### 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: Youhave advised us of the following facts. Thomas E. Braniff died testate devising andbequeathing to The Braniff Foundation 

### 199,476shares of stock in Braniff Airways, Inc. The stock has been valued for inheritance tax purposes at 

### $1,324,364. Thewill places no geographical limitation upon the Lxpenditure of this gift. Neither the charter nor the by-laws of the corporation in anywaylimits 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 beworld-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 dueunder the provisions of Article 7122, Vernon’s Civil Statutes.

Mr. Braniff died onJanuary 10, 

### 1954. Atthat 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 anvother person or religious, educational or charitable organization or institution, or to anyother person, corporation or association not included ln any of theHon. Robert S. Calvert, page 2 (S- 222 )

classes mentioned in the preceding portions of the original Act.

. ., the tax shall be:

‘1.

. .

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

“Provided, however, that this Article shal;b not oalv on Dobertv we: to or for the use pf tte United &ates or -religious,- tional or charitable o-when such beSIUst. 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 

### 198S.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. Nolimitation as to usewas expressed in thewill. The Presbyterian Church in the United States operates In many states (including Texas) andforeign countries. “Therefore,” said the Court at pages 282, 283, “at the time of the death of Mrs. Manley, there wasno inhibition or limitation of anykind to the use of said bequest by said Churchwithin 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 andthrough its proper officials, satisfied the St&e-of Texas andits 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 dowith the property as it sawfit andcould use it in Texas or for the Church activities in any State or in foreign countries. Since the property passed to the Churchupon the death of the testatrfx without limitation as towhere it was to be used, the Court stated that this was the “character of succession or passing of property to areligious organization that the

. . . statute expressly seeks to tax.” Thefact that the governlng authorities of the Church had agreed to use the gift only in Texaswas not regarded as material. TheCourt pointed out that the Legislature had provided no form or methodbywhich the taxing authorities might ascertain whether alarger or lesser use maybe madeHon. Robert S. Calvert,. page 3 ..(,+..?22,, )

of the property by the devlsee,~pr legates I.&,order to secure an exemption; andthat thenquestionof 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 adevise 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 sameprovlsion.oS Articles 7122, is G.A.C. Halff Foundation v. Calva, 

### 281S.W.2d 

### ,178(Tex.Clv.App., 

### 1955,error ref., n.r.e.1. In this latter case the will gave certain namedtrustees 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 moreof enumerated charitable purposes. After thendeath of the testator, the G.B.C. Halff Foundation was formed by the surviving testamentary trustee; andthe use of the Foundation’s property was restricted by its charter to usewithin the State .oSTexas. At page 

### 1.80

the Court said: , II

. It has been decided that abequest to a ci&itable organization authorized tc operate generally throughout the Un,itedStates and foreign countries is not exempt:under the.exceptions contained in Article 7122, whenthere is noprovision in the will restricting the use of the bequest to the State of Texas.~-Presbyterian Church in United States v. Sheppar$,,Tex.Civ.App., 

### 198S.Y.2d 

### 282.

...” The Court held that the will had.,creked amandatory power of appointment andthat under the doctrine of “relation back” title passed directly from the testator to the appointee Foundation as of the effective date-~ of~~thewill. The situation, said the Court at page 

### 183,‘I.,

. . insofar as inheritance tax liabil~ity is concerned, 1s:the sameas,lS the testator in his will haddesignated ~the”G.kLC.‘~HalfS Fo~jujdationas the devisee of one-half OSthree-eights of the residue of his estate o 1Simes, Future Intere’sts;, %2;’ g253.,’ Asthe Foundation by its charter iarestricted to ’Tex& charitle’s, the devise comeswithin 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 4: 8

‘1.

. . that the will of G.A.C. Halff, deceased, vested In said HughA. L. Iialff a special power of appointment to anentity which was required to makecharitable 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 hadbeen namedin 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 donot assert the existence of apower 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, andupon the proposition that the corporate stock, the subject matter of the bequest, has an actual situs in Texas andis the property to be used within this State.

We cannot agree with this position in view of the aecisions in the andu cases. As stated In the Balff case at

1’

. . 7122pro&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 whensuch bequest, devise or gift is to be usedwithin this State. t The Legislature has thus decided that the greater good maybe served by exempting certain property from taxation, considering the use to which it is dedicated. Ause of orooertv which

at aublic exaense. or ause thereof which fulfjJJ& or aCCOtUDlishes the m acceot& charitable Q lectives of the oeoole of the State, is e qg b rc - njzed as a orooer subSect of tax wtion bv SDQcific leg&slat ive enactme& ll

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

Wethink. th,at only actual use for charitable purposes within this State:will all.evlate a.buF’denwhich 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.

Themost recent amendmentto Article 7l22 evidences a legislative intent to continue the requirement of actual use for charitable purposes within this State. Asamended, 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, whensuch 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 anybequest, devise, or gift to or for the use of the United States, or a religious, educational or charitable organization, which is, in writing andprior to the paymentof 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 andadded a method of obtaining exemption by so restricting the use of charitable gifts subsequent to the incidence of the tax.

Youare therefore advised that no exemption can be allowed in this case andthat the bequest is subject to tax at the rates stated in Article 7122.

Bbequest to aTexas 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: JORIiREiNSHEPPERD Attornes General W.V. Geppert Taxation Division Mert Starnes Reviewer Elbert M.Morrow Reviewer L. W. Gray Special Reviewer Davis Grant First Assistant John BenShepperd Attorney General W:wb BYMarietta McGregor Payne Assistant

.