On appeal from the Superior Court, Appellate Division.
For reversal -- Chief Justice Weintraub, and Justices Francis, Proctor, Hall and Schettino. For affirmance -- None. The opinion of the court was delivered by Weintraub, C.J.
The issue is whether a bequest of a fund in trust for the education of young men desiring to study for the priesthood is totally exempt from inheritance tax as a transfer "to or for the use of any educational institution" (N.J.S.A. 54:34-4 d) or is but partially exempt as a "trust for an exclusively religious benevolent or charitable use or purpose" (R.S. 54:34-2 b). The Director of the Division of Taxation of the Department of the Treasury found the gift to be but partially exempt and assessed a tax accordingly. The Appellate Division affirmed. 60 N.J. Super. 98 (1960). We granted certification. 33 N.J. 111 (1960).
The facts are not in dispute. The will bequeaths the residue of the estate to Charles C. Deubel, Jr. in trust to invest for a period of 99 years "and to use the income and interest therefrom for the education of poor worthy Roman Catholic young men studying or desiring to study for the Roman Catholic Priesthood of the Order of Saint Benedict and providing proper maintenance and support for them
during their course of study." The will provides the class of such young men "may be selected by the Abbot of Saint Mary's Abbey of said Order of Saint Benedict of New Jersey or any Committee of Ordained Priests of the Order of Saint Benedict of New Jersey which the said Abbot may appoint." The income is to be held by the trustee in special account entitled "Maurice Froehlich Scholarship Fund." At the expiration of the trust the corpus is to be paid over "to the Order of Saint Benedict of New Jersey" without any limitation upon its use.
The Order of Saint Benedict of New Jersey was incorporated by P.L. 1868, c. 102. The essential objects of the Order as stated in the act of incorporation are "the education of youth and the establishment of churches and conducting of service therein."
The Order operates Delbarton School, Saint Benedict's Preparatory School, both preparatory schools, and also a seminary, all within this State. The preparatory schools instruct in subjects taught in non-sectarian schools and meet the requirements of the State Board of Education. The seminary, situate in Morristown, is devoted to theological instruction for men who have qualified for study for the priesthood. The record reveals that a young man interested in the priesthood is sent, following completion of the usual college preparatory course, to institutions operated by branches of the Order in other states, and upon successful completion of studies there, he enters the seminary at Morristown for theological instruction for a period of four years. The Order pays for the instruction outside New Jersey and provides for all of the needs of those at the seminary. Thus far, the income from the trust has been allocated to students at the seminary.
R.S. 54:34-2 b deals with transfers "to" religious, benevolent and charitable institutions and organizations or "in trust for an exclusively religious benevolent or charitable use or purpose." It exempts such transfers up to $5,000 and taxes the excess at 5%. This is the provision the
State asserts to be controlling. N.J.S.A. 54:34-4 d, upon which appellant relies, provides for a total exemption of:
"d. That part of the estate of any decedent which passes to or for the use of any educational institution * * * no part of the net earnings of which inures to the benefit of any private stockholder or other individual or corporation; provided, that this exemption shall not extend to transfers of property to such educational institutions of other States, territories and foreign countries which do not grant an equal and like exemption of transfers of property for the benefit of such institutions of this State." (Emphasis added)
The pertinent statutory history appears in Tappan Washington Memorial Corp. v. Margetts, 9 N.J. Super. 212 (App. Div. 1950). As was there stated, N.J.S.A. 54:34-4 d was derived from P.L. 1925, c. 102, which granted total exemption for transfers "to or for the use of any institution solely educational for whose benefit there may have been or may hereafter be appropriations made by the Legislature of this State." The section was then amended by P.L. 1948, c. 268, to read as quoted above. In the statement attached to the bill which became the statute just cited, the purpose was stated at length:
"The purpose of this bill is to encourage privately endowed higher education by making uniform the exemption from inheritance tax of bequests and devises to all educational institutions not operated for profit. It also avoids the conferring of an unintentional tax exemption, by operation of the present law, in the event that the Legislature should in the future make an appropriation for the benefit of an educational institution under such programs as a veterans' educational aid or for other purposes. Under the present law, exemption is granted where the transfer ...