Comptroller of Treasury v. Taylor

Hotten, J. This case arises from the Comptroller of the Treasury's ("Comptroller") assessment of estate tax and penalties against a Maryland estate that included the value of a particular type of marital trust. The marital trust, which was created in Michigan, consisted of qualified terminable interest property or "QTIP" that was reported on the decedent's federal estate tax return, but was omitted from the Estate's corresponding Maryland estate tax return. In a reported opinion, Comptroller of the Treasury v. Taylor , 238 Md. App. 139 , 152, 189 A.3d 799 , 807 (2018), the Court of Special Appeals held that "the Comptroller lack[ed] the authority to tax the [trust assets] as part of [the] Maryland estate." The Court also held that "[g]iven no tax was authorized under the statute, no penalty could be properly charged against the Estate." Id. On appeal, the Comptroller presents the following questions for our review: 1.

Is the value of a surviving spouse's interest in a QTIP trust created in another state properly included in the surviving spouse's Maryland estate, and therefore subject to the Maryland estate tax? 2. Did the Tax Court improperly waive a late-filing penalty when waiver must be supported by affirmative evidence and the only basis cited for the waiver was the personal representative's erroneous interpretation of the tax laws? The personal representative filed a cross-petition with the following issues: 1. Is [the Comptroller's] taxation of the QTIP trust in the [E]state unconstitutional? 2.

Is the fact that an issue was raised before the Tax Court, but not expressly decided by that agency, sufficient to permit review of that issue on appeal from the agency ruling? For reasons discussed infra , we reverse the judgment of the Court of Special Appeals on the first issue. We conclude that, upon the death of decedent's surviving spouse, Margaret Beale Taylor ("Ms. Taylor"), the QTIP trust assets were deemed to be transferred upon her death and that transfer was taxable by Maryland. As to issue two, we answer in the negative, concluding that the Tax Court properly waived the late-filing penalty.

With respect to the cross-petition, we consider the second issue first, concluding that this Court's review is limited to the Tax Court's findings and to the reasons for those findings. Because the Tax Court did not expressly address a constitutionality argument in its written opinion, we decline to review the personal representative's first issue in the cross-petition. BACKGROUND Factual Background The instant tax dispute arose from events that were triggered by the death of Ms. Taylor's husband, John Wilson Taylor ("Mr. Taylor"). Mr. Taylor predeceased Ms. Taylor on December 1, 1989.

At the time of Mr. Taylor's death, Mr. and Ms. Taylor were residents of Wayne County, Michigan. Mr. Taylor died with a valid Will dated September 1, 1982. The Will directed the creation of a "residuary marital trust," consisting of a portfolio of eleven different parcels of stocks and bonds valued on Mr. Taylor's date of death at $2,299,893.20. Mr. Taylor's Will directed that the net income from the residuary marital trust be paid to Ms. Taylor at least annually for and during her lifetime and that upon Ms. Taylor's death, the trust assets would be dispersed to the trust beneficiaries, Mr. Taylor's son and grandchildren.

Upon the death of Mr. Taylor, the personal representative for his estate filed a timely federal tax return with the Internal Revenue Service in which the estate claimed a deduction for the marital trust, known as a qualified terminable interest property ("QTIP") election. Election of the QTIP deduction enables a married couple to defer payment of any estate tax on the transfer of the QTIP until the death of the surviving spouse. The marital deduction is allowed for the entire value of the QTIP. See 26 U.S.C. §§ 2044 (a), (c) ; 2056(b)(7)(B).

Following Mr. Taylor's death, Ms. Taylor continued to reside in Michigan until 1993, when she moved to Washington County, Maryland. She died testate on January 15, 2013. The personal representative filed a federal Estate (and Generation-Skipping Transfer) Tax Return with the Internal Revenue Service, which included the value of the property in the marital trust. On the federal estate tax return, the personal representative reported an Estate value of $5,582,245.

The personal representative also filed a Maryland estate tax return, in which he excluded the value of the marital trust, decreasing the reported value of Ms. Taylor's federal gross estate by $4,108,048.02. The personal representative explained his deduction of Ms. Taylor's interest in the marital trust in a statement attached to the Maryland return. It stated: In reliance on Section 7-309(b)(6)(i) [ 1 ] of the Maryland Tax-General Code Annotated, the marital trust created under the Last Will and Testament of decedent's deceased spouse, John Wilson Taylor, in which decedent had an income interest for life and which is reported on Schedule F of decedent's Federal Estate Tax Return, Form 706, has been excluded from the federal gross estate (line 1, federal Form 706) reported on line 1 of Section IV of the MET-1. John Wilson Taylor died on December 1, 1989, and was a resident of the State of Michigan on the date of his death.

No Maryland estate tax return was filed for Mr. Taylor, and thus no "marital deduction qualified terminable interest property election was made for the decedent's predeceased spouse on a timely filed Maryland estate tax return." After examining the Maryland estate tax return, the Comptroller disallowed the claimed exclusion of Ms. Taylor's interest in the marital trust, adding back the value to the federal gross estate and the corresponding Maryland estate. The Comptroller then sent the personal representative a Deficiency Notice, which added interest, a 10% late penalty, and imposed a 25% penalty "due on underpayment attributable to substantial estate tax valuation." In a letter to the Comptroller dated January 20, 2014, the personal representative protested the Deficiency Notice and objected to the Comptroller's demands. The personal representative asserted that Maryland had no taxable interest in the trust assets, citing to Maryland Code, Tax-General ("Tax-Gen.") §§ 7-309(b)(6)(i), 7-302, and 26 U.S.C § 2044, discussed infra . On May 28, 2014, the Comptroller sent a revised Deficiency Notice, waiving the 25% penalty, but retaining the 10% late penalty.

On June 24, 2014, the personal representative filed a Petition of Appeal. Procedural Background 1. Maryland Tax Court Proceeding The Tax Court held a hearing on May 6, 2015, followed by a written opinion, Taylor v. Comptroller of the Treasury , Maryland Tax Court, Case No. 14-EL-OO-0691, Memorandum and Order of the Court dated Sept. 2, 2015 (" Tax Court Proceeding "), which affirmed the estate tax assessed on the trust assets, as well as the assessed interest. In an amendment to the memorandum and order, the Court waived and abated the 10% late penalty fee, citing Tax-Gen. § 13-714 and Frey v. Comptroller , 422 Md. 111 , 29 A.3d 475 (2011), as relevant authority. 2 The Tax Court found that, at the time of Ms. Taylor's death, she possessed a federal gross estate, consisting entirely of personal property, valued at $5,582,245.

In considering this State's authority to tax the trust's assets, the Tax Court concluded that: [T]he Maryland estate tax is directly linked to the federal estate tax, and completely integrated with it. The linkage and integration is accomplished by adopting, at the outset, the federal definition of "gross estate." Tax-Gen. § 7-301(b). (The term " 'estate' means the federal gross estate of the decedent as determined by Subtitle B of the Internal Revenue Code ...").... Thus, the Maryland estate means the federal gross estate - as increased by any property not otherwise included in the federal gross estate that is deemed to be included pursuant to § 7-309(b)(6) of this subtitle.

Tax-Gen. § 7-301(b). Ms. Taylor's [E]state was properly reported by [the personal representative] on the Estate's federal estate tax return as $5,582,245 on her date of death. This value, pursuant to 26 U.S.C § 2044(a), included the value of the property in which Ms. Taylor had "a qualifying income interest for life[,]" which was Ms. Taylor's QTIP property. There is no statute or statutory provision that authorizes [the personal representative] to subtract the value of Ms. Taylor's QTIP property from her federal gross estate for Maryland [e]state tax purposes.

Tax Court Proceeding at 4-5. The personal representative filed an appeal with the Circuit Court for Washington County on September 17, 2015. The Comptroller filed a cross-petition for review of the Tax Court's decision to abate the late penalty payment. 2. Circuit Court Proceeding The circuit court reversed the Tax Court's assessment of taxes and interest against the Estate.

In the Matter of Richard Reeves Taylor , Case No. 21-C-15-055059; Memorandum Opinion of the Court dated Nov. 23, 2016. The circuit court indicated that the Tax Court erred in concluding that Ms. Taylor's federal gross estate consisted entirely of personal property, because the trust assets "were not and never were" the property of Ms. Taylor. According to the circuit court, Ms. Taylor never had legal title to the trust assets because legal title was transferred to the trust beneficiaries. That property right vested in the beneficiaries at the time of Mr. Taylor's death in 1989.

The circuit court held that the federal QTIP election simply enabled the trust assets to be taxable as part of the federal estate; the election did not convert the trust assets into Ms. Taylor's personal property which could be subjected to Maryland estate tax. The circuit court explained that, because the trust assets were not the property of Ms. Taylor, the only way for the State to impose taxes on the assets would be through statutory authority. After conducting a statutory analysis of Tax-Gen. §§ 7-301(b) and (d), 7-302, and 7-309(b)(5) and (b)(6), the circuit court concluded that the Tax Court had erred in assessing the estate tax on the trust assets. The circuit court also held that imposition of a Maryland estate tax on the trust assets violated the Fourteenth Amendment to the U.S. Constitution and the Maryland Declaration of Rights, because the State had taxed property outside its jurisdiction and taxed an item from which this State had received no benefit. 3.

Court of Special Appeals Proceeding The Court of Special Appeals affirmed the decision of the circuit court. The Court held that "the Tax Court's decision was premised upon an erroneous conclusion of law, and the Comptroller lacks the authority to tax the [trust assets] as part of Ms. Taylor's Maryland estate." Taylor , 238 Md. App. at 152 , 189 A.3d at 807 . The Court of Special Appeals based this holding on its statutory analysis, which mirrored the circuit court's analysis. The Court also held that "[g]iven no tax was authorized under the statute, no penalty could be properly charged against the Estate." Id.

The Court of Special Appeals did not address the circuit court's decision regarding the Fourteenth Amendment and the Maryland Declaration of Rights, "as it was not decided by the Tax Court." Id. STANDARD OF REVIEW [D]ecisions of the Tax Court receive the same judicial review as other administrative agencies. In this context [... we] evaluate[ ] the decision of the agency. A court's role in reviewing an administrative agency adjudicatory decision is narrow; it is limited to determining if there is substantial evidence in the record as a whole to support the agency's findings and conclusions, and to determine if the administrative decision is premised upon an erroneous conclusion of law.

We cannot uphold the Tax Court's decision on grounds other than the findings and reasons set forth by the Tax Court. Taylor , 238 Md. App. at 145 , 189 A.3d at 803 (internal citations and quotations omitted). DISCUSSION A. The value of the property contained in Ms. Taylor's Maryland estate includes the value of her QTIP, and the transfer of such property at death is subject to the Maryland estate tax. 1. Ms. Taylor was deemed to have a property interest in the marital trust that transferred upon her death, such that the entire value of the marital trust is included in her federal gross estate.

The personal representative contends that Ms. Taylor did not own, control, or have any interest in the assets of the QTIP trust, nor was there a transfer of trust property at her death. The personal representative asserts that: [O]n Mr. Taylor's death, legal title to the QTIP property transferred to the trustees of the trust and equitable title transferred to Mr. Taylor's son and grandchildren, the remainder beneficiaries of the trust. Accordingly, the transfer of the QTIP property occurred in Michigan in 1989 under Mr. Taylor's [W]ill, not in Maryland in 2013 when Ms. Taylor died. However, the personal representative fails to adequately consider the estate tax scheme and the creation of QTIP trusts.

Ms. Taylor's property interest in the marital trust was deemed to have transferred upon Ms. Taylor's death. We review the general estate tax scheme and creation of QTIP trusts to explain our conclusion. Estate Taxes and QTIP Trusts The estate tax applies on the transfer of assets from an estate upon one's death. The federal code, however, provides an exception for married couples through the marital deduction, codified in 26 U.S.C. § 2056 (a).

The marital deduction generally shields the outright transfer of property, from the first-to-die spouse to the surviving spouse, from estate taxes. This marital "exemption is premised on the expectation that the property will be subject to estate tax on the death of the second spouse (unless consumed during her life or transferred by gift and thus subject to gift tax)." Estate of Sommers v. Commissioner of Internal Revenue , 149 T.C. 209 , 223 (2017). Pursuant to 26 U.S.C. § 2056 (b)(1), transfers of 'terminable' property interests are not generally eligible for the marital deduction because they are not included in the surviving spouse's estate. 3 This is known as the "terminable interest rule." Estate of Smith v. Commissioner of Internal Revenue , 565 F.2d 455 , 459 (7th Cir. 1977). In the instant matter, Ms. Taylor had a terminable property interest because she had a qualifying terminable income interest for life, paid annually, through operation of the QTIP trust.

See 26 U.S.C. § 2056 (b)(7)(B)(i)(II). However, the terminable interest rule has an exception for QTIP assets to enable application of the marital deduction. The QTIP rules provide an election under which a qualifying terminable interest can be covered by the marital deduction at the death of the first spouse with the proviso that the underlying property be included in the estate of the second spouse upon death. See secs. 2056(b)(7), 2044.

In effect, the rules employ a fiction that treats the second spouse as owning the subject property outright, rather than owning merely a life or other terminable interest. Estate of Sommers , 149 T.C. at 223 (emphasis added). The provisions creating the QTIP option, codified in 26 USC §§ 2044 and 2056, create two fictional legal transfers so that the full value of the QTIP assets is captured by the estate tax upon the surviving spouse's death. The first fictional transfer occurs upon the death of the first-to-die spouse, when QTIP assets "shall be treated as" passing from the first-to-die spouse to the surviving spouse.

See §§ 2056(b)(7)(A)(i), (b)(7)(B)(i)(I). The second fictional transfer occurs when the surviving spouse dies and the QTIP assets "shall be treated as property passing from" the surviving spouse under § 2044(c). This second fictional transfer triggers the estate tax, and the entire value of the QTIP assets is included in the surviving spouse's federal gross estate under § 2044(a). Our review of the federal estate tax scheme and QTIP trusts reveals that the entire value of the marital trust was deemed to have transferred upon Ms. Taylor's death.

See supra ; see also In re Estate of Bracken , 175 Wash.2d 549 , 577-78, 290 P.3d 99 , 112 (2012) (Madsen, C.J., concurring/dissenting), overturned by statute ("[U]nder federal law there are two relevant transfers where QTIP property is concerned.... When the surviving spouse dies, a second transfer of the entire property is deemed to occur-the transfer of the property from the surviving spouse to the third party remainder beneficiaries."); see 2006 Leg. Sess., Fiscal and Policy Note, Senate Bill 2 ("SB 2") (stating that "[t]he value of the QTIP that qualifies for the marital deduction as a result of the election is included in the surviving spouse's estate when the surviving spouse dies." (emphasis added)). The Comptroller did not seek to tax Mr. Taylor's property or the transfer of his property, but rather sought to tax the deemed transfer of the QTIP property upon Ms. Taylor's death as a Maryland resident. 4 2.

The value of Ms. Taylor's Maryland estate is the same as the value of her federal gross estate. The "Maryland estate" is defined as "the part of an estate that this State has the power to subject to the Maryland estate tax." See Tax-Gen. § 7-301(d) (emphasis added). Furthermore, an "estate" is defined as " the federal gross estate of a decedent, as determined by ... the Internal Revenue Code, as increased by any property not otherwise included in the federal gross estate that is deemed to be included pursuant to § 7-309(b)(6) of this subtitle." See Tax-Gen. § 7-301(b) (emphasis added). Putting these definitions together results in two parts to a Maryland decedent's estate: (1) the federal gross estate as determined by the Internal Revenue Code, plus (2) any property not otherwise in the federal gross estate that is included in Tax-Gen. § 7-309(b)(6).

As to the first part of the Estate, the personal representative properly reported a value of $5,582,245 for Ms. Taylor's federal gross estate. As to the second part of the Estate, we must consider the statutory language of Tax-Gen. § 7-309(b) in the context of the definition for an "estate." Accordingly, Tax-Gen. § 7-309(b)(6) serves to increase the value of the Estate (an estate is the federal gross estate, as increased by property pursuant to § 7-309(b)(6) ), and is inapplicable for decreasing Ms. Taylor's Maryland estate. We explain more fully, infra . Plain Language of Tax-Gen. § 7-309(b) Tax-Gen § 7-309(b)(6)(i) states: For purposes of calculating Maryland estate tax, a decedent shall be deemed to have had a qualifying income interest for life under § 2044(a) of the Internal Revenue Code with regard to any property for which a marital deduction qualified terminable interest property election was made for the decedent's predeceased spouse on a timely filed Maryland estate tax return under paragraph (5) of this subsection.

Paragraph (5), in turn, states: (5)(i) With regard to an election to treat property as marital deduction qualified terminable interest property in calculating the Maryland estate tax, an irrevocable election made on a timely filed Maryland estate tax return shall be deemed to be an election as required by § 2056(b)(7)(B)(i), (iii), and (v) of the Internal Revenue Code. (ii) An election under this paragraph made on a timely filed Maryland estate tax return shall be recognized for purposes of calculating the Maryland estate tax even if an inconsistent election is made for the same decedent for federal estate tax purposes. (emphasis added). Cumulatively, subsections (5) and (6) provide that a spouse who dies first may elect a QTIP on the Maryland estate tax return.

Specifically, Tax-Gen § 7-309(b)(5)(ii) enables a spouse to make a Maryland QTIP election without also electing the QTIP on the federal return. 5 The plain language of an "estate," as defined by Tax-Gen. § 7-301(b), reveals that Tax-Gen. § 7-309(b)(6) increases the value of the Maryland estate. Therefore, the provision is inapplicable for reducing the value of Ms. Taylor's Estate. The unambiguous plain language of the statute renders it irrelevant to any reduction in Ms. Taylor's Estate. In addition, the definition of an "estate" provides that Tax-Gen. § 7-309(b)(6) applies to those properties "not otherwise included in the federal gross estate[.]" See Tax-Gen. § 7-301(b).

In the case at bar, Ms. Taylor's QTIP was included in her federal gross estate under applicable federal law and there was no additional property to augment the Maryland estate. Given the lack of any augmenting property, Tax-Gen. § 7-309(b)(6) is irrelevant. The personal representative contends that Tax-Gen. § 7-309(b)(6) results in a decrease in Ms. Taylor's Estate because a Maryland QTIP election was never filed. 6 Yet the personal representative and dissent neglect the plain language of an estate and the augmentation provisions of Tax-Gen. § 7-309(6). In the event of an ambiguity in the plain language of the statute, we look to the legislative history of Tax-Gen. § 7-309(b)(6) for clarity.

("If the true legislative intent cannot be readily determined from the statutory language alone, however, we may, and often must, resort to other recognized indicia [including] ... the legislative history[.]" Bellard v. State , 452 Md. 467 , 482, 157 A.3d 272 , 280 (2017) ). "In addition, the meaning of the plainest language is controlled by the context in which i[t] appears[,]" id. , 157 A.3d at 281 , and it is necessary to consult indicia, such as legislative history, to ascertain legislative intent. We will therefore consider the legislative history of Tax-Gen. § 7-309 to better-inform our understanding of the relationship between the federal and Maryland estate tax. Legislative History of Tax-Gen. § 7-309(b) [In 2001, Congress enacted the Economic Growth and Tax Relief Reconciliation Act, which] provided for the reduction and ultimate repeal of the credit allowed under the federal estate tax for state death taxes paid (federal credit). [ 7 ] Maryland, like most states, had an estate tax that was linked directly to the federal credit.

Without statutory changes by the General Assembly, the repeal of the federal credit under the 2001 federal tax Act would have automatically repealed the State estate tax because of the link between the State tax and federal credit. 2006 Leg. Sess., Fiscal and Policy Note, SB 2. In essence, prior to the 2001 federal act, state governments enjoyed revenue sharing with the federal government for purposes of the estate tax. 8 As a result of the federal government's 2001 legislation, a number of states amended their tax codes to preserve state estate taxes. In 2002 and 2004, the Maryland General Assembly partially decoupled Maryland's estate tax from the federal estate tax.

Id. 9 In 2006, the General Assembly amended Subtitle 7 of the Tax-Gen. Article through Chapter 225 (SB 2). SB 2 made changes to § 7-309, including enactment of subsections (b)(5) and (6). The definition of an "estate" was also amended in Tax-Gen. § 7-301 to reflect the changes in § 7-309(b)(5) and (6).

As discussed supra , the text of § 7-309(b)(5) and (6) enabled Maryland estates to make inconsistent QTIP elections on their federal and Maryland estate tax returns. In sum, the effect of SB 2 on Tax-Gen. § 7-309 was merely to enable inconsistent QTIP elections due to the 2001 federal Act, contrary to the dissent and personal representative's contention that Mr. Taylor's estate had to elect a marital deduction on its Maryland return. The historical context of SB 2 provides that Tax-Gen. § 7-309(b)(5) and (6) simply sought to retain the Maryland estate tax by ensuring that Maryland estate taxes were captured even if an estate opted not to make a federal QTIP election: this State opted to maintain the benefit of estate taxes. The concern was not over whether an estate filed a Maryland QTIP election because the statute meant to clarify that this State could collect an estate tax absent a federal election.

Interpreting the statute otherwise could result in a loophole, whereby this State "would tax only the QTIP trusts that were elected in Maryland tax returns, and not QTIP trusts that were created in other States, where the beneficiary of the trust resided in Maryland at the time of death." Concurring opinion at 109 n. 6, 213 A.3d at 648 n. 6. We conclude that both the plain language and legislative history of Tax-Gen. § 7-309 reveal that the value of Ms. Taylor's estate is the same for federal and Maryland estate tax purposes. As provided by the Tax Court, there is no provision that authorizes the personal representative "to subtract the value of Ms. Taylor's QTIP property from her federal gross estate for Maryland Estate tax purposes." Upon her death in Maryland, Ms. Taylor had a property interest in the lifetime income from the residuary trust. By operation of 26 U.S.C. § 2044 , Ms. Taylor's interest is treated "essentially as ... outright ownership of the property," 10 and the entire value of the marital trust is properly taxed by operation of the federal taxation scheme.

Ms. Taylor's fictional "outright ownership" interest did not dissipate upon her death. That value was deemed to have transferred to the beneficiaries of the trust and is subject to taxation by this State pursuant to the definition of an "estate" in Tax-Gen. § 7-301(b). Neither Tax-Gen. § 7-309(b)(5) or (6) operate to decrease the value of Ms. Taylor's federal gross estate. 11 We affirm the decision of the Tax Court on the first issue and conclude that the value of the QTIP trust is subject to Maryland estate tax. B. The Tax Court did not improperly waive the late-filing penalty because it had broad discretion to waive the penalty for "reasonable cause," which the personal representative sufficiently demonstrated. [W]hen the Tax Court considers appeals from a tax collector's refusal to abate an interest assessment, that court considers whether the party has demonstrated with affirmative evidence that reasonable cause exists or that the tax collector's decision was an obvious error.

See [Tax-Gen.] § 13-528(b). Under this standard, a tax collector's assessment of interest will not be overturned unless the complaining party provides affirmative evidence demonstrating reasonable cause for the abatement or the tax collector has made an obvious error. Frey v. Comptroller , 422 Md. 111 , 187, 29 A.3d 475 , 519 (2011) (emphasis added). In Frey , this Court held that the Tax Court has the authority to waive interest for "reasonable cause" and the party appealing an assessment bears the burden of proving that the assessment was in error through affirmative evidence.

Id. Though the issue in Frey was the Tax Court's authority to waive interest as opposed to late payments, the Court found that the authority would likely extend to the waiver of penalties as well. Id. at 185 , 29 A.3d at 518 , n.21 . In a response filed during the Tax Court proceeding, the Comptroller conceded that the Tax Court could waive late penalties under Tax-Gen. § 13-714. 12 Therefore, the Comptroller does not contend that the Tax Court did not have the authority to waive the late penalty.

Rather, the Comptroller asserts that the personal representative failed to produce affirmative evidence to demonstrate reasonable cause for the late penalty abatement. Specifically, the Comptroller argues that reasonable cause is generally defined by the exercise of "ordinary prudence" and the "degree of diligence that an ordinarily prudent person would have exercised under the same or similar circumstances." Because the personal representative failed to provide affirmative evidence that the Estate acted with "ordinary prudence," the Comptroller contends that the Tax Court improperly waived the late penalty. Contrary to the Comptroller's argument, we conclude that the personal representative did provide sufficient affirmative evidence for waiver of the late penalty. The Personal Representative contends that: The evidence before the Tax Court included the letters to the Comptroller from the Personal Representative, which specifically set forth the [legal] reasons why the Personal Representative thought the tax on the QTIP was not due.

The Personal Representative also submitted extensive briefing and argument before the Tax Court on why the tax was not due. Despite this evidence, the Comptroller contends that the evidence is insufficient for two reasons: (i) legal argument is inadequate to constitute sufficient affirmative evidence, and (ii) the personal representative's "good faith" argument cannot be conflated with a showing of "reasonable cause." We find it difficult to conceptualize that a coherent legal argument based on the peculiar facts of the case, even if erroneous, does not constitute sufficient affirmative evidence for waiving the late penalty. Furthermore, the Comptroller neglects to consider the history of Tax-Gen. § 13-714 in advancing the "good faith" argument. When the General Assembly created the Tax-Gen.

Article in 1988, Tax-Gen. § 13-714 was codified as § 13-701(d). See 1988 Md. Laws at 544. The Revisor's Note to that section specifies that "[w]illfullness and intent are no longer determinative factors [for waiving a taxing penalty] ... but may be considered as an element of 'reasonable cause [.]' " Id. (emphasis added).

According to the Revisor's Note, though good faith alone cannot operate to provide "reasonable cause," good faith may be considered for waiving a late penalty. Certainly, the personal representative advanced a good faith argument, litigated before this Court for its relevance, to argue that Ms. Taylor's QTIP interest was not subject to Maryland estate tax. The Comptroller also disregards a 1985 opinion from the Attorney General, which provided advice on the "Comptroller's authority to waive certain penalty and interest charges on late-filed sales and admissions tax returns." 70 Md. Op. Atty.

Gen. 208 (Md.A.G. 1985). As explained in the opinion, Tax-Gen. § 13-714's predecessors, Article 81 §§ 365(c) and 407(c), enabled waiver of penalties "for cause shown" and for "good cause shown." We consider these terms equivalent to the "reasonable cause" standard before us. The 1985 Opinion of the Attorney General found that 'cause' and 'good cause' are synonymous, 13 and that "a general test of 'ordinary prudence' or 'reasonable diligence' has been recognized as satisfying the 'good cause' standard." The Attorney General advised that: [T]he Comptroller has comparably broad discretion to determine whether a taxpayer had shown 'ordinary prudence' or 'reasonable diligence' and, hence, has met the statutory standard of good cause. Under one view of the waiver provisions, the taxpayer would meet the 'good cause shown' standard by his or her demonstrated record of past timely filing.

In other words, that taxpayer will have demonstrated 'ordinary prudence' or 'reasonable diligence' through a pattern of compliance with the applicable law, and the Comptroller may properly treat one instance of untimely filing as not vitiating that diligent track record. As such, the 1985 opinion provides that "reasonable cause" may be found under a variety of circumstances to enable the waiver of late penalties. In the instant case, the personal representative adequately met the threshold of "reasonable cause" to permit waiver of the late penalty. The Tax Court had broad authority to waive the late penalty.

As "an adjudicatory administrative agency ... the Tax Court's factual findings and the inferences drawn therefrom" are reviewed under a substantial evidence standard. Frey , 422 Md. at 136 -37 , 29 A.3d at 489 -90 . Under the standard, The question for the reviewing court is ... whether the [agency's] conclusions reasonably may be based upon the facts proven. The [reviewing] court may not substitute its judgment on the question whether the inference drawn is the right one or whether a different inference would be better supported.

The test is reasonableness, not rightness. Alviani v. Dixon , 365 Md. 95 , 108, 775 A.2d 1234 , 1242 (2001) (internal quotations and citations omitted). In the instant matter, we conclude that the Tax Court reasonably waived the late penalty based on its assessment that the personal representative provided sufficient evidence to meet the threshold of "reasonable cause." The Tax Court considered the personal representative's arguments and concluded that those arguments met the threshold of "reasonable cause" to waive the late penalty. C. This Court's review is limited to the Tax Court's findings and to the reasons for those findings; because the Court did not expressly make a finding regarding the constitutionality of the tax, the issue is not preserved for appeal.

Judicial review of administrative action differs from appellate review of a trial court judgment. In the latter context the appellate court will search the record for evidence to support the judgment and will sustain the judgment for a reason plainly appearing on the record whether or not the reason was expressly relied upon by the trial court. However, in judicial review of agency action the court may not uphold the agency order unless it is sustainable on the agency's findings and for the reasons stated by the agency. United Steelworkers v. Beth.

Steel, 298 Md. 665 , 679, 472 A.2d 62 , 69 (1984) (emphasis added). The personal representative rightfully contends that it raised the issue of constitutionality at the agency level. However, in an administrative proceeding, raising the issue is insufficient to preserve it on appeal. This Court's holding in United Steelworkers , quoted supra , reveals the distinction for preserving an issue at the trial court level as opposed to the agency level, the latter of which is relevant to the case at bar.

Though the Tax Court contemplated the personal representative's constitutionality argument, 14 it did not base its final decision on the issue. Rather, the Court's Memorandum and Order focused on statutory interpretation. The Court of Special Appeals reflected this limitation in its opinion: We need not address the circuit court's decision regarding the Fourteenth Amendment to the United States Constitution and the Maryland Declaration of Rights, as it was not decided by the Tax Court . See Gore Enterprise Holdings, Inc. v. Comptroller of the Treasury , 437 Md. 492 , 503, 87 A.3d 1263 (2014) (internal citations omitted) ("We cannot uphold the Tax Court's decision 'on grounds other than the findings and reasons set forth by [the Tax Court]' ").

Taylor , 238 Md. App. at 152 , 189 A.3d at 807 (emphasis added). Because we conclude that any constitutional issues were not preserved, we decline to review the merits of the personal representative's constitutionality argument. 15 CONCLUSION Contrary to the holding of the Court of Special Appeals, we conclude that Ms. Taylor had a property interest in the full value of the marital trust by operation of the fictional transfers created through the federal statutory scheme. Pursuant to 26 U.S.C. § 2044 Ms. Taylor's interest is treated as outright ownership of the QTIP property and the marital deduction is allowed for the entire value of the QTIP trust. By operation of Md. Code, Tax-Gen. § 7-301, in conjunction with our reading of Tax-Gen § 7-309(b)(5) and (b)(6), we conclude that Ms. Taylor's federal gross estate is the same as her Maryland estate, such that the entire value of the marital trust is rightfully taxed by this State.

We agree with the Court of Special Appeals holding as to the late-filing penalty, but on separate grounds from the rationale advanced by our intermediate court. We conclude that the Tax Court did not improperly waive the penalty because it had broad discretion to waive the penalty for "reasonable cause," which the personal representative sufficiently demonstrated. As to the personal representative's cross-appeal, we note that this Court's review is limited to the Tax Court's findings and to the reasons for those findings. Because the Tax Court did not expressly make a finding regarding the constitutionality of the tax, the issue is not preserved for appeal and we therefore decline to consider the personal representative's constitutional arguments on the merits.

JUDGMENT OF THE COURT OF SPECIAL APPEALS IS REVERSED IN PART AND AFFIRMED IN PART. COSTS TO BE PAID 2/3 BY RESPONDENT/CROSS-PETITIONER AND 1/3 BY PETITIONER/CROSS-RESPONDENT. Watts, J., concurs. Getty, J., dissents.

Concurring Opinion by Watts, J. Respectfully, I concur. I agree with the Majority that the Maryland estate tax applies to a Maryland resident's interest in a qualified terminable interest property ("QTIP") 1 trust that was created in another State. See Maj. Op. at 79-81, 213 A.3d at 631-32.

I write separately because I arrive at this conclusion for reasons similar to, but slightly different from, the Majority's. 2 Md. Code Ann., Tax-Gen. (1988, 2016 Repl. Vol.) ("TG") § 7-302(a)(1) provides that the Maryland estate "tax is imposed on the transfer of the Maryland estate of each decedent who, at the time of death, was[ ] a resident of this State[.]" Significantly, TG § 7-301(b) defines "estate" as follows: " 'Estate' means the federal gross estate of a decedent, as determined by Subtitle B of the Internal Revenue Code, as increased by any property not otherwise included in the federal gross estate that is deemed to be included pursuant to [TG] § 7-309(b)(6) [.]" In other words, the Maryland estate tax applies to all of a Maryland resident's property that is subject to the federal estate tax, plus any of the Maryland resident's property that "is deemed to be included [in a Maryland estate] pursuant to [TG] § 7-309(b)(6) [.]" TG § 7-301(b). In turn, TG § 7-309(b)(6)(i) states: For purposes of calculating Maryland estate tax, a decedent shall be deemed to have had a qualifying income interest for life under [ 26 U.S.C.] § 2044(a) [ 3 ] with regard to any property for which a marital deduction [QTIP] election was made for the decedent's predeceased spouse on a timely filed Maryland estate tax return under [ TG § 7-309(b) ](5)[.] (Emphasis added).

And, TG § 7-309(b)(5) states: (i) With regard to an election to treat property as marital deduction [QTIP] in calculating the Maryland estate tax, an irrevocable election made on a timely filed Maryland estate tax return shall be deemed to be an election as required by [ 26 U.S.C.] § 2056(b)(7)(B)(i), (iii), and (v) [ ]. [ 4 ] (ii) An election under this paragraph made on a timely filed Maryland estate tax return shall be recognized for purposes of calculating the Maryland estate tax even if an inconsistent election is made for the same decedent for federal estate tax purposes. In my view, TG § 7-301(b)'s plain language establishes that, where a Maryland resident's interest in a QTIP trust that was created in another State is subject to the federal estate tax, it is also subject to the Maryland estate tax. TG § 7-301(b) provides that the word " '[e]state' means the federal gross estate of a decedent, ... as increased by any property not otherwise included in the federal gross estate that is deemed to be included pursuant to [TG] § 7-309(b)(6) [.]" Thus, where a Maryland resident's property is subject to federal estate tax, it is also subject to the Maryland estate tax. TG § 7-301(b) does not make an exception from the Maryland estate tax for any particular kind of property, such as a Maryland resident's interest in a QTIP trust that was created in another State.

Nor does TG § 7-309(b)(6)(i) include an exception from the Maryland estate tax for a Maryland resident's interest in a QTIP trust that was created in another State. TG § 7-301(b)'s plain language belies the existence of such an exception; TG § 7-309(b)(6)(i)'s plain language does the same; and TG § 7-301(b)'s and TG § 7-309(b)(6)(i)'s legislative history establishes that the General Assembly did not intend to create such an exception. To begin, TG § 7-301(b) provides that the word " '[e]state' means the federal gross estate of a decedent, ... as increased by any property not otherwise included in the federal gross estate that is deemed to be included pursuant to [TG] § 7-309(b)(6) [.]" TG § 7-301(b) unambiguously demonstrates that: (1) the Maryland estate tax applies to all property of a Maryland resident that is subject to the federal estate tax; and (2) the Maryland estate tax also applies to any property of a Maryland resident that, under TG § 7-309(b)(6), "is deemed to be included" in a Maryland estate. In other words, TG § 7-301(b) provides that TG § 7-309(b)(6) can only "increase[ ]"-not decrease-the amount of property that is subject to the Maryland estate tax.

It inescapably follows that TG § 7-309(b)(6) cannot except any particular kind of property from the Maryland estate tax. This interpretation of TG § 7-301(b) is consistent with the Tax Court's decision in this case. Significantly, "[t]his Court accords great deference to the Tax Court's interpretation of the tax laws[.]" Lane v. Supervisor of Assessments of Montgomery Cty. , 447 Md. 454 , 464, 135 A.3d 828 , 834 (2016) (cleaned up). Here, the Tax Court explained that TG § 7-309(b)(6)(i) does not bar the Comptroller of the Treasury, Petitioner/Cross-Respondent, "from assessing an estate tax deficiency on the transfer of QTIP" because, under TG § 7-301(b), a Maryland estate is the same as "the federal gross estate[,] as increased by any property not otherwise included in the federal gross estate that is deemed to be included pursuant to" TG § 7-309(b)(6).

(Emphasis in original). I agree with the Tax Court's interpretation of TG § 7-301(b). Like TG § 7-301(b)'s plain language, TG § 7-309(b)(6)(i)'s plain language establishes that TG § 7-309(b)(6)(i) does not preclude the Maryland estate tax from applying to a Maryland resident's interest in a QTIP trust that was created in another State. TG § 7-309(b)(6)(i) states in pertinent part: For purposes of calculating Maryland estate tax, a decedent shall be deemed to have had a qualifying income interest for life ... with regard to any property for which a marital deduction [QTIP] election was made for the decedent's predeceased spouse on a timely filed Maryland estate tax return under [ TG § 7-309(b) ](5)[.] In turn, TG § 7-309(b)(5)(ii) states: "An election under this paragraph made on a timely filed Maryland estate tax return shall be recognized for purposes of calculating the Maryland estate tax even if an inconsistent election is made for the same decedent for federal estate tax purposes." Read together, TG § 7-309(b)(6)(i) and (b)(5)(ii) simply mean that, where "a marital deduction [QTIP] election was made for the decedent's predeceased spouse on a timely filed Maryland estate tax return[,]" TG § 7-309(b)(6)(i), the decedent's interest in the QTIP trust is subject to the Maryland estate tax-regardless of whether the decedent's interest in the QTIP trust is also subject to the federal estate tax, see TG § 7-309(b)(5)(ii).

TG § 7-309(b)(6)(i) and (b)(5)(ii) make clear that, even if a Maryland resident's interest in a QTIP trust is not subject to the federal estate tax, it is nonetheless subject to the Maryland estate tax if the QTIP election was made in a timely filed Maryland estate tax return. Nothing in TG § 7-309(b)(6)(i) and (b)(5)(ii) indicates that the Maryland estate tax does not apply to a Maryland resident's interest in a QTIP trust that was created in another State. Stated otherwise, although TG § 7-309(b)(6)(i) and (b)(5)(ii) establish that the Maryland estate tax applies to a Maryland resident's interest in a QTIP trust if the QTIP election was made in a timely filed Maryland estate tax return, TG § 7-309(b)(6)(i) and (b)(5)(ii) do not state or imply that that is the only circumstance under which the Maryland estate tax can apply to a Maryland resident's interest in a QTIP trust. In short, TG § 7-309(b)(6)(i) and (b)(5)(ii) do not, in any way, contradict TG § 7-301(b)'s edict that all of a Maryland resident's property that is subject to the federal estate tax is also subject to the Maryland estate tax.

This interpretation of TG § 7-301(b) and TG § 7-309(b)(6)(i) and (b)(5)(ii) squares with this Court's practice of harmonizing statutes that "appear to apply to the same situation[.]" Blackstone v. Sharma , 461 Md. 87 , 142-43, 191 A.3d 1188 , 1221 (2018) (citation omitted). Unlike the majority and concurring opinions, the dissent takes the position "that Maryland lacks the power to tax a [ ]QTIP[ ] trust that was never claimed on a Maryland tax return." Dissent Op. at 109-10, 213 A.3d at 648. The dissent does not reach this conclusion by simply interpreting the plain language of TG § 7-301(b) or TG § 7-309(b)(6)(i) in a different way than the majority and concurring opinions do. Instead,