Untitled Texas Attorney General Opinion ( 1962 )

THEA~TORNEYGENERAL
OF-XAS
AUSTIN ~LTEXAS
June 7, 1962
Honorable Robert S. Calvert Opinion No, WW-1349
Comptroller of Public Accounts
Capitol Station Re: Exemption from inheri-
Austin, Texas tance taxes of devise
and bequest to National
Foundation for Infantile
Dear Mr. Calved: Paralysis, Inc.
In connection with your request for an opinion of this
office on the above captioned matter, you have advised us of
the following facts.
H. T. Bender died testate a resident of Gray County, Texas,
on December 30, 1960. You have furnished us with a copy of the
Decedent's last w~illand testament. The controlling provisions
of the will are contained in paragraphs IX, X and XI. The pertin-
ent provisions of these paragraphs are the following:
"In the event I shall survive my wife,
then I hereby give, devise and bequeath
unto my Trustees hereinabove named all my
property, both real, personal or mixed,
of which I may die seized and possessed,
IN TRUST NEVERTHELESS to hold, manage,
control, sell and convey the same in
accordance with the authority hereinafter
conferred upon them.
"The beneficiaries of this trust shall
be The American Cancer Society, Texas
Division, a non-profit corporation, incor-
porated under the laws of the State of
Texas and the National Foundation for In-
fantile Paralysis, Inc., a corporation
organized under the Membership Corpora-
tions Law of the State of New York, having
its principal office at 120 Broadway, New
York, New York. My estate and the income,
rents and revenues therefrom, including
the proceeds of the same, shall be used
by said corporations for the purposes
and uses hereinafter set out.
"The term of this trust shall be for
a period not to exceed five years from
Honorable Robert S. Calvert, Page 2 Opinion No. WW-1349
and after the date of my death. . .
"During the pendency of this trust,
after the payment of all expenses
thereof, there shall be paid by my
Trustees one-half of the income, rents,
and revenues from the property of my
estate to The American Cancer Society,
Texas Division, with its office at
Houston, Texas, and one-half of the
income, rents and revenues from the
property of my estate shall be paid
to the National Foundation for Infan-
tile Paralysis, Inc., a New York cor-
poration. Prior to the termination of
this trust, I direct that my Trustees
shall sell all of the property of my
estate and shall deliver one-half of
the proceeds of the same, together w~ith
one-half of the net income therefrom
after the payment of all expenses of
administering this trust, to each of
the beneficiaries, to be made at the
discretion and in the amounts as may
be determined by the Trustees.
"The American Cancer Society, Texas
Division, shall use all of the funds
received by it from my Trustees for
research in the methods of treatment,
diagnosis and prevention of cancer, and
to aid in the care of indigent cancer
patients in securing adequate diagnosis
and treatment, and any other activities
which may contribute to the control of
cancer in such manner as may be directed
by said corporation; provided however,
that all of the funds which may be re-
ceived by The American Cancer Society
shall be used by it and expended for
any and all of said purposes within the
State of Texas.
"The National Foundation for Infan-
tile Paralysis, Inc., shall use such
funds as may be received by it for the
purposes for which it is incorporated."
We quote the following excerpt from your letter requesting
the opinion of this office on the taxability of the devise and
Honorable Robert S. Calvert, Page 3 Opinion No. '~-1349
beque,stto the National Foundation for Infantile Paralysis,,Inc.
"Apparently, the intent of the testa-
tor was to limit the proceeds of one-half
of the estate devised to 'the American
Cancer Society for use within the State
of Texas and the other one-half of the
proceeds of the estate devised to the
National Foundation for Infantile Paraly-
sis, Inc., for use for the purposes for
which the corporation was incorporated.
Therefore,no limitation was placed on
the expenditure of the proceeds of the
estate passing to the National Founda-
tion for Infantile Paralysis, Inc.
"We have attempted to tax the bequest
to the National Foundation for Infantile,
Paralysis, Inc., but the attorney repre-
senting this estate disagrees, and we
are furnishing you a copy of his letter
in connection with his position on the
question involved in this case, . . ,
"Please advise whether or not this
department is correct in fixing and
assessing a tax against that portion of
the estate passing to the National Founda-
tion for Infantile Paralysis, Inc. Since
the expenditure of the proceeds of one-;
half the estate passing to the American
Cancer Society was limited to the State
of Texas, it is exempt under our law."
The attorneys representing the estate take the position
that the fact that the beneificiary isa charitable organization
under the law is sufficient to effectuate exemption.
While it is true that under the Federal Estate Tax laws
there are no geographical limitations imposed as a requisite
to exemption for charitable institutions, this has never been
true in this State for inheritance tax purpo,ses. Prior to its
amendment in 1955, Article 7122, Vernon's Civil Statutes, pre-
sently carried as Article 14.06, 20A, Tax.-ien., V.C.S., had
provided an exemption for property passing . . .to or for the
use of any religious, educational or charitable organization when
such bequest, devise oregift is to be used within this State."
This provision had been construed by our courts as requiring the
limitation to use within this State to be expressed in the will,
Honorable Robert S. Calvert, Page 4 Opinion No. WW-1349
even though the charitable beneficiary irrevocably committed the
devise and bequest to use within this State subsequent to the
death of the decedent and prior to the payment of the tax. Pres-
byterian Church in the U. S. v. Sheppard, 198 S.W.2d 282, (Civ.
App. 194b, error ref. n.r.e.).
In 1955, Article 7122 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 the charitable gift be used within this State, bye irrevo-
cably committing such gift to use within this State prior to
the payment of inheritance taxes. Senate Bill 266, Acts 1955,
54th Leg., Chapter 389, p. 1032.
In 1959, the 56th Legislature further enlarged charitable
exemptions by extending the geographical limitations on use
and thereby departed from the former concept that the exemp-
tion would be accorded charitable devises, bequests and gifts
only if their use was limited to this State. The pertinent
portions of the sta ute as it presently reads are set out in
the footnote below.1 However, it is noteworthy that even under
1
Article 14.06, V.C.S., reads as follows:
"If passing to or for the use of. . ,
religious, educational or charitable
organization or institution, . . .
the tax shall be:
11
. . .
"Provided, however, that this Arti-
cle shall not apply on property passing
to or for the use of. . .any religious,
educational or charitable organization
incorporated, unincorporated or in the
form of a trust, when such bequest, de-
vise or gift is to be used within this
State.
"The exemption from tax under the
preceding provisions of this Article
shall, without limiting its applica-
tion under other appropriate circum-
stances, apply to all or so much of
any bequest, devise or gift to or for
(Continue)
Honorable Robert S. Calvert, Page 5 Opinion No. WW-1349
this most recent amendment of the statute, which accords exemp-
tion to property passing to or for the use of charitable organ-
izations conducting their operations on a regional basis, it
is still necessary that the,State of Texas or a part thereof
must be included within the region of operations.
You are therefore advised 'thatunder the provision of
Article 14.06, as that article and its predecessor Article 7122
have been construed by the ~decisionsof the courts of this State,
and further in view of the plain language of its most recent
amendment, exemption cannot be accorded to the bequest for the
use of the National Foundation for Infantile Paralysis, Inc.
' (Cont'd)
the use of. * .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.
"Provided, further, that if the pro-
perty so passing is to or for the use
of a religious, educational, or chari-
table organization which conducts its
operations on 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 with-
in such region shall be deemed to be
used within this state.
"For purposes of this paragraph a
region shall comprise not more than
five 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, characterdevelopment, and citi-
zenship training or like program."
-. . \
Honorable Robert S. Calvert, Page 6 Opinion No. WW-1349
SUMMARY
A bequest to the National Foundation for
Infantile Paralysis, Inc., a New York corpora-
tion, is not exempt from inheritance taxes since
the funds so devised and bequeathed will not be
used exclusively within the State of Texas.
Yours very truly,
WILL WILSON
Attorney General of Texas
Assistant
APPROVED:
OPINION COMMITTEE:
W. V. Geppert, Chairman
Arthur Sandlin
Robert Scofield
Elmer McVey
W. E. Allen
REVIEWED FOR THE ATTORNEY GENERAL
By: Houghton Brownlee, Jr.