Untitled Texas Attorney General Opinion ( 1963 )

THEATTOECNEY GENERAL
OF%%XAS
Honorable Ben Atwell, Chairman Opinion No. c-76
Revenue and Taxation Committee
House of Representatives Re: Exemption from f'ran-
Austin, Texas chise tax of non-
profit corporations
Dear Mr. Atwell: under submitted facts.
Your letter requesting the opinion of this office on the
above captioned matter reads as follows:
"Article 12.03, Taxation-Qeneral, V.A.T.S., ex-
empts certain corporations from the payment of the
franchise tax. A question has been raised as to
whether non-profit corporations without capital
stock who~secharters contain the following purpose
clause, would be exempt under this provision:
"'This corporation Is formed for the or-
ganization of a Chamber of Commerce, with
power to provide and maintain suitable rooms
for the conduct of Its business, and to es-
tabllsh and mallitalnuniformity In the com-
mercial usages of cities and towns, to ac-
quire, preserve and disseminate valuable
business Information, and to adopt rules and
regulations to promote the Interest of trade
and Increase the facilities of commercial
transactions. The primary purpose of said
corporation being to develop the manufactur-
ing lnduatry In Texas and in aid of cities
and towns of Texas In the eetabllshment of
manufacturing In Texas.'
"Such corporations operate on a state-wide basis
and have as one of their principal purposes the en-
couraging and attracting of new Industry to the
state, and aiding In the expansion of existing in-
dustry.
"Attorney General's Opinions w'W-106and O-7240,
In my opinion, are not controlling on this question,
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Honorable Ben Atwell, page 2 (C-76)
sfnce they pertafn to a regional and a county
chamber of commerce and not to an organization
state-wide In scope.
"An opinion from your office answering this
question would be appreciated."
Article 12.03, Chapter 12, Title 122A, 2OA, Taxation-
General, Vernon's Annotated Texas Statutes, reads as follows:
"The franchfse tax imposed by this Chapter shall
not apply to any insurance company, surety, guaran-
ty or fidelity company, transportation company or
sleeping, palace car and dining car company now re-
quired to pay an annual tax measured by their gross
receipts, or to any corporation organized as a
railway terminal corporation and having no annual
net income from the business done by it, or to cor-
porations having no capital stock and organized for
the exclusive purpose of promoting the public ln-
terest of any county> city, or town, or other area
within the state OP to corporations organized for
the purpose of religious worship or for providing
places of burial not for private profit, or to cor-
porations organized for the purpose o&'holding
agricultural fairs and encouraging agricultural
pursuits, or for strictly educational purposes, or
for purely public charity, or to state-chartered
bufldfng and loan associations; or to any 'mutual
investment company registered under the Federal In-
vestment Company Act cf 1940, as from time to time
amended, which holds stocks;bonds or other securi-
ties of other compan%es solely for mutual investment
purposes9 or for nonprofit corporations having no
capital stock organized for the purpose of the
education of the public In the protection and con-
servation of fish, game and other wildlife, grass- .
lands and forests, or"to nonprofit water supply or
sewer servfce corporations organized on behalf of
cities or tovns pursuant to Acts of 1933, 43rd Leg-
islature, 1st Called Sessfon, Chapter 76, as amend-
ed. I"
In order to be entitled to exemfjtfon,the corporation
must come within the provisions for D u e corporations having
Honorable Ben Atwell, page 3 (C-76)
:._
no capital stock and organized for the exclusive purpose of
promoting the public Interest of a? county, city, or town,
or other area within the state. . D since It ls'well settled
that Article 12.01 leviesa franchise tax on corporations
without capital stock as Gel1 as corporations with stock.
McCallum v. Associated Retail Credit Men of Austin, 41 S.W.2d
'45 (Comm.App. 1931).
Prior to 1957, the exemption under this provision of the
statute was limited to corporations organized for the exclu-
sive purpose of promoting the public Interest "of any city or
town. Under that language, the Attorney General's Office
had held that chambers of commerce of cities and towns were
exempt but that county or regional chambers of commerce were
not exempt. Att'y. Gen. Ops. O-7240 (1946),``-106 (1957).
In 1957 this provision of the statute was amended to read 'any
county, city, or town, or other area within the State," and
these opinions are now obsolete. However, your opinion re-
quest raises the question, among others, of whether a state-
wide organization can qualify for exemption. We are of the
opinion that the phrase "other area within the State" includes
the entire State as well as lesser regions and that a corpor-
atlon is not precluded from exemption because its activities
are state-wide.
It is also our opinion that there is nothing else in the
purpose
_. clause set forth
.^ in
_-your request which, on its face,
would prevent exemption. Although the charter recites that
the corporation is formed for the organization of a chamber
of commerce, the further recitations show that the corporation
is not intended to operate as do usual chambers of commerce,
which function not primarily to promote any one industry but
rather to promote the general interests of the public In the
areas which they serve. However, a purpose of a more speclal-
ized nature is sufficient so long as it la exclusively In the
public interest. The promotion of the Industrial development
of an area is in the public interest.
Within the orbit of the purpose clause under considera-
tion, a corporation could carry on some activities designed
primarily to benefit the private interests of those engaged
in the industry rather than the interests of the public at
large without exceeding its charter powers. We do not think
it is necessary that the corporate charter be so worded that
any function not designed primarily for the promotion of the
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Honorable Ben Atwell, page 4 (C- 76)
public interest would.be In violation of Its charter provi-
sions, but in order for the corporation to be exempt from the
franchise tax It Is essential that the functions actually per-
formed can be confined to those which have as their purpose
the promotion of the public Interest. McCallum v. Associated
Retail Credit Men of Austin, aupra.
On the basis of the charter provision alone, It is not
possible to state whether a particular corporation would
qualify for the exemption, as complete Information on all
activities actually carried on by the corporation would have
to be known in order to determine whether it was exempt.
Therefore, we can answer your Inquiry only by a general state-
ment of the prlnclples which we think to be controlling and
cannot state categorically whether a corporation having this
purpose clause in Its charter.would or would not be exempt
from the franchise tax.
In connection with your opinion request, a corporation
whose charter contains the purpose clause quoted In your re-
quest has submitted a brief which, among other things, des-
cribes various activities OS the corporation to distinguish
It from a trade association organized primarily for the bene-
fit of its members. We are not Informed whether this corpora-
tion carries on any other actlvltles, and In the absence of
complete Information we are not In a posltlon to express an
opinion as to whether this particular corporation qualifies
for the exemptlon.
SUMMARY
The development of Industry Is In the public in-
terest; and a nonprofit corporation having no
capital stock, whose charter states that Its primary
purpose Is to develop the manufacturing industry In
Texas and In aid of cities and towna In Texas In the
establishment of manufacturing in Texas, la exempt
from franchise tax under the provisions of Article
12.03, Tax.-&an., V.A.T.S., if all of Its activities
are "for the exclusive purpose of promoting the
public Interest." It is not exempt If any of its
activities are primarily for the promotion of pri-
vate interests,
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. .
Honorable Ben Atwell, page 5 (c-76)
Yours very truly,
WAGGONER CARR
Attorney General of Texas
Attorney General
MMP:MKW:da
APPROVED:
OPINION COMMITTEE;
W. V. Geppert, Chairman
Gordon Appleman
Paul Robertson
J. Arthur Sandlfn
APPROVED FOR TKE ATTORNEY GENERAL
By: Stanton Stone
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