Payment of Interest Now Prohibited.

§ 225

410. Statute Need Not Provide for Interest When Directing a Refund.

In the Matter of People ex rel. Knickerbocker Trust Company, Relator v. Kelsey, 114 App. Div. 319, decided on the authority of Matter of O'Berry, 179 N. Y. 285, it was held that when the State became liable by statute to refund a tax paid, which was illegal or void, the right to interest follows without any express provision of law on the subject.

411. Amendment of 1907 Prohibiting Payment of Interest on Refunds.

Chapter 323 of the Laws of 1907, in effect May 9, 1907, amended section 225 of the Tax Law by providing:

"That the representatives of the estate, legatees, devisees, or distributees entitled to any refund under this section shall not be entitled to any interest upon such refund."

The liability to pay interest on refunds subsequent to the passage of this amendment was claimed after the decision of the Court of Appeals in the Thayer and Grosvenor cases.

In the Thayer Case (193 N. Y. 430), the taxing order was entered February 15, 1906, imposing a tax of $12,640.72, which was paid under protest, and in order to save penalty August 9, 1906. Appeal was taken by the executors and a new taxing order entered September 4, 1907, fixing tax at $5,210.37, which was further modified by order entered February 27, 1908, fixing tax at $4,049.85. Appeals were then taken by the Comptroller to the Appellate Division, and thereafter to the Court of Appeals, and the order of affirmance upon the remittitur from the Court of Appeals was entered in

§ 225

Right to Refund Not a Vested Right.

the surrogate's office November 28, 1908. On January 13, 1909, demand was made upon the Comptroller for the refund of $8,590.87, with interest from August 9, 1906, the date of payment. The Comptroller refused to allow interest on this refund, but offered to draw check for the amount of the refund without interest, claiming that the amendment of 1907 (supra) was a bar to the recovery of interest on this refund under the decision of the Court of Appeals in the Matter of Hoople, 179 N. Y. 308. Application was thereafter made to the Supreme Court for a peremptory writ of mandamus compelling the Comptroller to refund said $8,590.87, with interest from August 9, 1906, but the proceedings were subsequently withdrawn, and the amount of the refund, without interest, was accepted by the representatives of the estate.

412. Right to Refund Is Not a Vested Right.

The right to a refund of illegal tax is a privilege and not a vested right, and since the amendment to section 225 by chapter 382, Laws 1900, in effect April 11th of that year, application to modify or reverse the order fixing the tax must be made within two years from and after the entry of such order, on due notice to the State Comptroller, and the application for such refund must be made within one year from such reversal or modification of said order. Matter of Hoople, 179 N. Y. 308, revg. 93 App. Div. 486, 87 N. Y. S. 842.

413. Refund of Temporary Payment.

A temporary payment is deductible from the amount of tax finally found due, and if nothing be due then it must be refunded. Matter of Skinner, 106 App. Div. 217.

Order Should Not Direct Refund.

414. Order Need Not Direct Comptroller to Refund.

§ 225

The surrogate may properly refuse to insert in the order vacating the transfer tax imposed upon the estate a direction to the State Comptroller to refund the amount of the tax, as the statute itself directs the refunding of the tax in such a case. (Laws 1896, chap. 908, § 225, as amended by chapter 284, Laws 1897.) Matter of Cameron, 97 App. Div. 436, 89 N. Y. S. 977; affd., 181 N. Y., mem. 49, without opinion.

415. Taxing Debts, etc., Erroneously Allowed.

The last clause of section 225 authorizes the surrogate to enter an order assessing a tax upon the amount of debts wrongfully or erroneously allowed and deducted upon the appraisal. This provision points out the way to avoid inequitable results and conflicting determination in making deduction for debts and expenses of administration in advance and before the exact amount is definitely known. Matter of Dimon, 82 App. Div. 107-110, 81 N. Y. S. 428. As to this provision being res adjudicata as to the debts and expenses allowed in the proceedings before the appraiser where no appeal has been taken, see Matter of Rice, 56 App. Div. 253-258, 61 N. Y. S. 911, 68 N. Y. S. 1147, and cases cited.

CHAPTER XI.

BEQUESTS IN LIEU OF COMMISSIONS, § 226, TAX LAWLIABILITY OF CERTAIN CORPORATIONS TO TAX, § 227,

416. Taxes upon Devises and Bequests in Lieu of Commissions.

[§ 226, Tax Law.] If a testator bequeaths or devises property to one or more executors or trustees in lieu of their commissions or allowances, or makes them his legatees to an amount exceeding the commissions or allowances prescribed by law for an executor or trustee, the excess in value of the property so bequeathed or devised, above the amount of commissions or allowances prescribed by law in similar cases shall be taxable under this article.1

[Former section 226, relating to "deferred payments," was omitted from chapter 368, Laws of 1905.]

1. Sec. 3 of Chap. 483, Laws of 1885, as amended by Chap. 713, Laws of 1887, contained a provision that a bequest to an executor or trustee

417. Prior to 1892-Excess over "Reasonable Compensation for Services" Was Taxable.

In the Matter of Havens, N. Y. Law Journal, October 23, 1908, Surrogate Beckett held that the amount received by the executor as commissions under the will, in excess of the amount allowed by law for such commissions, is taxable (section 226 of the Tax Law; Matter of Huber, 86 App. Div. 458), but the penalty will be remitted. Upon application being made to modify this order the surrogate held that

"After a careful examination of all the papers submitted on this application, and particularly the affidavits reciting in detail the services rendered by Clifford A. Hand as executor and trustee, and taking into consideration the peculiar ability which he possessed and which he exercised for the benefit of the estate, I will find that a reasonable compensation for his services as executor and trustee would be the sum of $35,435.02. As the decedent died prior to the enactment of section 227, chapter 908, Laws of 1896 (which imposes a tax upon all commissions received by an executor in excess of the amount allowed by statute), this application is governed by section 3, chapter 713, of the Laws of 1887, which limits the taxability of commissions in the excess over and above a reasonable compensation for the services rendered; and as I find that the amount received by Mr. Hand under the provisions of decedent's will was a reasonable compensation for his services, I will grant the application to exempt from taxation the amount of commissions to which Mr. Hand was entitled as executor and trustee of the estate of Charles G. Havens, deceased."

in lieu of their commissions or allowances which exceeds "what would be a reasonable compensation for their services" such excess shall be liable to tax.

Section 8 of the Act of 1892-in effect May 1 of that year-contained a similar provision, omitting, however, the clause above quoted, the effect of which was to tax any legacy to an executor or trustee in excess of his statutory commissions or allowances.

Section 8 of the Act of 1892 became section 227 of the Act of 1896, and section 226 of the Act of 1905-in effect June 1 of that year without any substantial change.