Court Opinion

ID: 4135837
Source: CourtListenerOpinion
Date Created: 2017-02-18 02:06:50.749917+00
Date Added: 2024-06-11T14:37:42.070105
License: Public Domain

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        Honorable Robert S. Calvert       Opinion No, WW-1141
        Comptroller of Public Accounts
        Capitol Station                   Re:   Exemption from inheritance
        Austin, Texas                           tax of devise to an Okla-
                                                homa charitable trust
        Dear Mr. Calvert:                       under submitted facts.
               You have requested that we advise you as to whether a de-
        vise 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 organization which con-
                  ducts its operations on a regional
                  basis, one such region of which in-
                  cludes the State of Texas, or any
                  part thereof, then a bequest, devise
                  or gift to be used within such re-
                  gion shall be deemed to be used
                  within this state.
                     “For purposes of this paragraph
                  a region shall comurise not more
                  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 chari-
                 table organization shall Include,
                 but not be limited to, a youth pro-
                 gram of physical fitness, character
                 development, and citizenship train-
                 ing or like program.”
               In connection with your request you have advised us of
        the following facts. Charles Mortbn 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 de-
        vised Texas real property, valued at $596,361.00,to the “Charles
                                                                      .   .

Honorable Robert S. Calvert, Page 2       Opinion No. WW-1141

Morton Share Trust."
       Prior to his death, the decedent had created this chari-
table trust in the State of Oklahoma. The trust purposes, as
stated in the Trust Agreement, are for general charitable pur-
poses. The Trust Agreement does not contain any geographical
limitations on the expenditure of the trust funds; nor does it
prescribe any particular method 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 specifically authorized to engage or employ any
persons they may desire to engage or employ for the performance
of any services to the Trust, including an Executive Director.
The Trustees are also expressly authorized to erect such buildings
as they may deem advisable on real property in any location.
Further, ~the Trustees are authorized to execute all instruments
necessary or proper for the accomplishment of the purposes of
the Trust. The Trust Agreement does contain   the following pro-
vision in Section 2 of Article VI:
             "This agreement is executed and
          delivered in the State of Oklahoma;
          the aitus shall be in that State;
          and it shall be governed by, and
          construed and administered in ac-
          cordance with the laws of that
          State."
        The Board of Trustees is required to file annual reports
'in the District Court of Woods County, Oklahoma and furnish copies
of said reports to the Attorney General of 'the State of Oklahoma.
       The Board of Trustees have agreed to execute a Resolution
for the purpose of complying with the provisions of Article 14.06 ;a
above quoted and obtaining an exemption from an inheritance tax. 'C,;,
Specifically then, the question which 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
              CHARLES MORTON SHARE TRUST ADOPTED AT
               SPECIAL MEETING HELD AUGUST -, 1961

             "WHEREAS, Charles Morton Share died tes-
          tate 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 situated within the State of
Honorable Robert S. Calvert, Page 3         Opinion No. WW-1141

          Oklahoma and the State of Texas and
          other states; and
             “WHEREAS, the Charles Morton Share
          Trust is the principal beneficiary of
          the estate of Charles Morton Share, de-
          ceased, under his last will and testament,
          and is the devisee and legatee of all
          property owned by the deceased stiuated
          in the State of Texas, together with
          other property situated in other states;
          and
            “WHEREAS, the last will and testament
         of Charles Morton Share, deceased, has
         been duly probated in Cause No. 3569 in
         the County Court of Woods County, Okla-
         homa, the decree of distribution having
         been entered by said Court on June 27,
         1961, and said decree of distribution
         being now a final order; and
             “WHEREAS, the property of the estate
          situated within 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 Thousand Dollars ($~oo$oo.oo);
          and
             “WHEREAS, the said Charles Morton
          Share Trust is an organization estab-
          lished by the said Charles Morton Share
          solely for charitable purposes, as evi-
          denced by a certain trust indenture dated
          June 12, 1959, and hereinafter referred
          to as the ‘Trust’ and the Board of Trustees
          of which is -hereinafter referred to as
          the ‘Board’; and
             “WHEREAS, said Texas property consti-
          tutes a substantial portion of the estate
          of Charles Morton 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 there-
          fore recognizes a moral obligation to ex-
          pend and use said income exclusively with-
          in a geographical area including the Stated
                                             ..

Honorable Robert S. Calvert, Page 4     Opinion No. NW-1141

          of Texas to the end that said expendi-
          tures will effect a substantial benefit
          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~purpose of availing
          Itself of a legal exemption from pay-
          ment of Inheritance taxes to the State
          of Texas under the provisions of Arti-
          cle 14.06, Title 122-A, Revised Civil
          Statutes of Texas, said Board at a
          special meeting held December 28, 1960,
          adopted a resolutation whereby it ir-
          revocably committed funds accruing to
          the Trust from the Texas property for
          charitable use and expenditure within
          the geographical boundariea of a region
          composed of the States of Texas and
          Oklahoma and bound itself to keep books
          and records separately accounting for
          the income derived from said Texas pro-
          perty; and
             “WHEREAS, administration of 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 termin-
          ation of said administration proceedings
          the Texas property shall be transferred
          to the Board and operations of the
          charitable trust will then begin on a
          regional basis within the region com-
          prised of the States of Texas and
          Oklahoma; and
             “WHEREAS, prior to the determination
          of the applicabillty~of the provisions
          of said Article 14.06, above referred
          to, the appropriate officials of the
          State of Texas have requested of the
          Board certain assurances with respect
          to its manner of operation of said
.

      Honorable Robert S. Calvert, Page 5       Opinion No. WW-1141

                trust on a regional basis 60 as to
                enable said officials to accurately
                determine whether 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 offi-
                cials of the State of Texas,
                   “NOW, THEREFORE, IT IS HEREBY RESOLVED:
                   “That not less than Five Thousand
                Dollars ($5,000.00) in any one fls-
                cal year during the period of ten
                fiscal years immediately following
                the commencement of regional opera-
                tions nor in the aggregate not less
                than One Hundred Thousand Dollars
                ($lOO,OOO.OO) during such period
                shall be expended and disbursed by
                the Board for charitable purposes
                within the geographical limits of
                the State of Texas; and
                    “BE IT FURTHER RESOLVED that for
                 the purpose of providing a convenient
                 method for the appropriate authorities
                 of the State of Texas to ascertain
                 whether compliance with this Irrevocable
                 commitment Is in fact being made, a
                 copy of each of the annual reports
                 required to be filed -inthe District
                 Court of Woods County, Oklahoma,
                 under the provisions of Article V
                 of said trust agreement, shall be
                 sent by certified or registered
                 United States mall 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 FURTHER RESOLVED that as
                soon as practicable after the com-
                mencement of regional operations the
                Board shall designate one or more
                persons, residents of Texas, as Its
Honorable Robent S. Calvert, Page 6      Opinion No. WW-1141

          agent or agents for the purpose
          of according and facilitating
          contact with the Board) screening
          applications for benefits, making
          recommendations, and locally facili-
          tating the disbursement of funds
          to charitable institutions and
          facilities located within the
          State of Texas; and
             “BE IT FURTHER RESOLVED that
          jurisdiction of said Trust and
          its Board and venue for trial of
          any action at law or suit in equity
          which may be brought by the State
          of Texas through its Attorney
          General or other appropriate offi-
          cial for any alleged violation of
          the letter or spirit of this resolu-
          tion shall lie, and by agreement is
          hereby vested, in any court of com-
          petent jurisdiction situated with-
          in the boundaries of Travis County,
          Texas; and
             “BE IT FURTHER RESOLVED that no
          donation or contribution in any
          form whatever shall be made to any
          charitable institution or facility
          nor shall any charitable facility
          be erected from funds created by
          the Texas properties which excludes
          from its benefits, bounty or opera-
          tion residents or citizens of the
          State of Texas because of such
          residency or citizenship.
             “BE IT FURTHER RESOLVED that
          the appropriate officials of the
          State of Texas and particularly
          its Attorney General and Comp-
          troller shall and may rely upon
          the truth in fact of all recita-
          tions of fact hereinabove set
          forth; and
             “BE IT FURTHER RESOLVED that
          all terms of this resolution shall
          remain forever irrevocable; and
.   .

        Honorable Robert S. Calvert, Page 7      Opinion No. WW-1141

                     “BE IT FURTHER RESOLVED 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 Attorney General
                  of the State of Texas.”
               At the outset, we are faced with the question of whether
        a charitable organization must be operating on a regional basis
        at the date of the decedent’s death In order to be entitled to
        exemption. Since in that portion of Article 14.06l which imme-
        diately precedes the provisions we are here considering, exemp-
        tion is allowed where there is an irrevocable commitment for
        use exclusively within this State subsequent to the date of de-
        cedent’s death and prior to the payment of the tax, we have con-
        cluded that it would be inconsistent with the spirit of the sta-
        tute to require that the charitable beneficiary be operating on
        a regional basis at the date of the decedent’s death if regional
        operations are effectuated prior to the payment of the tax.
                The second question is whether the proposed Resolution
        and the plan of operations set forth therein constitutes “opera-
        tions on a regional basis” within the meaning of the statute.
        We think that the Legislative history of Article 14.06, formerly~
        Article 7122, v.c.s., is pertPnent to a determination of this
        question. Prior to its amendment in 1955, Article 7122 had pro-
        vided an exemption for property passing “to or for the use of
        any religious,  educatlonal or charitable organization when such
        bequest, devise or gift is to be used within this State.”
                This provision had been construed by our courts as re-
        quiring the limitation to use within this State to be expressed
        in the will, even though the charitable beneficiary Irrevocably
        committed the devise and bequest to use within this State sub-
        seuuentto the death’of the decedent and prior to the payment
        of -the tax. Presbyterian Church 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,
        that property passing to religious, educational or charitable
        organizations could gain exemption from Inheritance taxes, even
        though the instrument effectuating transfer did not require that

          This portion of the statute is more fully discussed hereafter.
                                                                    .   .

Honorable Robert S. Calvert, Page 8       Opinion No. WW-1141

the charitable gift be used within this State, by irrevocably
committing such gift to use2within this State prior to the pay-
ment of inheritance taxes.
       The decision in the Presbyterian Church 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 evident purpose of the 1955 amendment was to allow exemption
for charitable devises, bequests and gifts if this State will
receive benefit therefrom, even though the instrument effectuating
the transfer did not itself require that the charitable devise,
bequest or gift be used within the State. Mr. Justice Norvell
recognized the “benefits” doctrine as the basis for exemption
under our statute even prior to the 1955 amendment. In G.A.C.
Halff Foundation v. Calvert, 281 S.W.2d 178 (Tex.Civ.App. 1955,
error ref., n.r.e.), he stated at page 181:
                  .The Legislature has thus
          decided that the greater good may
          be served by exempting certain pro-
          perty from taxation, considering
          the use to which it is dedicated.
          A use of property which alleviates
          a burden which the State or Its
          political subdivisions would other-
          wise necessarily bear at public ex-
          pense, or a use thereof which f’ul:
          fills or accomplishes the generally
          accepted charitable objectives of
          the people of the State, Is recog-
          nized as a proper subject of tax
          exemption by specific legislative
          enactments. . a ,‘I
        In 1959, the 56th Legislature further enlarged charitable
 exemptions by extending the geographical limitations on use and
thereby departed from the former concept that exemption would be
accorded char&table devises, 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 charitable bequest,
devise or gift. The Legislature did not see fit to provide any
yardstick for measuring the amount of benefits which this State
 should receive from the charitable organization operating 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     Opinion No. WW-1141

intend to accord an exemption for all charitable bequests, de-
vises or gifts since this regional exemption provision 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 contemplates that this State receive some
benefit before exemption will be allowed. Since we have no fixed
legislative standard to use as a guide, we are of the opinion
that each particular case must rest upon its own facts, and that
if the facts show that this State will receive substantial benefit
as a result of the regional operations of the charitable organl-
zation, exemption should be accorded. We turn, therefore, to an
examination of the benefits which will flow to this State if the
proposed Resolution is adopted.
       The Resolution recites that the Texas property has a
value of approximately $~OO,OOO.OO. You have advised us that
if exemption is,not allowed, ~the Trust will owe an inheritance
tax in an amount of approximately $71,000.00.
       The specific benefits guaranteed by the resolution   are
the following:
             (1) “. . .the Board recognizes
          a moral obligation to expend and
          use said income [from the Texas
          property_7 exclusively within a
          geographical area including the
          State of Texas to the end that
          said expenditures will effect a
          substantial benefit to the people
          of Texas; . . .‘I
             (2) The Board has irrevocably
          committed funds accruing from the
          Texas property for charitable use
          and expenditure within the geo-
          graphical boundaries of a region
          composed of the State of Texas
          and Oklahoma and has further bound
          itself to keep books and records
          separately accounting for the ln-
          come derived from the Texas pro-
          perty .
             (3) The Board ;as obligated
          itself to expend . . .not less
          than Five Thousand Dollars. . .
          in any one fiscal year during
          the period of ten fiscal years
          immediately following the
~ Honorable Robert S. Calvert, Page 10      Opinion No. WW-1141

           commencement of regional opera-
           tions nor in the aggregate not
           less than One Hundred Thousand
           Dollars. . .during such period. . .‘I
           within the State of Texas.
              (4) The Board has guaranteed
           that no charitable facility will
           be erected from funds created by
           the Texas properties nor Will any
           donation or contribution be 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 operations by designating “one or more per-
 sons, residents of Texas, as its agent or agents for the pur-    ..
 pose of according and facilitating contact with the Board,
 screening applications for benefits, making recommendations, and
 locally facilitating the disbursement of funds to charitable lnsti-
 tutions and facilities located within the State of Texas; . . .’
        As a further evidence of the Board’s good faith in exe-
 cuting the Resolution in question, the Board has agreed to fur-
 nish to the Attorney General of the State of Texas a copy of each
 of the annual reports which the Trust Is required under the pro-
 visions 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,,vlolationof the
 letter or spirit of the proposed Resolution, . . .jurisdiction
 of said Trust and its Board and venue. . .of any 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 substantial benefit 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
 operations within these regions has been submltted to us; and
 we will therefore consider whether regional operations within
 the single region of Oklahoma and Texas satisfy the requirements
 of the statute. The statute refers to a charitable organization
 “which conducts its operations on a regional basis, one such re-
 gion of which .includes the State’:ofTexas, or any.part?thereof. . .‘I
Honorable Robert S. Calvert, Page 11           Opinion No. WW-1141

 Although national organizations operating on a regional basis are
 clearly within this provision, we do not regard the last quoted
 portion of the statute as requiring the existence of more than
 one region as a requisite to coming within statutory meaning of
 “operations on a regional basis”. Here again, the guide to the
 interpretation of the statute should be the teat of benefits to
 this State; and If the phrase “one such region of which includes
 the State of Texas, or.,anypart thereof, . . .” be Interpreted
 as requiring the existence of a national organization divided ln-
 to’regions, or even an organization not national in scope but
 conducting operations In more than one region, the “benefits”
 test becomes meaningless. It can make no differenae whether there
 is more than one region since no benefits would accrue to the
 State by virtue of the existence of other regions.

                           SUMMARY

            A charitable organization need 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 operations are commenced prior
        to the payment of the tax. Operations on a single
        regional basis satisfy the requirements of the sta-
        tute 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.