Dennis Falk and Dick Patten filed Initiative 402 on April 3, 1981 to abolish the gift and inheritance tax. On November 3, 1981 the voters approved Initiative 402 with 67 percent vote thus abolishing the inheritance and gift tax in Washington State effective January 1, 1982. The Initiative’s ballot title prepared by the Attorney General was, “Shall inheritance and gift taxes be abolished and state death taxes be restricted to the federal estate tax credit allowed?” The only money the Washington State Department of Revenue was entitled to after January 1, 1982 was a small percent of the total 100 percent levied by the IRS for the Federal Estate Tax and normally called a pick-up tax. The IRS would levy 100 percent and give the Washington State Revenue Department five percent or less. There was no additional cost to the deceased estate. In the Initiative 402 we used the term Estate Tax to qualify the State of Washington to only receive a percentage of the Federal credit (pick-up tax). There was no intent to create an estate tax in excess of the IRS credit or pick-up tax. With no additional financial cost to the deceased estate we really have had no death tax in Washington State from January 1, 1981 until the year 2005 when the state legislature imposed a state death tax adding an additional financial burden.

As the Federal IRS pick-up tax to the state decreased the Washington State Department of Revenue claimed to have an estate tax in excess of the Federal IRS credit. They got greedy and started assessing and collecting an estate tax that was in excess of the IRS Credit (pick-up tax).

The Washington State Supreme Court 9 to 0 decision on February 3, 2005 said the Washington State Revenue Department had no authority to assess tax upon property in excess of the Federal Credit (pick-up tax) and tax payers are due a refund.

The Revenue Department violated Initiative 402 in two important particulars: 1) RCW 83.100.050(1)(b) read, “No Washington return need to be filed if no federal return is required;” and 2) RCW 83.100.030 still provided explicitly that the Washington estate tax was “A tax in an amount equal to the federal credit…”

The Department of Revenue adopted new regulations in direct conflict with the Initiative 402 and intimidated tax payers to file a tax return with the State of Washington Revenue Department even though they were not required to file with the federal government. The wrongful imposition of the tax violated Initiative 402 and was an unlawful deprivation of property.

The Washington State Supreme Court with a 9 to 0 decision supported the 1981 Initiative 402 in favor of the citizens and ordered refunds to the tax payers.

Dick Patten and Dennis Falk are very proud that Initiative 402 held the Washington State Revenue Department at bay until the 2005 legislative session (23 years). The sad message is that the citizens of this state need to again abolish death taxes. The 2005 Washington State Legislature obliterated (abolished) the 1981 Initiative 402. Then they legislatively passed a new death tax.

Click, Washington State Supreme Court Ruling on the home page to read the court’s text.