Untitled Texas Attorney General Opinion ( 1944 )

.‘::. OFFICE OF ‘THE GENERAL, OF TEXAS
.~’,AUSTXN
‘., &l8tin,
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Honorable
‘comptroller of
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.~.Doai Siri
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oritlea upon whioh we ~.;
llevs it may ‘be helpful -I
ubaoription warrantam.
o bs wnrraata lseued by a
et to atoak etidoaa- .!
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Artlalo 15, R; B. S ROE. Se88.r .i
ioh your request is ahated, was
AOL A aomparleon Of the pertinent ,!
,, ro rtwenu~ m3afwe8. f5eom8roquielta. Thus0 :
POF~~OJI? r0ii0w:
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.. *Art. 7047111. Stools trausror en4 saXerr tax- - I:‘~ ’
Tax irqoaa4~ afrixlng atampa; mamorandum0r sale ‘.
.~ ~aSeotlOn 1.. Thoro I8 hereby imposed an4 levied i
* a tax’ a8 herelaaftar provided on all tsal+m, agreomeata ;j .
to oell, or nionoraa6a of salefi sad all~~4ellverle8 or
’ ~.tnaoSoro or. &area, Or ar~tdoates of atoak, .or:~’._ - j i
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Bon. thorgo 8. Shoppar4, Page p!
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oertiti atao for rlghta to’etook:, or owtirl-
oaten 0f dopooit rapresentla~ an intarest la
or reprooeatlag oortltloates kado taxable under
thla Sootioa ln any doneof or r0r0ir4 aesoola-
tlon, oozpany, or aorporatloa, or aertlrloateo 0r
lnteroot la any bueiaeoo oonduotod by truoteo or
truatoeo made aftor the 0rrOOtivd.9 Cat0 .horoor,
whether UT&I upon or shown by th.3 books or the .
~aoeoalation, donpeny, aorporatlon, or trustee,
or by any asolgamcmt la bl’enk or by ‘any do1.ivez-y
or any pagoro or egreomnt .or m0oorana0t3 or other ..
srldonae or sale or transfer or order ror or agree-
mnt to buy, whethor iatermadiata or rinal, and
wbethar lnvsotlng the holdor.uith the beneflolal
late&A la or legal title to ouob atook or other
oortifioate taxable horeundor, or wlth tho posses- .‘..
: olon or ~86 thsroot ror any purpose, or to oooura
the rOm0. payment oi ~onoy or tbs ruture txwno-
tar of any ouah otock,, or aertiriaato, oa each : * *..‘.,:~
hun4rs4 4ollaro of faoa~.valua or traatlon thereof, ~;;. I;’
oonto, ercrept in cases where tho shares
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or oartfffaatao ar6 loauo4 wfthcut dealgnats moaa- :,
tary voluo, ln wblah aaoe the tax, shall be at .tho ., -
$Fate ff thrqe (J) oonto to? eaoh and, avery.ahme. ::
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IChapter50 Civil ‘IA&J Uow York. *Tranofero
8ubjeOt to Tax- provldos ati iOliOw8:
“SOO. 270. Amount of tax - 1. There la hereby ,”
impose4 au4 shall Sxae4latoly accrue an4 be aolleatod
a tax, a8 herein provided, oa ~811 sale8 or s&room.i#o
” to ~311, or me8ioranda 0r oale‘e an8 all .dellv~rieo or ..
: tranofero OS shares or a0rtlilosteo ot otoak, or oortl-
rloateo oi rlghta to atook, or aertlfloatoo of intorest
ia property or aooumulatlons, or aortiiioatss 0r depoolt
reprooontlng aertlfloateo taxable under tblo artlolo, in
any 4omaotio or foreign neeoolation, oo~~ptny or oorpora-
tloa, or oortlfloatoo 0r interest la buaincoa oooduote6
by a trustee or trustees msde artor the ilrot day or
,..~ June, aiaotoea hundrad five, whether uado upoa or ‘.’
.ohownmbythe. bOOk8of thea aeeoalat~on, aozipany., apr- ,..
poratlon or truotdo, or by any aoslfgumnt 1x1blank, or
:. .. by any dellvory, or by say paper or a&reom+at or niouo-.:. ‘.
.; raadum or 4thor ~vl4enoo or sale or traaorer, whetheq : “. ‘.
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. lntamrodlate or final., ‘end ahether lnve6ting :.
.‘. . .i ’ .tha holder wlth the bannefioial Intereat la or
.*. leeal’tit& to said otook, or other oortlSloetos
tarable hefaun&er, or merely orith tho poe6e66lon.
or me thoreOS for any purpose, or to Beauro the
Suture paynen~ or money’, or t&e Sututa tranator
of any such stock, or oort~tioatea.~
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We obeervo that the longuagd.os the tuo hots. do-
scribing the tranoaotiono taxable seeagpbroood in exactly tho ’
#arm uord6, though not arranead. In tbe eaaio oontlnulty. 9io
’ ;Seif.to rind exgreas laLan(;uapin either of tbmo statutes at-
trmptlne to. levy a tar upon Ytlfihtn to aubecribe to stock.*
: SUma tho United States Xnternnl iiovenuo Aot, Title .
26, pqrqraph lf302b, U. S. C. A.. had Its lnaeption prior to
the p66aee of the Toxaa statute, we nust grasumo that the
:eglslatura bad ouoh Aot before It at .the tlma It adopted thm .
RowYork statute as the model for lts‘aSSort6. The exprers
16nguage of f’ pert of the Federal Aot i0 a9 follows; ,, .-
-(b)Sales and tranofoars. On all mlea, or
agreemeat to aell,, or monrorando0S eslos or. de-
livarlee or, or trapsfort of leg61 tltl@ to any ~0S
tho~rbfnw or oert$Slaatas mcntlonad or described
id euboootlon (e), oc to xkhta to subsdribe for ’
. .: or reoeloo’suoh ahares or oartlSlcate6~ whether
m6tYeupon or shown by the. book0 of the oorporatlon :
, : or .othpr: Organl68tlOn, or by’anp 6t36lgUi~~nt in .
bleak, or by any delivery,, Or by any paper or agree- ’: ’ .
meat or memorandumor other evldenaa of tran6SOr or : .~
: sale (whether ontitling the holder ia any uonnor to ,,’ .: s
the bobeflt oS suoh ahaT oertlfioate, interest Or .
rlehti, or not), on eoob &lob of per or faoo ,oalu6 :
or Sreotion thereof of the aertifloats6 OS suah
oorcoratlon or other or&ealzatlon (or OS the 6haroe :
wbero no’oertifioatoa were iesueb) . . .*'
In ~o&Hzulng a etatute, the .gurpo~e lo to. eeaertaln
the lo&lative intent end from ou,r oboorvatlon of the ex~resa
rcvi~ions oS the tbres revenue maasure6, we Sind that mnse
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‘IfIr ta to subsaribe to etoOk* though InelUded in the Podoral
et?Auto in onritted Sran the fiat York and Tours statutes and we
muetkeep tb~tinotlon oloarly in dad in soeking to tletor;
tin0the intentionor tho Lei3lalatUrO~
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~0s. Coorgo 8. Shoppard, Page 4
The Texas law being oS rOOat orluln, ha6 not been
;ntorprett?d by Our OOUrt6, sad for that FeaBon, we mot turn
to Now York dooIsion6 and ruleo and rogulotlano of Ite tax
suthoritiee for a oomtruotlon of the quoatlon herein pro6ent-
The60, or oour60, aro not'conolu6Ive but are pOr6U6aIVO
:% rhoulb bo 61vea @oat woI&ht.
Conmonpanotloe end prooeaure of aorporatlons doing
busineos tbroueh the New York Etook Pxchan(~e uni!er nsthodr ap-
proved by the New York Tax Co~~~~lsslonshould be oonsldercd Ja
doterdnlne ~ranseotione taxable and tranoaotlona not taxable
unbar Now York furlsprudonoe. Oboarvlng the rU1tl6 68 inter-
protod by ParagraFhh8600000,60-300, InolusIre, the Corporation
Tax Servlae, C. 0. Ii., 11. Y. 1; paragraph8 41004l34, Inolu-
ei+e, Corporatloa Servloe,. Yrentioe-Hall, Vol. 1; knaChrl6ty
&XoLoaa, Tbo Tranofer of Stook, 2ntl Ed.; we observe thotr
I. Subaorlptlon werrant 16 a oertISloato . ..
~srld~nolag tha right to aubeoribe to stook and Is' t
Issued by the oorporatlon to the titookholder ontitled *
to the prlvllege of subscrIbIng to the stock to be la*-
rutid. I”oragraFh 4108 and I’sragraph 4205, Premtlao-,
. Hall Corp. Serv., Vol. 1.
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‘XL Fresentatlon of warrant.
(a) Tbo,warrant shall be preaeated to tho
oorporatlon before tlio expiration date shownon
,a. the SaOe of ouohwarrantaad upon suoh prO6Ont6-
.: tlon the bearer nay 6ub6OrIbO to etook. ,fS full .:..
.“:. paymentI6 made IOr the shares to .be iosued 6ub-
6oriber la delivered a reoeI$ OvIdenolng hi6 rI&ht
to the otook, entItlIng him on a spsoiflad datd~‘to
uortaln full share6 or Sraotloa6l 6heres Of atOOk,
subroquentlp bolng i66Ued OOrtlfiO6tO8 OS atook.
F6ragraph 4208, Prontloo-Xall Corp. serv., Vol. 1.
(b) .fn evant bearer eleots to pay for suoh ~’
share6 llr Inetallmeats be IS laouod a negotfablo '.
.MOelpt, ovIdonoInghi6 right to the stoak, entitl-
*. '. ing the holdor on a 6peaIsIed date t0 OertalXi full
ohare or .sraotlonal eharos~ or atook, and upon
: -bin61 pqwmt, at the the an&In the mannoropeol- :
‘Slad,&e ia iosuod, oortUloato8 of 6took. .
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son. Gaor~e Ii., ShepDard, Peg9 s
Upon the tranarer by sala or otherwise of subsorlp-
tlon nrrants, datlnad in Paragraph I above, the Federal Tax
rppller and stampeara roqulrad to be arrlxed and oanoalled.
’ Tba Uaw Yor& tax doae not apply to this’ transaotloa. Para-
graph 601lC9, C. .a.~ X., B. Y. 1; ,Paragreph 4205 and pa80 4148,
Praatl00-Hall Corp.Sarv?, :Yol..l; Ohrioty & UoLaan, Paraereph
563, page 834.
Subsaquant to tha aot or subsoiibina to the atook by
*.*a bolder oi a subscription warrant ,as described In Paragraph II.
* (II) and (b) tbaraof, eny trensaotloa.involving the traoarar of
the rl&ht- held by tha subsorlba~ requires the arrlxln6 and oan-
.oallatlon of Unltad Stotae Revenue Staops and New York Revenue
stamps. : Sohmar v. Rarflaa, 1m-a; ParaCrapb 4205, Sea. 7,
Prantloa-Ralf Corp. Serv., Vol. 1; and Pnragraph 60-301, ~The
.Qorporatlon Tax Servlo~,0. 0. ?.. X.-Y;1; .‘,
” : The State oi Naw York ‘Tax Department, Albanp;Naw York
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in ‘,la.tter to the New York Stook Exchange, dated Kay S, 1922,. r&t
“Ey ‘CartlilOata Of Richtis to Steak* IS meant ._
o& sudh. oertlrloatas wbloh ontltla tha holder on
a apsoiri6d d&e to oartaln run share8 op rrsatlolul
share8 of atook. *Rights to oubacrlba’ to stock do’
not oozaa within this meanidaare
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the statute.W (Undarsoorlng our5J
Pursuant to a wzlttan request by the) wrltor tha State
oi New York Dapartmant or .Taxetlon and Pinanaa answered by’latter
.&to6 l!?ar0hl;-1944, advlsl& u5 further +th refaronoa tb rub-
rorlptlon warrantethat 8uah are not taxableunder New )lOrk Law.
The partlnont. part or auoh. latter reads as lollowsr
*The raderei rtook transrar tax law 40rititaly ‘.
provides ior a tax on tranafers of laplal title to
*rlp,hts to subeorlbe ror*atook. The New York law.
has no slaillar provision. It does tax trauerara or 1~’*
.*oartirloatea ‘or ~rlghts to steak’ but tha Tax Corn-
mla8l0n has held that a oortltioate giVin6 tkP right
;;o~$?Ohaer atook 1s not T oartirloote or A6hts t
.
*I osmiot rerer you’to any oginlon. of our ,.
2ttfkney Caneral: or to any dooleion of our ooUrt8 ,.,
on the quo&lo& : ?y way or- r.aaeonlng it may be. ..’ -
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..” pointed out that~ a right to subearlba So= stoak . .
‘or a rjght to purchase stock is likely to be of’ .
The aoaaldaratlon whloh must be
Id for thi subeorlption or the purchase will
n many oases, at least, represent as much as the
: : stock 1s worth. It saama highly lnaquitabla~, .
tbaratora, to impose the 6ama tax on a transfer . .
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OS a stook purohasa warrant, (a oertlrlcate or a
..~~rl&ht to rooaiva stook after paying oisa supra *be r&llPta+ corn ani in-
its
Oreased oapitaf. stook and paa&ttad lts etockbo Eders the
p~lpiollage OS puro&asing his portion Or the stook at’9175 par ,.
ahare tha payma@.a. be!%9 ~darorred~ ., The .ogurt aald,. in
..,part,
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‘, ~on.!,Oaorga 8.’ Sbqqnril,Page 7
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II There were 51an8 llmltatlons on the ..
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I..:..: holder; &*thtwe now aheros. They were not to
...: hav0 ail 0r tba privllaga8 0r atoakholders until
the tine1 payments, but ln the meentlxe they were
.’ “’ pivea lntermodlata aortlfloatea, which satltled
.. . I ‘:‘- them to reaeloe 7 par cent Interost upon the per-
tlon paid in, together with the right or making
. . ‘ the flnsl pnymoats and reoelvlng the rlnal certI-
. rioatba. Theea lntennerdlate c0rtirio~m were
etook 0ertlrIcatee; thoy were transrorabls, and
: .(‘2 .gave ~fo the holder the rights or a otoakholder
-:. upon the porf~rsmnc~o or the oonditloao. The foot ~.* ...
;.: , that they did not IrmadlatcQ invest tho holder with
.. .; all of the grivileeeo or the old oortlCIoatea IS or ’
no Iaportanoei oaoh or them ocrrtirlcatee ~.a:218
a
‘paper or a(2reemeAt oraoziormlum or other evidence ‘.
0r odle or timmrer~ Iatarzimllate to the rlael~ oer-
tliioatee, and It (POadesigned Co saoure the Wuturo
tramfor aJ’any ~t.ook,~ %hIch mipbt heve been soourod
to,tho holdor thepaot. . i .* ..
Tba 6soI6Ion ik thi S&mr COJB, cu&a.doa8~not
diaows the ‘queotlon herein r&104, but wo molto It aa ohola-
In6 a distlnotioA between rights to otook evidenced by Inter-
‘msdiste‘oertifloatee Iaauod artor aubeorlotion, therein dlri-
ouased, ead ri&hts ‘to aubsorlbe to ntook, o~idenoed by sub-
rorlptlon warnrnto Itmuod before subticrlntion.
SlAOO there haye bOaA A0 OOUrt dcolaloas or ruloe
or re~ulatloas presorLbed by our taxing authorltles rolotlng
to this subject, wo h8ve ttWAed to the rules and re&UlatiOAA
Of the Now York Tax AUthorItlea. and .lnterpretntIon8 .Or the OOurtO
in thet jurieprudance to datomlda tho aonetruotloa plcroed upoa :
the provlalons of the New York Aot that wore rollowod as a model
tOr the Texas rtatute.. Alter a study Of. the available authorl-
the, the ou8tcxaaand owmon cueage approved by the Kew York Tar
Dt?psrtceAt, ‘we flad that the tMln?der Or oubecrlptlon y18rXfint8
la not taxable ia New York. It .hna long been the ouetom In Texar
to &vs the s:&meooaatruatlon to on Act that it roaelvsd in tho
8tats where 8UOh Aat has been conetrued. Kay V. Sahnsider, 2Sl
6, W. 680)’ 18 Corpus Jurie 717, olting owe0 tram 22 rtatea.
w0 th0reror~ ad&e you that the trftneror or *sub- ”
roriptloa wacraata*~Io not taxable under Artlole 7047% VerAotP8
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. Boa. OeOr60~IL .8bO~Paril, Patis ‘8 .
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.. ¬ated Civil Statute& a’s again dsrlns ~suhaoriptloa
. ~rrantd* t0 be w6rraAta i6SUdd by a oorporatlon to those
matitled to oubaoribe to atook eoidoaolag their VI2hta to
aubaOrib8 rOr atook.” .
Opfnlon No. O-4029; delivered’ to you on Novsuther
0, 1941, in60r6ras It la :n oonrllat horevrith, is heroby
ovwnlled . In such opln~on rerereaoo was frequently made by
ua to riqulatlona and Ioterpratatlona of the Unltod States
. Troaaury Department rsgardlne tranaaotlona taxable under the
. ~?eUeral Act. Since the Federal Act ooatalned express la-age
1 levying a tax on rluhts to aubacrlbo to at-oak, and slaoe no auoh .
express language la o~ta3Aea lo either tha Tetie or Now York
, ~ .6tat~tea, we believe Opinion No. O-4029, ~Insorer an it oonatrusb
the Aot to Qupoae a tax on the traaarer or subscription warranta,
ta haVe been fn arror. In OVQrrt?liw Opinion No. 04029, wo rest ~,’
upon the presumption tbat the le&latum had before It, at the
' . tiai, (d the adoption 4 the Texas a$t%tute, the’exprsas lmgtmgo. f : __
.oontainod In tho Unltod State6 Revenue ‘meamre and la the New
.York statute and that it wari.aware of! the Iaterpreta~loa given
ia $bo Nesw-York jurIsdiotIoa, from whloh our atatutp lW6 takea,
: anU that IB adOptb&~ .atmh &atUtO,, &j ++&a. alSO t0 OOgeOpt . .
rpoh 0oa&ru0t10a. ~;I. . *’ .. ?.:>‘-- . . . ; -
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