PAULA J. TYLER and MARK J. ALCORN, Appellants,
IOWA DEPARTMENT OF REVENUE, Appellee.
from the Iowa District Court for Polk County, Robert J.
appeal from a district court order upholding the
constitutionality of a definition used in an inheritance tax
D. Priebe and David J. Dutton of Dutton, Braun, Staack &
Hellman, P.L.C., Waterloo, for appellant.
J. Miller, Attorney General, Donald D. Stanley Jr., Special
Assistant Attorney General, and Hristo Chaprazov, Assistant
Attorney General, for appellee.
administrative review proceeding requires us to decide
whether Iowa may constitutionally deny an inheritance tax
exemption for bequests to stepchildren when the marriage
between parent and stepparent was dissolved before the
stepparent's death, while granting an exemption when the
marriage was not dissolved. We conclude that this
differential treatment based on divorce of the parent and
stepparent does not violate article I, section 6 of the Iowa
Constitution. The different tax treatment of these two
categories is rationally related to the legislature's
legitimate state interest in promoting and preserving family
relationships through the tax laws. Accordingly, we affirm
the judgment of the district court and the administrative
ruling of the Iowa Department of Revenue.
Background Facts and Proceedings.
Paula Tyler (born 1963) and Mark Alcorn (born 1958) are the
biological children of Joseph and Constance Alcorn. Joseph
and Constance divorced in 1964. Joseph paid child support
after the divorce but did not have regular visitation with
Paula and Mark. Joseph died in 2007 or 2008.
1966, Constance married the decedent, Donald Hitzhusen.
Constance, Paula, and Mark moved to Rockwell to reside with
Donald on his family farm. Donald treated Mark and Paula as
his own children. He helped pay for them to attend college.
Both Mark and Paula eventually moved to Texas. Each of them
married in Texas, but they maintained a close personal
relationship with Donald.
2001, Constance and Donald divorced after thirty-five years
of marriage. Yet Donald remained close with both Paula and
Mark. In 2007, Donald gave both Paula and Mark his power of
attorney so they could assist him with financial matters.
Donald also executed a medical power of attorney, designating
Mark primary agent and Paula secondary agent as to health
2008, Donald executed a will and revocable trust leaving his
estate to Paula, Mark, and Constance, with Paula and Mark
receiving larger shares than Constance. In 2012, Donald
inheritance tax return originally filed with the State of
Iowa in October 2013 reported tax due on the bequests going
to all three beneficiaries-Paula, Mark, and Constance. The
tax due on Paula's and Mark's shares was paid under
protest. Approximately five months later, in March 2014, the
estate filed an amended tax return claiming no inheritance
tax was actually due on Paula's and Mark's shares.
Thus, under the amended return, inheritance tax would be due
only on the 23% of the $1.823 million estate going to
Constance, not on the 77% of the estate being divided equally
between Paula and Mark. The estate therefore sought a refund
of approximately $203, 000 for inheritance tax previously
paid on Paula's and Mark's shares.
many years prior to 1997, the Iowa inheritance tax had an
unlimited exemption for any share of the estate passing to
the surviving spouse, limited exemptions for lineal
descendants and lineal ascendants, and no exemption for
stepchildren. See Iowa Code § 450.9 (1997).
That year, the general assembly enacted legislation that
eliminated the inheritance tax on property passing to
parents, grandparents, great-grandparents, children,
stepchildren, grandchildren, and greatgrandchildren, among
others. See 1997 Iowa Acts ch. 1, § 2 (codified
at Iowa Code § 450.9 (1999)).
2003, the general assembly passed legislation making a series
of changes to the inheritance tax and the probate code.
See 2003 Iowa Acts ch. 95. Among those changes was
the insertion of the following definition of
"Stepchild" means the child of a person who was
married to the decedent at the time of the decedent's
death, or the child of a person to whom the decedent was
married, which person died during the marriage to the
See id. § 1 (codified at Iowa Code §
as of 2003, "stepchild" for purposes of the
inheritance tax exemption was limited to stepchildren of a
decedent who had not divorced the parent prior to the
on this statutory definition, the Iowa Department of Revenue
denied Donald's estate's request for a refund in a
letter dated April 10, 2014. The letter explained that
because Constance and Donald were divorced at the time of
Donald's death, Paula's and Mark's shares of the
estate were not eligible for the stepchild tax exemption.
and Mark then filed a protest with the department on May 7,
challenging the denial of the tax refund on the ground that
the statute's classification of stepchildren violated
their equal protection rights under article I, section 6 of
the Iowa Constitution.
a contested hearing on April 10, 2015, an administrative law
judge issued a proposed decision on February 26, 2016,
setting forth findings of fact and conclusions of law and
rejecting the equal protection challenge. This decision