TIIIE Amramwtm GENERAL 

OIF ??EXAS 

December 10, 1956 

Honorable Robert S. Calvert 

Comptroller of Public Accounts 

Capitol Station 

Austin, Texas 

Opinion No. S- 222 

Re: Imposition of inheritance taxes 

on bequest to Texas charitable 

eorporatioa not limited to carrying on Its charitable activities 

within the State. 

Dear Sir: 

You have advised us of the following facts. Thomas 

E. Braniff died testate devising and bequeathing to The 

Braniff Foundation 199,476 shares of stock in Braniff Airways, 

Inc. The stock has been valued for inheritance tax purposes 

at $1,324,364. The will places no geographical limitation 

upon the Lxpenditure of this gift. Neither the charter nor the 

by-laws of the corporation in any way limits the corporation’s 

charitable activities to the State of Texas. Since its organization, the Foundation has made contributions to organizations 

In other states and in foreign countries. The attorneys for 

the estate have advised us that the Foundation will continue 

to be world-wide in scope insofar as its charitable activities 

are concerned. 

You state that it has been the departmental practice 

in identical cases in the past to tax bequests of this nature. 

The attorneys for the estate have submitted a brief in support 

of their position that the bequest In question is exempt from 

Inheritance taxes. You request that we advise you as to whether 

any tax is due under the provisions of Article 7122, Vernon’s 

Civil Statutes. 

Mr. Braniff died on January 10, 1954. At that time 

the pertinent provisions of 4rtlcle 7122 read as follows: 

“If passing to or for the use of the United 

States, to or for the use of anv other person or 

religious, educational or charitable organization 

or institution, or to any other person, corporation or association not included ln any of the 
Hon. Robert S. Calvert, page 2 (S- 222 ) 

classes mentioned in the preceding portions of 

the original Act. . ., the tax shall be: 

‘1. . . 

“20% on any value in excess of $l,OOO,COO. 

“Provided, however, that this Article shal;b 

not oalv on D obertv we: to or for the use 

pf tte United &ates or -religious,- 

tional or charitable o-when such beSIU st. 

stkp 

devise or si t is to be used ithin I&& 

(Emphasis sipplied throughou: .) 

The leading case construing the underscored provisions of &ttcle 7122, as it then read is Presbvterian Church 

&I the U 6. v. gheooa a 198 S.W.2d 2$2 (Tex.Clv.App. 1946 

error reh. n.r.e.). 1: {his case the testatrix bequeathed &ehalf of her estate to the Presbyterian Church in the United 

States. No limitation as to use was expressed in the will. 

The Presbyterian Church in the United States operates In many 

states (including Texas) and foreign countries. “Therefore,” 

said the Court at pages 282, 283, “at the time of the death of 

Mrs. Manley, there was no inhibition or limitation of any kind 

to the use of said bequest by said Church within the State of 

Texas, and it was free to use said bequest anywhere that it 

chose .‘I 

Prior to the due date of the inheritance tax involved 

and prior to the assessment thereof, the “Church, by and through 

its proper officials, satisfied the St&e-of Texas and its proper 

officials that. . . said Church. . . ,&au legally obligated 

itself and said Church (by action taken subsequent to the death 

of the testatrix, Mrs. Manley) to use said bequest in its entiretx. . . within the State of Texas, for religious purposes, 

0 . . Exemption was then claimed under Article 7122. 

The Court refused to allow exemption stating that under the provisions of the will the devisee Church could do with 

the property as it saw fit and could use it in Texas or for the 

Church activities in any State or in foreign countries. Since 

the property passed to the Church upon the death of the testatrfx without limitation as to where it was to be used, the Court 

stated that this was the “character of succession or passing of 

property to a religious organization that the . . . statute expressly seeks to tax.” The fact that the governlng authorities 

of the Church had agreed to use the gift only in Texas was not 

regarded as material. The Court pointed out that the Legislature had provided no form or method by which the taxing authorities might ascertain whether a larger or lesser use may be made 
Hon. Robert S. Calvert,. page 3 ..(,+..?22,, ) 

of the property by the devlsee,~pr legates I.&, order to secure 

an exemption; and that then questionof whether exemption 

will be accorded must be determtied at the t~$me the tax is 

levied, i.e., the date of the aeath of the decedent. The 

Court iurther stated: 

“This, together, with the fact that all incidents of the tax are.aSSixed as of the date of 

the death of testatrix, clearly evidences the 

legislative intent to require that the limitation 

of the use of a devise in this State shall be expressed in the will.” 

Since the B case was decided, the only 

other case involving exemption of a charitable devise or bequest, under the same provlsion.oS Articles 7122, is G.A.C. 

Halff Foundation v. Calva, 281 S.W.2d ,178 (Tex.Clv.App., 

1955, error ref., n.r.e.1. In this latter case the will gave 

certain named trustees a.~portlon of the testator’s estate to 

be distributed to such corporation, assoc$ation or trust fund 

as said trustees might select for one or more of enumerated 

charitable purposes. After then death of the testator, the 

G.B.C. Halff Foundation was formed by the surviving testamentary trustee; and the use of the Foundation’s property was restricted by its charter to use within the State .oS Texas. At 

page 1.80 the Court said: , 

II 

. It has been decided that a bequest 

to a ci&itable organization authorized tc operate generally throughout the Un,ited States and 

foreign countries is not exempt: under the. exceptions contained in Article 7122, when there is 

no provision in the will restricting the use of 

the bequest to the State of Texas.~- Presbyterian 

Church in United States v. Sheppar$,,Tex.Civ.App., 

198 S.Y.2d 282. . ..” 

The Court held that the will had. ,creked a mandatory 

power of appointment and that under the doctrine of “relation 

back” title passed directly from the testator to the appointee 

Foundation as of the effective date-~ of~~the will. The situation, said the Court at page 183, ‘I., . . insofar as inheritance 

tax liabil~ity is concerned, 1s: the same as ,lS the testator in 

his will had designated ~the”G.kLC.‘~HalfS Fo~jujdation as the 

devisee of one-half OS three-eights of the residue of his estate o 1 Simes, Future Intere’sts;, %2;’ g253.,’ Asthe Foundation 

by its charter iarestricted to’Tex& charitle’s, the devise 

comes within the exception; of P-rticleJ’l22’” 1 

,~.~ : 
Hon. Robert 8. Calvert, page 4 (S- 222 ) 

It is therefore evident that the u case did 

not purport to overrule the presbvtu case. In addition 

to the portions of the opinion previously uotecl, the Court 

in concluding its opinion stated at page 1 8 4: 

‘1. . . that the will of G.A.C. Halff, deceased, vested In said Hugh A. L. Iialff a special 

power of appointment to an entity which was required to make charitable use of the property in 

accordance with its corporate purpose; that under 

the doctrine of ‘relation back’ the selection of 

the Texas charity, under the mandatory power expressed in the will, constituted selection by the 

testator as if the Foundation had been named in 

the will, so that at the time of taxable succession the bequest to the Foundation was exempt uuder Article 7122.” 

The attorneys for the estate do not assert the existence of a power of appointment in this case; nor do they 

represent that the Suture charitable activities of the Braniff 

Foundation will be limited to this State. Their claim for exemption rests upon the proposition that the Foundation is chartered under the laws of this State, and upon the proposition 

that the corporate stock, the subject matter of the bequest, 

has an actual situs in Texas and is the property to be used 

within this State. 

We cannot agree with this position in view of the aecisions in the and u cases. As stated In the 

Balff case at 

1’. . 

7122 pro&es 

The exception contained in Article 

that the schedule of taxes contained 

therein ‘shall not apply on property passing to or 

for the use of the United States or any religious, 

educational or charitable organization when such 

bequest, devise or gift is to be used within this 

State. t The Legislature has thus decided that the 

greater good may be served by exempting certain 

property from taxation, considering the use to 

which it is dedicated. A use of orooertv which 

at aublic exaense. or a use thereof which fulfjJJ& 

or aCCOtUDlishes the m acceot& charitable 

Q b lectives of the oeoole of the State, is rc e qg - 

njzed as a orooer subSect of tax wtion bv SDQcific leg&slat ive enactme& ll 

. . . . 
Hon. Robert S. Calvert, p&g% 5 (*..a22 3 

We think. th,at only actual use for charitable purposes within this State:will all.evlate a. buF’den which the 

State or its political subdivisions would otherwise necessarily bear at public expense and that this fact of actual 

use for charitable purpose~s’within this State, rather than 

the ‘domicile of the corporation or the situs of its property, 

is the determinative Sact l&allowing exemption. 

The most recent amendment to Article 7l22 evidences 

a legislative intent to continue the requirement of actual 

use for charitable purposes within this State. As amended, 

the pertinent provisions ‘of Article 7122 read as follows: 

“Provided, however, that this Article shall 

not apply on property passing to or for the use 

of the United States, or to or for the use of any 

religious, educational or charitable organization, 

incorporated, unincorporated or in the form of a 

trust, when such bequest, devise or gift is to be 

used. within this State. The exemption from tax 

under the preceding provisions of this &ticle 

shall, without limiting its application under other 

appropriate circumstances, apply to all or so much 

of any bequest, devise, or gift to or for the use 

of the United States, or a religious, educational 

or charitable organization, which is, in writing 

and prior to the payment of the tax, irrevocably 

committed for use exclusively within the State of 

Texas or transferred to a religious, educational 

or charitable organization for use exclusively 

within this State.” 

By allowing exemption for charitable gifts which will be used 

exclusively within this State even though at the death of the 

decedent the funds were not required to be so used, the Legislature in effect reiterated the requirement of actual use for 

charitable purposes within this State and added a method of 

obtaining exemption by so restricting the use of charitable 

gifts subsequent to the incidence of the tax. 

You are therefore advised that no exemption can be 

allowed in this case and that the bequest is subject to tax at 

the rates stated in Article 7122. 

B bequest to a Texas charitable corporation 

is subject to inheritance tax under Article ‘7122, 
Hon. Robert S. Calvert, page 6 (s- 222.) 

V.C.S., if the corporation 

the bequest for charitable 

State. 

. 

is, not required to use 

purposes within this 

Yours very truly, 

APPROVED: JORIi REiN SHEPPERD 

At t ornes General 

W. V. Geppert 

Taxat ion Division 

Mert Starnes 

Reviewer 

Elbert M. Morrow 

Reviewer 

L. W. Gray 

Special Reviewer 

Davis Grant 

First Assistant 

John Ben Shepperd 

Attorney General 

W:wb 

BY 

Marietta McGregor Payne 

Assistant 

.