            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




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