Constitutionality of Retroactive 2011 Estate Tax

Stephen BellisAttorney Stephen Bellis brought a lawsuit against the State of Connecticut Commissioner of Revenue Services for decreasing the exemption amount of $3.5 million to $2 million on the estate tax. Although the legislature passed the law May 4, 2011, they made it retroactive effective January 1, 2011. Consequently, anyone who died before the legislature made the change in the law could have to pay approximately $100,000 more in estate taxes.

The lawsuit alleges that the estate tax should not be applied retroactively and that it violates Connecticut General Statute §55-3 which states “no provision of the general statutes not previously contained in the statutes of the state, which imposes any new obligation on a person or corporation shall be construed to have a retrospective effect.” The retroactive application of the new estate tax violates Attorney Bellis’ client’s rights under the 5th and 14th Amendments to the United States Constitution and constitutes a taking. The complaint seeks a declaratory judgment against the Commissioner of Revenue Services that the retroactive portion of the law is an unconstitutional taking.

Attorney Bellis has filed the case in the Milford Superior Court. Currently, there is no Connecticut State Supreme Court decision on this topic. The United States Supreme Court has ruled in U.S. v. Carlton, 512 US 26 (1994) a tax statutes retroactive application must be supported by a legitimate legislative purpose furthered by rational means. The Court held that the retroactive aspects of legislation must meet the test of due process, i.e. the law was neither illegitimate nor arbitrary. The Court quoted Justice Stone in a prior case stating that “taxation is a way of apportioning the cost of government among those who in some measure are privileged to enjoy its benefits and must bear its burdens. Since no citizen enjoys immunity from that burden, its retroactive imposition does not necessarily infringe due process.” Attorney Bellis will argue that a dead person does not enjoy the benefits of government and should not unnecessarily bear its burdens since he has already paid taxes on the money comprising the estate.

The case has generated considerable interest having been reported by the Wall Street Journal, Hartford Courant, Bridgeport Post and Stamford Advocate.