Untitled Texas Attorney General Opinion

I.
May 14, 1956
Hon. Tom Reavley Opinion No. S-196
Secretary of State
Capitol Station Re: Use of assessed property
Austin, Texas value in computation of
the franchise tax.
Dear Mr. Reavley:
You have requested an opinion of this Office as
follows:
“A question has arisen as to the proper basis of
computing the franchise tax for certain periods where the
assessed value is the factor rather than the taxable capital.
“There is a foreign corporation that was granted
a permit to transact business in Texas March 19, 1952. The
first franchise tax return was filed within 90 days after
March 19, 1953 in accordance with the provisions of Article
:;C$ V.C.S. of Texas, as amended by the .5Lst Legislature,
. The return shows no gross receipts, either in Texas
or elsewhere, and the minimum tax of $25 was paid for the
first permit year ended March J9, 19.53, the proportionate
part of $25 for the period to May 1, 19.53 and $25 for the
year beginning May 1, 1953. The corporation also reported
that there was no assessed value of property for County ad
valorem tax purposes. Under the schedule for furnishing
such information as of January 1, 1953, the date we requested,
the corporation made the following statement:
rAt the date of this return property has not
been assessed for 195301
Although the return was presented with a balance sheet as of
March 31, 195’3, it was signed before a notary public June 9,
1953, at which time it can be assumed the ad valorem assess-
ment had been made.
Hon. Tom Reavley, page 2. (Opinion No. S-196)
“Upon comparing this return against the March 15,
1954 return, which shows a close of December 31, 1953, it
was discovered that there was an assessed value as of Janu-
ary 1, 1953 amounting to $2,000,040.00. Incidentally, the
report form called for the assessed value as of January 1,
1953. It appearing that such assessed value should have
been reported in the first year tax return and the tax com-
puted thereon, additional tax has been proposed for the three
periods mentioned in the second paragraph hereof. . . .
“. . .
“It is agreed that the corporation owned no property
in Texas January 1, 1952. The corporation did, however, own
property subject to ad valorem tax assessment on January 1,
1953. . . .
“With the foregoing facts before you, please give
us your opinion on the following:
“(1) Should the assessed value for County
advalorem tax purposes as of January 1, 1953, be
used in computing the tax under the first year
return?
“(2) If your answer is in the affirmative,
should the assessed value be used for all three
periods, namely March 19, ,1952 to March 19, 1953,
for the short period from that date to May 1,
1953 and for the year beginning May 1, 19.53?
“(3) If not for all three periods, then what
specific period or periods?”
We answer your first and second questions in the
affirmative. The assessed value, for county ad valorem tax
purposes, of the property owned by the corporation in this
State as of January 1, 1953, should be used in computing the
franchise taxes for all three periods, namely March 19, 1952,
to March 19, 1953, for the period from March 19, 19.53, to
May 1, 1953, and for the year beginning May 1, 1953.
The 47th Legislature, in its Regular Session in
1941, reenacted Article 7084, Vertonrs Civil Statutes and
added thereto the provision that . . . and provided further
that the tax shall in no case be computed on a sum less than
the assessed value, for State ad valorem tax purposes, of
the property owned by the corporation in this State. . . .‘I
Hon. Tom Reavley, page 3 (Opinion No. S-196)
The departmental construction of the Secretary of
State placed upon this amendment to Article 7084 is that the
corporation should show in its first year franchise tax re-
port the total assessed value, for county ad valorem tax
purposes of all property owned by the corporation on the first
day of January occurring within said first year after the date
of the filing of its charter or the granting of its permit, as
the case may be.
Since this departmental construction of the Secre-
tary of State has been consistently followed for a period of
more than fifteen years, and, the Legislature has met many
times since the establishment of this departmental construc-
tion, the following rule enunciated by the Supreme Court of
Texas in the case of Isbell v. Gulf Union Oil Company, 147
Tex. 6, 209 S.W.2d 762 (194b), would govern:
“While the Legislature has met many times since
Article 7092 was construed as above indicated, it has
not undertaken to change the statute so as to alter
the construction which had been given it. If the
Legislature did not approve the construction which
had been given the statute, it could have easily a-
mended the law. This was not done. This Court does
not feel Justified to hold now that the Secretary of
State was in error in the construction of this
statute.”
You are advised, therefore, that a corporation should
include in its first year franchise tax return the assessed
value of its property held or owned in this State, for county
ad valorem tax purposes, on the first day of January occurring
within the first year after the filing of its charter or the
granting of its permit, as the case may be.
In the case of the corporat.ion in question, the
first year of the granting of its permit ended on March 19,
19.53. This corporation did not file its first year franchise
tax return or pay its initial tax unti1~June 9, 1953. This
corporation reported, as of June 9, 1953, that no property had
been assessed as of January 1, 1953. However, in its franchise
tax return, filed March 15, 19.54, it showed an assessed value
as of January 1, 1953, of $2,OOO,OhO. Therefore, the first
year franchise tax return of said corporation was improper
and incorrect wherein it showed that no property was assessed
as of January 1, 1953.
Hon. Tom Reavley, page 4 (Opinion No. S-196)
The corporation having been derelict in its duty to
properly an,d correctly report all items on which its franchise
taxes in question were to be computed, owes the State addition-
al franch,ise taxes for all three periods, namely, the first
initial tax year from March 19, 1952 to March 19, 1953, for the
short period from March 19, 19.53, to May 1, 1953, and for the
tax year beginning May 1, 19.53. These additional taxes are
to be computed on the basis of the assessed value, for county
ad valorem tax purposes, of the property held or owned by it
in this State as of January 1, 1953. The reason for this is
that the said tax return, as filed by this corporation, sho,wed
no business done in Texas; therefore, there was no taxable
capital allocable to this State upon which to compute said
taxes. These franchise taxes would, therefore, have to be
computed on the ad valorem assessments as provided by Article
7084, wherein it is provided that the franchise tax shall in
no case be computed on a sum less than the assessed value,
for county ad valorem tax purposes, of the property owned by
the corporation in this State.
As the date for timely payment of these franchise
taxes has passed, the statutory penalty df twenty-five (25%)
per cent of the taxes due has accrued by operation of law.
This statutory penalty is provided for in Article 7091,
v. c. 5.
Where a corporation had no gross receipts
from business done in this State during the first
year following the granting of the charter or per-
mit, the franchise taxes of the corporation for the
initial tax year, for the additional period (if
any) between January 1, and May 1 followtng the
end of the f,frst year, and for t~he year beginning
May 1 following the end of the first, year should be
. .
Hon. Tom Reavley, page 5, (Opinion No. S-196)
computed on the basis of the assessed value, fcr
county ad valorem tax purposes, of the property held
or owned by it in this State as of the date of Janu-
ary 1 which falls within the first tax year.
APPROVED: Yours very truly,
W. V. GEPPERT JOHN BEN SHEPPERD
Taxation Division Attorney General of Texas
MARY K. WALL
Reviewer
BY
J. ARTHUR SANDLIN
Reviewer
L. W. GRAY
Special Reviewer
DAVIS GRANT
First Assistant
JOHN BEN SHEPPERD
At to,rney General