UNITED STATES OF AMERICA, APPELLANT V. CROCKER NATIONAL BANK, ET AL. UNITED STATES OF AMERICA, APPELLANT V. HARRY ROSENBERG AND ARTHUR ROSEN, ETC. No. 86-1521 In the Supreme Court of the United States October Term, 1986 On Appeal from the United States District Court for the Central District of California Jurisdictional Statement PARTIES TO THE PROCEEDING Crocker National Bank, Lew R. Wasserman and Ruth S. Cogan were all plaintiffs in District Court No. CV 85-7614 as Executors of the Will of Jules C. Stein. Harry Rosenberg and Arthur Rosen were plaintiffs in District Court No. CV 85-3465 as co-trustees of the Morris and Tillie Folb Trust, FBO Tillie Folb. TABLE OF CONTENTS Questions Presented Opinion below Parties To The Proceeding Jurisdiction Constitutional and statutory provisions involved Statement The question is substantial Conclusion Appendix A Appendix B Appendix C Appendix D OPINION BELOW The opinion of the district court (App., infra, 1a-18a) is unofficially reported at 86-2 U.S. Tax Cas. (CCH) Paragraph 13,703. JURISDICTION The judgments of the district court (App., infra, 19a-20a) were entered on October 20, 1986. The notices of appeal to this Court were filed on November 19, 1986 (App., infra, 21a-24a). On January 12, 1987, Justice O'Connor extended the time for docketing the appeals to and including March 19, 1987. The jurisdiction of this Court is invoked under 28 U.S.C. 1252. CONSTITUTIONAL AND STATUTORY PROVISIONS INVOLVED The relevant constitutional and statutory provisions are set out in a statutory appendix (App., infra, 25a-27a). QUESTIONS PRESENTED 1. Whether obligations of public housing agencies owned by the decedents were excludable from their gross estates for purposes of the federal estate tax by virtue of the United States Housing Act of 1937, as amended. 2. If the first question is answered in the affirmative, whether Section 641(b)(2) of the Deficit Reduction Act of 1984 violates the Fifth Amendment in making such obligations includible in the gross estates of decedents who died before that provision's effective date, but whose representatives reported those obligations on their estate tax returns as part of the gross estate. STATEMENT 1. These appeals are taken from judgments in two cases that were consolidated in the district court. They present identical legal issues relating to the estate tax treatment of certain short-term obligations of public housing agencies ("Project Notes"). These Project Notes are exempted from some -- but, we believe, not all -- federal taxation by the Housing Act of 1937, as amended. Appellees in the Crocker case are the executors under the will of Jules C. Stein, who died on April 29, 1981. At the time of his death, Stein owned $9,500,000 face amount in Project Notes, which matured on various dates in 1981 subsequent to his death. On January 29, 1982, appellees filed a federal estate tax return for Stein's estate. On that return, appellees included these Project Notes, plus accrued interest, in the gross estate. The return showed as due, and appellees paid, estate tax in the amount of $10,874,767, a sum that reflected appellees' belief that the Project Notes were subject to tax. Two and a half years later, on June 29, 1984, appellees filed a claim for refund of $1,320,097 in estate tax, plus interest. This refund claim was premised on the assertion that the Project Notes were exempt from estate tax and should not have been included in the gross estate. The Commissioner denied the refund claim. App., infra, 3a. Appellees in the Rosenberg case were co-executors of the estate of Morris Folb, who died on July 1, 1982, and are co-trustees of a trust to which Folb's net estate was distributed. At the time of his death, Folb owned $250,000 face amount in Project Notes, which matured on various dates in 1982 subsequent to his death. On March 30, 1983, appellees filed a federal estate tax return for Folb's estate. On that return, appellees included these Project Notes, plus accrued interest, in the gross estate. The return showed as due, and appellees paid, estate taxes in the amount of $221,519, a sum that reflected appellees' belief that the Project Notes were subject to tax. More than a year later, on August 15, 1984, appellees filed a claim for refund of $84,596 in estate tax, plus interest. This refund claim was premised on the assertion that the Project Notes were exempt from estate tax and should not have been included in the gross estate. The Commissioner denied the refund claim. App., infra, 2a-3a. 2. The refund claims in these cases were triggered by the district court decision in Haffner v. United States, 585 F. Supp. 354 (N.D. Ill. 1984), aff'd, 757 F.2d 920 (7th Cir. 1985), which held that comparable Project Notes were not includible in a decedent's gross estate for estate tax purposes. The district court in Haffner bottomed its decision on what is now Section 11(b) of the Housing Act of 1937, 42 U.S.C. 1437i(b), enacted in its original form as Section 5(e) of the Housing Act of 1937, ch. 896, 50 Stat. 890. Section 5(e) provided that Project Notes "shall be exempt from all taxation now or hereafter imposed by the United States." The Haffner court acknowledged the "general rule * * * that an exemption from all taxation generally does not affect the imposition of estate and other excise taxes" (585 F. Supp. at 356-357). It viewed Section 5(e) as different, however, because of what it found to be a "strong indication" (id. at 357) that Congress in 1937 intended to exempt Project Notes from federal estate taxation. The Haffner court relied primarily on the difference in language between Section 5(e) of the 1937 Act and Section 20(b) of that law. The latter section (50 Stat. 898) provided that obligations of the United States Housing Authority "shall be exempt * * * from all taxation (except surtaxes, estate, inheritance, and gift taxes) now or hereafter imposed by the United States or by any State * * * or local taxing authority." The court reasoned that the absence in Section 5(e) of an explicit proviso like that contained in Section 20(b) indicated a congressional intent to exempt Project Notes from estate tax. 585 F. Supp. at 357-360. The court also relied in part on an explanation of the 1937 legislation on the floor of the Senate by Senator Walsh, who stated that the obligations of public housing agencies would be tax-exempt, "which means they are free from income tax surtax, estate, gift, and inheritance taxes" (81 Cong. Rec. 8085 (1937), quoted in 585 F. Supp. at 359). And the court noted that an alternate version of Section 5(e) submitted to the Senate Committee had expressly subjected Project Notes to the estate tax (585 F. Supp. at 358). Hence, the Haffner court concluded that Project Notes had been exempt from estate and gift taxation continuously since 1937, inasmuch as Congress had never acted to change that supposed tax-exempt status. Congressional reaction to the unprecedented holding of the district court in Haffner was swift. Noting that it was "extremely concerned" by the decision (Staff of the Joint Comm. on Taxation, 98th Cong., 2d Sess., General Explanation of the Revenue Provisions of the Deficit Reduction Act of 1984, at 971 (Joint Comm. Print 1984)), Congress enacted legislation within three months to overturn the Haffner decision. Section 641(a) of the Deficit Reduction Act of 1984 (DEFRA), Pub. L. No. 98-369, 98 Stat. 939, entitled "Clarification of Treatment," provides: General Rule. -- Nothing in any provision of law exempting any property (or interest therein) from taxation shall exempt the transfer of such property (or interest therein) from Federal estate, gift, or generation-skipping transfer taxes. Section 641(b)(1) makes this provision applicable to the estates of decedents dying, and to gifts and transfers made, on or after June 19, 1984, which appears to be the date on which the legislation was approved by the Conference Committee (98 Stat. 939). /1/ Section 641(b)(2) also makes the provision applicable to estates of decedents dying, and to gifts and transfers made, prior to June 19, 1984, "if at any time there was filed an estate or gift tax return showing such transfers as subject to Federal estate or gift tax." Section 641(b)(3) provides that no inference should be drawn from the statute as to the taxability of transfers made prior to June 19, 1984. And Section 642 required taxpayers to report all transfers of Project Notes occurring after December 31, 1983, and before June 19, 1984 (98 Stat. 939-940). Thus, the effect of the 1984 amendments was to overturn the result of Haffner (1) prospectively and (2) for any case in which a taxpayer or his estate had filed a tax return reflecting a belief that the Project Notes were in fact subject to transfer tax. The DEFRA provisions do not address the gift and estate tax treatment of Project Notes transferred, or held by persons dying, before June 19, 1984, in circumstances where no tax return was filed showing the Project Notes as being subject to tax. 3. Against this statutory background, appellees brought these refund suits in the United States District Court for the Central District of California. Relying on Haffner, /2/ appellees urged that the Project Notes should not have been included in their decedents' gross estates. With respect to DEFRA, appellees argued that it should not be construed to apply retroactively to the estates in this case and, if it did so apply, that the application of the statute was unconstitutional because it was violative of the Fifth Amendment. The government argued that Haffner was wrongly decided and that Project Notes were subject to estate taxation. In the alternative, if Haffner were held to have been correctly decided, the government argued that DEFRA required that the Project Notes be held to have been properly included in the decedents' gross estates. The district court granted appellees' motions for summary judgment. Adopting the reasoning and analysis of the district court opinion in Haffner, the district court here held that the Project Notes were exempt from federal estate taxation under the Housing Act of 1937 (App., infra, 18a). The court further held that Section 641(a) of DEFRA was intended to make the estate tax applicable to Project Notes owned by the estates involved here (App., infra, 5a-8a). Finally, the district court concluded that such a retroactive application of the 1984 statute was unconstitutional. The court identified two constitutional infirmities in the DEFRA amendment. First, the court concluded that the retroactive application of Section 641(a) violates the Due Process Clause of the Fifth Amendment (App., infra, 9a-14a). The court recognized that "(t)here is nothing unusual about retroactive tax laws" (id. at 9a). It found, however, that "the retroactive removal of the exemption from estate tax equals the imposition of a wholly new tax." It therefore concluded that this Court's decision in Untermyer v. Anderson, 276 U.S. 440 (1928), which invalidated the retroactive application of the first gift tax, "compels the court to find that retroactive application of Section 641 is arbitrary and invalid under the due process clause of the Fifth Amendment" (App., infra, 13a). Second, the court ruled that the application of DEFRA in this case violates the equal protection component of the Fifth Amendment (App., infra 14a-17a). The court noted that the statute draws a distinction between two otherwise identical estates that differ only in whether they had listed Project Notes as assets includible in their taxable estates. The court said that there was "absolutely no rational basis" for this distinction (id. at 16a). The court did not deny that the evident purpose of the distinction drawn in the statute was to prevent persons from "join(ing) the bandwagon in the wake of Haffner in anticipation of a windfall." But the court found such a legislative purpose to be inadequate to justify the statutory distinction because "(t)o deny persons those windfalls based on speculation about the legal position that they have taken is impermissable" (ibid.). THE QUESTION IS SUBSTANTIAL The district court has squarely invalidated a federal tax statute on grounds of repugnancy to the Constitution. Although the statute is, in a sense, transitional legislation that diminishes in importance with the passage of time, the rationale of the district court's decision is a sweeping one that has broad ramifications. The court has held that any legislation that eliminates a claimed tax preference -- including one not previously relied upon by the taxpayer, or of which he was not even aware -- is unconstitutional to the extent that it does not operate in a purely prospective fashion. This holding would disable Congress from enacting curative legislation to prevent taxpayers from obtaining windfall benefits from erroneous court decisions. And the equal protection aspect of the court's opinion eviscerates Congress's authority to draw rational distinctions designed to reflect the degree to which the legislation may interfere with the different expectations of different classes of taxpayers. The decision below thus threatens to affect adversely the structure of the revenue laws by circumscribing what has heretofore been recognized as the unquestioned prerogative of Congress in enacting tax legislation. Moreover, apart from the broader ramifications of the district court's rationale, the invalidation of the statute at issue here independently presents an important issue that requires resolution by this Court. The tax consequences of the holding are quite substantial in dollar terms. /3/ And there has already been considerable litigation concerning the statute at issue here, litigation that to date has yielded highly divergent outcomes. /4/ 1. Before the provisions of DEFRA, and the attendant questions about their constitutionality, come into play, there exists the threshold question of whether the Housing Act of 1937 actually exempted Project Notes from federal estate taxation. If the district court was mistaken in giving an affirmative answer to that threshold question, then appellees' refund claims here must fail irrespective of DEFRA. An appeal under 28 U.S.C. 1252 of course brings the entire case before the Court. United States v. Locke, 471 U.S. 84, 92 (1985). Therefore, we begin by discussing this threshold statutory question in accordance with this Court's usual practice of first confronting statutory issues whose resolution may obviate the need to consider constitutional claims. See, e.g., United States v. Locke, 471 U.S. at 92; Ashwander v. TVA, 297 U.S. 288, 347 (1936) (Brandeis, J., concurring). The conclusion that the Housing Act of 1937 exempted Project Notes from estate taxation is not supported by the terms of that statute and creates a significant dislocation in the overall scheme of federal taxation. It is established beyond doubt that general language exempting particular property from taxation, like that contained in Section 5(e) of the Housing Act of 1937, does not operate to prohibit the imposition of an excise tax on the transfer of that property, such as an estate tax or a gift tax. See, e.g., United States Trust Co. v. Helvering, 307 U.S. 57 (1939); Murdock v. Ward, 178 U.S. 139 (1900). The Haffner decision recognized this general rule, but deviated from it because of some peculiarities that the court discerned in the language of other sections of the 1937 Act and in the Act's legislative history. The court's interpretation is flawed for several reasons. First, the federal estate tax has never incorporated any express exemption for any type of securities owned by a citizen or resident alien, /5/ and it is well settled that "(e)xemptions from taxation do not rest upon implication" (United States Trust Co. v. Helvering, 307 U.S. at 60 (footnote omitted)). Moreover, the legislative history evidence relied on by the Haffner courts is extremely flimsy. As Judge Posner convincingly demonstrated in his dissent (757 F.2d at 921-923), an in-depth examination of the context of these "ambiguous tidbits" (id. at 922) shows that they provide little, if any, support for the view that Congress in 1937 sought to exempt Project Notes from federal estate taxation. For example, the difference in language between Sections 5(e) and 20(b) of the Housing Act of 1937 provides no support for the Haffner courts' result. That difference is traceable to the need for Section 20(b) to make a specific reference to the income tax "surtax" in existence at that time in order to make that surtax applicable to United States Housing Authority obligations. On the other hand, because Congress did not wish to subject Project Notes to the income tax "surtax," it was unnecessary to make any reference to it in Section 5(e) (see 757 F.2d at 922). And Senator Walsh's statement on the floor of the Senate appears to reflect not the establishment of a unique estate tax exemption for Project Notes, but rather the Senator's own misunderstanding of the ordinary connotation of the term "tax-exempt" (ibid.). Finally, the exemption found by the Haffner courts is difficult to justify from the standpoint of tax policy or common sense. Such an exemption would enable taxpayers to avoid the estate tax at will simply by converting their wealth into Project Notes (of which there have been billions outstanding) shortly before their death. The exemption would thus frustrate the purpose of the estate tax to inhibit the concentration of wealth (see, e.g., S. Surrey, W. Warren, P. McDaniel & H. Gutman, Federal Wealth Transfer Taxation 3-6 (2d ed. 1982)). Furthermore, common sense suggests some implausibility in the Haffner courts' discovery, in the early 1980s, of an estate tax exemption that had gone unclaimed by taxpayers, unacknowledged by the IRS, and unrecognized by the courts for some 45 years. Generally speaking, tax exemptions of billion-dollar magnitude do not lay dormant for such extended periods of time, invisible to the ever-watchful eyes of the private tax bar. Thus, quite apart from DEFRA, the district court erred in holding that the Housing Act of 1937 entitled appellees to omit the Project Notes from their decedents' gross estates. /6/ 2. a. The district court clearly erred in concluding that Section 641(a) of DEFRA violates the Due Process Clause. It is well established that the mere fact that legislation has some retroactive application does not establish a constitutional violation. As this Court stated in Pension Benefit Guaranty Corp. v. R.A. Gray & Co., 467 U.S. 717, 729 (1984): (T)he strong deference accorded legislation in the field of national economic policy is no less applicable when that legislation is applied retroactively. Provided that the retroactive application of a statute is supported by a legitimate legislative purpose furthered by rational means, judgments about the wisdom of such legislation remain within the exclusive province of the legislative and executive branches. These principles apply with full force to the tax laws; indeed, tax legislation regularly contains some elements of retroactivity. See, e.g., United States v. Darusmont, 449 U.S. 292, 296-299 (1981); Welch v. Henry, 305 U.S. 134, 146-150 (1938); Milliken v. United States, 283 U.S. 15, 24 (1931). The retroactive application of a tax is unconstitutional only if it is found to be "harsh and oppressive." United States v. Hemme, No. 84-1944 (June 3, 1986); Welch v. Henry, 305 U.S. at 147. The district court did not point, and it could not point, to anything suggesting that the retroactive application of Section 641 is "harsh and oppressive." To the contrary, the statute is designed simply to avoid giving taxpayers a windfall benefit as a result of a judicial decision that postulated (we believe erroneously) a previously unrecognized estate tax exemption. And even with respect to that narrow objective, the scope of the statute's retroactive application is confined to those taxpayers who had already reported the Project Notes as taxable on a tax return filed with the IRS. Hence, the statute does not affect any taxpayer who may have taken action prior to June 19, 1984, on the assumption that Project Notes were immune from estate and gift tax. The statute therefore upsets no settled expectations; it does no more than restore the status quo ante the district court's decision in Haffner. There is nothing "harsh and oppressive" about a statute that merely holds a taxpayer to his own treatment of items on a tax return that he himself prepared. The district court's reliance on Untermyer v. Anderson, 276 U.S. 440 (1928), is quite mistken. As the district court itself recognized (App., infra, 12a), Untermyer stands, at most, for the proposition that a "wholly new tax" cannot be imposed retroactively on transactions completed before the new tax is enacted. See, e.g., United States v. Hemme, slip op. 9 (distinguishing Untermyer); United States v. Darusmont, 449 U.S. at 299-300 (same); Milliken v. United States, 283 U.S. at 21 (same). /7/ The district court's assertion that Section 641 of DEFRA "amounts to" the imposition of a "wholly new tax" (App., infra, 12a) is completely unsupportable. The fact is that DEFRA made no more than a slight change in the long-existing estate tax (if it made any change at all (see pages 9-11, supra)). The decedents here at all times knew that the transfer of their estates would be subject to estate tax, and they knew that the value of property interests held at death generally would be includible in the gross estate. See 26 U.S.C. 2001, 2031 and 2033. A legislative alteration of this scheme to eliminate a supposed exemption for a particular type of property is not the establishment of a "wholly new tax." Rather, it is precisely the type of adjustment in the existing tax structure that this Court repeatedly has held may be effected retroactively without violating any due process rights. The district court's assertion that these cases "present far more egregious factual situations than Untermyer" (App., infra, 13a) is similarly untenable. This assertion appears to rest on the fact that the taxpayer in Untermyer, because legislation to enact a gift tax was pending in Congress at the time he made his gift, could have anticipated that a gift tax would be enacted. On the other hand, the decedents here "could not have foreseen the enactment * * * of DEFRA's provisions taxing the Project Notes" (App., infra, 14a). But even if one assumes arguendo that forseeability or "personal notice" may sometimes be material in assessing the constitutionality of a retroactive tax (see Darusmont, 449 U.S. at 299), it is completely irrelevant here. For while it is true that the instant decedents, prior to their death, could not have foreseen the enactment of DEFRA, it is also evident that they did not foresee the opinion in Haffner either -- their executors, after all, included the Project Notes in their taxable estates. In assessing whether the effect of Section 641 is "harsh and oppressive," therefore, it is immaterial that these decedents were not aware of Congress's plan to repeal the supposed exemption for Project Notes, since these decedents manifested no awareness that the supposed exemption existed to begin with. Moreover, even if the decedents had entertained a subjective expectation that their Project Notes would be immune from estate tax, that expectation would not have been reasonable since, as we explain above (pages 9-11, supra), there was little basis for that view before (or, for that matter, after) the district court's decision in Haffner. In sum, it was not "harsh and oppressive" for Congress to implement its intent that Project Notes be included in the gross estate just like other forms of property. b. The district court's holding that Section 641(a) of DEFRA violates Fifth Amendment equal protection principles is equally unsupportable. The distinction drawn by Congress between persons who had reported Project Notes on a federal tax return as being subject to estate or gift tax, and those who had not done so, was designed to eliminate any possible perception of unfairness in the statute's retroactive application. Congress thereby ensured that DEFRA would not operate retroactively against any taxpayer who might reasonably be thought to have acted in reliance on the assumption that Project Notes were exempt from transfer taxes, while preventing a rush to the courts by taxpayers who, having previously manifested a belief that Project Notes were subject to tax, sought to secure a windfall based on Haffner. If this legislative purpose is not "rational," Congress's ability to cure erroneous statutory interpretations retroactively will be severely circumscribed. Accordingly, this case presents substantial questions concerning the power of Congress to enact curative tax legislation, and the broad ramifications of the district court's decision require review by this Court. CONCLUSION Probable jurisdiction should be noted. Respectfully submitted. CHARLES FRIED Solicitor General ROGER M. OLSEN Assistant Attorney General ALBERT G. LAUBER, JR. Deputy Solicitor General ALAN I. HOROWITZ Assistant to the Solicitor General MICHAEL L. PAUP ERNEST J. BROWN Attorneys MARCH 1987 /1/ The Conference Committee Report was issued on June 23, 1984. The statute was passed by both Houses of Congress on June 27, 1984, and was signed into law on July 18, 1984. /2/ Subsequent to the enactment of DEFRA, Haffner was affirmed by a divided panel of the court of appeals, with the majority adopting the district court's opinion with minor corrections (757 F.2d 920 (7th Cir. 1985)). Judge Posner dissented (id. at 921-923). /3/ We have been informed by the Internal Revenue Service that there are currently pending, administratively or in court, approximately 160 estate and gift tax cases involving over $260 million in Project Notes. And because the statute of limitations governing assertions of deficiencies and refund claims for estate taxes of decedents dying prior to June 19, 1984, has not yet run, those numbers may well increase. /4/ The issues presented here have been raised and (thus far) decided in three other district court cases, each of which reached a result different from that reached by the district court below. In Shackelford v. United States, 649 F. Supp. 1347 (E.D. Va. 1986), appeal pending, No. 87-2512 (4th Cir.), where the taxpayer sought a refund of more than $22 million in estate taxes, the court held that Haffner was wrongly decided and that Project Notes have always been subject to estate taxation. Accordingly, the court had no occasion to consider the applicability or the constitutionality of DEFRA. In Netsky v. United States, 58 A.F.T.R. 2d (P-H) Paragraph 148,467 (E.D. Pa. 1986), appeal pending, No. 86-1616 (3d Cir.), the district court held that Haffner was correctly decided. Noting its view that retroactive application of Section 641(a) of DEFRA would be unconstitutional, the court held that the statute should not be construed to apply retroactively to estates that had filed claims for refund before the effective date. In Estate of Bradford v. United States, 645 F. Supp. 476 (N.D. Cal. 1986), appeal pending No. 86-2634 (9th Cir.), the court also followed Haffner, though it termed the question whether Project Notes were exempted from estate taxation by the Housing Act of 1937 "a close one." The court concluded, however, that Section 641(a) of DEFRA applied to require the inclusion of Project Notes in the gross estate and further concluded that the retroactive application of DEFRA was constitutional. Thus, the four district courts that to date have ruled on refund claims based on Haffner for estate taxes shown on returns filed before DEFRA have reached four mutually inconsistent results. /5/ Since the estate tax was first imposed in 1916, its provisions have rarely excluded any specified types of property owned by a citizen or resident alien decedent from the gross estate, and for more than 20 years have excluded none. The Revenue Act of 1918, ch. 18, Section 402(f), 40 Stat. 1098, which first included in the gross estate the proceeds of life insurance taken out by the decedent, excluded up to $40,000 receivable by beneficiaries other than the decedent's estate. That exclusion was removed by the Revenue Act of 1942, ch. 619, Section 404, 56 Stat. 944. The Revenue Act of 1934, ch. 277, Section 404, 48 Stat. 754, excluded from the gross estate "real property situated outside the United States." That exclusion was repealed by the Revenue Act of 1962, Pub. L. No. 87-834, Section 18, 76 Stat. 1052. No securities of any sort have ever been excluded from the gross estates of citizens or resident aliens. To the best of our knowledge, the two exclusions described above are the only ones ever recognized for items owned by a citizen or resident alien decedent, if, indeed, the proceeds of life insurance can properly be characterized as "owned" by the decedent. Cf. 26 U.S.C. 2042 (specifically including life insurance proceeds in the gross estate). /6/ Although it does not of course present a discrete basis for direct appeal, this threshold statutory question would independently warrant review by this Court because of its substantial revenue consequences. There are numerous estates whose decedent died prior to the effective date of DEFRA, but whose estate tax return was not due until after Haffner was decided, thus giving the executors the opportunity to omit Project Notes from the gross estate and thereby avoid being covered by DEFRA. A large portion of the $260 million in Project Notes involved in pending litigation are held by estates to which DEFRA does not apply, and that amount can be expected to increase substantially until the period for asserting deficiencies expires. Moreover, while there is not yet a conflict in the circuits on this issue, that situation is likely to change with appeals now pending in three circuits outside the Seventh Circuit and an increasing number of cases pending in the trial courts. See note 4, supra. /7/ Following this Court's lead, the courts of appeals, if not questioning the continuing validity of Untermyer, have uniformly viewed it as applying only to the retroactive application of a wholly new tax. See, e.g., Fein v. United States, 730 F.2d 1211, 1213-1214 (8th Cir.), cert. denied, 469 U.S. 858 (1984) ("the modern trend of decisions has uniformly been to limit" Untermyer to the "narrow situation" there involved); Estate of Ceppi v. Commissioner, 698 F.2d 17, 21 (1st Cir.), cert. denied, 462 U.S. 1120 (1983) (collecting cases and concluding that, in light of this Court's subsequent decision in Milliken, "Untermyer at best remains good law only for the proposition that a wholly new gift tax cannot be applied retroactively"); Westwick v. Commissioner, 636 F.2d 291, 292 (10th Cir. 1980) (limiting Untermyer to "wholly new types of taxes"); Buttke v. Commissioner, 625 F.2d 202, 203 (8th Cir. 1980), cert. denied, 450 U.S. 982 (1981) (reading Untermyer to bar "retroactive application of a wholly new tax"); Sidney v. Commissioner, 273 F.2d 928, 932 (2d Cir. 1960) (Friendly, J.) ("If Untermyer remains authority at all, it is so only for the particular situation of a wholly new type of tax."). See generally Hochman, The Supreme Court and the Constitutionality of Retroactive Legislation, 73 Harv. L. Rev. 692 (1960); Ballard, Retroactive Federal Taxation, 48 Harv. L. Rev. 592 (1935). APPENDIX