. ,

Honorable Robert S. Calvert OpinionNo, WW-1141

Comptroller of Public Accounts Capitol Station Re: Exemption from inheritance Austin,Texas tax of devise to an Oklahoma charitable trust Dear Mr. Calvert: under submitted facts.

You have requested that we adviseyou as to whether a devise to an Oklahoma charitable trust is exempt from an inheritance tax by virtue of that portion of Article 

### 14.06,20-A, Tax.-Gen., Vernon’s Annotated Texas Statutes,which reads as follows:

“Provided, further, that if the property so passing is to or for the
use of a religious, educational,or charitable organizationwhich conducts its operationson 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.

“For purposes of this paragraph
a region shall comurisenotmore than flve contiguous states, either in whole or in part, one of which is the State of Texas.

“For purposes of this paragraph,
a religious,educational,or charitable organization shall Include, but not be limited to, a youth program of physical fitness, character development,and citizenship training or like program.”

In connectionwith your requestyou have advised us of the following facts. CharlesMortbn Share,,hereinafter.:referred to as the decedent,died June 

### 13, 1959,a resident of Woods County, Oklahoma. By the residuary clause of his will, the decedent devised Texas real property, valued at 

### $596,361.00, to the “Charles. .

Honorable Robert S. Calvert, Page 2 OpinionNo. WW-1141

Morton Share Trust."

Prior to his death, the decedenthad created this charitable trust in the State of Oklahoma. The trust purposes, as stated in the Trust Agreement, are for general charitablepurposes. The Trust Agreement does not contain any geographical limitationson the expenditure of the trust funds; nor does it prescribe any particularmethod of geographical operation. On the other hand, there is no limitation in the Trust Agreement which would prevent the Trustees from conducting their operations
on a regional basis. Indeed, in addition to their general powers, the Trustees are specificallyauthorized to engage or employ any persons they may desire to engage or employ for the performance of any servicesto the Trust, including an Executive Director. The Trustees are also expresslyauthorized to erect such buildings
as they may deem advisable on real property in any location. Further,~theTrustees are authorized to execute all instruments necessary or proper for the accomplishmentof the purposes of the Trust. The Trust Agreement does contain the followingprovision in Section 2 of ArticleVI:

"This agreement is executedand delivered in the State of Oklahoma; the aitus shallbe in that State; and it shall be governed by, and construed and administeredin accordance with the laws of that State."

The Board of Trustees is required to file annual reports 'inthe District Court of Woods County, Oklahoma and furnish copies of said reports to the Attorney General of 'theState of Oklahoma.

The Board of Trusteeshave agreed to execute a Resolution for the purpose of complyingwith the provisions of Article 

### 14.06 ;a above quoted and obtainingan exemption from an inheritance tax. 'C,;, Specifically then, the questionwhich you have submitted to us is whether the Resolution, if executed*will effectuate exemption ; from an inheritance tax, The Resolution reads as follows:

"RESOLUTION OF THE BOARD OF TRUSTTES OF THE CHARLESMORTON SHARETRUST ADOPTED AT SPECIALMEETING HELD AUGUST -, 1961

"WHEREAS, CharlesMorton Share died testate on 3une 

### 13, 1959, and was a resident of the City of Alva, County of Woods, State of Oklahoma, at the time of his death and owned property situatedwithin the State ofHonorable Robert S. Calvert, Page 

### 3 OpinionNo. WW-1141

Oklahoma and the State of Texas and other states; and

“WHEREAS, the CharlesMorton Share Trust is the principalbeneficiary of the estate of CharlesMorton Share, deceased,under his lastwill and testament, and is the devisee and legatee of all property owned by the deceased stiuated in the State of Texas, togetherwith other property situatedin other states; and

“WHEREAS, the last will and testament of CharlesMorton Share,deceased,has been duly probated in Cause No. 3569 in the County Court of Woods County, Oklahoma, the decree of distributionhaving been entered by said Court on June 27, 1961, and saiddecree of distribution being now a final order; and

“WHEREAS, the property of the estate situatedwithin the State of Texas is
now subject to temporary administration proceedings in the County Court of Ochiltree County,Texas, Cause No. 793, and has a value of approximately Six Hundred ThousandDollars ($~oo$oo.oo); and

“WHEREAS, the said CharlesMorton Share Trust is an organizationestablished by the said CharlesMorton Share solely for charitablepurposes, as evidenced by a certain trust indenturedated June 12, 1959, andhereinafter referred to as the ‘Trust’and the Board of Trustees of which is-hereinafterreferred to as the ‘Board’; and

“WHEREAS, saidTexas property constitutes a substantialportion of the estate of CharlesMorton Share, deceased, and has received and will continue to receive the protection of the laws and government of the State of Texas and the Board therefore recognizes a moral obligation to expend and use said income exclusivelywithin a geographicalarea including the Stated..

Honorable Robert S. Calvert, Page 4 OpinionNo. NW-1141

of Texas to the end that said expenditures will effect a substantialbenefit to the people of Texas; and

“WHEREAS, In order to act upon Its desire to expend the Income from the Texas property within a geographical
area Including the State of Texas and for the additional~purposeof availing Itself ofa legal exemption frompayment of Inheritance taxes to the State of Texas under the provisions of Article 

### 14.06,Title 122-A, Revised Civil Statutes of Texas, said Board at a specialmeetingheld December 28, 1960, adopted a resolutationwhereby it irrevocably committed funds accruing to the Trust from the Texas property for charitableuse and expenditurewithin the geographicalboundarieaof a region composed of the States of Texas and Oklahoma and bound itself to keep books and records separatelyaccounting for the income derived from saidTexas property; and

“WHEREAS, administrationof the Texas property in Cause No. 

### 793 in the County Court of Ochiltree County,Texas, will be closed as soon as practicable after determination of the inheritance tax liability, if any, of the estate of Charles Morton Share,deceased, to the State of Texas, and whereas, on termination of said administrationproceedings the Texas property shallbe transferred to the Board and operations of the charitable trust will then begin on a regional basis within the region comprised of the States of Texas and Oklahoma; and

“WHEREAS,prior to the determination of the applicabillty~ of the provisions of saidArticle 

### 14.06,above referred to, the appropriate officials of the State of Texas have requested of the Board certain assuranceswith respect to its manner of operation of said.

Honorable Robert S. Calvert,Page 5 OpinionNo. WW-1141

trust on a regional basis 60 as to enable said officials to accurately determinewhether said estate of Charles Morton Share, deceased, is in fact exempt from the inheritance tax of the State of Texas; and

“WHEREAS, the Board desires to make said assurances to said officials of the State of Texas,

“NOW, THEREFORE, IT IS HEREBY RESOLVED:

“That not less than Five Thousand Dollars ($5,000.00)in any one flscal year during the period of ten fiscal years immediately following the commencementof regional operations nor in the aggregate not less than One Hundred Thousand Dollars ($lOO,OOO.OO)during suchperiod shall be expended and disbursedby the Board for charitablepurposes within the geographical limits of the State of Texas; and

“BE IT FURTHERRESOLVED that for the purpose of providing a convenient method for the appropriateauthorities of the State of Texas to ascertain whether compliancewith this Irrevocable commitment Is in fact beingmade, a copy of each of the annual reports required to be filed -inthe District Court of Woods County, Oklahoma, under the provisions of ArticleV of said trust agreement, shall be sent by certified or registered United Statesmall to the Attorney General of the State of Texas,

,,,,, ,,.

,,~.4 .nithln.

five (5) days after the date
on which each such report shall be filed in the District Court of Woods County, Oklahoma; and

“BE IT FURTHERRESOLVED that as soon as practicable after the commencement of regional operations the Board shall designate one ormore persons, residents of Texas, as ItsHonorable Robent S. Calvert, Page 6 OpinionNo. WW-1141

agent or agents for the purpose of according and facilitating contact with the Board) screening applications for benefits,making recommendations,and locally facilitating the disbursement of funds to charitable institutionsand facilities locatedwithin the State of Texas; and

“BE IT FURTHER RESOLVED that jurisdiction of saidTrust and its Board and venue for trial of any action at law or suit in equity which may be broughtby the State of Texas through its Attorney General or other appropriateofficial for any allegedviolation of the letter or spirit of this resolution shall lie, and by agreement is hereby vested, in any court of competent jurisdiction situatedwithin the boundaries of Travis County, Texas; and

“BE IT FURTHERRESOLVED that no donation or contribution in any form whatever shallbe made to any charitable institution or facility
nor shall any charitable facility be erected from funds created by the Texas propertieswhich excludes from its benefits,bounty or operation residents or citizens of the State of Texas because of such residency or citizenship.

“BE IT FURTHERRESOLVED that the appropriate officials of the State of Texas and particularly its Attorney General and Comptroller shall andmay relyupon the truth in fact of all recitations of facthereinabove set forth; and

“BE IT FURTHERRESOLVED that all terms of this resolution shall remain forever irrevocable;and. .

Honorable Robert S. Calvert, Page 

### 7 OpinionNo. WW-1141

“BE IT FURTHERRESOLVED that copies of the Trust Agreement dated June 12, 1959, the Resolution of the Board of Trustees adopted on December 

### 28, 1960, and of this Resolution, all duly certified as authentic copies, shall forthwith be furnished to the AttorneyGeneral of the State of Texas.”

At the outset, we are faced with the question of whether
a charitable organizationmust be operating on a regional basis at the date of the decedent’sdeath In order to be entitled to exemption. Since in that portion of Article 

### 14.06lwhich immediatelyprecedes the provisionswe are here considering, exemption is allowedwhere there is an irrevocable commitment for
use exclusivelywithin this State subsequentto the date of decedent’s death and prior to the payment of the tax, we have concluded that it would be inconsistentwith the spirit of the statute to require that the charitablebeneficiarybe operating on a regionalbasis at the date of the decedent’sdeath if regional operations are effectuatedprior to the payment of the tax.

The second question is whether the proposedResolution and the plan of operations set forth therein constitutes “operations on a regional basis”within the meaning of the statute. We think that the Legislativehistory of Article 

### 14.06,formerly~ Article 

### 7122,v.c.s.,is pertPnent to a determinationof this question. Prior to its amendment in 1955, Article 7122 had provided an exemption for propertypassing “to or for the use of any religious, educatlonal or charitable organizationwhen such bequest, devise or gift is to be used within this State.”

This provisionhad been construedby our courts as requiring the limitationto use within this State to be expressed in the will, even though the charitablebeneficiary Irrevocably committed the devise and bequest to use within this State subseuuentto the death’of the decedent and prior to the payment of-thetax. PresbyterianChurch In the U; S. v. Sheppard, 

### 198 S.W.2d 

### 282, (Tex.Civ.App.,1946, error ref., n.r.e.).

In 1955, Article 7l2'Z was amended by providing, in effect, thatproperty passing to religious, educational or charitable organizationscould gain exemption from Inheritance taxes, even though the instrument effectuating transferdid not require that

This portion of the statute ismore fully discussedhereafter.. .

Honorable Robert S. Calvert, Page 

### 8 OpinionNo. WW-1141

the charitablegift be used within this committing such gift to use2within this ment of inheritance taxes. State, by irrevocably Stateprior to the payThe decision in the PresbyterianChurch case, supra,was .: based on the proposition that the tax accrued as of the date of ; death of the decedent and that therefore any subsequent limita- Y tion as to use within this State could not effectuate exemption. The evidentpurpose of the 1955 amendmentwas to allow exemption for charitabledevises, bequests and gifts if this State will receive benefit therefrom, even though the instrument effectuating the transfer did not itself require that the charitabledevise, bequest or gift be used within the State. Mr. Justice Norvell recognized the “benefits” doctrine as the basis for exemption under our statuteeven prior to the 1955 amendment. In G.A.C. Halff Foundationv. Calvert, 

### 281 S.W.2d 

### 178 (Tex.Civ.App.1955,
error ref., n.r.e.),he stated at page 

### 181:

.TheLegislaturehas thus decided that the greater goodmay be served by exempting certainproperty from taxation, considering the use to which it is dedicated. A use of property which alleviates
a burdenwhich the State or Its political subdivisionswould otherwise necessarilybear at public expense, or a use thereofwhich f’ul: fills or accomplishes the generally accepted charitable objectives of the people of the State, Is recognized as a proper subject of tax exemptionby specific legislative enactments.

. a ,‘I

In 1959, the 56th Legislature further enlarged charitable exemptionsby extending the geographical limitations on use and thereby departed from the former concept that exemptionwould be accorded char&tabledevises, bequests and gifts only if their ,;~p~.w limited to this State. Some remnants of the doctrine of benefits remain since the State of Texas must constitute a part of the region which is the recipient of the charitablebequest, devise or gift. The Legislaturedid not see fit to provide any yardstick for measuring the amount of benefitswhich this State shouldreceive from the charitable organizationoperating on a regional basis;yet it is evident that the Legislature did not

2 Senate Bill 

### 266,Acts 1955, 54th Leg., Chapter 389, p. 1032..,

Honorable Robert,S. C’alvert, Page 9 OpinionNo. WW-1141

intend to accord an exemption for all charitablebequests, devises or gifts since this regional exemptionprovision 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, necessarilythe statute contemplatesthat this State receive some benefit before exemptionwill be allowed. Since we have no fixed legislative standard to use as a guide,we are of the opinion that each particular casemust rest upon its own facts, and that if the facts show that this State will receive substantialbenefit
as a result of the regional operationsof the charitable organlzation, exemption shouldbe accorded. We turn, therefore, to an examination of the benefitswhich will flow to this State if the proposedResolution is adopted.

The Resolution recites that the Texas propertyhas a value of approximately $~OO,OOO.OO. You have advisedus that if exemption is,

not allowed,~theTrust will owe an inheritance tax in an amount of approximately $71,000.00.

The specificbenefits guaranteedby the resolution are the following:

(1) “.

. .theBoard recognizes
a moral obligationto expend and
use said income [from the Texas property_7 exclusivelywithin a geographicalarea including the State of Texas to the end that said expenditureswill effecta substantialbenefit to the people of Texas;

. . .‘I
(2)The Board has irrevocably committed funds accruing from the Texas property for charitableuse and expenditurewithin the geographicalboundaries of a region composed of the State of Texas and Oklahoma and has furtherbound itself to keep books and records separatelyaccounting for the lncome derived from the Texas property

. 

### (3)The Board ;as obligated itself to expend

. . .not less than Five Thousand Dollars.

. . in any one fiscalyear during the period of ten fiscalyears immediately following the~Honorable Robert S. Calvert, Page 10 OpinionNo. WW-1141

commencementof regional operations nor in the aggregatenot less than One Hundred Thousand Dollars.

. .during suchperiod.

. .‘I within the State of Texas.
(4)The Board has guaranteed that no charitable facilitywill be erected from funds created by the Texas properties nor Will any donation or contributionbe made from such funds to any charity which excludes from its benefits resident6 of the State of Texas because of such residency.”

Under the terms of the resolution, the Board plans to
commence regional operationsby designating “one ormore persons, residents of Texas, as its agent or agents for the purpose of according and facilitatingcontactwith the Board, . . screeningapplications for benefits,making recommendations,and locally facilitating the disbursement of funds to charitable lnstitutions and facilities locatedwithin the State of Texas;

. . .’

As a further evidence of the Board’s good faith in executing the Resolution in question, the Board has agreed to furnish to the Attorney General of the State of Texas a copy of each of the annual reportswhich the Trust Is requiredunder the provisions of the Trust Agreement to file in the District Court of Woods County, Oklahoma. The Board further agrees that shouId any suit be brought by the State of Texas for any,,vlolation of the letter or spirit of the proposed Resolution,

. . .jurisdiction of said Trust and its Board and venue.

. .ofany action

. . .shall lie... .ln any court of competent jurisdiction.

. .”In Travis County, Texas. The terms of the Resolution are declared to be irrevocable.

In view of these guarantees,we can only conclude that the State of Texas will receive substantialbenefit from the regional operations of the Trust.
Although the Board in the Resolution adopted in December,~ 

### 1960,has created three other regions in addition to the region consisting of Texas and Oklahoma, no evidence of the Trustla operationswithin these regionshas been submlttedto us; and
we will therefore considerwhether regional operationswithin the single region of Oklahoma and Texas satisfy the requirements of the statute. The statute refers to a charitable organization “which conducts its operationson a regionalbasis, one such region of which .includesthe State’:of Texas, or any.

part?thereof.

. .‘IHonorable Robert S. Calvert, Page 11 Opinion No. WW-1141

Although national organizationsoperating on a regional basis are clearly within thisprovision, we do not regard the last quoted portion of the statute as requiring the existence ofmore than
one region as a requisite to comingwithin statutorymeaning of “operations on a regional basis”. Here again, the guide to the interpretationof the statute shouldbe the teat of benefits to this State; and If the phrase “one such region of which includes the State of Texas, or.,any part thereof,

. . .”be Interpreted
as requiring the existence of a national organizationdivided **ln** to’regions, or even an organizationnot national in scopebut conducting operations In more than one region, the “benefits” test becomesmeaningless. It can make no differenaewhether there is more than one region since no benefitswould accrue to the State by virtue of the existence of other regions.

SUMMARY

A charitable organizationneed not be operating
on a regional basis at the date of the decedent’s death in order to gain exemption from an inheritance tax under Article 14.06, 20-A, Tax.-Gen.,V.A.T.S., if bona fide regional operationsare commencedprior to the payment of the tax. Operations on a single regional basis satisfythe requirements of the statute If the region Includes the State of Texas, or any part thereof, and is comprised of not more than five contiguous states.

Yours very truly,

WILL WILSON Attorney General of Texas

MMcGP:jp

APPROVED:
OPINION COMMITTEE: W. V. Geppert, Chairman

Henry Braswell Riley Eugene Fletcher John Reeves T. B. Wright

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