The opinion of the court was delivered by: KELLY
This is an action against the government filed by the executor of the estate of Frank W. Netsky ("decedent") asserting a claim for a refund of $ 1,233,739.89 in estate taxes, plus costs and interest. Jurisdiction is predicated on 28 U.S.C. § 1346(a)(1). The parties have filed cross motions for summary judgment based on the undisputed facts in the record. For the reasons stated in this Memorandum, the executor's motion is granted and the government's motion is denied.
The following public housing agency obligations ("project notes") were included in the decedent's estate as part of Schedule B of the 706 return:
(1) $200,000.00 Fayette County, PA Project Notes, 7.32%, due 12/4/81 with interest accrued from 6/30/81 to 8/18/81
(2) $1,000,000.00 Philadelphia, PA Project Notes 5th Series 1980, 6.04%, due 10/21/81 with interest accrued from 10/7/80 to 8/18/81
(3) $500,000.00 Philadelphia Housing Authority Project Notes, 6.32%, due 10/2/81 with interest accrued from 10/7/80 to 8/18/81
(4) $200,000.00 Pittsburgh, PA Project Notes, 8.21%, due 12/4/81 with interest accrued from 6/2/81 to 8/18/81
(5) $1,000,000.00 Williamsport, PA Project Notes 7.54% due 12/4/81 with interest accrued from 8/4/81 to 8/18/81
The decedent purchased each of these project notes between 1980 and 1981 with the expectation and belief that they were exempt from all taxes.
On May 7, 1984 the plaintiff filed an administrative claim for a refund, asserting that the project notes should not have been included as part of the property in valuing the decedent's gross estate. The plaintiff claimed the project notes are exempt from estate taxation pursuant to Section 11(b) of the United States Housing Act of 1937, Pub. L. No. 75-412, 50 Stat. 888 (1937) ("Section 11(b)") and Section 102(g) of the Housing Act of 1949. The IRS did not act favorably on the plaintiff's claim in the six month period following its filing. Having exhausted his administrative remedies, the plaintiff filed this suit September 9, 1985. The defendant claims first, that the notes are not exempt from estate tax under Section 11(b) and second, that retroactive, curative legislation has clarified that the Section 11(b) tax exemption does not apply to the federal estate tax. The questions presented by the cross motions for summary judgment are solely of law.
The Project Notes Were Exempt From Estate Tax
Section 11(b) provides that obligations like the project notes owned by the decedent and the interest on them "shall be exempt from all taxation now or hereafter imposed by the United States whether paid by such agencies or by the United States." While statutory language granting an exemption from "taxation" and "all taxation" does not necessarily operate as an exemption from estate taxes, see, e.g., Murdock v. Ward, 178 U.S. 139, 44 L. Ed. 1009, 20 S. Ct. 775 (1900); U.S. Trust Co. v. Helvering, 307 U.S. 57, 83 L. Ed. 1104, 59 S. Ct. 692 (1939), where there is a "strong indication" in a statute and its legislative history that Congress intended an exemption to encompass estate taxes, specific ...