..
THEATTORNEYGENERAL
OF TEXAS
Ronorable Robert 8. Culvert opinion Ro. (C- 347)
Comptroller of PubJlc Accounts
Capitol station Rer Whether income from Susan
Au&n, Texas V. Clayton trust fund may
be used to retire Treasury
bills of the United States
of America which are In
bearer form and are tender-
ed for redemption to the
Federal Reserve Bank of
p&&t by Texas ColPsPerCir3
rwar Nr. ce1vertt .
You have rBque8fed the eplnlon of this office on the
above captioned matter. .-_ late Mrs. ~layton~exercise~~a
The
power of appointment by will over certam trust. income m
favor of the United States of America upon the condition
that eald incaae be used for the retirement of the Ilcrtlonal
debt. You have advised ue that ti Treasury bill8 of the
Wited States .of America, which are in bearer form, are tendered
for redegtion to the Federal Beeerve Benk of Dallas by Texae
cmmerclal banb, payment 16 arAe to erid banks aa owner8 of the
oblleptiono dthout inquiry am to rhether the blank ni t be
acting for ofhor partlea in lb mltk ia the gTreamry b el..
A jud ent use entered in J. Y. Johnson v. R. 8. Calvart,
Ro. 600, dr in the 129th Judicirl +fl et ceuct
Dl ,_____ __- _ Of
-- Harris
__----- cellntv.
_._~~. I
Texas
__-- on___ October
.- .-_ -- 14.~I 1963.
~~~--~ Boththe e’ #&ate
- of Texas and the
undted Stat@6 of Amrlca lnterpened In this cult. Under the tenor,
of the judgment, it use decreSa thet the UnIted State0 of Awrlca
owed an inheritance tax to the State of Texas by rea8on of t
exercise of the power OS appointment by Sllun: Vi-C&
the tax rhould be computed under the provilrlonr of Article 14.t
.Taxatlon-Wneral, Vernon*r Civil,8ktuter. The tax 80 computQd
-tBd to $g7,351.71. uo
and the tax hu been patd to %sG
of Art&ala x4.03 read, %n part, (yo Pollorrrr
Honorable Robert S. Calvert, Page ,2 Opinion No. (C-347)
“If paeelng to or for the we ~of the United
Statea, to be ueed in this State, the tax shall
be one per cent of any Flue in exe688 of Twenty-
five Thousand Dotlare, and,not exceeding Fifty
Thousand Dollars;, two per c$nt on any value in
exdgse of Fifty Thousand Dollars an< not exceed-
ing One Hundred Thoueand Domlarej. . .”
Thereafter the Article provides $or inoreaee in rate& In stated
value brackets with a maxlmuin 61~ per cent rate on any value in
exceea of One~Nillion Dollare.
Prior to theIsnddition of thle judgment, the Secretary of
the Treasury of the United State8 of America, the Honorable
D$ug;lf Dillon, executed a Commitment which it? here copied
.
“WHEREAS,Susan Va an Olayton late of the
State of Texas, by a cod“ircil to her iaet will dated
August 3, 1957, directed, that one-half of th6 Income
of a truet theretofore created by her surviving
h.ueband, William L, Cla ton, by an indenture made
February 19, 1931, and &l own 00 the ‘Susan Vaughan
Clayton Truet No, ?t, br pIid to the United States
of America;.
“NOW,THEREFORE,the United States of America, by
It8 undereigned Secrrter OP the Treasury, by virtue
of the authority vreted 3:n him bnolud$n$ the authority
contained in the Act of 8Yunr24, 1961, Public Law 58,
87th Congress, and for the purpose of securing the
benefit afforded lsy’&%kcl$ .J&,O6 kif3%tle: l22A,:~VB~llanfis
Annotate,d Texas StattiLer,, to bequests to the United
States which are irrevoaaibly committed for use ex-
cluaively within th8 8trte of Texan, herrby declarei%,
directs and agrees:
"(1) That thr~txNcWm of the Susan
Vaughan Clayton TrwO No, 2 @hall be and they
hereby are directed to pay all income of said
truet to which the United State6 may now be,
or hereafter broomr ‘cmtitled to the Federal
Res@Me Rank oi Do&, am the fiacbl agent of’
the United klt&~OaJ.and
.
. -
Honorable Robert 8. Calvert, Page 3 cpinion Ro. (C-347)
“(2) That all moneys to which the United
States is, or may become, entitled from said
trust shall, upon receipt by eaid Bank, be
deemed deposited in a subsidiary account of
the special account established on the books
of the Treasury of the United States by
Section 4 of said Act of June 27, 19613 and
’ 3) That all moneys paid over and de-
posite 6 as aforesaid shall be specifically
identified on the books of the Treasury as
available, and shall be disbursed, solely .~. ‘..
for the retirement in Texas of national
debt obligations of the United States owned
by citizens or residents of the State of
Texas, and the payment of any taxes authorized
to be paid by Section 3 of said Act of June 27,
1961; and
“(4) That said Bank shall. be and hereby
is directed to use all moneys received and
deposited as aforesaid, which remain after
authorized payments of taxes, to redeem public
debt obligations of the United States owned by
citieens or residents of the State of Texas
which may from time to time be presented to it
in Texas for redemption3 and
“(5) Thatthe foregoing directions to the
Trustees of the Susan Vaughan Clayton Trust 100. 2
and to the Federal Reserve Bank OS Dallas meqnot
and shall not be revoked9 rescinded, or amended,
and said subsidiary account may not and shall not
be closed, discontinued OT terminated until all .
moneys to which the United States is or may be-
come entitled from said trust have been received
and paid out in accordance with the foregoing t.
authorizations and directions.
“United States of America ‘,.
(Signed) Douglas Dillon
‘Secretary of the Trearmry
June 27, 1962”
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Honorable Robert S. Calvert, Page 4 Opinion Ro. (C-347)
At the date of the death of Mrs. Clayton Article 14.06
V.C.S. provided,in part,as followsr
"IS passing to or for the use of the United
States . . . the tax shall be:
"5s on any value in excess of $5dO and not
exceeding $10,000
"6$ on an value in excess of $10,000 and
not exceeding $ 25,000
1,. . . . It
Thereafter the percentage of the tax increase8 In stated value
bracket8 until it reaches's maximum rate of 20$ on any value in
excess of $1,000,000.
Article 14.06 also contained the following provision:
"Provided, however, that this Article shall
not apply on property passing to or for the use
of the United States, . . . when such bequest,
devise or gift is to be used tithin this State.
The exemption from tax under the preceding pro-
vieion of this Article shall, without limiting
its application under other appropriate circum-
stances, apply to all or 80 much of any bequest,
devise, gift to or for the use of the United
States, . . . which is, in wrdting and prior
to the, payment of the tax, Irrevocably committed
for use exclusively within the State of Texas. .
,I. . . . ,t
'. Although the commitment recites that it wa8 executed
for the purpose of gaining exemption under the provielons of
Article 14.06, V.C.S., the trial court in the Johnson case,
determined, as previously stated, that a tax was due under
the provision8 of Article 14.03. In this connection, we point
out that Article 14.03 require8 "use within this State" 88, a
prerequisite to gaining the more favorable exemption and lower
tax rates than are accorded by 14.06 in the absence of obtain-
ing exemption thereunder. Prior to the adjudication of tax
liability, the court made, among othera, the following express
finding:
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Honorable Robert S. Calvert, Page, 5 Opinion No. (C-347)
“The United States of Americaj acting by
and through the Secretary of the Treasury,
executed and delivered to the Federal Reserve
Bank of Dallas and to the Trustees of the ‘.
Susan V. Clayton Trust No. 2, a document com-
mitting the income to be received by The United
States of America to be use within the State
of Texas, within the meaning of Chapter 14
of Title 122A of the Revised Civil Statutes of
Texas, as amended. ”
The commitment is declared to be irrevocable and may
not be “revoked, rescinded or amended.” It requires the money
received from the &rust fund-to be used to redeem public debt
obligations of the United States owned by citizens or Te8ident8
of the State of Texas. Therefore, the express term8 of the
commitment prohibit retirement of Treasury bills of the United
State8 of America which are in bearer form and are tendered
for redemption to the Federal Reserve Bank of Dallas by
Texas commercial banks. This is so because payment8 are
made to the commercial bank8 a8 owners of the obligations
without inquiry as to whether the bank8 might be acting
for parties who are not residents of this State.
SUMMARY
-------
Income from Susan V. Clayton trust furid
may not be used to retire Treaeury bill8 of
the United States of America which are in
bearer form and are tendered for redemption
to the Federal Reserve Rank of Della8 by
Texas commercial banks. Said income has
been irrevocably committed by the Secretary
of the Treasury OS the United States of
America to the retirement of Rational debt
obligations which are owned by resident8
of the State of, Texas. This requirement ie
not satiefied where redemption of Treasury
bills is accomplished by payment to Texas
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Honorable Robert S. Calvert, Page 6 Opinion No. (C-347)
commercial banks a8 owners without inquiry
a8 to the-residence of the parties for whom
such banks are acting.
Yours very truly,
WAGGORER
CARR
General of Texas
Attorney
By:
MHcGPrsjl
APPROVED:
OPINIOR COMMITTEE
W. V. Geppert, Chairman
Brady Coleman
George Black
Charles Swarmer
Paul Phy
~;PROVEDFORTHEATTORRRY
0-L
: Roger Tyler
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