**May 14,**  **1956**

Hon. Robert S. Calvert Comptroller ofPublic Accounts Opinion No. S- 198 Capitol Station **Austin,** Texas Re: fnherttance tax ltabiitty of bequests to

### certain foreign charitable corporations. Dear 

### Mr. Calvert:

**We** quote thefollowing excerpts from **your le;tter**  requesting our opinion on the above-captioned matter.

‘C. Ii. Seabrook died January 30; 1953, a resident 

### ofTexas, Leaving awill which. after several specific bequests, provides thathis estate shall go toThe Mercantile National Bank, Dallas, Texas, as trustee. The income is tobe paid 

### to the wife for life. On her death the property in the hands of the **trustee** is tobe transferred to the following named religious, educational and charitable organizations: -Principia College, Elsah, MO.; Christian Scientist Benevolent Association, SanFrancisco, Cal.; Christian Scientist Benevolent Association, Boston, Mass.; Pleasant View Home for the Aged, Concord, N.H.; First Church of Christian Scientist, Dallas, Texas; Scottish Rtte Hospital for Crippled Children, Dallas, Texas.

‘Decedent’s wife died about 8months **after** his death. The trustee has reduced the trust to cash and has delivered the shares to the respective beneficiaries. The trustee held a sufficient amount ofeach payment to pay the inheritance taxes proposed by theState Comptroller.

‘The trnstee at the time of delivery to each beneficiary had each tosign a commitment or statement to the effect that the bequest would be used inTexas.

## 88

Hon. **Robert** S. 

### Crlvert, page 2 (Opinion No. S-198)



### “Inconnection with the 

### transfer bythe trustee ofthe trust property to the beneficiaries, decedent’s will provides as follows:

*‘It shall **be**the duty of **the**trustee in any such transfer to condition the same by a provision that tbe gift 

### or gifts 

### are tobe used within the State of

’.Texas. 

### There shall be noduty 

### or obligation on the trustee to see thatthe 

### terms of the aforementioned conditions 

### are fulfilled or tofurther concern ttseif with the trust properties and the use 

### thereof after said transfer has been made.’

‘The Comptroller concedes that the last two names beneficlar ies above are exempt **from** lnherltancc tax as they **are** religious, educational or charitable organisatioas organised under the laws of the State ofTexas and the bequests will be used inTexas,

“The Comptroller contends that thefirst 

### four named organizatlons are dus an inheritance on their bequests because:

‘( 1 They are foreign corporations, *(21That such bequests onaccount of the location of the organizations cannot be used in Texas. l We **are** inreceipt of photostatic copies of the charters of the Christian Science Benevolent Association onPacific Coast, Christian Science Benevolent Association and The Christian Science Pleasant View Home, Like-. wise, each of these corporations has furnished uswith a certified copy of a resolatlon passed by the trsstees of the respective institutions. These resolutions insubstance state that the bequest will be held in trust in afund tobe known as the ‘Cbar.les H. Seabrook Fund’ which shall 

### be available only for use in the State of Texas for purposes COMiStent with the charitable purposes of the 

### respective institutions, including specifically gifts 

### to individuals wtthin the State ofTexas for care by Christian Sclencc nurses and Christian Science practitioners, living expenses andother charitable purposes.

We have received from the Principia Corporation a photos’tatic copy of its char&r and a certified copy ofa resolution duly executed by said corporation, under tie terms ofwhich the corporation accepted its legacy in accordance with the terms of the

### will requiring that the Legacy be used in this State and dedicated said legacy to a**fund**tobe 

### known as the *Seabrook

## 59

Hon. Robert S. Calvert. page 3 (Opinion No. S-198)

Fund” to be used within this State for purposes consistent with the charitable purposes of the Principia Corporation, including specifically gifts to individuals within the State of Texas for educational expenses, scholarships and other charitable purposes.

In McIntire’s Estate, 34 Pac. 2d432 (Wash. Sup. 1934). the case cited in

### your request, the court was concerned wlth exemption under thefollowing provision of thaWashington statute:

‘All gifts, bequests, devises and

### transfers of property situated within or under thejurisdiction 

### oftheState ofWashington shall be exempt from the payment of any Inheritance tax, when the same are for one of thefollowing charitable purposes. , . Provided, That all such gifts, bequests, devises and transfers be limited for use within the State of Washington’ The bequest lnquestion was to the Congregational Board of Ministerial Relief, a Connecticut corporation, in trust for thebenefit of needy ministers of the Congregational Church in the State ofWashingtonand their widows.The majority opinion held thatonly domestic corporations could qualify for exemption, saying, at page 434, that ‘the bequest itself must go outof this state into the state of Connecticut to be used inthat state by the foreign corporation to produce the income provided by thewill.”

Three judges dissented. We quote the following excerpt from thedissenting opinion:

‘If the bequest in this case was to ‘the Congregational Board ofMinisterial Relief, a corporation organized under the laws of the state of Connecticut in 1907,’ without limitation or qualification. the majority opinion would be correct, but the will provides that thebequest shall constitute a ‘trust for the uses and purposes and upon theterms herein set forth, to-wit: ***********+***t+

-‘The said fund is to be invested and reinvested by the said Board, and its income only shall be used toassist in the support andmaintenance of aged, needy and dependent ministers ofthe Congregational Church inthe State ofWashington and their widows; it being my intention that this bequest to the Congregational Board ofHon. Robert S. Calvert, page 4 (Opinion No. S-198)

Ministerial Relief shall be limited for use within the State ofWashington and shall be granted for the relief of only such aged, needy and dependent ministers and their widows as may be actually resident within said state.’

‘It cannot be said that the gift was for the benefit or maintenence of aforeign charity, or to be used even partly in itsjarisdiction, but through such charity for use only in this state, This limitation distinguishes this case from the aathorlties cited in the majority opinion, as I understand them, andbrings Itwlthin the terms of our statute.* In re Thomas’ Estate, 53P. 2d 305 (Wash. Sup. 1936) held that abequest to ‘Salvation Army of Spokane’ for charitable **uses** was notexempt from inheritance tax where donee 

### was a California corporation authorized to do business in the State ofWashington, The court said that the state hadno visitorial power enabling it to enforce compliance with will’s direction that the property be used in theState of Washington.

The judge who wrote the majority opinion pointed out that hehad concurred in the dissent in

### the McIntire case butthat it mast nowbe regarded as theestablished rule. Onejudge concurred solely for the same reason and onejudge dissented.

Obviously all of the cases which have passed onwhether charltable bequests toforeign corporations 

### are exempt are bottomed on the particular statutory provision involved. See Annotations in 168A.L.R. 1260n and 108A.L.R. 300n.

The first Texas Inheritance Tax Act1 exempt property passing to *any public corporation 

### or charitable, educational or religious organisation within this State when such bequest, gift or devise 1stobe used for charitable, educational or religious purposes within this State

. , .- (Emphasis supplied throughout.)

In 1923the exemption provision was amended and subjected charitable devises totax ifproperty passed to y . . . any religious, education. or ,charitable organization, located without the State of Texas, or to any religious, education or charitable organization located in the State of

1General Laws, 30th Leg., 1st C. S., 1907, ch. 21, p. 496.Hon. Robert S. Calvert, page 5 (Opinion No. S-198)

Texas,.

. .andthe bequest is to be used without this State

. . .r2

In 1927theabove quoted section was again amended and an exemption-was provided **for** property valued at less than $25,000.00 tfthe property was devised to a charitable organization ‘located within this state’ and to be usedwithin the state. Property in excessof $25,000.00 in **value** was subject to tax.3

In 1931the Legislature passed House Bill 741,4 the pertinent portions ofwhich 

### are the following.

‘If passing to
. . . any religioas, educational or charitable organization 

### or institution located without the State ofTexas, **or** to any religious, educational or chariw organization or institution located inthe State of Texas or to the United States, and the bequest, devise **or** gift is to-be used without this State,

. . . the tax shall be

. . . The above quoted provision was construed inSanJacinto Nat. Banlcv. Sheppard, et al, 125S.W. 2d 715 (Tex. Civ. App. l-9). The court heldted’ as used in the statute was used by the Lexislature inthesense of domicile or residence of a corporation and not only to distingulsh generally aforeign from a domestic corporation but to require that even a domestic corporation, in order to claim amore favorable exemption, must use the devise or gift within the state.

At the date of the death of the decedent inthe instant case, Article 7122, Vernon’s Civil Statutes, had again been amended.5 The pertinent provision reads as follows:

‘Provided, however, that this Article shall not apply on property passing to or for the use of

. . . any religious, educational or charitable organization when such bequest, devise or gift is tobe used within this State.’

2Acts, 38th Leg., 2d Called Sess., 1923, ch. 29, PP. 63, 85. 3Acts, 40th Leg., R. S.. ch. 62, p. 87. 4 Acts, 42nd Leg., ch. 72, p. 109. 5Acts, 43rd Leg., R. s., 1933, ch. 192, pp. 581, 592.Hon. Robert S. Calvcrt. page 6 (Opinioo No. S-198)

The above quoted portion of the statute was construed in Presbyterian Church in the U. S. v, Sheppard, 198S.W. 2d 282 (Tex. Civ. App. 1946, error 

### ref., n.r.e.). Inthat 

### case& bequest in question was to ths Presbyterian Church in the United States. No limitation 

### asto use was expressed inthewill. It was stipulated that thePresbyterian Church :through its proper officials had satisfied theState of Texas and its proper officials that said Church had Legally obligated itself by action taken subsequent to thedeath of the decedent to use the bequest in its entirety within the State ofTexas. The court held that the bequest was subject to tax upon the date ofthe death of the decedent and that the subsequent agreement on the part ofthe Church could not effectuate exemption, At page 284 the court said: Y

. . . The will contained no language limiting or directing that the devisee church use the property in Texas only, and under **no** rule of construction can the will be construed as showing the intention of testatrix to require that the property be used only in Texas.

. , * Thus the property passed to appellant church upon the death of testatrix without limitation, restriction or reservation as towhere or inwhat manner itwas to be used. It is this character of succession or passing ofproperty to areligious organization that the foregoing statute expressly seeks to tax.” Although the question was notbefore the court, the clear implication of theforegoing language is that had such limitation been expressed in the will, exemption would have been accorded even though the General Assembly, the governing body of the Church, was incorporated under the laws of 

### North Carolina.

The 54th Legislature again amended Article 71226 and it now contains thefollowing provision:

*Provided, however, that this Article shall not apply 

### on property passing

. , . to or for the use of any religious, educational or charitable organisation, 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 ofthis Article shall, without limiting its application under othe’r appropriate circumstances, apply to all or so much of any bequest, devise

6 Acts, 54th Leg., R. S., 1955, ch. 389, p. 

### 1032.Hon. Robert S. Calvert, page 7 (Opinion No. S-198)

or gtft to or for the use of

. . , areligious, educationalor charitable organization, which is, inwriting and pr.ior to the payment~of the tax, irrevocably committed for use excluslvely within’ the State ofTexas 

### or transferred to a religious, educational or charitable organization for use.exclusively within this State.’ The foregoing history of theTexas exemption provision shows thatsince 1933 the statute has omitted any reference to the location 

### ofthe charitable organization which receives agift or bequest. The controlling statute in this case allows exemption for property passing to *an
-8.í l charitable organization when such bequest, devise or gift la to e used within this State.. Exemptions to charitable organinations are bottomed uponthe fact that they render service tothe State for which reason theyare relieved of certain burdens of taxation. The will in this case expressly requires that the charitable bequests be used inthis State. The charitable donees have undertaken thebefore summarized guarantees that said bequests will be used in this State. You are therefore advised that the statutory requisites for exemption have been satisfied and that no inheritance taxes are due. SUMMARY

Bequests to foreign charitable corporations are not subject to inheritance taKes where will conditioned bequests upon corporations’ acceptance ofwill’s requirement that the bequests be used within theState of Texas andwhere corporations complied with this requirement.
APPROVED: W. V. Geppert Taxation Division Yours very truly, JOHN BEN SHEPPERD Attorney General of Texas
J. C. Davis, Jr. Reviewer J.Arthur Sandlin Reviewer L. W. Gray Special Reviewer Davis Grant First Assistant i,JohnBen Shepperd k.Attorney General ,~A.