May 14, 1956
Hon. Robert S. Calvert Opinion No. S- 198
Comptroller of Public Accounts
Capitol Station Re: fnherttance tax ltabiitty of
Austin, Texas bequests to certain foreign
charitable corporations.
Dear Mr. Calvert:
We quote the following excerpts from your le;tter requesting our
opinion on the above-captioned matter.
‘C. Ii. Seabrook died January 30; 1953, a resident of Texas,
Leaving a will which. after several specific bequests, pro-
vides that his estate shall go to The Mercantile National Bank,
Dallas, Texas, as trustee. The income is to be paid to the
wife for life. On her death the property in the hands of the
trustee is to be transferred to the following named religious,
educational and charitable organizations:
-Principia College, Elsah, MO.;
Christian Scientist Benevolent Association,
San Francisco, Cal.;
Christian Scientist Benevolent Association,
Boston, Mass.;
Pleasant View Home for the Aged, Concord,
N.H.;
First Church of Christian Scientist, Dallas,
Texas;
Scottish Rtte Hospital for Crippled Children,
Dallas, Texas.
‘Decedent’s wife died about 8 months after his death. The
trustee has reduced the trust to cash and has delivered the
shares to the respective beneficiaries. The trustee held a
sufficient amount of each payment to pay the inheritance
taxes proposed by the State Comptroller.
‘The trnstee at the time of delivery to each beneficiary had
each to sign a commitment or statement to the effect that
the bequest would be used in Texas.
88
Hon. Robert S. Crlvert, page 2 (Opinion No. S-198)
“In connection with the transfer by the trustee of the
trust property to the beneficiaries, decedent’s will pro-
vides as follows:
*‘It shall be the duty of the trustee in any such
transfer to condition the same by a provision
that tbe gift or gifts are to be used within the
State of’.Texas. There shall be no duty or obli-
gation on the trustee to see that the terms of
the aforementioned conditions are fulfilled or
to further concern ttseif with the trust proper-
ties and the use thereof after said transfer has
been made.’
‘The Comptroller concedes that the last two names bene-
ficlar ies above are exempt from lnherltancc tax as they
are religious, educational or charitable organisatioas or-
ganised under the laws of the State of Texas and the be-
quests will be used in Texas,
“The Comptroller contends that the first four named or-
ganizatlons are dus an inheritance on their bequests
because:
‘( 1 They are foreign corporations,
*(2 1 That such bequests on account of the
location of the organizations cannot
be used in Texas. l
We are in receipt of photostatic copies of the charters of the
Christian Science Benevolent Association on Pacific Coast, Christian Science
Benevolent Association and The Christian Science Pleasant View Home, Like-.
wise, each of these corporations has furnished us with a certified copy of a
resolatlon passed by the trsstees of the respective institutions. These resolu-
tions in substance state that the bequest will be held in trust in a fund to be
known as the ‘Cbar.les H. Seabrook Fund’ which shall be available only for
use in the State of Texas for purposes COMiStent with the charitable purposes
of the respective institutions, including specifically gifts to individuals wtth-
in the State of Texas for care by Christian Sclencc nurses and Christian
Science practitioners, living expenses and other charitable purposes.
We have received from the Principia Corporation a photos’tatic
copy of its char&r and a certified copy of a resolution duly executed by said
corporation, under tie terms of which the corporation accepted its legacy in
accordance with the terms of the will requiring that the Legacy be used in
this State and dedicated said legacy to a fund to be known as the *Seabrook
59
Hon. Robert S. Calvert. page 3 (Opinion No. S-198)
Fund” to be used within this State for purposes consistent with the chari-
table purposes of the Principia Corporation, including specifically gifts to
individuals within the State of Texas for educational expenses, scholarships
and other charitable purposes.
In McIntire’s Estate, 34 Pac. 2d 432 (Wash. Sup. 1934). the case
cited in your request, the court was concerned wlth exemption under the fol-
lowing provision of tha Washington statute:
‘All gifts, bequests, devises and transfers of property
situated within or under the jurisdiction of the State of Wash-
ington shall be exempt from the payment of any Inheritance
tax, when the same are for one of the following charitable
purposes. , . Provided, That all such gifts, bequests, de-
vises and transfers be limited for use within the State of
Washington’
The bequest lnquestion was to the Congregational Board of
Ministerial Relief, a Connecticut corporation, in trust for the benefit of
needy ministers of the Congregational Church in the State of Washingtonand
their widows.
The majority opinion held that only domestic corporations could
qualify for exemption, saying, at page 434, that ‘the bequest itself must go
out of this state into the state of Connecticut to be used in that state by the
foreign corporation to produce the income provided by the will.”
Three judges dissented. We quote the following excerpt from
the dissenting opinion:
‘If the bequest in this case was to ‘the Congrega-
tional Board of Ministerial Relief, a corporation organized
under the laws of the state of Connecticut in 1907,’ without
limitation or qualification. the majority opinion would be
correct, but the will provides that the bequest shall consti-
tute a ‘trust for the uses and purposes and upon the terms
herein set forth, to-wit:
***********+***t+
-‘The said fund is to be invested and reinvested by
the said Board, and its income only shall be used to as-
sist in the support and maintenance of aged, needy and
dependent ministers of the Congregational Church in the
State of Washington and their widows; it being my inten-
tion that this bequest to the Congregational Board of
Hon. Robert S. Calvert, page 4 (Opinion No. S-198)
Ministerial Relief shall be limited for use within the State
of Washington and shall be granted for the relief of only
such aged, needy and dependent ministers and their wid-
ows as may be actually resident within said state.’
‘It cannot be said that the gift was for the benefit
or maintenence of a foreign charity, or to be used even
partly in its jarisdiction, but through such charity for use
only in this state, This limitation distinguishes this case
from the aathorlties cited in the majority opinion, as I
understand them, and brings It wlthin the terms of our
statute.*
In re Thomas’ Estate, 53 P. 2d 305 (Wash. Sup. 1936) held that
a bequest to ‘Salvation Army of Spokane’ for charitable uses was not exempt
from inheritance tax where donee was a California corporation authorized to
do business in the State of Washington, The court said that the state had no
visitorial power enabling it to enforce compliance with will’s direction that
the property be used in the State of Washington.
The judge who wrote the majority opinion pointed out that he had
concurred in the dissent in the McIntire case but that it mast now be regard-
ed as the established rule. One judge concurred solely for the same reason
and one judge dissented.
Obviously all of the cases which have passed on whether charl-
table bequests to foreign corporations are exempt are bottomed on the
particular statutory provision involved. See Annotations in 168 A.L.R. 1260n
and 108 A.L.R. 300n.
The first Texas Inheritance Tax Act1 exempt property passing
to *any public corporation or charitable, educational or religious organisa-
tion within this State when such bequest, gift or devise 1s to be used for
charitable, educational or religious purposes within this State . , .- (Em-
phasis supplied throughout.)
In 1923 the exemption provision was amended and subjected
charitable devises to tax if property passed to y . . . any religious, educa-
tion. or ,charitable organization, located without the State of Texas, or to
any religious, education or charitable organization located in the State of
1 General Laws, 30th Leg., 1st C. S., 1907, ch. 21, p. 496.
Hon. Robert S. Calvert, page 5 (Opinion No. S-198)
Texas,. . . and the bequest is to be used without this State . . .r2
In 1927 the above quoted section was again amended and an ex-
emption-was provided for property valued at less than $25,000.00 tf the
property was devised to a charitable organization ‘located within this state’
and to be used within the state. Property in excessof $25,000.00 in value
was subject to tax.3
In 1931 the Legislature passed House Bill 741,4 the pertinent
portions of which are the following.
‘If passing to . . . any religioas, educational or
charitable organization or institution located without the
State of Texas, or to any religious, educational or chari-
w organization or institution located in the State of
Texas or to the United States, and the bequest, devise or
gift is to-be used without this State, . . . the tax shall
be . . .
The above quoted provision was construed in San Jacinto Nat.
Banlc v. Sheppard, et al, 125 S.W. 2d 715 (Tex. Civ. App. l-9). The court
heldted’ as used in the statute was used by the Lexis-
lature in the sense of domicile or residence of a corporation and not only
to distingulsh generally a foreign from a domestic corporation but to re-
quire that even a domestic corporation, in order to claim a more favorable
exemption, must use the devise or gift within the state.
At the date of the death of the decedent in the instant case,
Article 7122, Vernon’s Civil Statutes, had again been amended.5 The perti-
nent provision reads as follows:
‘Provided, however, that this Article shall not
apply on property passing to or for the use of . . . any
religious, educational or charitable organization when
such bequest, devise or gift is to be used within this
State.’
2 Acts, 38th Leg., 2d Called Sess., 1923, ch. 29, PP. 63, 85.
3 Acts, 40th Leg., R. S.. ch. 62, p. 87.
4
Acts, 42nd Leg., ch. 72, p. 109.
5 Acts, 43rd Leg., R. s., 1933, ch. 192, pp. 581, 592.
Hon. Robert S. Calvcrt. page 6 (Opinioo No. S-198)
The above quoted portion of the statute was construed in
Presbyterian Church in the U. S. v, Sheppard, 198 S.W. 2d 282 (Tex. Civ.
App. 1946, error ref., n.r.e.). In that case & bequest in question was to
ths Presbyterian Church in the United States. No limitation as to use was
expressed in the will. It was stipulated that the Presbyterian Church
: through its proper officials had satisfied the State of Texas and its proper
officials that said Church had Legally obligated itself by action taken subse-
quent to the death of the decedent to use the bequest in its entirety within
the State of Texas. The court held that the bequest was subject to tax upon
the date of the death of the decedent and that the subsequent agreement on
the part of the Church could not effectuate exemption, At page 284 the court
said:
Y
. . . The will contained no language limiting
or directing that the devisee church use the property in
Texas only, and under no rule of construction can the
will be construed as showing the intention of testatrix
to require that the property be used only in Texas.
. , * Thus the property passed to appellant church up-
on the death of testatrix without limitation, restriction
or reservation as to where or in what manner it was to
be used. It is this character of succession or passing
of property to a religious organization that the foregoing
statute expressly seeks to tax.”
Although the question was not before the court, the clear impli-
cation of the foregoing language is that had such limitation been expressed in
the will, exemption would have been accorded even though the General Assem-
bly, the governing body of the Church, was incorporated under the laws of
North Carolina.
The 54th Legislature again amended Article 71226 and it now
contains the following provision:
*Provided, however, that this Article shall not apply
on property passing . , . to or for the use of any religious,
educational or charitable organisation, incorporated, unin-
corporated 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 Article shall,
without limiting its application under othe’r appropriate cir-
cumstances, apply to all or so much of any bequest, devise
6 Acts, 54th Leg., R. S., 1955, ch. 389, p. 1032.
Hon. Robert S. Calvert, page 7 (Opinion No. S-198)
or gtft to or for the use of . . , a religious, educationalor
charitable organization, which is, in writing and pr.ior to
the payment~of the tax, irrevocably committed for use ex-
cluslvely within’ the State of Texas or transferred to a reli-
gious, educational or charitable organization for use.exclu-
sively within this State.’
The foregoing history of the Texas exemption provision shows
that since 1933 the statute has omitted any reference to the location of the
charitable organization which receives a gift or bequest. The controlling
statute in this case allows exemption for property passing to *an
charitable organization when such bequest, devise or gift la to-8.e used’ l
within this State.. Exemptions to charitable organinations are bottomed
upon the fact that they render service to the State for which reason they are
relieved of certain burdens of taxation. The will in this case expressly re-
quires that the charitable bequests be used in this State. The charitable
donees have undertaken the before summarized guarantees that said bequests
will be used in this State. You are therefore advised that the statutory req-
uisites for exemption have been satisfied and that no inheritance taxes are
due.
SUMMARY
Bequests to foreign charitable corporations are not
subject to inheritance taKes where will conditioned bequests
upon corporations’ acceptance of will’s requirement that the
bequests be used within the State of Texas and where cor-
porations complied with this requirement.
Yours very truly,
APPROVED:
JOHN BEN SHEPPERD
W. V. Geppert Attorney General of Texas
Taxation Division
J. C. Davis, Jr.
Reviewer
J. Arthur Sandlin
Reviewer
L. W. Gray
Special Reviewer
Davis Grant
First Assistant
i, John Ben Shepperd
k. Attorney General
,~A.