Untitled Texas Attorney General Opinion

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, -370- 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 -372- 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, -373- . . 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 -374-