IncludedIn Opinlon,No.C-519
IylLL WILSON
A-l-roRNEY
OENIDIIAI.
September16, 1960
Mr. R. E. Swift OpinionNo. W-935
County Attorney
AndersonCounty Re: Permlsslblllty of deducting
Palestine,Texas reservefor bad debt8 aet
up by NationalRank pursuant
to FederalRuling8In arriving
at the value of ehareholder8e
sh@reafor state and county
Dear Mr. Swift: ad valoremtax purposes.
We quote the r0n0ting excqrptfrom your letter requesting
Our opinionon the above captionedmatter.
“For state and countytax purpoees,la
a NationalBank requiredto .includein Its
capitalstructurea reservefor bad debts
set up under the federal.
statuteor ruling
eometlmetireferredto 88 the.‘20year moving
average’statuteor z+lng?
“Attachedhereto are two stat&mentamade
by the bank In ,questlon,’
one of them labeled
statementA and the other labeledstatement
B.
“An inspectionof the two etatementa’will
dlacloeea differenceor $98,505.33In the
total llabllltlea.and capitalaccounts,and
It le agreedby the bank in questionthat
thle dlfll~rence.iaa reservefor bad debts
set up under the followingrulings:
:
“Thlereservefor bad debta has been set
up under the above statuteor ruU.ng and the
bank In questionhae.atatedthat the limit
.oithese reservesunder the~federalt3tatUte
or ruling haa not been exceeded.
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Included ln OpinionNo. c-gig
Mr. R. E. Swift, Page 2 OpinionNo. A-935
"Thisbank takes the positionthat this
reserveaccountshould not be includedin
determlnlngthe assetsof'thebank subject
to state and co&y sd valoremtaxes.
II
. . . ,
'lTheother banks ln Palestinedo notihave
any such specialreserveset up for bad debts
under the federalstatuteor yullng. I was
requestedto ask your opinionthat lf,the
bank which has,the large reserve~for bad
debt8 was not requiredto IncludeIt as part
of the assetsof the bank in order to determlne
the value of the sharesand thus determinethe
tax llabllltyfor the shareholders, would the
other banks be permlttedto deduct from their
capitalaccount8a proptrtlonate sum of their
respectivetotal'loans.
Article7165’and 7166 Veryon'sblvll Statutes,set out
in full in the footnotebelow, providefor the assessmentof
iArticle7165 reads as roiioti6:
%er$ bank, whether 0r leatie or deposit,
banker,broker,deal~rlnexehange,orstodc
~jobber,shall at the tlme ilxed by this chapter.,
for listingpersonalproperty,make out and
fui%lsh~theassessorof taxes a sworn statement
showingt
"1. If a nationalbank, the presidentor Soas
other officerof such bank shall furnishto the
astlessorof the county ln which such bank Is
locateda list of the names of all the shareholdsrs
of the stock,togetherwith the number and amount
oi the sharesof each stockholderof stock In
said bank3 and the shareholders of the stobk in
nationalbanks shall render to ths tax assessor,oi'
the oounty In which said bank ls.locatedthe nwitber
of their sharesand the true and full value there-
Of. All sharesoi stocksln nationalbanks not
renderedto the assessorof taxes In the aounty
where such bank.18locatedwithin the time pre-
scribedby law for listingpropertyfor taxes shall~
be assessedby the assessoragainstthe owner or
owners thereofas unrenderedproperty.18assessed;
but the tax roll shall show the name of‘theowner
or owners thereof'a8 per statementfurnishedby the
presidentor other officersof said bank.
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Inaludedln OpinionNo: C-e
NIT.R. E. Swift, Page 3 OpinionNo. WW-935
personaland real propertyof banks. In City of~Marshal1v.
State Rank 127 S.W. 1083 (lbx.Clv.App.1gIb, errorrsr.1, the
court held a state bankwas not liablefor any taxes'exoept
1 (cont .]
"2. Nationalbanks shall render all
otherbonds and stooksof everykind,
exceptUnited Staeesbonds, and all shares
0s capitalstocksor joint etook or stooks
0s other3ompaniesor ooi?porations-held
as an investmentor in any way representing
assets,togetherwith all other personal
propertybelongingor pertalning.tosaid
bank, except such~personalpropertyas la
speciallyexemptedin>m taxationby the
laws of the UnitedStates..
“3. Nationalbat&m shall be requiredto
render all of their real estateas other
regl estate IS mmlered; an& all thq personal
propertyof said nationalbanks herein taxed
shall be valued as othei. personal property
IS valued.
‘4. All other banks, bankers, brokers,or
dealersin exhange, or stock jobbers shall
render their list in the followlzigmanner:
"(1) The amountof money on hand on In
transitor In the hands of other banks,
bankers,brokersor others subjectto draft,
whetherthe same be In or out of the State.
"(2) The amountof bills .recelvable,
discountedor purchasedand other credits
due or to become due, lncludlngaccounts
receivable,Interestaccruedbut~notdue,'
and Interestdue and unpaid.
“(3) From the aggregateamcunt0s the
items named In the first and seaond of the
last two subdlvlsionsshall be deducted
the amount of money on deposit.
“(4) The Bmotuit0s bonds and 8t0cks0s
every kind, except United Statesbonds,~
and all sharesof capitalstocks or j0l.M
stocksof other companiesor W?pOratlmS -
held as an Investmentor In any way repre-
eentlngassets.
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-.
_
Imluded ti Oplnlon NO. c-519
HF. R. E. swift, Page 4 OpinionNo. W-935
those assessedagainstIts real estate. On Motion for
BehearIng,the courtpointed&t*hatunderthe Acts 0s
1883, page 111; 9 &unme18sLam 0s Texa6, 417, property,
both.realand personal,owned by state banks could be taxed
1 (uon4.I
"(5) All other propertybelonging
or appertainingto said bank or business,
Includingboth personalpropertyand real
'estate,
Shallbe listed ai dther personal
propertyand real estate,
Article7166 reads as r0ii0w8:
%very ba+lrtg oorporatlon, State or
national,doing businessIn this State
shall, In the clty.ortows In which it Is
located,renderIts real estateto the tax
assessoriat the time and In the manner
requiredof lndlvlduals.At ,thetlme 0s
making such renditionthe presidentor some
other or?iceti0s said bank shall rile with
said assessora ~suornstatementshowingthe
number and amountof the sharesof said -
bank, the nime and residenceof each share-
holder,and the number and amountof shares
owned by him. Every shareholder0s
said bank shall,In the city or town where
said bank Is located,renderat their actual
value to the tax assessorall shares owned
by him in such bank; and In case of hlk
failureso to do, the assessorshall assess
such unrenderedsharesas other unrendered
property. Each share in such bank shall
be;taxedonly for the differencebetween
Its actual cash value and the proportionate
amountper share at which Its real estate
Is assessed. The taxes due upon the shares
of bankI@ corporations shall be a lien
thereon,and no bankingcorporationshall
pay any~dlvidendto any shareholderwho Is
In defaultIn the paymentof taxes due on
hi8 shares;nor shall any bankingcorporation
permit the transferupon lte books of
any share, the owner of which Is In default
In the paymentof his taxes upon the same.
Nothingherein shall be SO construedas to
tax nationalor State banks,or the share-
holdersthereof,at a greaterrate than Is
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. .
Inqludedln OpinionNo. C-U9
Hr. R. E. Swift, We 5 OpinionNo. UN-935
directlyIn the hands of the individualor corporateowsen
shlle thatofnatlonal hanks oouldbe ~achedonl~WWx&ng
the shares0i stock in the hands 0s the holders. The c4nzrt
srld that the 1885 enactment of what aurrptls wean& as
Article5080 0s the then RevisedStatutes indioatedcr
Legi latlve intent that effect he given to both~&tlQles
50799and 5080 The court pointedout that Arflate5079
was broad eno&to lnoludewithlnits tems ur~ladlvldua-
or partnership,as weWas a oorporatlonlasage&lrim:
banking or stodc Jobblxqbuslness.endthat it mi#kt also
Includejoint-steak ampmies an6 othen’dnfpgsd aid 4Wag
M exchangeor brokersgebuslne88. Mole 5080 ml*ted
exaluslvel to state or nationalbsnklngcorporations.
At page 1056, the court said:
1, We oannot construeartlole
507fi&*a'method ror as8e88ing'th.e
property held by state bankingoorporatlons
wlthoutsuspendingorannullingsome0s
theprovlslonsof hrt.SO80,orholdlng
that the Leglsl8ture.lntended to tax both
thd QFOpW& Of thb b@K ai& it8 SmS Of
stook la the hands of the stookholdef8 also.
lhris :wouldbe.double.taxation, and woufd be
ottrlbutiq to the Leg%slrturean intent
whioh would render one or the other of the
two artlolesvoid. OiXle8plev. Ctaston,
l¶m proper oonstruotlon, we think,
%?%bs fo hold that in adoptingthe sot
0s 1885 (artlole5080) the Legislature
Intendedthereby%o providea bpeoialand
uniformmethod for taxing the personal
propertyrepresentedby the bank*8 holding
to be made applicableto both state and
nationalcorporatelnstltutions.
q, we must asslms that in the
enaEt&t'of article5080 the Legislature
had a definitepurposi in view, and Intended
1 (cont.I
assessedagainstothsr moneysd oapltalin
the hands 0s lndlvl&ial8.
"
%esently carrledas krtlole7166, V.C.S.
%resently carriedas Arti& 7l65;V.C.S.
I
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.
Includedln OpinionNo. c-519
m. R. E. Swift,Page 6 OpinionNo. WW-935
that all of Its provisionsshouldbe
enforced. Those prwlslons relatingto
the taxationof the'share8of stock of
Incorporated state banks cannot be
enforceda8 a method of taxationIf It
be held that the personalprofirtyof
such ln8tltutlonsie subjectto.taxation
againstthe corporationitself. We cannot
attributeto the Legislaturethe intent.
to have two inconsistentstatutesenforced;
nor shouldwe treat one a8 repealingthe
other by Implication, unless the inconsistency
resultsfrom timonlyreasonableconstruction
that can be placed upon them. There are ln
this s+fc alngleindlvidual8and association8
of.personsengagedIn the claesesof bueiness
referred to in article5079 to which lt.may
apply. The requirementsas to the detailed
lists to be furnishedmay also prove servlce-
able to a8seBsor8and equalizationboards
ln arrivingat the proper valuationof shares
of stock i.nincorporatedbank8. By giving
fill effectto the ~rovlslonsof article5080
it operate8tily to except incorporatedstate
banks from the provlslone,of article5079,
In so far a8 that articlemay be relled.on
as a has18 of asse8slngthe personalproperty
0s euch banks. Article507 IS generalin
it& scope,while article50%o Is special. In
such case8 there Is no lrreconcllable~confllct,
and court8universallygive effect to both by
construingane a8,an exceptionfrom the general
terms of.thdother.
" . . Adoptingthis conetructlonof the
two'&tlcle8 of the statuteto which we have
referred,we think it 18 clearlyapparent
that the LeglelatureIntendedby article5080
to providea means of taxingthe personal
propertyof state banklng corporationsin the
hands of the shareholdere."
‘InOplrilonNo. WW-439, this Office held that in determlnlng
the value of bank stock,assessmentshouldbe based upon the
fair cash market value of the stock less the value of the
proportionate amountper share of the real estateowned by the
bank ratherthan the value that would be obtainedby adding
the value of the capitalstock, the amount of surplu8,undivided
profitsor reservefunds and dividingthis by the number.of
sharesof stock. This is so becauseIt Is proper~ for the.
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IncludedIn OpinionNo. c-519
Mr. R. E. Swift,Page 7 Opin10nNo; WW-935
asse66or or board to ConSider all element6which tend to
augmentthe value of the etock In the hand6 of the lndlv%dual
stockholder.
The fact that the bank 18 requiredunder federallaw to
set apart a reservefor bad debt6 does not changethe fact
that 6uCh reserveconstitutesa segregatedportionOf its
earned surplusand a part of Its personalproperty. Even
though such reserve8cannotbe taxed againstthe bank, they
are necessarilys'factorto.be conalderedIn arrivingat the
irctualcaeh market value of the shares for the purposeof
determiningthe tax liabllltyof 8hareholders.
Since we have concludedthat a nationalbank's re6erve
for bad debts may not be deductedbut must be treated88 part
of the aseets in traluingIts shares,forad valoremtax pu oses,
it is efrldentthat we could find no ba6i6 for allOWingb28
other than nationalbanks to deduct from their capitalaccounts
8 proportionate sum of their respectivetotal loans.
SUMMARY
The reservefor bad debts eet up by
a NationalBank pursuantto Federalruling6
may not be deductedin arrivingat the value
0s the shareholder's 6haz.es
for State and
Countyad valoremtax purposes. Nor may a
bank, other than a NationalBank, deduct a
proportionatesum for bad debt6 In arriving
at the value 0s the shareholder~6sharesfor
State and Countyad.valoremtax purposes.
Yours very truly,
WILL WILSON
AttorneyGeneralof Texas
MMP:jlp
AFFROVEU:
OPIHIOICOMMITTEE:
W. V. Geppert,Chairman
Virgil Pulllam
James P. Ryan
Leon F. Pesek
REVIEWEDFGR!CRE'A'H?GRHBYGERERAL
By: LeonardPassmore
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