Galloway v. Franchise Tax Board

Opinion

DRAPER, P. J.

Each plaintiff is a former employee of the state, now receiving a pension or retirement allowance under the Public Employees Retirement Law. Each claims such income (insofar as it exceeds contributions paid by her from income previously taxed to her) to be exempt from income taxation, and seeks refund of the portion of her income tax attributable to such income only. Each side moved for summary judgment. The cases were submitted upon a stipulation of facts. The motions of plaintiffs were denied and those of defendant Franchise Tax Board were granted. Judgments of dismissal followed, and plaintiffs appeal.

Appellants rely upon the code provision (Gov. Code, § 21200.5) that the right of a person to a pension or retirement allowance under the state retirement law is “exempt from taxation, including any inheritance tax.” Although the issue is wholly one of statutory construction, we do not look solely to the face of this section but, under established principles, consider also the legislative-judicial history of its language. A statute adopted in 1937. (Stats. 1937, ch. 677, p. 1900, now Gov. Code, § 31452) and derived from a 1919 act (Stats. 1919, ch. 373, p. 782) provided that a pension or retirement allowance under the county employee’s retirement act is “exempt from taxation, whether State, county, municipal or district.” The wife of a longtime county employee contended that death benefits due to her from his retirement fund were exempt from state inheritance tax. The Supreme Court reviewed in detail the history of retirement legislation and of tax exemptions in California

(Estate of Simpson

(1954) 43 Cal.2d 594 [275 P.2d 467, 47 A.L.R.2d 991]). It concluded that the exemption applied only to ad valorem property levies, and not to other taxes.

Simpson

specifically pointed out language which would effectively express a legislative intent to exempt retirement proceeds from all taxes. It quoted (p. 599) a New York statute which had been held to effect exemption from all taxes, including those on inheritance, by use, of the phrase, “ ‘exempt from

[930]

any . . . tax.’ ” Holding that it could not construe the words “ ‘exempt from taxation’ ” to apply “beyond the limits of property taxation,” our Supreme Court pointed out, obviously as an alternative, that “if further extension is deemed appropriate so as to include ... the state inheritance tax, the act should be so clarified by the Legislature in unmistakably clear language.”