TIIIE Amramwtm GENERAL
OIF ??EXAS
December 10, 1956
Honorable Robert S. Calvert
Comptroller of Public Accounts
Capitol Station
Austin, Texas
Opinion No. S- 222
Re: Imposition of inheritance taxes
on bequest to Texas charitable
eorporatioa not limited to carry-
ing on Its charitable activities
within the State.
Dear Sir:
You have advised us of the following facts. Thomas
E. Braniff died testate devising and bequeathing to The
Braniff Foundation 199,476 shares of stock in Braniff Airways,
Inc. The stock has been valued for inheritance tax purposes
at $1,324,364. The will places no geographical limitation
upon the Lxpenditure of this gift. Neither the charter nor the
by-laws of the corporation in any way limits the corporation’s
charitable activities to the State of Texas. Since its organi-
zation, the Foundation has made contributions to organizations
In other states and in foreign countries. The attorneys for
the estate have advised us that the Foundation will continue
to be world-wide in scope insofar as its charitable activities
are concerned.
You state that it has been the departmental practice
in identical cases in the past to tax bequests of this nature.
The attorneys for the estate have submitted a brief in support
of their position that the bequest In question is exempt from
Inheritance taxes. You request that we advise you as to whether
any tax is due under the provisions of Article 7122, Vernon’s
Civil Statutes.
Mr. Braniff died on January 10, 1954. At that time
the pertinent provisions of 4rtlcle 7122 read as follows:
“If passing to or for the use of the United
States, to or for the use of anv other person or
religious, educational or charitable organization
or institution, or to any other person, corpora-
tion or association not included ln any of the
Hon. Robert S. Calvert, page 2 (S- 222 )
classes mentioned in the preceding portions of
the original Act. . ., the tax shall be:
‘1. . .
“20% on any value in excess of $l,OOO,COO.
“Provided, however, that this Article shal;b
not oalv on D obertv we: to or for the use
pf tte United &ates or -religious,-
tional or charitable o-when such be-
SIU st. devise or si t is to be used ithin I&&
stkp (Emphasis sipplied throughou: .)
The leading case construing the underscored provi-
sions of &ttcle 7122, as it then read is Presbvterian Church
&I the U 6. v. gheooa a 198 S.W.2d 2$2 (Tex.Clv.App. 1946
error reh. n.r.e.). 1: {his case the testatrix bequeathed &e-
half of her estate to the Presbyterian Church in the United
States. No limitation as to use was expressed in the will.
The Presbyterian Church in the United States operates In many
states (including Texas) and foreign countries. “Therefore,”
said the Court at pages 282, 283, “at the time of the death of
Mrs. Manley, there was no inhibition or limitation of any kind
to the use of said bequest by said Church within the State of
Texas, and it was free to use said bequest anywhere that it
chose .‘I
Prior to the due date of the inheritance tax involved
and prior to the assessment thereof, the “Church, by and through
its proper officials, satisfied the St&e-of Texas and its proper
officials that. . . said Church. . . ,&au legally obligated
itself and said Church (by action taken subsequent to the death
of the testatrix, Mrs. Manley) to use said bequest in its en-
tiretx. . . within the State of Texas, for religious purposes,
0 . . Exemption was then claimed under Article 7122.
The Court refused to allow exemption stating that un-
der the provisions of the will the devisee Church could do with
the property as it saw fit and could use it in Texas or for the
Church activities in any State or in foreign countries. Since
the property passed to the Church upon the death of the testa-
trfx without limitation as to where it was to be used, the Court
stated that this was the “character of succession or passing of
property to a religious organization that the . . . statute ex-
pressly seeks to tax.” The fact that the governlng authorities
of the Church had agreed to use the gift only in Texas was not
regarded as material. The Court pointed out that the Legisla-
ture had provided no form or method by which the taxing authori-
ties might ascertain whether a larger or lesser use may be made
Hon. Robert S. Calvert,. page 3 ..(,+..?22,, )
of the property by the devlsee,~pr legates I.&, order to secure
an exemption; and that then questionof whether exemption
will be accorded must be determtied at the t~$methe tax is
levied, i.e., the date of the aeath of the decedent. The
Court iurther stated:
“This, together, with the fact that all inci-
dents of the tax are.aSSixed as of the date of
the death of testatrix, clearly evidences the
legislative intent to require that the limitation
of the use of a devise in this State shall be ex-
pressed in the will.”
Since the B case was decided, the only
other case involving exemption of a charitable devise or be-
quest, under the same provlsion.oS Articles 7122, is G.A.C.
Halff Foundation v. Calva, 281 S.W.2d ,178(Tex.Clv.App.,
1955, error ref., n.r.e.1. In this latter case the will gave
certain named trustees a.~portlon of the testator’s estate to
be distributed to such corporation, assoc$ation or trust fund
as said trustees might select for one or more of enumerated
charitable purposes. After then death of the testator, the
G.B.C. Halff Foundation was formed by the surviving testament-
ary trustee; and the use of the Foundation’s property was re-
stricted by its charter to use within the State .oS Texas. At
page 1.80the Court said: ,
II . It has been decided that a bequest
to a ci&itable organization authorized tc oper-
ate generally throughout the Un,ited States and
foreign countries is not exempt: under the. excep-
tions contained in Article 7122, when there is
no provision in the will restricting the use of
the bequest to the State of Texas.~- Presbyterian
Church in United States v. Sheppar$,,Tex.Civ.App.,
198 S.Y.2d 282. . ..”
The Court held that the will had. ,creked a mandatory
power of appointment and that under the doctrine of “relation
back” title passed directly from the testator to the appointee
Foundation as of the effective date-~of~~the will. The situa-
tion, said the Court at page 183, ‘I., . . insofar as inheritance
tax liabil~ity is concerned, 1s: the same as ,lS the testator in
his will had designated ~the”G.kLC.‘~HalfS Fo~jujdation as the
devisee of one-half OS three-eights of the residue of his es-
tate o 1 Simes, Future Intere’sts;, %2;’ g253.,’ Asthe Foundation
by its charter iarestricted to’Tex& charitle’s, the devise
comes within the exception;
,~.~ of P-rticleJ’
: l22’
” 1
Hon. Robert 8. Calvert, page 4 (S- 222 )
It is therefore evident that the u case did
not purport to overrule the presbvtu case. In addition
to the portions of the opinion previously uotecl, the Court
in concluding its opinion stated at page 1 8 4:
‘1. . . that the will of G.A.C. Halff, de-
ceased, vested In said Hugh A. L. Iialff a special
power of appointment to an entity which was re-
quired to make charitable use of the property in
accordance with its corporate purpose; that under
the doctrine of ‘relation back’ the selection of
the Texas charity, under the mandatory power ex-
pressed in the will, constituted selection by the
testator as if the Foundation had been named in
the will, so that at the time of taxable success-
ion the bequest to the Foundation was exempt uu-
der Article 7122.”
The attorneys for the estate do not assert the ex-
istence of a power of appointment in this case; nor do they
represent that the Suture charitable activities of the Braniff
Foundation will be limited to this State. Their claim for ex-
emption rests upon the proposition that the Foundation is char-
tered under the laws of this State, and upon the proposition
that the corporate stock, the subject matter of the bequest,
has an actual situs in Texas and is the property to be used
within this State.
We cannot agree with this position in view of the ae-
cisions in the and u cases. As stated In the
Balff case at
1’. . The exception contained in Article
7122 pro&es that the schedule of taxes contained
therein ‘shall not apply on property passing to or
for the use of the United States or any religious,
educational or charitable organization when such
bequest, devise or gift is to be used within this
State. t The Legislature has thus decided that the
greater good may be served by exempting certain
property from taxation, considering the use to
which it is dedicated. A use of orooertv which
at aublic exaense. or a use thereof which fulfjJJ&
or aCCOtUDlishes the m acceot& charitable
Q b lectives of the oeoole of the State, is rce qg -
njzed as a orooer subSect of tax wtion bv SDQ-
cific leg&slat ive enactme& . . . . ll
Hon. Robert S. Calvert, p&g% 5 (*..a22 3
We think. th,at only actual use for charitable pur-
poses within this State:will all.evlate a. buF’den which the
State or its political subdivisions would otherwise neces-
sarily bear at public expense and that this fact of actual
use for charitable purpose~s’within this State, rather than
the ‘domicile of the corporation or the situs of its property,
is the determinative Sact l&allowing exemption.
The most recent amendment to Article 7l22 evidences
a legislative intent to continue the requirement of actual
use for charitable purposes within this State. As amended,
the pertinent provisions ‘of Article 7122 read as follows:
“Provided, however, that this Article shall
not apply on property passing to or for the use
of the United States, or to or for the use of any
religious, educational or charitable organization,
incorporated, unincorporated or in the form of a
trust, when such bequest, devise or gift is to be
used. within this State. The exemption from tax
under the preceding provisions of this &ticle
shall, without limiting its application under other
appropriate circumstances, apply to all or so much
of any bequest, devise, or gift to or for the use
of the United States, or a religious, educational
or charitable organization, which is, in writing
and prior to the payment of the tax, irrevocably
committed for use exclusively within the State of
Texas or transferred to a religious, educational
or charitable organization for use exclusively
within this State.”
By allowing exemption for charitable gifts which will be used
exclusively within this State even though at the death of the
decedent the funds were not required to be so used, the Legis-
lature in effect reiterated the requirement of actual use for
charitable purposes within this State and added a method of
obtaining exemption by so restricting the use of charitable
gifts subsequent to the incidence of the tax.
You are therefore advised that no exemption can be
allowed in this case and that the bequest is subject to tax at
the rates stated in Article 7122.
B bequest to a Texas charitable corporation
is subject to inheritance tax under Article ‘7122,
.
Hon. Robert S. Calvert, page 6 (s- 222.)
V.C.S., if the corporation is, not required to use
the bequest for charitable purposes within this
State.
Yours very truly,
APPROVED: JORIi REiN SHEPPERD
At t ornes General
W. V. Geppert
Taxat ion Division
Mert Starnes BY
Reviewer Marietta McGregor Payne
Assistant
Elbert M. Morrow
Reviewer
L. W. Gray
Special Reviewer
Davis Grant
First Assistant
John Ben Shepperd
Attorney General
W:wb
.