GLENDA J. BAILLIE, as Executor for the Estate of John F. Baillie, Deceased, Plaintiff-Appellant,
KWAME RAOUL, in His Official Capacity as Attorney General of the State of Illinois, and MICHAEL W. FRERICHS, in His Official Capacity as Treasurer of the State of Illinois, Defendants-Appellees.
from the Circuit Court of Ford County No. 15P26 Honorable
Matthew John Fitton, Judge Presiding.
Attorneys for Appellant: Jeremy J. Stoller, of Stoller Law
Office, of El Paso, and John R. Simpson, of Sorling Northrup,
of Springfield, for appellant.
Attorneys for Appellee: Kwame Raoul, Attorney General, of
Chicago (Jane Elinor Notz, Solicitor General, and Carl J.
Elitz, Assistant Attorney General, of counsel), for
JUSTICE CAVANAGH delivered the judgment of the court, with
opinion. Presiding Justice Holder White and Justice Harris
concurred in the judgment and opinion.
1 This is an action pursuant to the State Officers and
Employees Money Disposition Act (30 ILCS 230/1 to 6a (West
2014)), which allows taxpayers to voluntarily pay taxes under
protest and then sue the government for a refund. The tax in
question here is the Illinois estate tax. The estate is that
of the late John F. Baillie. Plaintiff, Glenda J. Baillie, is
his surviving spouse and personal representative. (We will
refer to the Baillies by their first names, as Glenda does in
her brief.) Defendants are Kwame Raoul, the Attorney General
of Illinois, and Michael E. Frerichs, the Treasurer of
Illinois. (We will refer to them collectively as "the
2 The parties disagree on how John's one-half shares in
three joint tenancy parcels should be valued. The answer,
according to the State, is in subsection (b)(1) of section
2040 of the Internal Revenue Code (26 U.S.C. §
2040(b)(1) (2012)): Each of the joint tenancy parcels, the
State argues, was a qualified joint interest within the
meaning of that subsection, and subsection (b)(1)
(id. § 2040(b)(1)) says simply to divide the
fair market value of a qualified joint interest by two.
3 Glenda points out, however, that because she made a
qualified disclaimer of her survivorship interests in the
three joint tenancy parcels (see 755 ILCS 5/2-7 (West 2014);
26 U.S.C. § 2518 (2012)), the probate court did not
treat the three parcels as joint tenancy property. Instead,
John's one-half shares in those parcels (that is to say,
Glenda's disclaimed survivorship interests) passed into
John's probate estate and, in turn, to their daughters.
Consequently, Glenda argues, instead of being valued under
section 2040(b)(1) (26 U.S.C. § 2040(b)(1) (2012)),
i.e., 50% of the fair market value of the joint
tenancy parcel, the disclaimed one-half shares should be
given their fair market value under section 2033 of the
Internal Revenue Code (id. § 2033), which
allows a fractional interest discount, a reduction in value
to account for the necessity of accommodating cotenants.
4 The circuit court of Ford County upheld the State's
disallowance of fractional interest discounts for the
disclaimed shares in the joint tenancy parcels because the
court was unconvinced that Glenda's qualified disclaimers
had taken those parcels out of section 2040(b)(2)(B)
(id. § 2040(b)(2)(B)). The joint tenancy
parcels, the court concluded, still met that section's
definition of a qualified joint interest, and fair market
value divided by two was how a decedent's share of a
qualified joint interest had to be valued (id.
§ 2040(b)(1)). So, the court denied Glenda's motion
for summary judgment and granted the State's motion for
summary judgment. Glenda appeals.
5 In our de novo review (see Lake County Grading
Co. v. Village of Antioch, 2014 IL 115805, ¶ 18),
we likewise conclude that, despite Glenda's qualified
disclaimer of her survivorship interests in the three joint
tenancy parcels, the conditions for using the valuation
methodology in section 2040(b)(1) (26 U.S.C. §
2040(b)(1) (2012)) remain fulfilled: Until John's death,
he and Glenda alone, as a married couple, held the three
parcels in joint tenancy with right of survivorship (see
id. § 2040(b)(2)(B)). Glenda's disclaimer
of the survivorship interests did not change that. Therefore,
we affirm the judgment.
6 I. BACKGROUND
7 John died on April 29, 2015. In his will, he gave his
estate to Glenda and, in the event she predeceased him, to
their daughters, Johneen L. Davis and Suzanne M. Bargmann.
8 Until John's death, he and Glenda owned farmland in
Ford County: five parcels as tenants in common and three
parcels as joint tenants with right of survivorship. (The
joint tenancy parcels have tax identification Nos.
04-04-06-200-004, 04-04-08-100-001, 04-04-08-100-002, 04-
04-08-100-003, and 03-03-21-300-001.)
9 On October 28, 2015, Glenda made a qualified disclaimer of
all of John's interest in real estate, including her
survivorship interests (John's one-half shares) in the
three j oint tenancy parcels. Consequently, John's
one-half shares in the joint tenancy parcels entered his
probate estate and were distributed to Davis and Bargmann, as
if Glenda had predeceased John.
10 As John's personal representative, Glenda obtained
appraisals of the farmland so she could prepare estate tax
returns. The appraisals applied a 20% fractional interest
discount to John's one-half shares in the tenancies in
common and the same discount to his one-half shares in the
joint tenancies. Glenda filled out the federal and Illinois
estate tax returns accordingly and filed them.
11 The Attorney General agreed to the 20% fractional interest
discount for John's one- half shares in the tenancies in
common, but on the authority of sections 2040(b)(1) and
(b)(2)(B) (id. § 2040(b)(1), (b)(2)(B)), he
rejected any fractional interest discount for John's
one-half shares in the joint tenancies. As a result, in his
adjustment to the tentative taxable estate, the Attorney
General imposed an additional Illinois estate tax, with
12 In compliance with the Attorney General's demand,
Glenda, as the personal representative, paid an additional
$120, 108 into the state treasury, but she made the payment
under protest and brought this action. On her motion, the
circuit court ordered the retention of the payment in the
protest fund, pending resolution of this case.
13 The parties filed cross-motions for summary judgment. In
arguments on those motions, Glenda's attorney represented
to the circuit court that the Internal Revenue Service had
approved the federal estate tax return without question or
comment. But "[t]hat's not binding on the Attorney
General," he conceded.
14 The circuit court granted the State's motion for
summary judgment and denied Glenda's motion for summary
15 This appeal followed.
16 II. ANALYSIS
17 Section 3(a) of the Illinois Estate and
Generation-Skipping Transfer Tax Act (Act) (35 ILCS 405/3(a)
(West 2014)) imposes an estate tax "on every taxable
transfer involving transferred property having a tax situs
within the State of Illinois." A" '[t]axable
transfer' means an event that gives rise to a state tax
credit" within the meaning of section 2011 of the
Internal Revenue Code as that section ...