Untitled Texas Attorney General Opinion

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 $98,505.33In the total llabllltlea.and capitalaccounts,and It le agreedby the bank in questionthat thle dlfll~rence.iaa reservefor bad debts set up under the followingrulings: : “Thlereservefor bad debta has been set up under the above statuteor ruU.ng and the bank In questionhae.atatedthat the limit .oithese reservesunder the~federalt3tatUte or ruling haa not been exceeded. -2442- Included ln OpinionNo. c-gig Mr. R. E. Swift, Page 2 OpinionNo. A-935 "Thisbank takes the positionthat this reserveaccountshould not be includedin determlnlngthe assetsof'thebank subject to state and co&y sd valoremtaxes. II . . . , 'lTheother banks ln Palestinedo notihave any such specialreserveset up for bad debts under the federalstatuteor yullng. I was requestedto ask your opinionthat lf,the bank which has,the large reserve~for bad debt8 was not requiredto IncludeIt as part of the assetsof the bank in order to determlne the value of the sharesand thus determinethe tax llabllltyfor the shareholders, would the other banks be permlttedto deduct from their capitalaccount8a proptrtlonate sum of their respectivetotal'loans. Article7165’and 7166 Veryon'sblvll Statutes,set out in full in the footnotebelow, providefor the assessmentof iArticle7165 reads as roiioti6: %er$ 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. -2443- 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. -2444- -. _ 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 -2445- . . 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 -2446- . 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. -2447- 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 -2448-