&
THEATTORNEY GENERAL.
OP TEXAS
AT-roRNEYGENERAl.
December 12, 1962
Honorable James A. Morris Opinion No, WW-1492
District Attorney
Courthouse Ae: (1) Whether the value of
Orange, Texas real estate occupied by a
National Bank under a leaae-
purchase agreement pursuant
to which agreement the Bank
pays taxes thereon may be
deducted from the value of
the capital Stock, surplus
and undivided profits in
determining the value of
the shares of stock of
said Bank when the value
of such real estate was
not taken into consideral
tlon in arriving at the
actual cash value of the
aharea. (2) Whether a
back-assessment may be
made against the ahare-
holders under submitted
Dear Mr. Morris: facts.
We quote the following excerpt from the statement
attached to your letter requeating the opinion of this office
on the above captioned matters:
"The County National Bank of Orange,
Texas was organized and began operations
during the year 1960.The real estate
and Improvements occupied by the bank aa
Its banking house are owned in fee by
Mr. E. W. Brown, Jr., who ha8 leased the
property to County National Bank by the
attached lease-purchase agreement. In
addition to,.astipulated monthly rental,
the bank ia obligated to pay certain
insurance premiuma, a0 well as all taxes
upon the property Involved. The land
and improvements were rendered by the
bank for the year 1961and 1962 and the
1961taxes were paid by the bank, The
bank has also furnished the Tax Aaaessor-
Collector of Orange Independent School
District with a list ahowing Its capital,
Honorable James A. Morris, Page 2 Opinion No. WW-1492
surplus and undivided profits and a list
of the names and addresses of its share-
holders and the number of shares owned by
each. In determining the value of the per-
sonal property to be assessed to the share-
holders, the bank has subtracted from its
capital structure the value of the real
estate upon which it paid the taxes. The
bank's published statement of condition
does not list any real estate among its
resources.
"Our first question is:
"Where a National Bank occupies real
property under such a lease-purchase
agreement and pays the taxes thereon in
compliance with the lease, should the
value of the real estate [which was
not taken Into consideration in arrlvin
at the actual cash value of the shares-7
be deducted from the value of the capi-
tal stock, surplus and undivided profits
in determining the value of personal
property to be asaeaaed to the share-
holders?"
The lease-purchase agreement is for a term of five years.
The lessor agreed to construct the bank building and improve-
ments according to certain plans and specifications. At any
time prior to the expiration of the original term of the lease,
the lessee has an option to renew the lease for a further term
of five years upon the original expiration date of the agree-
ment with a further option to renew the lease for a third five-
year period. Lessee has the right and option to purchase the
leased premises during the various terms of the lease.
Article 7166,
Vernon's Civil Statutes, reads, in part,
as follows:
"Every banking corporation, State or
national doing bualneas in this State
shall, in the city or town in which it
is located, render its real estate to
the tax assessor at the time and in the
manner required of individuals. At the
time of making such rendition the presi- ,
dent or some other officer of said bank
shall file with said assessor a sworn
statement showing the number and amount
of the shares of said bank, the name and
Honorable James A. Morris, Page 3 Opinion No. WW-1492
residence of each shareholder, and the
number and amount of shares owned by
him. Every shareholder of said bank
shall, in the city or town where said
bank Is located, render,at their actual
value to the tax assessor all shares
owned by him in such bank; and in case
of his failure 30 to do, the assessor
shall assess such unrendered shares as
other unrendered property. Each share
in such bank shall be taxed only for
the difference between its actual cash
value and the proportionate amount per
share at which its real estate is as-.
aessed. The taxes due upon the shares
of banking corporations shall be a lien
thereon, and no banking corporation shall
pay any dividend to any shareholder who
is In default in the payment of taxes
due on his shares; nor shall any banking
corporation permit the transfer upon its
books of any share, the owner of which
is In default in the payment of his
taxes upon the same. . . ."
We call your attention to the fact that the value of
shares of bank stock for ad valorem tax purposes should be
based upon the actual cash value of the Stock, leas the value
of the proportionate amount per share of the real estate owned:
by the,bank.,.Attorney Geheral's.Opfnlon No. WW-1208 pointed
out that depending upon the facts of each case, the actual cash
value of the shares might or might not be obtained by adding
the value of the capital stock, the amount of surplus. undivided
profits or reserve funds. As stated in Rosenburg-v. Weekes,
67 Tex. 578. 4 S.W. 899. "The value of a bank share deuends
upon the-value of its-franchise, capital, and_property-of all
kinds, leas the amount of its debts." We assume that the
m-d which has been followed In this case does, in fact,
arrive at the actual cash value of the stock. However, it Is
noted that the value of the leasehold Interest in the real
estate, if any, waa not taken into consideration in arriving
at the actual cash value of the ahares.
We think that the provisions of Article 7166 are clear
and unambiguous, and each share in a bank shall be taxed only
for the difference between Its actual cash value and the
proportionate amount per ahare at which real estate actually
owned by the bank is asseased. It has been held that the
effect of Article 7165, V.C.S. and Article 7166, V.C.S;, is to
require the banking corporation to pay taxes on all of its real
estate and the shareholders to pay the taxes on the personal
Honorable James A. Morris, Page 4 Opinion No, WW-1492
property. Engelgeke v. Schlenker, 12 S.W. ggg,&idgo); ;ity of
Marshall ,v: State Bank of Marshall, 127 S.W. 10 3 (Civ. pp.
910, error ref.-)-.Implicit in the holdings of theae cases,
is the requirement of actual ownership by the banking corpora-
tion.
Attorney General's Oplnlon No. O-1214 held that the
leglalatlve purpose in permitting the deduction of the assessed
valuation of real estate owned by the bank in arriving at the
value of the aharea waa to prevent double taxation of the real
estate owned by the bank. In the instant case, the taxes paid
by the bank amount to nothing more than a part of the considera-
tion paid for the lease. Thus refusing to allow deduction for
the assessed valuation of the real estate In this case in
valuing the shares of stock does not result in double taxation
since the real estate isnot taxed again through the shareholders
as a part of the assets of the bank, as the value of the real
estate, if any, was not taken into consideration in arriving
at the actual value of the shares.
We quote again from the statement attached to your re-
quest:
"Our second question results from the
failure of the school district to make
any aaaeaament against the shareholder.3
for the year 1961. Along with its real
estate rendition, the bank furnished a
statement of its capital, surplus and
undivided profits, a copy of which is
attached, as well as a list of its share-
holders and the number of shares owned
by each. Since the omission was dis-
covered within two years, we infer that
It is proper to make a back-assessment
for the year 1961 against the share-
holders at the value determined to be
correct by your anawer to the first
question. The bank contends that the
unsigned list showing capital, surplus
and undivided profits, together with the
list of shareholders, constituted a ren-
dition of the personal property on be-
half of the shareholders and further
contend8 that such property cannot now
be back-assessed.
"Our second question is:
"Should the school tax anaessor-
collector make a back-assessment for
Honorable James A. Morris, Page 5 OPin,ionNo. WW-1492
the year 1961 against the shareholders
in the manner provided in Article 7208?”
The provisions of Article 7208, V.C.S., read as follows:
“If the assessor of taxes shall dis-
cover in his county any property, or
outside of his county but belonging to
a resident of the county, any personal
property which has not been assessed or
rendered for taxation every year for
two years past, he shall list and assess
the same for each year thus omitted
which it has belonged to said resident,
in the manner prescribed for assessing
other property; and such assessment
shall be as valid and binding as though
it had been rendered by the owner there-
of.”
In Republic Ins. Co. v. Highland Park Independent School
District, 141 Tex. 224 171 S W 2d 342 (1943) the court held
that Article 7208 has Ao application to schooi district asses-
sora, but only to county assessors in assessing taxes due the
state and county. In that case the attempted back-assessment
involved taxes more than two years past due. We quote the
following excerpt from page 348 of the court’s opinion:
II
. . .We have said that Art. 2791,
aupra, gives the assessor and ~01:~
lector of an independent school dia-
trict the aame powers and duties with
respect to assessing and collecting
taxes as are vested in the tax officials
of towns and villages. The very next
article (2792, R.S. 1925) authorizes
the school districts to have their taxes
assessed and collected by the county
assessor and collector, or collected
only by the county collector, and the
only limitation placed upon the county
official, when he thus becomes ex offi-
cio assessor and collector for the
school district, is that he cannot as-
8888 the taxable property In the dis-
trict at a greater value than that as-
sessed for county and state purposes.
We think 1t is clear that if the legls-
lature had meant that his powers and
duties should otherwise be different
from those given a duly constituted
.
,
Honorable James A. Morris, Page 6 Opinion No. WW-1492
school district assessor and collector
under Art. 2791, the limitation would
appear in Art. 2792. Therefore, the
county assessor and collector, in dla-
charging his duty to ass~essand collect
for respondent during the years in ques-
tion, was governed by Art. 1047 and not
by Art. 7208; in ao far as his power
to 'back' assess for school taxes was
concerned. And, as we have said, if
he suffered taxable personal property
to be omitted from the rolls during
those years, his action was in no wise
binding on the school district and did
not affect the right and duty of some
successor in office to 'back' assess
it, under Art. 1047."
Article 1047, V.C.S., reads as follows:
"Whenever.the assessor and collector
shall ascertain that any taxable pro-
w*ty, real or personal, has not been
assessed for any previous year, he
shall assess the same in a supplement
to his next assessment roll, at the
same rate under which such property
should have been assessed for such
year, stating the year for which such
property should have been assessed;
and the taxes thereon shall be col-
lected in the same manner as other
assessments. In any case where any
party has omitted to render property
for taxation for any former year or
years, and such taxes have not been
paid, such party shall give such pro-
perty in for assessment for the years
thus omitted and pay such taxes; and
the assessor and collector shall enter
all such property in a supplement to
his next assessment roll, under the
head of payments for former years."
Under the plaln'terms of the above quoted statute the
Tax Assessor-Collector of the Orange Independent School Dis-
trict has a clear duty to make the back-assessments for the
year 1961 against the shareholders and should proceed accord-
ing to the provisions of the statute.
.
,
Honorable James A. Morris, Page 7 Opinion No. WW-1492
SUMMARY
The value of real estate occupied by a
National Bank under a lease-purchase agreement
pursuant to which agreement the Bank pays
taxes thereon may not be deducted from the
value of the capital stock, surplus and un-
divided profits in determining the value of
the shares of stock of said Bank, as the value
If any, of~the.real property was not taken
into consideration in arriving at the actual
cash value of the shares. Under the submitted
facts, a back-assessment may be made against
the shareholders pursuant to the provisions of
Art iC le 1047, V.C.S.
Yours very truly,
WILL WILSON
Attorney General of Texas
MMP/j
P
APPROVED:
OPINION COMMITTEE
W. V. Geppert, Chairman
Charles Llnd
Frank Booth
W. E. Allen
Vernon Teofan
REVIEWED FOR THE ATTORNEY GENERAL
By: Leonard Paaamore