No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; nor shall any person be subject for the same offence to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.
It has been customary from the beginning for Congress to give some retroactive effect to its tax laws, usually making them effective from the beginning of the tax year or from the date of introduction of the bill that became the law.1 Application of an income tax statute to the entire calendar year in which enactment took place has never, barring some peculiar circumstance, been deemed to deny due process.2 “Taxation is neither a penalty imposed on the taxpayer nor a liability which he assumes by contract. It is but 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, and to challenge the present tax it is not enough to point out that the taxable event, the receipt of income, antedated the statute.” 3 A special income tax on profits realized by the sale of silver, retroactive for 35 days, which was approximately the period during which the silver purchase bill was before Congress, was held valid.4 An income tax law, made retroactive to the beginning of the calendar year in which it was adopted, was found constitutional as applied to the gain from the sale, shortly before its enactment, of property received as a gift during the year.5 Retroactive assessment of penalties for fraud or negligence,6 or of an additional tax on the income of a corporation used to avoid a surtax on its shareholder,7 does not deprive the taxpayer of property without due process of law.
An additional excise tax imposed upon property still held for sale, after one excise tax had been paid by a previous owner, does not violate the Due Process Clause.8 Similarly upheld were a transfer tax measured in part by the value of property held jointly by a husband and wife, including that which comes to the joint tenancy as a gift from the decedent spouse9 and the inclusion in the gross income of the settlor of income accruing to a revocable trust during any period when the settlor had power to revoke or modify it.10
Although the Court during the 1920s struck down gift taxes imposed retroactively upon gifts that were made and completely vested before the enactment of the taxing statute,11 those decisions have recently been distinguished, and their precedential value limited.12 In United States v. Carlton, the Court declared that “[t]he due process standard to be applied to tax statutes with retroactive effect . . . is the same as that generally applicable to retroactive economic legislation” —retroactive application of legislation must be shown to be “‘justified by a rational legislative purpose.’” 13 Applying that principle, the Court upheld retroactive application of a 1987 amendment limiting application of a federal estate tax deduction originally enacted in 1986. Congress’s purpose was “neither illegitimate nor arbitrary,” the Court noted, since Congress had acted “to correct what it reasonably viewed as a mistake in the original 1986 provision that would have created a significant and unanticipated revenue loss.” Also, “Congress acted promptly and established only a modest period of retroactivity.” The fact that the taxpayer had transferred stock in reliance on the original enactment was not dispositive, since “[t]ax legislation is not a promise, and a taxpayer has no vested right in the Internal Revenue Code.” 14
- United States v. Darusmont, 449 U.S. 292, 296–97 (1981).
- Stockdale v. Insurance Companies, 87 U.S. (20 Wall.) 323, 331, 332 (1874); Brushaber v. Union Pac. R.R., 240 U.S. 1, 20 (1916); Cooper v. United States, 280 U.S. 409, 411 (1930); Milliken v. United States, 283 U.S. 15, 21 (1931); Reinecke v. Smith, 289 U.S. 172, 175 (1933); United States v. Hudson, 299 U.S. 498, 500–01 (1937); Welch v. Henry, 305 U.S. 134, 146, 148–50 (1938); Fernandez v. Wiener, 326 U.S. 340, 355 (1945); United States v. Darusmont, 449 U.S. 292, 297 (1981).
- Welch v. Henry, 305 U.S. 134, 146–47 (1938).
- United States v. Hudson, 299 U.S. 498 (1937). See also Stockdale v. Insurance Companies, 87 U.S. (20 Wall.) 323, 331, 341 (1874); Brushaber v. Union Pac. R.R., 240 U.S. 1, 20 (1916); Lynch v. Hornby, 247 U.S. 339, 343 (1918).
- Cooper v. United States, 280 U.S. 409 (1930); see also Reinecke v. Smith, 289 U.S. 172 (1933).
- Helvering v. Mitchell, 303 U.S. 391 (1938).
- Helvering v. National Grocery Co., 304 U.S. 282 (1938).
- Patton v. Brady, 184 U.S. 608 (1902).
- Tyler v. United States, 281 U.S. 497 (1930); United States v. Jacobs, 306 U.S. 363 (1939).
- Reinecke v. Smith, 289 U.S. 172 (1933).
- Untermyer v. Anderson, 276 U.S. 440 (1928); Blodgett v. Holden, 275 U.S. 142 (1927),modified, 276 U.S. 594 (1928); Nichols v. Coolidge, 274 U.S. 531 (1927). See also Heiner v. Donnan, 285 U.S. 312 (1932) (invalidating as arbitrary and capricious a conclusive presumption that gifts made within two years of death were made in contemplation of death).
- Untermyer was distinguished in United States v. Hemme, 476 U.S. 558, 568 (1986), upholding retroactive application of unified estate and gift taxation to a taxpayer as to whom the overall impact was minimal and not oppressive. All three cases were distinguished in United States v. Carlton, 512 U.S. 26, 30 (1994), as having been “decided during an era characterized by exacting review of economic legislation under an approach that ‘has long since been discarded.’” The Court noted further that Untermyer and Blodgett had been limited to situations involving creation of a wholly new tax, and that Nichols had involved a retroactivity period of 12 years. Id.
- 512 U.S. 26, 30, 31 (1994) (quoting Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 16–17 (1976)). These principles apply to estate and gift taxes as well as to income taxes, the Court added. 512 U.S. at 34.
- 512 U.S. at 33.