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.
[Copyrighted Material Omitted]
from the Circuit Court of Ford County, No. 15P26, Honorable
Matthew John Fitton, Judge Presiding.
J. Stoller, of Stoller Law Office, of El Paso, and John R.
Simpson, of Sorling Northrup, of Springfield, for appellant.
Raoul, Attorney General, of Chicago (Jane Elinor Notz,
Solicitor General, and Carl J. Elitz, Assistant Attorney
General, of counsel), for appellees.
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
2] The parties disagree on how Johns 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, Johns
one-half shares in those parcels (that is to say, Glendas
disclaimed survivorship interests) passed into Johns 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
States disallowance of fractional interest discounts for the
disclaimed shares in the joint tenancy parcels because the
court was unconvinced that Glendas 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 sections definition of a qualified
joint interest, and fair market value divided by two was how
a decedents share of a qualified joint interest had to be
valued (id. § 2040(b)(1)). So, the court denied Glendas
motion for summary judgment and granted the States 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, 385 Ill.Dec. 683, 19 N.E.3d 615), we likewise
despite Glendas 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 Johns
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)). Glendas 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 Johns 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 Johns interest in real estate,
including her survivorship interests (Johns one-half shares)
in the three joint tenancy parcels. Consequently, Johns
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 Johns personal representative, Glenda
obtained appraisals of the farmland so she could prepare
estate tax returns. The appraisals applied a 20% fractional
interest discount to Johns 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 Johns 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
Johns 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,
12] In compliance with the Attorney Generals
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, Glendas attorney
represented to the circuit court that the Internal Revenue
Service had approved the federal estate tax return without
question or comment. But "[t]hats not binding on the
Attorney General," he conceded.
14] The circuit court granted the States motion for
summary judgment and denied Glendas 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
read on December 31, 2001 (26 U.S.C. § 2011 (2000)). 35 ILCS
405/2(b), (b-1) (West 2014).
18] Under section 2011(a) (26 U.S.C. § 2011(a)
(2000)), the United States government, when calculating the
federal estate tax, allows a state tax credit in "the
amount of any estate, inheritance, legacy, or succession
taxes actually paid to any State or the District of
Columbia." The amount of the Illinois estate tax is,
with adjustments, the amount of the state tax credit. 35 ILCS
405/2(b), 3(c) (West 2014). The amount of the state tax
credit depends in turn on the amount of the adjusted taxable
estate; the state tax credit increases as the value of the
adjusted taxable estate increases. 26 U.S.C. § 2011(b)
(2000). The adjusted taxable estate is "the taxable
estate reduced by $60,000" (id. § 2011(b)), and the
taxable estate is the gross estate ...