361 Mass. 611

March 8, 1972 - April 18, 1972

Middlesex County


For the purpose of G. L. c. 65, Section 1, exempting from inheritance taxes bequests by Massachusetts residents to charitable institutions of other States where the other States gave a reciprocal exemption to bequests to Massachusetts charities, absence in another State of an inheritance tax or an estate tax applicable to charitable bequests was the equivalent of an exemption there. [612-614]

PETITION filed in the Probate Court for the county of Middlesex, on December 8, 1970.

The case was heard by Hays, J.

Daniel J. Johnedis, Assistant Attorney General, for the Commissioner of Corporations and Taxation.

Charles W. Robbins for the petitioners.

CUTTER, J. This is an appeal by the commissioner from a decree of the Probate Court abating an inheritance tax. The commissioner had assessed such a tax upon a legacy, under the will of a Massachusetts testator, to certain Florida public charitable institutions. There is a statement of agreed facts amounting to a case stated.

Under the testator's will and codicils, a fund was left to pay certain specific legacies after the death of the testator's wife. She died in 1967, less than three months after the death of the testator. One legacy of $10,000 was given to Bethesda Hospital, owned and operated by the Southeastern Palm Beach County Hospital District. [Note 1] Another legacy of $10,000 was given to Congregational Church of the Palms, Delray, a Florida nonprofit corporation.

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The Internal Revenue Service allowed the testator's estate a charitable deduction for each legacy for Federal estate tax purposes.

Florida has no inheritance tax. It has an estate tax equal to the credit allowed for State death taxes against the Federal estate tax. No Federal estate tax is assessed on legacies such as these. Such legacies do not contribute to the amount of the credit and no Florida estate tax is assessed or payable by reason of such legacies. If the testator had been a resident of Florida, no Florida inheritance or estate tax would have been assessed or become payable by reason of these two legacies.

General Laws c. 65, Section 1, [Note 2] exempts from Massachusetts inheritance taxes all property transferred by reason of the owner's death to charitable, educational, or religious institutions "which are organized under the laws of, or whose principal charitable, educational or religious objects are carried out within any other state or states of the United States which exempt from similar taxation legacies and devises by its citizens to or for the use of such societies or institutions which are organized under the laws of, or whose principal charitable, educational or religious objects are carried out within the commonwealth" (emphasis supplied).

1. Since Florida imposes no inheritance tax at all, we think it must be regarded as a State (within G. L. c. 65, Section 1, quoted above) which affords Massachusetts charities the equivalent of a reciprocal exemption from inheritance taxes upon bequests made to them by Florida domiciliaries. The obvious legislative purpose of G. L. c. 65, Section 1, is to exempt bequests by Massachusetts residents to non-Massachusetts charities where the States of such charities would do the same for legacies to Massachusetts

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charities. Certainly, in the light of this obvious legislative purpose, the effect of the absence of a Florida inheritance tax is the same as an exemption. See Tax Commr. v. Poucher, 127 Conn. 441, 447-449, which (at pp. 444-445) gives weight to legislative purpose in construing such statutes, citing Bliss v. Bliss, 221 Mass. 201, 210-211. In the Bliss case, in a somewhat different context, the words "like exemption" were construed in the light of whether another State in fact would impose a tax burden upon particular property passing upon the death of its owner. [Note 3]

2. The same principle applies to Florida's estate tax (Fla. Stat. Sections 198.02, 198.03, 198.44) which is equal only to the credit for State death taxes allowable against the Federal estate tax. See Int. Rev. Code of 1954, Section 2011 (and amendments through 26 U. S. C. [1970] Section 2011). It is agreed that such legacies as those to the two Florida charities "do not contribute to the amount of the [estate tax] credit and [that] no Florida estate tax is . . . payable by reasons of such legacies."

3. The types of charitable legacies exempt from Federal estate tax appear to be substantially the same as those exempt under the Massachusetts statute. See Int. Rev. Code of 1954, Section 2055 (as amended through 26 U. S. C. [1964], Section 2055; later amendments through the 1970 U.S. Code compilation are not here pertinent). If there is any difference between the scope of the relief from taxes upon charitable bequests afforded by Section 2055 and that afforded by G. L. c. 65, Section 1, the difference relates only to a few corporations, and for present purposes (involving

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a church and a hospital) is neither relevant nor consequential. [Note 4] Any such difference obviously has no application to the bequests here in issue.

Decree affirmed.


[Note 1] Legacies to this hospital district have been ruled by the Commissioner of Internal Revenue to be deductible in computing a decedent's taxable estate for Federal estate tax purposes.

[Note 2] Section 1 has been amended, in respects here pertinent, by St. 1955, c. 596. Since that amendment and prior to the testator's death (July 15, 1967), Section 1 was amended in other respects. Since 1967 there have been various further amendments. See Old Colony Trust Co. v. Commissioner of Corps. & Taxn. 343 Mass. 613, 615 et seq. See also 1955 Ann. Survey Mass. Law, Section 16.9; annotation, 12 A. L. R. 3d 918.

[Note 3] The commissioner in his brief properly and expressly disclaims any intention to ask us to follow the "unduly restrictive" and narrow construction adopted in In Re Estate of Parmelee, 7 Ohio Op. 455, 461-462, cert. dism. 304 U.S. 544, S. C. 133 Ohio St. 519; 134 Ohio St. 420. There are no limitations upon Florida's complete statutory failure to impose any tax burden on bequests by Florida residents to Massachusetts charities. We thus have no occasion to consider provisions of the type held fatal to reciprocal exemptions in the Poucher case, 127 Conn. 441, 445-447, and in Merrill Trust Co. v. State Tax Assessor, 159 Maine, 45, 49-51.

[Note 4] Some suggestion was made at the arguments that Carroll v. Commissioner of Corps. & Taxn. 343 Mass. 409, dealt with a charitable enterprise which would not be an exempt donee under the Federal statute. Whether the enterprise was thus exempt does not appear in the original papers in the Carroll case. See, however, cumulative list of organizations described in Section 170 (c), Int. Rev. Code of 1954; Int. Rev. Serv. Publn. No. 78 (rev. 12-31-1966) p. 327. See also Dulles v. Johnson, 273 F. 2d 362, 365-369 (2d Cir.) cert. den. 364 U.S. 834; St. Louis Union Tr. Co. v. United States, 374 F. 2d 427, 431-440 (8th Cir.); Industrial Natl. Bank v. United States, 187 F. Supp. 810, 812-816 (D. R. I.); Rabkin & Johnson, Federal Income, Gift, and Estate Taxation, Sections 59.01A, 59.01B, 59.02A, 59.07. Cf. Hammerstein v. Kelley, 349 F. 2d 928, 929-930 (8th Cir.), discussing a gift to a medical society, which had some noncharitable activities.