Supreme Court Revisit the Issue of Retroactive Tax Legislation?


Earlier this month, the Hambleton Estate filed a petition for a writ of certiorari from the U.S. Supreme Court, appealing the Washington Supreme Court decision in In re Estate of Hambleton and MacBride. At issue in the case was Washington’s adoption of legislation in 2013 that retroactively imposed an estate tax for decedents dying on or after May 17, 2005, according to an Oct. 24, 2014, story in Bloomberg BNA’s Weekly State Tax Report. One of the main issues in the case is the constitutionality of retroactive tax legislation.

By way of background, Washington’s legislation was a response to the 2012 Washington Supreme Court decision in In re Estate of Bracken. In Bracken, the court held that Washington could not tax qualified terminable interest property (QTIP) when the second spouse died, if the first spouse died prior to May 17, 2005. The decision hinged on a narrow interpretation of the word “transfer.” The 2013 legislation, dubbed the “Bracken fix” broadened the definition of “transfer.”

Although the taxpayers in Hambleton presented a veritable smorgasbord of arguments, all of which were rejected by the Washington Supreme Court, the most compelling argument may have been the due process argument. In rejecting the taxpayers’ argument, the court relied heavily on United States v. Carlton, a 1994 case from the U.S. Supreme Court that upheld a retroactive amendment to a federal estate tax.

The court also reasoned that the “Bracken fix” did not impose a new tax, but merely clarified the legislature’s intent when it imposed the original estate and transfer tax in 2005. Still, the Hambleton case could present the U.S. Supreme Court an opportunity to revisit the controversial issue of retroactive tax legislation.

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