           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.
