FISHER, Senior Judge.
The Estate of Floyd L. Odle through its personal representative, Geoffrey Odle, appeals the Hamilton Superior Court No. 1's (probate court) determination that the beneficiaries under Floyd's will were properly classified as Class B and C transferees for Indiana inheritance tax purposes. In challenging the probate court's determination, the Estate contends that the classification of beneficiaries for purposes of Indiana's inheritance tax scheme violates Indiana's Constitution Article 1, Sections
On February 12, 2009, Floyd L. Odle died testate. Because Floyd's wife preceded him in death and the couple never had children of their own, Floyd left his entire estate to several collateral relatives, including nephews, great nieces, and great nephews.
On November 10, 2009, the Estate filed its Indiana inheritance tax return classifying each of Floyd's beneficiaries as either Class B or Class C transferees. The Estate remitted its inheritance tax payment to the Hamilton County Treasurer on the same day. The probate court issued an order accepting the Estate's inheritance tax return as filed on November 19, 2009.
On March 15, 2010, the Estate filed a refund claim with the Department, contending that all of Floyd's beneficiaries should have been classified as Class A transferees, not Class B or Class C transferees. The Department denied the refund claim on the same day.
The Estate subsequently appealed the Department's denial of its refund claim to the probate court. On May 7, 2012, after holding a hearing, the probate court issued an order determining that Floyd's beneficiaries had been properly classified as Class B and Class C transferees.
The Estate appealed to this Court on June 4, 2012. The Court heard oral argument on January 11, 2013. Additional facts will be supplied as necessary.
The Indiana Tax Court acts as a true appellate tribunal when reviewing an appeal of a probate court's determination concerning the amount of Indiana inheritance tax due. Ind.Code § 6-4.1-7-7 (2013); In re Estate of Young, 851 N.E.2d 393, 395 (Ind. Tax Ct.2006) (citation omitted). Accordingly, while the Court will afford the probate court great deference in its role as the finder of fact, it will review the probate court's legal conclusions de novo. In re Young, 851 N.E.2d at 395. (citations and footnote omitted).
"Indiana's inheritance tax statutes impose, at the time of [a] decedent's death, a tax on the privilege of succeeding to certain property rights of deceased persons." Indiana Dep't. of State Revenue v. Estate of Parker, 924 N.E.2d 230, 236 (Ind. Tax Ct.2010) (citations omitted). Consequently, the tax is imposed on a transferee's right to succeed to a decedent's property rather than the property itself. See Indiana Dep't. of State Revenue v. Smith,
The amount of inheritance tax due on each of the decedent's transfers is based on the fair market value (usually as of the decedent's death) of the property interests transferred and the relationship between the decedent and the transferee. Indiana Dep't. of State Revenue v. Estate of Brandewiede, 873 N.E.2d 209, 212 (Ind. Tax Ct.2007) (citations omitted); see also In re Grotrian's Estate, 405 N.E.2d 69, 80 (Ind.Ct.App.1980) (explaining that the "closer" the relation between the decedent and transferee, as defined by the Legislature, the more favorable the tax treatment). With respect to this latter factor, the Legislature has grouped these relationships into three "classes": Class A, Class B, and Class C. See IND.CODE § 6-4.1-1-3 (2009) (amended 2011).
Class A transferees, who include, among others, the decedent's lineal ancestors and descendants (e.g., children or grandchildren), the decedent's stepchildren, and their lineal descendants (regardless of whether the stepchild or the stepchild's lineal descendant were adopted), pay taxes on amounts exceeding $100,000 at rates ranging from 1 to 10 percent. See I.C. § 6-4.1-1-3(a); IND.CODE § 6-4.1-3-10 (2009) (amended 2012); IND.CODE § 6-4.1-5-1(b) (2009). Class B transferees, the decedent's siblings, a descendant of a brother or sister of the decedent (e.g., a niece or nephew), and a spouse, widow, or widower of a child of the decedent, pay taxes on amounts exceeding $500 at rates ranging from 7 to 15 percent. See I.C. § 6-4.1-1-3(b); IND.CODE § 6-4.1-3-11 (2009); I.C. § 6-4.1-5-1(c). Class C transferees include all other transferees (except a surviving spouse) who are neither Class A nor Class B transferees; they pay taxes on amounts exceeding $100 at rates ranging from 10 to 20 percent. See I.C. § 6-4.1-1-3(c); IND.CODE § 6-4.1-3-12 (2009); I.C. § 6-4.1-5-1(d).
The Estate contends the creation of "classes" for the determination and collection of inheritance tax that base both the amount of exemption and tax rate on the relationship between a decedent and a transferee violates Indiana's Constitution Article 1, Sections 1, 12, 23, and Article 4, Section 22. (See Appellant's Br. at 6.) The Department, however, claims that the Indiana Supreme Court found the inheritance tax classification scheme constitutional over ninety years ago in Crittenberger v. State Savings & Trust Company, 189 Ind. 411, 127 N.E. 552 (1920). (See Appellee's Br. at 1, 5-7.)
Courts should not pass upon constitutional questions and declare statutes invalid unless a decision upon that very point becomes necessary to the resolution of a cause. See Indiana Wholesale Wine & Liquor Co. v. State ex rel. Indiana Alcoholic Beverage Comm'n, 695 N.E.2d 99, 107 (Ind. 1998) (citation omitted). Thus, even if the quality of litigation is sufficient to support a constitutional determination, a court should avoid constitutional issues when it can sustain a judgment on non-constitutional grounds. See id. As such, the Court must first determine whether Crittenberger resolves any of the claims in this case.
In Crittenberger, the Indiana Supreme Court determined that a statute, which exempted certain educational and charitable bequests and devises from inheritance tax, comported with Article 1, Section 10 (the uniformity and equality of assessment and taxation clause) of our Constitution. Crittenberger, 127 N.E. at 555-56. In reaching that conclusion, the Indiana Supreme Court explained that the right to take property by descent or devise
Id. (emphasis added) (citations omitted).
Crittenberger, therefore, clearly provides that inheritance tax classification schemes that distinguish between lineal relatives, collateral relatives, and strangers are both equitable and reasonable when the classifications and statutory schemes operate on the classes uniformly. See id. at 555-56 (citations omitted). Consequently, the Supreme Court's holding in Crittenberger resolves the Estate's Article 1, Section 1
Article 1, Section 12 of the Indiana Constitution provides: "All courts shall be open; and every person, for injury done to him in his person, property, or reputation, shall have a remedy by due course of law. Justice shall be administered freely, and without purchase; completely, and without denial; speedily, and without delay." IND.
The remedies clause of Article 1, Section 12 prescribes procedural fairness, guaranteeing a "`remedy by due course of law' for injuries to `person, property, or reputation.'" McIntosh v. Melroe Co., a Div. of Clark Equipment Co., Inc., 729 N.E.2d 972, 975 (Ind.2000) (citation omitted). This constitutional assurance of a remedy for injury, however, does not create any new substantive right to recover for a particular harm. Id. at 977 (citation omitted). "`Rather, the clause promises that, for injuries recognized elsewhere in law, the courts will be open for meaningful redress.'" Id. (citation omitted).
The Legislature has provided the Estate with four alternative remedies by which to challenge the determination and collection of inheritance tax. See Sibbitt v. Indiana Dep't. of State Revenue, 563 N.E.2d 146, 147-48 (Ind.Ct.App.1990), trans. denied. The Estate has taken advantage of one of those remedies, the claim for refund process. See supra pp. 633-34 (noting that the Estate has, and currently is using, the claim for refund process to challenge its purportedly improper inheritance tax liability); Ind.Code § 6-4.1-10-1 et seq. (2009).
Article 4, Section 22 prohibits the enactment of "local" or "special" laws regarding, among other things, "the assessment and collection of taxes for State, county, township, or road purposes." IND. CONST. art. 4, § 22. The Estate contends that the inheritance tax classifications constitute prohibited special laws because they are not based on consanguinity or any other "uniquely meaningful" or inherently distinguishable characteristic. (See Oral Argument Tr. at 19-20; Appellant's Br. at 7, 10-11.) The Court disagrees.
"The determination of whether a law is special or general is a threshold question in determining its constitutionality under" Article 4, Section 22. Alpha Psi Ch. of Pi Kappa Phi Fraternity, Inc. v. Auditor of Monroe Cnty., 849 N.E.2d 1131, 1136 (Ind.2006) (citation omitted). "A statute is `special' if it `pertains to and affects a particular case, person, place, or thing, as opposed to the general public.'" Municipal City of South Bend v. Kimsey, 781 N.E.2d 683, 689 (Ind.2003) (citation omitted). "A statute is `general' if it applies `to all persons or places of a specified class throughout the state.'" Id. (citation omitted). Contrary to the Estate's contention, therefore, the statutes classifying beneficiaries for the determination and collection of inheritance tax are not special laws; rather, they are general laws because
For the above-stated reasons, the Court AFFIRMS the probate court's determination that Floyd's beneficiaries were properly classified as Class B and C transferees for Indiana inheritance tax purposes.
Minot v. Winthrop, 162 Mass. 113, 38 N.E. 512, 516 (1894) (emphasis added); see also Crittenberger, 127 N.E. at 556.