                               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.
