WVILL WILSON

AlTORNEYG~NERAL October 10, 1961

HonorableRobert S. Calvert OpinionNO. ~~-1160 Comptroller of PublicAccounts Capitol Station Re: Exemption from inheritance Austin, Texas tax of devise to Shriners Hospitals for Crippled Childrenunder submitted Dear Mr. Calvert: facts.

In connectionwith your request on the above-captioned matter, you have advised us of the following facts. L. Alberta Watkins and her husband, who predeceasedher, had executed a joint andmutual will. Paragraphs 3 and 5 of this will read
as follows:
“3. In case of a common disaster of

the undersigned testators causing the death of each of us, then,,in that event, we jointly and severallydevise and bequeath all of the property,whether real, personal or mixed of which we,may die seized and possessed to Shriners Hospital for Crippled Children,a Corporation, for the use and benefit of the hospitals owned, operated, and maintainedby said Corporation. 8,

. . . “5. In case either testator survives the other, but makes no other or later will, then In such event, the estate of such survivor shall pass under and according to the program of distribution set forth in numerical Paragraph Three above."
Article 14.06, Title 122A, 20-A, Tax.-Gen.,Vernon's Annotated Texas Statutes,provides an exemption from inheritance taxes for transfers to charitableorganizations if such charitable organizationsare to use the gift within this State. Article 14.06 also contains the following furtherprovisions for exemption which reads as follows:

"Provided, further, that If the property
so passing is to or for the use of aHonorableRobert S. Calvert, Page 2 OpinionNo. ~~-1160

religious, educational, or charitable organizationwhich conducts its operations
on a regional basis, one such region of which includes the State of Texas, or any part thereof, then a bequest, devise or gift to be used within such region shall be'deemed to be'used within this state.

"Forpurposes of thisparagraph a region shall comprisenot more than five contiguous states, either in whole or in part, one of which is the State of Texas."

The Attorneys for Shriners Hospitals for Crippled Children have suppliedyou with certain informationwhich they deem pertinent in the determination of the taxability of the devise in question and which is offere~d in support of theirposition that said devise Is exempt from an inheritancetax. We quote the following excerpt from the letter submitted to you in connectionwith thismatter.

"ShrinersHospitals for Crippled Children is a wholly charitable corporationorganized pursuant to the laws of the State of Colorado. This organization,ownsand operateshospitals for crippled children located in different parts of the country; one such hospital being located in Shreveport,Louisiana,which services the region of Texas, Arkansas, Mississippi, and Alabama. In other words, crippled children of parents financially unable to supply needed orthopedic care, hospitalizationand surgical treatment from the statesmentioned are admitted for treatment at our Shreveport, Louisiana,hospital entirelywithout cost. Over the years since
our hospitals have been in existence,many crippled children from the State of Texas have been admitted for treatment at a cost of many thousands of dollarswhichmight otherwisehave been spent in treating such children in public institutionswithin the State of Texas.
"ShrinersHospitals for Crippled Children have always been affiliatedwith the Imperial Council of the Ancient Arabic Order of the Nobles of the Mystic Shrine of North America,HonorableRobert S. Calvert, Page ~3 OpinionNO. ~~-1160

a fraternal order. The 'charitablecorporation was organized tomoperate the hospitals which administer the charitablework of the Shrine fraternal order. The Shrine is operatedunder the so-calledLodge System form of government,which means~that Shrine Temples are charteredby the parent body and are~located throughout the country. Eleven such Shrine Temples are located in the State of Texas, one such templebeing in Austinand another in Dallas, where the Watkins estate Is being administered. The other temples are at Amarillo; El Paso, Wichita Falls, Fort Worth, San Angelo, San Antonio, 'Waco,Houston and Galveston. The members of the Shrine fraternal ordermake annual payments toward the operation and maintenance of Shriners Hospitals for Crippled Children and the various Shrine Temples are responsible for locating and processing crippled childrenwho are eligible for admission to our hospitals. The Shrine Temples also provide transportationfor the children to and from the hospitals and assist inmany other ways ,infurthering the charitable endeavors of the organization.

II

. . .
"As indicatedabove,-thefunds to be received by Shriners Ho~spitals for Crippled Children from the estate of L. Alberta Watkins will be used at the Shreveport,Louisianaunit of Shriners Hospitals for Crippled Children for the care and treatment of crippled children from the State of Texas. An affidavlt to such effect over the signature,ofone of our corporate officerswas to have been attached to the inheritance tax report.

. .'

The submittedaffidavitwas signedby George M. Saunders, Secretary of the Shriners Hospitals for Crippled Children. The substance of the affidavit Is that George M. Saunders is the Secretary of.the Shriners Hospitals for Crippled Children and that, as such officer,he ~1sauthorized tomake the statements contained In .theaffidavit on behalf of the Shriners Hospitals. These,,statcments :are to theeffect that the Shriners Hospitalsfor Crippled Children is a charitableHonorable Robert S. Calvert, Page 4 OpinionNO. ~~-11.60

Colorado corporationowning and operatinghospitals for Crippled Children throughout the country and providing care for children of parents financiallyunable to provide such
care. He states that the Hospitals are administeredand operated on a regional basis and that one suchhospital unit is located at Shreveport,Louisiana, and is known as the Shreveportunit of Shriners Hospitals for Crippled Children. He states that children from,,the State of Texas are treated there and that it is hereby

. . .stipulatedand agreed that the funds and/or assets received by Shriners Hospitals for Crippled Children from the estate of L. Alberta Watkins will be expended exclusively for the care, surgery,hospitalization and treatment of crippled childrenwho are residents and domiciliariesof the State of Texas at the Shreveport, Louisiana,unit of said ShrinersHospitals for Crippled Childrenwholly without charge;.

. ,'

Attached to the affidavit is a copy of a resolution adoptedby the Board of Directors of Shriners Hospitals for Crippled Children at a regularmeeting held in Miami, Florida,
on June 15, 1961. This resolutionprovides, in part, that, among other officers, the Secretary J.s authorized,directed and empowered in the name and in behalfof ShrinersHospitals for Crippled Children, a Colorado corporation,to take certain enumerated legal steps. Paragraph 3 of the resolution reads
as follows:

"Tomake and execute all necessary contracts

and documents affecting the property of Shriners Hospitals for Crippled Children, and otherproperties of the corporation;"
Paragraph 9 reads as follows:

"Tomake and execute any and all papers and documents as may be necessary from time to time to comply with the laws ofthe state in which any of the properties of the corporationmay be located for the purpose of protecting and safeguarding the same;" Paragraph 10 reads as follows:

"Tomake and execute such agreements, papers and documents as may be necessary from time to time to settle any controversies
over the properties of the corporation,or such suits asmay be pending affecting the properties of the corporation,and as mayHonorableRobert S. Calvert, Page 5 OpinionNo. ~~-1160

be deemed necessary. ‘forthe’

protectionbf the proparties of the corporati,on;”

Tha foregoing facts clearly satisfy the requirements of the statute. The limitationas to the use and expenditure of the devise is in no way lnconsistantwith the terms of the will. The Secretary of Shrlners Hospitals for Crippled Chlldren is plainly authorized to so bind the corporation. The regional operation of the Shriners Hospitals for Crippled Childrenwithin the states of Texas, Arkansas,Mississippi and Alabama meets the statutoryrequirement that the region shall comprisenot more than five contiguous states, either inwhole or In part, one of which is the State of Texas.

In Attorney Qeneralls,OpinionNo. W-1141, the following statamentappears in connectionwith the proper construction of the statutoryprovisionhare under consideration:

II .TheLegislaturedid not see fit to pr&ide any yardstick for measuring the amount of baneflts which this State should receive from the charitableorganization operating on a regional basis; yet it Is avident that tha Legislaturedid not intend to accord an exemption for all charitable, bequests, devises or gifts since this regional axemptlonprovision is limited to regions of not more than five contiguous states, either In whole or in part; one of which is the State of Texas. Therefore,necessarily the statute contamplates that this State receive
some teneflt bafore exemptionwill be allowed

. . . The “benefitstast” establishedby Opinion No. NW-1141
as determinative of exemptionhas been mat in this case by Irrevocably committing the devise In question for the use and benefit of the crippled children of this State. You are, tharefora, advised that the devise Is exempt from an inheritance tax.

SUMMARY

A devisa to Shrlners Hospitals for Crippled Children, a Colorado charitable corporation, is exempt from an inherltanca tax undar Article 14.06, 20-A, Tax.-Gen., V.A.T.S., by vlrtua of the corporation’sHonorableRobert S. Calvert, Page 6 OpinionNo. ~~-1160

regional operation in the states of Texas, Arkansas,Mississippi, and Alabama and by its irrevocable commitmentof the devise for the use and benefit of the crippled children of this State.
Very truly yours,

WILL WILSON Attorney General of Texas

Assistant

MMP:lmc

APPROVED:

OPINION COMMITTEE: W. V. Geppert, Chairman

Henry Braswell Tom Burrus Linw~ard

Shivers

REVIEWED FOR THE ATTORNEY GENERAL By: Houghton Brownlee, Jr.