Untitled Texas Attorney General Opinion ( 1961 )

THEA~TORNEYGENERAL
OF TEXAS
December 5, 1961
.~
Honorable’Robert S. Calvert Opinion No. W-1208
Comptroller of Public Accounts
Capitol Station Re: Proper method for
Austin, Texas assessing value of
shares of bank stock
for ad valorem tax
purposes In view of
Attorney General
Opinions Nos. V-315
Dear Mr. Calvert: and WW-439.
In your letter requesting our opinion on the above
captioned matter, you state:
“It has been the long standing practice
of the Tax Assessor-Collectors in the
State of Texas to assess the shares of
stock of a bank as the par value of
capital stock, plus the surplus and
undivided profit, less the assessed
value of real estate. Attorney General
opinion No. WW-439 says that the method
for assessing such stock Is based upon
the actual cash value of the stock less
the value of the proportionate amount
per share of the real estate owned by
-'thebak. It
You further state that in connection with this question
you are having difficulty In reconciling Attorney General
Opinions Nos. V-315 and WW-439.
In Opinion NG. V-315, the state banking corporation in
question had been granted its charter In September 1946. The
Banking Comm$sslon’s permit gave January 2, 1947, as the
opening date of the bank, which did In fact open on that date.
The capital stock had been subscribed.to by the stockholders
prior to January 1; 1947, and the bank’s capital as well as
surplus and undivided profits was set up prior to January 1,
1947. A certain portion of the llndlvided profits had been
used for the purpose of furniture and fixtures for the bank.
The bank did not own any real estate. The precise question
presented for consideration was:
Honorable Robert S. Calvert, Page 2’ Opinion No. W-1208
“In view of the fact that the capital,
surplus and undfvlded profits were In
being prior to January 1, 1947 an8 some
of the monles and the roflts were used
prior to Jar.uary 1, 19fl7, is this capital
the surplus and. undivided profits taxable
property for the year 1947 even though the
State Banking Commission’s permit gives
the opening date as January 2, 1947 and
the bank In fact started operating as a
bank as of January 2, 1947?”
The specific anawer’to this que?tlon and, therefore, the
specific holding of Oplnlon No, V-315 1s contained ln~the
following paragraph:
“These ,bank shares under the express
provisions of Article 7145, V.C.S., above
quoted are subject to taxation. They are
‘property; real* personal or mixed.’ They
were in existence on January~lat and the
fact that the bank Itself did not open
Its ~doors for business until January 2 Is
lmmaterLa1 B”
It is true that the Opinion states that the’ “i . .value
of the capital, surplus and undivided profits (being personal
property) Is used as a,baale for determining the value of the
shares for taxation ~purposes *” However, this statement was
not necessary to a determination of the question iLnddr.-con-
slderatlon and Is therefore not a part of the apeelflc holding
of Opinion No. V-315. In view of the Pacts which were presented
in connection with the opinion request* that method of valuation
would probably have been the correct method of valuatfon In
that particular case.
We agree with the following statement contained in Attorney
General’s Opinion No. O-5258:
“Although the aggregate ‘actual cash
value I of the shares of g bank normally ”
Is based upon %he value of Its franchises
capital, and property of all kinds, less
the amount of Its debts Rosenber v.
Ueekes, 67 Tex. 578, 584, 4 S.Y. 899, ‘it
Is proper for the assessor or the board
to consider all elements which tend to
compose.or augment the value of the stock
in the hands of the individual stockholder. t
6 Tex.Jur., p* 348. From the value thus
Honorable Robert S. Calvert, Page 3 Opinion No. w-1208
obtained is to be deducted the proportionate
amount per share at which the real estate
of the bank is assessed. See our Opinions
Nos. o-2406, 0-3563 and O-1214, enclosed
herewith, for different applications of
this formula. The obvious purpose of the
formula was to obtain the value of all
assets of the bank, except real estate,
and to tax such assets proportionately
against then shareholders. ”
In other words, we are of the opinion, as was held In
Attorney General’s Opinion No. o-4869, that there Is no
exclusive method for determining the fair cash market value
of shares of bank stock. Generally speaking, we reaf f lrm
the holding of WW-439 ‘I. that such stock value would be
the value of the stock rather than the value that would be
obtained by adding the value of the capital. stock, the amount
of surplus, undivided profits or reserve funds and dividing
this by the number of shares of stock.” But this la not to
say that the latter method of valuation could never result
In a determination of the actual cash value of the stock. As
stated in Opinion No. O-4869:
I,. . . any method reasonably calculated
to reach a correct conclusion as to value
Is sufficient for the taxing authorities.
The laws of this state place the duty of
determining the value of such stock within
the discretion of the local assessing
authorities. The Legislature has vested
In boards of equalization, as constituted
by statute, the sole discretion In the
valuation and the equalization of values
of property subject to ad valorem taxation.
Their action is clothed with the presumption
that It has been rightfully made on the
basis of actual value and the courts will
decline to disturb such assessments unless
shown to be arbitrary and grossly excessive
or fraudulent or based upon a fundamental1
wrong principle or method. 40 Tex.Jur. 15 ii .
Further than this the courts have not gone
nor can this department In stating the rule.”
SUMMARY
The value of shares of bank stock
for ad valorem tax purposes should be
Honorable Robert S. Calvert, Page 4 Opinion No. W-1208
based upon the actual cash value of the
stock less the value of the proportionate
amount per ahare of the real estate owned
by the bank. Depending upon the facta of
each case, this actual cash value may or
may not be obtained by adding the value
of the capital stocks the amount of surplus,
undivided proffts OP reserve funds and
dividing this amount by the number of sharee
of stock.
Your5 very truly,
WILL WILSON
Attorney General of Texas
MMP:cm
APPROVED:
OPINION COMMITTBE:
W. V. Geppert, Chairman
F. C. Jack Goodman
Leon Pesek
Llnward Shivers
REVIEWEDFORTHE ATTORNBYQEMERAL :
By: Houghton Brownlee, YP.