Untitled Texas Attorney General Opinion ( 1947 )


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  •                             August 14, 1947
    Hon. C. If. Cavness
    State Audit or
    Capitol Station
    Aust ia, Texas
    Attent i.ona    Ron. Willl@m A. Harrison
    First Asalstant
    Opinion No. Y-341
    Re:   The basis upon which to
    determine, for franchise
    tax purposes, the amount
    of capital stock of a
    corporation vhose capita
    stock has no nominal or
    Dear sir:        .i                 par value.
    ‘~ Youi req~uest for an opinion      of this Depart-
    ment’is: aa follows:
    “In computing the amount. 6f ~frCiMh.ise
    tax due the State by corporations. whose cap-
    *’ltal stock has a nominal -or par value per
    share, the total authorized capital stock,
    regardless me         amount actually paid in
    for 881118,is used by the Xecretary of State
    in detemnLning the franchise tax liability
    of ~such corporation.
    “In computing the franchise tax due by
    corporations    whose capital stock has no nom-
    lnal or par velne only the amount that has
    aCtI.Ialls be& paia in, which does not always
    represents       total number of shares author-
    ,ieed by the charter,   is used as the amount of
    capital    stock for such tax purposes ana no
    tax Is assessed on that portion of the author-
    ‘iced capital .stock~that pas not been paid as
    ;;,gne    in cases of par value stock corpora-
    .
    ‘>
    Hon. C. H. Cavness,   Page 2, V-341
    2229
    “An opinion is resp,ectfully     requested as
    to whether the amount actually       m     & for
    shares of capital stock of non-par corpora-
    tions Is the amount of capital       stock on which
    the franchise    tax should be basea or whether
    the tax should be based on the entire amount
    authorized after ascertaining       the value of
    the unissued stock by means set forth in the
    following   court decisions:
    Southland Ice Co. V. McChlum,
    119 T. 47, 24 3. W. (2a).344
    American RefinUg Co. V. Staples,
    CIV. app., 260 5. ,w., 614
    “Alqo please estate in your opinion wheth-
    er the above referred to decisions    are appll-
    cable or Inapplicable   to the current fran-
    chise tax law. n.
    The Austin. Court of Civil Appeals recently held
    llu’the case of Sterling Oil & Refining Corporation v. Is-
    bell,  et al, 202 3. W. (2rll 300, (no writ of error applied
    for] as follows:
    “Its was also shown that when sala amencl-
    m&t was filed with the ‘Secretary-of           Sta,te
    each of the 80 shares of the par value stock
    80~surrendered .ana cancellea haa ,an appralsea-
    cash values ~of .~$12,914;765. ~Further; %n res-
    ponse to a demand .of the Secretary        of State,
    sala corporation     filed Sts, franchise      tax re-
    turn for 8934 ‘showing ~Jts: capital ,stock as
    being $1~,033,181.25 and :pala its .fra.nchlse
    taxes for 1935 oti:th+t valuation+         For all
    subsequent years,     however,- its ~f.ran.chlse tax
    returns showed its capital       stock as $100 for
    the .40.000 .&ares issued to .the 22 stockhold-
    erti in’lieu  ~of the ‘80~&&s      orlainalls     held
    by them, plus the value actual3,g ;recelied           for
    such of the, 40.OOO~or~ized.        shares as .wer
    ,thereETt~issued       aiiGZBTC      theTTc?Eie
    value -vof su~h~z~n~subeequently                     ma
    shares was not fixed la tfiZha~,ter.         amendmGiiE
    .Presumsm auch7Xiie~a~i5i5itthe                   alrec-
    tops of the corporation      pursuant to the pro-
    visions of Art . .15,38c,- Vernon:‘s. Ann., CLv. St.
    Eon.       C. Ii. Cavaess,   Page~3, ,V-341 ,.,,'
    :   In atiy evetlt, the report.inadd.bg.the   cdrpora-
    tlbn.t:o the ~Secretary ,of:S$ate;in~May,   ~1945,
    showeathat~ duri@the      years 1934 to~.l942,
    there.haa beecsold    ati aggregate of 30,610
    of.the authoidzed 40,000 shares;Ior       wh,Sch
    the .corporatlon h&l actually.w*ceWed      ,~$25
    per share."
    '?he do par’ value ‘coqorat icia’wzis’~not
    author&d     in Texas prior to the Act of 1925.
    R..‘C. Qh Arts 1538a to 153&m. That Act pro-
    vides that where ~a charter,     oran amendment to
    a charter,   1s sought, which authqrlze the ls-
    suance of'no~par value stock, the majoritg of
    the dlrectors,must     file with the Secretary of
    are based.uljonythe      'actual consider~tlon      E-
    corpbratlon .for:an         h
    Art.~l53r       d    %      $%?
    :   “’              theanchlse          tax statute,    provides that IFir
    the purpose of computlti&the tax oft Co or=
    Ens     lssulti~no    pr stoc~siiX        -7sEiil
    stoc
    been        ana considered as,br          of the value
    '2iXiZiT
    .+          received -h at t e--3
    time -,-
    0 Bie~siZiiZ
    t ereof;lnwsis              adder.
    The clear and unambiguous _..
    aoralag.of
    -        - - sta-
    the
    tutes as set forth la the opinion of the Conrt ,or,r;lVil
    
    Appeals, supra
    , requires that-,~the.franchlse      ~tax to be
    paid by.non-par    corporatlons,be  based upon the value ac-
    tually  .recelved by the corporations    of the shares of
    stock subscribed for~ana Issued.
    fin the .origin@l,coalficatlon  of the Revised
    Civil S&tut&'~of     1925 there,was containd   Article  15381,
    as~f&lJo,ws:.
    .~ "The amount ,~of franchise  tax to be paid
    by any corpotiatloa havlng shares, of stock wlth-
    out noniltd 6r par value shall.be    aetermlnea
    in the'mantieti'as now OF hereafter  prescribed
    .'~ by the ~lawS.of ,thiti State, except that'such
    shares without nominal or par ,value shall,     for
    the purpose of computing such tax only, be
    ”   .
    Hon. C. H. Cavness, Page 4, V-341
    2630
    treated and considered as having and being of
    the value actually received by the corporation
    for the .lssuance of shares as disclosed       by the
    charter or any amenclmsnt thereof,    as provided
    in Article  153&1 hereof,   or by a certlf lcate
    .as provlaecl ln Article   1538e hereof ;”
    On February 12, 1930, the Supreme Court del-
    ivered its opinion ln~ the case of aouthland Ice Company
    v. McCallum, Secretary of State, 
    117 Tex. 27
    , 24 S. W.
    (2&a) 344, the opinion being by Judge Crltz as Commlsslon-
    er, and a&opted by the Supreme Court.      This was an orig-
    inal mandamus suit brought by the Southland Ice Company
    against the Secretary of State to compel her to accept a
    certain sum in payment of franchise     taxes according to
    the report submitted by relator as a non-par stock cor-
    porat ion.  The facts shon that    only part of the author-
    ized capital stock had been sold land Issued    and that
    the relator had pald.the.tax     upon the stock so sold at
    the value received by it from the sale thereof,      but
    that the Secretary of State haa construed the law to
    be that the franchise tax~‘should be paid on both the ls-
    sued ana unsold stock.    Article   15381 was construed in
    connection tlith Article  7084, and the Court held that
    the value’ of the stock both Issued and unissued, was
    subject .to be used as a basis for the payment of a fran-
    chlse tax.
    ‘\         Thereafter, the Fifth ‘Caliea Session of the
    41& Ieglslature,     1930, Chapter 68, p. 220, repealed
    Article   15381 and substituted   ana amenaea Article   7084,
    which, after setting forth the ‘yardstick’      fo$“the com-
    putation of the franohise tax as Tao otuer corporations,
    contained the following    methoa provided by the Lsglsla-
    ture for computing the franchise     tax upon no-par    cor-
    porat ions.
    “Par the purpose of computing the tax
    of Oorporationa issuing no-par value s,tock,
    such stock shall be taken and conSidered       as
    being of the value actually     received at the
    time of the lssuaace   thereof;   and foreign
    corporation8   issuing such .stock shall fur-
    nish the Secretary of State mlth the same
    lnformatlon now required of domestic      cor-
    porations issuing, such stock.”
    Although Article  7084 has been amended by Acts
    1931, 42n8 Leg., p. 441, ‘chapter 265, para. 1, and Acts
    231
    Hon. C. H. &vness,;: Page 5,~V-341         "' ,'
    1941;.,47th.&eg.,:chaptel"~269,      9. 184, Art. VIII, para.
    1, nevertheless     thia~.provlsioa    of the Act'of:the    Fifth
    Called Session,     4lst Lsgislature      in 1930; has rendned
    unchanged.
    -.
    Since &e'repeal      dfArtiicle~l5381     as above set
    forth,   the aeclslons     j.n the case of Southland Ice Compaq
    v. 
    McCalZum; supra
    , and American Refldlng Company vs.
    8taplesi~260     3. W. 614,'(1924)     arti~lnappli&b&e    to the
    present'franchise      tax laws."
    '.
    The proper.,basls    for the domputatlon of
    the franchise    tax paid by non-par stock cor-
    .~            porations   is the value actually     receivea by
    the corporation     for shares of ~stock'subscrlbed
    for ana.lssued;      Articles   1538a; 1538g, V.C.S.,
    Sterling Oil & Refining Corporation TV. .Isbell,
    202 3. w. (2a) 300.
    Yours Avery truly,
    ~ATTO``GRRRRALOF TRXAS
    C. K. Richards
    Assistant
    APPROVED
    clmmrj                        ATTORNRY
    GRNRRAL
    

Document Info

Docket Number: V-341

Judges: Price Daniel

Filed Date: 7/2/1947

Precedential Status: Precedential

Modified Date: 2/18/2017