485 U. S. 351
March 23, 1988
A 1930s housing act allowed ‘Project Notes’ to be exempt from “all taxation.” For half a century, this tax-free perk was understood to not include estate taxes, but then a District Court ruled otherwise, setting off a rush by taxpayers to get estate taxes paid on Project Notes refunded. It was now up to the Supreme Court to decide whether or not the housing act really included estate taxes in its exemption of “all taxation.”
Unanimously, the Court ruled that Project Notes were not exempt from estate taxes (Kennedy did not participate). Brennan said that “all taxation” does not really mean ‘all’ in many statutes. Estate tax is a type of excise tax, and a long line of cases had held that excise tax exemptions needed to be specifically spelled out, and were not deemed included in statutory exemptions from ‘all’ taxation. An unrelated part of the housing act appeared to imply that estate taxes were part of “all taxation,” but Brennan further showed that a close textual parsing proved the opposite. Finally, Brennan gave little weight to the fact that one Senator had said during debate that estate taxes would be exempted. Half a century of unbroken understanding weighed far more heavily.
And we have yet another unanimous tax case! Brennan’s analysis is probably sound, but it sure leaves a sour taste in one’s mouth. “All taxation” really ought to mean all taxation.