Case Information
*1 OFFICE OF THE AmORNEY GENERAL OF TEXAS
AUSTIN
Ronorable Georga ii. Sheppard
Comptroller 0r Public :i.oooutlts
Austin, Texas
Dear Mr. Sheppard:
Opinion No. O-5294
aeeigned by him aotment the rstention oontrol by deoedent. our letter 0r Iday 4, 1943, are them:
upon his own lire various eoedent transferred all poliolen to his tire and t to the cash surrseder e oaiw for a loan, to surrender beaaiioiarfea or to obtain a . All prwuma on suoh polloles runds 0r himsalr he ooamaity oontsntion swh polioies 6re 8Ub- noe tax is predioated upon two proposltions: "1. The 1&6aauz'e or taxability is ths payment or premiuma by the insured and not the possession or legal ineidente of' ownsrahlp at death.
"2. The bsnefiolarles ot the proceeds of these policies did not cone into posaeaeion or enjoyment said prooaeds until the death or the lnaurea.*
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IIonorabls George B. Sheppard, page 2 You request the opinion ot thlm depudlsnt dri6illg you whether you should inolude the prooee48,;of ruoh
poliaierr in the final inherltaaos tar rrport and oom~ute the tax thereon.
Artiole 7117, V. A. C. S., laaofar (18 it undertakes to tax the prooeeds of inruranoo polloler pqablo to nand bonofloiarlea, wa8 enacted in X939. It reada, in part, as follows:
*All property within jPrf8dlotlon of thl8 State, real or perronrl, oorperato or lnoorponto, and 8ny interest thoroin, inoluding proport~ paa8lng under a general p ower of l ppolntmont eurollred br the deoedont by will, iir0 inmmanoe inoludlng the proo*ods the rxtuat or the mount rooairable br the exeoutor or adminlstrator..~ out by beambat upon hla owa lit*, iuaroao6 taken the laws of doeoent or any other State, or by dead, g?ant, rale or gift aado take em0t in pomau8ion iatendod or enjoyment after the death of the grantor donor, #hall, upon par&&g 80 for wo of any L)(L~SOII, , . ., bo subjaot to a tax . . .* (Ergheilr ouris)
Artas pointing out that the prorlalona Artiole 7117, rhioh levies an inherltanoo tax upon the prooeeds identloal wltih the pro- or lnsuranor ~polfoie8, ir praotloelly tledon of the Federal ostate tax atatutm whloh wae la roreo at the time of the pasrage or the 1939 aaendnent to Artiole 7117, the Texas Supreme Court, in the oaaa of BPI6km.m Y. Emaoa, 169 8. W. (26) 962, oaidc “. . . The sontrolling or the Fedora1 temm The Toxa8
atatute are identical with the Texaras statute. statute having been literally taken rrom the Federal statute, *3 Honorable George E. Sheppard, pega
In that ea8e the Supmmo Court l dbpted the
oonstruatlon or this statute given to the FedWal Statute by the United State6 Supreme Oourt in l&a& f, Oommie~loner of 304 !I. 9. 264. 58 8. Ct. 880, 82 L. Ed. 1331, 118 Int. Rev., A, L. R. 319, where the Oourt held that only that portion of the life inauranoe paid iOr by the deoedant was *taken out by the deoedwt upon his own liie” within the terma of the statute.
pewever, at the time or the pnaraga of the 1939 am#adaent to the Texan Statute end at ths time of tha Supreme Court’i~ droirion of the Blaokmon base, numerous other oaaea aon8fruing the Federal Statute haa been deoided by the Federal aourtta.
In the oa6e of Lawellfn T, Frlok, 268 0. 9.
2)8, 45 s. at. 487, 69 L. Ed. 934, t)n laitoa States summa had berore it the ldantloal taot8 and-the ldentioel Oourt qu8tion hare under oonaldarat1on. In thet oaa#a the oourt, l ttar rtatlng th8t there was &rave doubt of the mar
Qoagera to anaot a law that would rtteotuall~ tax a trnrrar ltr naotment, ron8ummated batora and in koldlng suah tntWat not taxable mde thll, rtetementr
*blot 0al.y are suoh doubts avOida by oon-
atruin& the statute en referrlag only to txanrartlon# taking plaoo after it we8 peamad, but the goneral prinolpla ‘that law8 are not to be oonaldrre6 aa applyling to @asa whloh aroI)e betore their pa88a@* 18 preaervad, when to disregard it would be to impose an unexpeated llablllty that, if known, might hare induoed those ooaoarned to and to use their money in other way@.* avoid it, in the oaee of Bin&am t. United States, &gain, 296 u. S. 211, 80 I,. JH. 160, )6 8. Ot. 180, the Supreme aourt Xtat emphatioally deoluttd that the Federal St8tUta 6&d not raaeh the prooeads OS inauranoe pollolw where awh pollolm~ had been aerlgnad prior to lte anaotmant, eryingr
“The principles BO raoently announoed by this ‘, in Helrering Y. St. Louis U&ion Trust Co., ante, oourt p. 39, ana Beaker Y. St. Louis Union Trust Co., ante, p. 48; are dsol8lte of the ease In razor of the taxpayers. Those prinolples establlah the title ana porrsas8ion of the benerlolary were fixed by the tarma of the poliofe~! and aeeignmenta thereor, beyond the power of the lnoured afroot, many years be&ore the clot in question here wa8 No interest paseed benerioiary aa tha p4SPSd. result o? the death of innurad.* ~pharii~ OurI)) *4 Honorable George H. Sheppard, page 4 Texas law in force at the time Under La .
this statute was waoted tha sseignagnc or ah ~rmuranoe polioy (absent rasenation of the right tq @hangs the beneficiary) ia a oompletad traneaotion whloh ?estm in the rrsignee oomplete and perfeat titla and rest8 in muoh rs8ignae the title to the prooeade of suoh inaumhoe. Burg68 v. Rew York Life Ina. Co., 53 S. u. 602. Oanneequantly, aiaoe tit10 ma alroady tested In the assignob&at the time of the parsage OS the 1939 amendment, nothlag pamed the as&mm after, either by aots or the deosdent or by his do&h. See there- yriok and B3ingham oaaer, ouprs.
Under the ruli115 of the Suprema Oourt in
Blaolmm 1. &snBOn, SUplW, our etatut must ba oonotrued in the came manner that the Fedsral~Statute from whioh it wa8 adopted was oonrrtruad at the time or ita pamage. The Friek antI Bingham oases represmt the ooswfruofion the Fe&oral Statute at the time of the anaotment of the 1939 mwm6mant 7u7. We, therefore, advise you that the prooaedm to Article of ineuranoe polidlee whloh wore aaelgned, without rwervatlon, prior to the anaotmmt of the 1939 amndmnt to Artlola 7U7, and in rhloh deoebent never thereafter aoquired an lntarest, are not taxable under the provisions OS Artiole 7117, V. A. C. 5.
Truatlng that the above fully answer your
inquiry, we am
tours very truly ATVCWEY ORNERAL OF TEXAS Fowler Roberto Aesietant