Hertz v. Woodman

Background

A Chicago man, James F. Woodman, died in March 1902. His bank acted as executor and owed legacies totaling $166,250 to heirs. In January 1905 the Treasury collector took $2,812.49 as an inheritance tax under the War Revenue Act of 1898 and its amendments. The question sent up from the appeals court was simple: because the testator died within one year before Congress repealed the inheritance tax, did that repeal cancel the tax on these legacies?

Reasoning

The Court examined whether the tax was 'imposed' before repeal. It held that the tax attached when the heirs obtained a vested right to immediate possession at the testator’s death, not only when the tax became due for payment. The majority relied on earlier decisions saying the tax is on the right of succession and on the general statutory rule that repeal does not release liabilities unless Congress clearly so provided. Because the saving clause in the repeal left taxes 'imposed' before repeal subject to collection rules, the Court said these legacies remained taxable.

Real world impact

This ruling means estates and heirs who got vested inheritance rights before a repeal may still owe the federal tax; executors must list and may be held liable for taxes even if payment was delayed. The decision settles a split among lower courts about taxes timed near a repeal, making it harder for heirs in similar situations to recover taxes paid.

Dissents or concurrances

Justice McKenna (joined by the Chief Justice and Justice Day) dissented. He argued the repeal aimed to relieve war-era taxes and that ambiguous wording should be read in favor of taxpayers. He relied on earlier cases holding similar taxes were not saved when not payable before repeal, and would have answered the appeals court’s question "yes."