Hon. John Ben Shepperd Opinion No. V-1248
Secretary of State
Austin, Texas Re: Effective dates of increases
in corporation franchise tax-
es under House Bill ,285,Acts
Dear Mr. Shepperd: 52nd Legislature, 1951.
Your letter requesting our opinion in reference to the
above captioned matter reads as follows:
“In House Bill 285, of the 52nd Legislature., Ar-
ticle 7084, R.C.S., was amended by providing that,
. . . every domestic and foreign corporation hereto-
fore or hereafter chartered or authorized to do busi-
ness in Texas, or doing business in Texas, shall, on
or before May first of each year, pay in advance to
the Secretary of State a franchise tax for the year fol-
lowing . . . which tax shall be computed on the basis
of One Dollar and Twenty-five Gents ($1.25) per One
Thousand Dollars ($1000.00) or fractional part there-
of; provided, that such tax shall not be less than Twenty-
five Dollars ($25.00) in the case of any corporation . . .’
The effective date of this Act isSeptem&er 1. 19,5.1. The
present effective rate of tax under Article 7084 is One
Dollar ($1.00) per One Thousand Dollars ($1000.00)
and a minimum of Twenty Dollars ($20.00).
“Article 7086, chapter 3, title 122, provides in
part that ‘wherever a foreign corporation applying for
a permit has theretofore done no business in Texas,
such initial tax shall not be payable until the end of one
11) year from the date of such permit, at which time the
tax shall be computed according to the first year’s busi-
ness as prescribed, in Article 7084, Revised Civil Statutes
of Texas, as amended; and, at the same time, such cor-
poration shall also pay its tax in advance, based upon the
first year’s business, for the period from the end of the
first year to and including May first following.’ (Under-
. ._.
Hon. John Ben Shepperd, Page 2 (V-1248)
scoring ours.)
“Article 7089, R.C.S., as amended, provides in
part that ‘where a foreign corporation has not here-
tofore done business in this State and is granted a per-
mit to do business in Texas, it shall file its first re-
port as of one (1) year from the date such permit was
granted, within ninety (90) days of such date.’
“It has become necessary that we have printed
the required forms for ‘First Year Franchise Tax Re-
ports.’ The order for these forms must be placed im-
mediately ,and.the new rate Will be shown for the appli-
cable period or periods.
“We are uncertain as to the proper method of
computing the franchise tax due by a foreign corpora-
tion that qualifies, for example, on June 30, 1950.
Its first franchise tax payment would be due ofi or be-
fore ninety (90) days after June 30, 1951, making the
final date of filing and payment before the accrual of
penalties, September 30, 1951. This latter date is thir-
ty (30) days past the effective date of House Bill 285.
Actually, of course, the report could be filed and the
tax paid immediately after June 30, 1951, and before
September 1951. Bearing in mind the date, of levy, as
contemplated by statute, we respectively ask that you
answer tb,e following questions:
“1. In the foregoing hypothetical case, is the tax
to be paid at the $1.00 rate for not only the first per-
mit year ending June 30, 1951 but also for the period
from June 30, 1951 to May 1, 19521
“2. Or, is the tax to be computed at the $1.00
rate for the period from June 30, 1951 to September 1,
1951 and then at the $1.25 rate from September 1, 1951
to May 1, 1952?
“In another hypothetical case which will arise in
the printing of these forms, we are confronted with
another problem. A foreign corporation qualifies on
November 1, 1950, thus making its first return; and
tax payment due on or before ninety (90) days after
Hon. John Ben Shepperd, Page 3 (V-1248)
November 1, 1951.
“1. Would the tax in this case be computed at
$1.00 only from the period Novembers 1, 1950 to Sep-
tember 1, 1951 and at the rate of $1.25 for the period
from September 1, 1951 to May 1, 19521
“2. Or, would the tax be computed at $1.00 for
the full first permit year &ding November 1, 1951 and
at $1.25 for the following period to May 1, 1952 ?
“‘3. Or, would the tax be computed at the rate of
$1.00 for the entire period from November 1, 1950 to
May 1, 1952?
“4. Or, would the tax be computed at the rate of
$1.25 for the entire period from November 1, 1950 t0
May 1, 1952?
“In still another situation a foreign corporation
qualifies on July 15, 1951, thus making its first return
and tax payment due on or before 90 days after July 15,
1952.
“‘1. Would the tax in this case be computed at
$1.00 from July 15, 1951 to September 1, 1951 and
thereafter at $1.257
‘2. Or would the tax be computed at $1.00 for
the entire period ?
“3. Or would the tax be computed at $1.25 for
the entire period ?
“4. Or would the tax be computed at $1.00 to
May 1, 1952.and at $1.25 thereafter?”
The rate to be used in computing the franchise tax
depends upon the rate in effect at the time the tax liability is
determined. If the tax liability attaches prior to September 1,
1951, the effective date of House Bill 285, the rate in effect at
that time should be used in computing the tax, which would be
the rates prescribed by Article 7084, V.C.S., and Article 7084i,
V.C.S., or a total rate of $1.10. If such tax liability attaches on
Hon. John Ben Shepperd, Page 4 (V-1248)
or after September 1, 1951, the $1.25 rate shouldbeused in
computing the tax. The time the taxpayer makes his report and
pays the tax is wholly immaterial in determining the tax rate to
be applied. In other’words, the law in force at the time the tax
liability is determined should be looked to in order to determine
the tax rate. Kansas City Life Ins. Co. v. Love, 101 Tex. 531,
109 S.W. 863.
In Opinion V-1246, dated August 21, 1951, addressed to
Hon. Robert S. Calvert, Comptroller of Public Accounts, this of-
fice held that House Bill 285 became effective from and after
September 1, 1951, and all taxes of whatever kind or nature in-
cluded therein should be levied and collected at the rates there-
in prescribed without regard to wfiether such tax was levied on
an annual, quarterly, or monthly basis. Hence, House Bill 285
imposes an additional franchise tax at the rate of 25$ upon all
corporations for the privilege of doing business in Texas in cor-
porate form for the period commencing September 1, 195 1,
through May 1, 1952.
It is clear to us that the initial tax of a foreign cor-
poration applying for a permit to do business in Texas accrue3
at the end of one year from the date the permit is issued; and it
is likewise clear that the tax liability of the corporation for the
period from the end of the first year to and including May 1 fol-
lowing, likewise attaches at the end of one year from the date
the permit is issued. This is evident from that part of Article
7086, V.C.S., which reads as follows:
“Wherever a foreign corporation applying for a
permit has theretofore done no business in Texas, such
initial tax shall not be payable until the end of one (1)
year from the date of such permit, at which time the
tax shall be computed according to the first year’s busi-
ness as prescribed by Article 7084, Revised Civil Stat-
utes of Texas, as amended; and, at the same time, such
corporation shall also pay its tax in advance, based up-
on the first year’s business, for the period from the
end of the first year to and including May first follow-
&” (Emphasis added.)
Applying the above rule, we answer your questions as
Hon. John Ben Shepperd, Page 5 (V-1248)
follows :
Where a foreign corporation secures a permit to do
business in Texas on June 30, 1950, you should use the $1.10
rate in computing the tax due for the first permit year ending
June 30, 1951; and for the period from June 30, 1951, through
May 1, 1952, you should use the $1.10 tax rate through August
31, 1951, and the $1.25 rate from September i, 1951, through
May 1, 1952, in computing the tax due for such period. Mann
v. Gulf States Utilities Co., 167 S.W.2d 557 (Tex. Civ. App.
1942, error ref.).
Where a foreign corporation secures a permit on
November 1, 1950, you should use the $1.25 rate in computing
the tax due for the first permit year ending November 1, 1951;
and for the period November ,l, 1951, through May 1, 1952, you
should use the $1.25 rate in computing the franchise tax due
for such period.
Where a foreign corporation secures a permit on July
15, 1951, you should use the $1.25 rate in computing the tax
due for the first permit year ending July 15, 1952.
SUMMARY
1.n computing the franchise tax liability of a
foreign corporation which secured its initial per-
mit before September 1, 1950, the $1.10 rate pre-
scribed by Article 7084, V.C.S., prior to its amend-
ment by House Bill 285, and by Article 7084i,V.C.S.,
should be used in calculating the tax for the initial
year. In computing the franchise tax liability of a
foreign corporation which secured its initial permit
on or after September 1, 1950, the $1.25 rate pre-
scribed by Article 7084, V.C.S., as amended by
House Bill 285, should be used in calculating the tax
Hon. John Ben Shepperd, Page 6 (V-1248)
for the initial year and for the period from the end
of the initial year up to and including May 1st fol-
lowing.
APPROVED: Yours very truly,
Everett Hutchinson PRICE DANIEL
Executive Assistant Attorney General
Charles D. Mathews
First Assistant
BV I
Price Daniel C. K. Richards
Attorney General Assistant
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