### GENERAL TEEATI~TOR~-EY

QFTEXAS

HonorableRobert S. Calvert OoinionNo. c-8 * Comptroller of Public Accounts Capitol Station Re: Austin, Texas Whether intangible ;>r,operty belonging to a nonresidentalien but located in Texas is subject to inheritance taxes upon the nonresident:s death. Dear Mr. Calvert:

You have submitted the following of this office. request,for an oi;ini.on

."EloyS. Vallina was a non-resident alien who died testatea resident of the Ciudad of Chihuahua, Chihilahu~,

Mexico. The decedent during his lifetime had rented a safety depositbox from the El Paso NationalBank of El Paso, Texas, anti besi~des

a checking account In saidbank, the followingdescribed propertywas found in said box: CheckingAccount -El Paso National Bank, El Paso, Texas $ 13,867.81.

3608 Shares EI Paso National Bank, ElmPaso, Texas 96,480. OG Ecj;? Shares E! Paso National Bank, I<~!, Paso, Texas 53)520, no
600 Shares NorthgateNat?onal Bsnk, El Paso, Texas 28,7 ’~iG

.a3
Receint iLllO- 3% 31 Paso National B:nk

/I S&ings Certificate 50, ooc

.00

Certificete #31’, --$ Savir*gs Cert:ficaLr: c-f Ei Paso NationaLBank ~Looo, oc

"Plesse advise whether or not the above described proper,ty1-s

subject to the inheritancetax as provi.tied in Chapters 14 and 1~5of Titie lZ?A, T:seti:,n Gener,jl.

."

It is we'llsettIed that themoney on deposit, the shi!res of stock, :nd the savings certificates constitute intar@bl~e
-28-HonorableRobert S. Calvert, Page 2 Opinion No. c-8

personal pr0perty.l We will first considerwhether therehas been a taxable transferunder theprovisions of Chapter 14.

The pertinentprovisions of Article 14.01 of Chapter 14, Title 122A, 20A, Taxation-General,Vernon'sAnnotated Texas Statutes, are the following:

"Allpropertywithin the jurisdiction of this State, real or personal, corporate or incorporate,and any interest therein,

. . .whether belonging to inhabitants of this State or to personswho are not inhabitants,

. . .which shallpass absolutely
or in trustby will

. . . shall, upon passing

. . .be subject to a tax

. . . in accordancewith the following classifications; provided,however, that the tax imposedby this Chapter in respect to personal property of non-residents (other than tangiblepro erty having an actual situs in this State P-
shallnot be payable; (1) if the grantor/or donor at the time of his deathwas a resident of a state or territoryof the United States which, at the time of his death, did not impose a transfer or inheritance tax of any character in respect of personal property of residents of this State (other than tangiblepersonal pro erty having an actual situs in said State P; or, (2) if the laws of the State or territoryof the residence of the grantor or donor at the time of his death, containeda reciprocal provisionunder which nonresidentswere exempted from transfer or inheritance taxes of every character in respect to personalproperty (other than tangible personal propertyhaving an actual situs therein)provided the State or territoryof residence of such non-residents allowed

1 33 Tex.Jur. 936, Property, Sec. 3 and authorities cited therein.

1,

. . . Intangibles,consistingof rights not related to physical things, aremerely relations between persons,natural or corporate,which the law recognizesby attaching to them certain sanctions enforceable in the courts.

. . ." 42 Am.Jur. 194, Property, Sec. 11.

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HonorableRobert S. Calvert, Page 3 OpinionNo. C-8

a similar exemption to residents of the State or territoryof residenceof such
a grantor or donor. For thepurpose of this Chapter the Distr-Lct of Columbia and possessions of the United States shallbe consLdered territoriesof the United States. Provided further that theprovl.si.onl;

of this Chapter shall not a:pi

;y :;J.residents

of those states which V!ave

no inheritance tax law.

. . .I'
Siriitr Kay 23, li:j:f>,

w:wn the United States Slupreme Court abandoned its sfr!,:I:. d.!~i,th ax t:!heory,

whih had limited the right to tax i,ntangiti.l,e:‘; t::the decedent'sdomLcj.iiary state (exceptwheze such I.ntang~bl.es had acquired a permanent situs elsewhere), the law has been settled thatmore than one state may impose a'death taxmeasured by some or all of the taxpayer's intangibles if said intangibleswere to some extent protected and benefitedby the laws of the state imposing the tax

.;j In effect, the ta/;is regarded as the quid pro quo for suchprotection.

In view of the United States Supreme Court cases which have re-established the right of states to impose death taxes
on the transfer of intangiblesof nonresidents, therewould
seem to be no doubt about the right of this State to impose
an inheritancetax upon the receipt of intangibles l~ocated within this State but owned by a nonresident of the United States provided such Intangibleswere afforded protectionby

2 FarmerstLoan & Trust Co. v. Minnesota, 50 S.Ct. 98, 230 U.S. 204 (1430);Baldwin v. Missouri, 50 S.Ct. 436, 281 U.S. 586 (1930);Beidler v. South Carolina Tax Commission, 51 S.Ct. 54, 282 U.S. 1 (1930 First National Bank of Boston v. Mann, 52 S.Ct. 174, 28 ‘u~12.

3 Curry v. McCanless, 307 U.S. 357, 59 s.ct. 900 Graves v. El.liott, 307 U.S. 383, 59 S.Ct. 913 (1939 *Graves v. Schmidlapp, 315 U.S. 657, 62 S.Ct. 870 (1942);State'Tax Commission of JJtah v. Aldrich, 316 U.S. 174, 62 S.Ct. 1008 (1942).

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HonorableRobert S. Calvert, Page 4 Opinion No. c-8

the laws of this State.4 It is evident that this proviso is satisfied in the instant case. Having determined that'an inheritancetaxmight constitutionallybe imposedunderArticle 14.01,we pass to a consideration of whether the, reciprocal exemption provisions for intangiblesbelonging to nonresidents coversnot only nonresidents of the States and territories of the United States but also nonresidents of,the United States. The statute.itself specificaliy limits the reciprocal exemptionprovisions to residents

. . . of a state or territory of the United States" under specifically stated conditions,and furthers specifically provides that ".

. . the provisions of this Chapter shall not apply to residents of those stateswhich have no inheritance tax law. .I. ;I' cshmsmd). We think that the ulainl language of the statuteprecludes its applicability to nonresidents of the"United States or of a territoryof the United States. Ordinarily; the word "stat ' is not construedas inc1uding.a foreign,stateor country. 3

In the instant case,we are not presentedwith any problem of discrimination in taxation against residents of foreign countrieswhichmight be prohibitedby a treatybetween the United States and Mexico providing that no such discrimination should be made. We have, therefore,'notfound itnecessar,y to ascertainwhether this goverlvnent and the Government of Mexico have entered into any treaty agreementwith regard to

4 Even prior to 1939, the United States Supreme Court had held that the Federal Governmenthad the power to tax securities belonging to a nonresident alien when such securitieswere physicallypresent in the United States at the time of the death of the decedent. U.S. 378 (1933). Burnet v. Brooks, 53 S.Ct. 457, 288 Applying the reasoning of the Burnet decision the following cases upheld the rights of thmes involved to collect an inheritancetax on the transfer of intanaibles belonging to nonresidents of the United States. Estate Gf McCreery, 220 Cal. 26, 29 P.2d 186 In re 185 Wash. 61, 1269 (1936). (1934'); Lloyd's Estate,

52 P.2d

5 Eidman v. Martinez, 22 S.Ct. 5i5, 184 U.S. 578 (1902). In re Miller's Estate, 239 Wis. 551, 2 N.W.2d,256 (19&2),holds that the Wisconsin statutoryprovision exempting the transfer of nonresident decedent's intangiblepersonalproperty:from inheritance taxes, if like exemption is given Wisconsin residents by the laws of the state, territoryor district of such nonresidents,did not apply to property of nonresident aliens since the purpose of the statutewas tomeet the domestic problem ofmultiple taxationby the various states. ^'I._ -31-HonorableRobert S. Calvert, Page 5 OpinionNo. c-8

death taxes.

6 You are therefore advised that the intangible property described in your request is subject to the inheritance tax levied by Article 14.01.

We will next considerwhether any tax will ,accrue under the provisions of Chapter 15. Although this Chapter is entit ed "AlditLonalInheritanceTax"; it is in essence an estate tax.3

Article 15.01 levies a tax upon the entire net value of the taxable estate of a decedent situated and taxablewithin tk-,e sta-se ) the ta;Eto be equal to the differencebetween the _:uil ,ft,heinheritancetaxes due the State and "eightyper cent (80$) of the total sum of the estate and transfer taxes imposed
on such estate by the United States Government under theRevenue Act of 1926,by reason of the property of such estate which is situated in this State and taxable under the laws of this State.'!
Article 15.04 levies a tax in the full amount of the allowable 80% creditwhefje no State Inheritancetaxes were due by reason of exemptions.

Thus the amount of the tax is a fixed oercentaae of an amount whichmust necessarily first be determinedunder the ' provisionsof the Federal estate tax statutes. In State v. Yliess, 141 Tex. 303, 171,S.W.2d 848 (1943),the court held that the terms "netestate" and "grossestate" as used in Article 7144aYmust be given the &me meaning as they are given in the Federal Act in order to take full advantage of the Federal creditprovision.

6 In Nielson,Admr. v. Johnson, Treasurer, 49 S.Ct. 223, 279 U.S. 47 (1929),the court held that a,treatybetween the United States and a foreign governmentprevented discrimination in taxation against the resident of the foreign government.

7 Strauss v. Calvert, 246 S.W.2d 287 (Tex.Civ.App.1952, error ref., (1959) n.r.e.). Sinnott v. Gidney (Hold&g on this point li 159 Tex. 366, 322 S.W.2d 507 &ted to Section 4 of Article 7144a, presently carried as Article 15.04).
8 The 1954 Code reaches this result by providing that the basic estate tax and the estate tax imposedby the~Revenue~Actof 1926 shall be 125% of themaximum credit allowed against the Federal estate tax for state death taxespaid. 26 U.S.C., 8 2011(d). I.R.C., 1954, 8 2011(d),

g Controlling sections of Article 7144a now carried in Articles 15.01 and 15.05. -32:. -

HonorableRobert S. Calvert,, Page 6 i Opinion No. c-8

In view of the holding in the Wiess case, the determination by the Federal Government of whether the intangiblesunder considerationare included in the decedent'sgrqss estate will necessarily determinewhether any tax can arise under the provisions of Chapte,r15.

SUMMARY Intangiblepersonalproperty located in Texas and ownedby,.a nonresident alien is, upon the nonresidentalien'sdeath, subject to an inheritancetax under the provisions of Chapter 14,,Title 122A,.20A,,Taxation-General,V.A.T.S. The determinationby the Federal Government of whether:the intangiblepersonal property under consideration is included in the decedent's '~gross estate will necessarilydeterminewhether any tax can arise under the provisions of Chapter l.5,Title 122A, 20A, Tax.-Gen.,V.A.T.S.

MN?/jp

APPROVED:

OPINION COMFITTEE: W. V. Geppert, Chairman

Frank Booth Arthur Sandlin F. C. Jack Goodman Yours very truly,

WAGGONER CARR Attorney General of Texas

APPROVED FOR THE ATTORNEY GENERAL By: Stanton Stone

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INTER-OFFICECOMMUNICATION
Attorney General's Office

DATE: March 13, 1963.

TO: Stanton Stone.

FROM: W. V. Geppert.

SURJECT: Opinion No. c-8.

The InheritanceTax Act, as enacted in 1923, read as follows:

"All property within the jurisdictionof

this State, real or personal, corporate or incorporate, and any interest therein, whether belonging to inhabitants of this State or to persons who are not inhabitants,regardless of whether property is locatedwithin or without the State, which shallpassabsolutely or In trust by will or by the laws of descent or distribution of this or any other State, or by deed, grant, sale or giftmade or intended to take effect in possession or enjoyment after the death of the grantor or donor, shallupon passing to or for the use of any person, corporation or associationbe subject to a tax for the benefit of the State's general revenue fund in accordancewith the following classifications." (Emphasis supplied throughout.)

The InheritanceTax Act was next
as follows: amended in 1929 to read

"All property within the jurisdictionof this State, real or personal, corporate or lncorporate, and any interest therein, whether belonging to inhabitants of this State persons who are not inhabitants,regardless of whether property is locatedwithin or without this State,which shallpass absolutely or in trust by will or by the laws of descent or distribution of this or any other State, or by deed, grant, sale or giftmade or intended to take effect in possession or enjoyment after the death of the grantor or donor, shalluponpassing to or for the use of any person, corporation or association,be subject to a tax for the benefit of the State’s general revenue fund In accordancewith the following classifications:

The Statutewas next amended in 1939 to read as follows:

‘All property~

within the jurisdictionof this State, real or personal, corporate or incorporate, and any interest therein, includingproperty passing under a generalpower of appointment exercised by the decedent by will, including the proceeds of life insurance to the extent of the amount receivable by the executor or administratoras insurance under policies taken out by the decedentupon his
own life, and to the extent of the excess over Forty Thousand Dollars ($40,000)of the amount receivable by all other beneficiariesas insurance ;$e;ip~li,cies taken out by the decedentupon his

,whether belonging to Inhabitants of this. .

State regardlessof whether suchproperty is located wlthin or without this State; which-shallpass absolutelv or in trust bs will or bv the laws of descent or distributionof this"or any~ other state, or by deed, grant, sale, or gift made or intended to take effect in possession or enjoymentafter the death of the grantor or donor, or association, be subject to a tax for the benefit of the State's General Revenue Fund, In accordancewith the following classification.

. . .'

The Statutewas next amended in 1945 to read as follows:

"All property within the jurisdictionof this State, real or personal, corporate or incorporate, and any interest therein, Includingproperty passing under a general power of appointment exercised by the decedent by will, including theproceeds of life insurance to the extent of the amount receivable by the executor or administratoras insurance under policies taken out by the decedentupon his
own life, and to the extent of the excess over Forty Thousand Dollars ($40,000)of the amount receivableby all other beneficiariesas Insurance under policies taken out by the decedentupon his
own life, whether belonging to inhabitants of this State or to persons who are not inhabitants,regardless of whether suchproperty is locatedwithin or without this State,which shallpass absolutely or in trust bv will or bv the laws of descent br distributlon"ofthis or"any other State,
or by deed, grant, sale, or gift made'or intended to take effect in possession or enjoyment after the death of the grantor or donor, shall,upon passing to or for the use of any person, corporation, or association,be subject to a tax for the benefit of the State's GeneralRevenue Fund, in accordancewith the following classification: provided.however, that the tax imp{

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The Statutewas again amended in 1959 when adopted as Article 14.01, Chapter 14, in a New Title of the Revised Civil Statutes to be known as "Title 122A, Taxation - General". Sec. 1. Title 122A. The 1945Act was brought forward in the new title, without any changes, except the word "Article" and the word "Act" were both changed to "Chapter" so that it would conform to the New Title,.

Section 3 of the New Title 122A reads as follows:

"With respect to the provisions of this Act which tax transactions subjectto taxation by the State.prior to the effectivedate of this Act, thisAct shallbe consideredto be the equivalent of a revision by amendment even though it is in the form of an enactment of
new law and repeal of the old law. This Act shall be construed to make a substantivechange in the prior law only, where the language of this Act manifests a clear intent to make such
a change."

I have set out the pertinentprovisions of our inheritance tax statutesas enacted in 1923 and as amended in 1929, 1939, 1945 and 1959 for the purpose of showing the history of our inheritance tax statutesand the uniform and consistentdepartmental constructionplaced on the 1923Act and its amendments by the Comptroller of PublicAccounts, who is achargedwith the enforcement and collection of inheritancestaxes, and for the purpose of showing the constructionplaced upon the original act by the Lesiglature itself in the 1929 amendmentand the 1945Amendment.

I callyour attention to the,fact that the 1923Act and all of the amendments contain the following language:

"All property within the jurisdictionof this State, real or personal, corporate or incorporate,and any interest therein, whether

-4-belonging to inhabitants of this State or to persons who are not inhabitants,regardless of whetherproperty is located,withinor without this state,which shallpass absolutely or in trust by will or by the laws of descent or distributionof this or any other State."
Upon the passage of the InheritanceTax Act in 1923, the Comptrollerof PublicAccounts construed the above quoted language and the phrase "of this or any other state" to mean and include inhabitants of foreign counties. This constructionwas not questionedby anyone,Andyfrom 1923until the time of the 1929 amendment, all property, both real and personal, tangible and intangible, belonging to inhabitants of foreign countries but within the jurisdiction of this State, was, upon the death of the nonresident aliens, subjectto inheritance taxes.

The Supreme Court of Texas in speaking of departmental constructionhas stated:

"This long-continuedadministrativeconstruction is entitled to great weight, especially in view of the fact that the statutewas amended
as late as 1943 and the Legislature,which is presumed to have been aware of the interpretation, made no changes in the language that would indicate a contrary intent." S.W.2d 570 (1944). Burroughs v. Lyles, 181

The court in Crane v. Mann, 162 S.W.2d 117 (Tex.Civ.App.1942
error ref.) with reference to departmental constructionof this
same inheritancetax statute stated:

"Moreover, the State Comptrollerhas acted in accord with it for a number of years in collecting inheritancetaxes. The parties have incorporated in the record by agreement several opinions of the Attorney General which show since the year 1929 that departmenthas construed the InheritanceTax Statute to place the tax on the entire estate passing by virtue of the will regardless of any compromise agreement which permits a portion of the estate to go to a contestant. That departmental constructionhaving been acquiesced in by the Legislature of Texas formore than 12 years is of itselfpersuasive and should not be overturned in the absence of strong reason therefor."

When the Legislature in 1929 amended the InheritanceTax Statute it is presumed to have been aware of the interpretation placed thereon by the Comptroller and In the 1929Amendment made no changes in the language that would indicate contrary intent.

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In fact, it added the followingproviso which clearly reflects that it was either aware of the departmental constructionor placed the same constructionupon theAct itself by adding the following:
"Provided,however, that the tax imposed by

this Article in respect to personal property of non-residents (other than tan ible property having
an actual situs in this State'fshallnot be payable: (1) if the grantor or donor at the time of his death was a resident of a State or territory of the United States or of a foreign country which at the time of his death did not impose a transfer or inheritance tax of any character in respect of personal property of residents of this State (other than tangiblepersonal propertyhaving an actual situs in said State); or, (2) if the laws of the State or territory or foreign country of the residence of the grantor or donor at the time of his death, contai,ned a reciprocalprovision under which non-residentswere exempted from transfer or inheritance taxes of every character in :respectto personalproperty (otherthan tangible personal propertyhaving an actual situs therein) provided the State or territory or foreign country of residence of such non-residentsallowed a similar exemption to residents of the State or territorym foreign country of residence of such a grantor or Zionor."

If the Legislature itself had not interpreted the phrase "of this or any other state" as including foreign countries it would not have added the above proviso exempting residents of a foreign country frompay~ingthe inheritancetax on intangible property in the event the foreign country did not impose a transfer or inheritance tax in respect to personal property~ of residents of this State (otherthan tangiblepersonalproperty having an actual sltus in said state) and would not have provided that if the foreign oountry~ contained a reciprocalprovision as to Intangibleproperty that they~ would not have to pays the inheritance tax on Intangibleswithin the jurisdictionof this state. It would have been a vain, useless and nonsensical proviso. For example, if the Legislaturewould pass an act providing that the provisions thereof would only apply~to counties containing a population of 200,000 or more according to the last preceding Federal Census it would certainlynot then add a proviso to the effect that the provisions of the Act would n,ot apply to counties containing a population of ,20,000or under. During the period of time from the 1929Amendment to the 1939Amendment, the Comptroller, In enforcingand collecting inheritance taxes, ruled that all property, both real and personal, tangible and intangible, belonging to inhabitants of foreign countries,but

-6-within the jurisdictionof this State, was, upon the death of the

aliens, subject to inheritance taxes, except in those instances in which the aliens resided in 'a foreign country~, which, at the time of death, did not impose a transfer or inheritance tax of any character in respect of personalproperty of residents of this State (other than tangiblepersonalproperty having an actual situs in said State); or if the laws of the foreign country of the residence of the grantor or donor at the time of his death, contained a reciprocalprovisionunder which nonresidentswere exempted from transfer or inheritancetaxes of every character in respect to personalproperty (otherthan tangiblepersonalproperty having an actual situs therein) provided the ..*. foreign country of residence of such non-residents allowed a similar exemption to residents of the State or territory~ of residence of such a grantor or donor." This constructionwas consistentand uniform up until the time of the 1939 Amendment and was not questionedby any taxpayer.

The Legislature in its amendment in 1939 omitted the provisions as to the exemptions of intangiblepersonal property as well as the reciprocalprovisions. From the time of this 1939 Amendmentuntil it was next amended in 1945 the inhabitants of foreign countries as well as the inhabitantsof any state or territory of the United Statespaid the inheritance tax upon all their property within the jurisdictionof this State both real and personal, whether tangible or intangible.

In 1945 the Legislature amended this statute andmade it identicalwith the provisions of the 1929Amendment except in the following respects: (1)The Act of 1929 exempted intangible personal property of a non-residentwho was a resident of a state or territory of the United States "or of a foreign country"which did not Impose an Inheritancetax in respect to intangiblepersonal property. The 1945 Act omitted the phrase "or of a foreign country." !2) The Act of 1929 also provided that the provinces of the Dominion of Canada were to be considered foreign countries. The 1945Ac'tomitted thi& provision. (3) The AmendatoryAct of 1939 added the provision for inclusion of life insuranceproceeds. (4) The Amendatory Act of 1945 restored the provisos containing the reciprocityprovisions as enacted in 1929 but omitted therefrom reference to foreign countries.

The amendment in 1959 is in the identical language as used in the 1945Act except the 1959Amendment in one place changed the word "Article" to "Chapter" and in another place in the Act changed the word "Act" to the word "Chapter" to conform with the New Title 122A, Taxation - General. From the time this Act was amended in 1945,which restored the provisions containing the reciprocityprovisions but omitted therefrom the reference to foreign countries as contained in the 1929 Act, it has been the uniform and consistentdepartmental construction by the Comptroller that all property whether real or personal, tangible or intangible,within the jurisdictionof this State

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belonging to inhabitantsof foreign countrieswas subjectupon the passing upon the non-residents'death to the inheritance tax. This constructionhas not been questioned by any taxpayer and the taxes on intangibleshave beenpaid by inhabitants of such foreign countriesuntil it was questioned by the executor of the Estate of Elloy S.Vallina which was the occasion of our Opinion No. c-8. Upon the release of this opinion the executor of theVallina Estate paid the inheritancetax upon the intangibles and same has been paid into the State Treasury.

The Legislature in 1929 first added the followingproviso: "provided further that the provisions of this Act shall not apply to residents of those states whichhave no inheritance tax laws." This proviso followed the provisos containing the reciprocity provisions as to residents "of a state or territory of the United States or of a foreign country." It was the uniform departmental constructionof the Comptroller that the proviso quoted above which stated that the act shall not apply to residents of those stateswhich have no inheritance tax lawshad reference only to a state or territory of the United States and served to accord complete exemption as to all property owned by non-resident decedents the state of whose residencedid not levy any inheritance tax. It did not apply to or cover "foreign countries". This proviso, as well as the reoiprocltyprovisions,was omitted from the 1939 Act, but was again inserted in the 1945Act and the 1959Amendment, and was given the same constructionby the Comptroller as was given the provision as contained in the 1929 Act. We have previously quoted in full the provision of Sec. 3 of the 1959 Act, which expresslyprovided that the Act shall be considered to be the equivalent of a revision by amendment, even though it

**is** in the form of an enactment of a new law and repeal of the old law. We requote this express statement:

1,

....ThisAct shall be construed to make a substantive change in the prior law on1 -F when the language of this Act manifests a c ear intent to make such a~change."
The Legislature is presumed to have known of the constructiongiven by the Comptroller to the 1929 and the 1945Acts, and has acquiesced in such construction for a period of fourteen years. The 1959 Amendmentmade no change in the provisions of the 1945 Act.

The holding in our Opinion c-8 is in harmony~ with this departmental constructionand is in harmony with the holding in Attorney General's OpinionNo. o-6122 (1944),a copy of which is attached to this memorandum. As stated by our courts, this departmental construction is entitled to great weight. It has been consistent and uniform and has been acquiesced in by the Legislature for a longperiod of time and as stated in the Crane case, supra, such departmental construction "should not be overturned in the absence of strong reason therefor".

I am convinced that our opinion c-8 is legally~sound.

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