r
QWNEY GENERAL
AusTmN 11. TEXAS
PRICE DANIEL
ATTORNEYGENERAL
fune 7, 1950
Hon. John Ben Shepperd Opinion No. v-iO66.
Secretory of State
Austin, Texas Rer Ioclusion of demand Beta exe-
cuted and re~rwed priox to
1941 but not renewed, oxtend-
cd, or rofinaaced o&or, 1941,
in determining taxable cap&al
for francbiee thx puvpour be-
tween ewtive dotee d 1941
and 1949 smeluhontr to Arti-
Dear Sir: cla.701u.
,We quote the followi~ exaxp* fram your letfor of May
8, 1950, requesting ou, opinion OILthe above captioaed matter,
~~ “The opinion of your office is respectfully re-
quested as to whether the provisions of Article 7084,
Rqvised Civil Statutes of 1925, 6.1 amended by Chapter
184, Acfr 1941, 47th Legirlature, appAy to a demand
note which wa8 executed before the 1941 amendrnemt,
extended bedore the 1941 amendment, but not renewed,
extended or sefinauced after such amendment. The fol-
lowiag fact situation is typical of out problem: A cor-
poration issued a demand note iu 1929, a partial pay-
ment on the indebtedness evidenced thereby was made
before the effective date of tbo 1941 amendment, autd a
new note was issued to evideace the balaace of tine in-
debtedness fhen due; no subsequent change Bas been
mado in hdebtedness OF the evidence the~eob~ Is the
presently outstanding aote to be Included b the basis
for computiag the cokporation’r fhattchiae tax liability
foa the years between the effective date of the 1941 a-
mendment and the ebtactive date ob the latest ~amend-
ment to Article 7084 (Chapter 536, Section 1, Acts 1949,
51st Legislatare)? (The latter amendmeat, ob COUFO@~
makes it clear it 8s to be Included.)”
Since the ffrat franchise tax was enacted in 1893. Acti
23rd Leg., 1893, ch, 102, p. 158, set, 5# the fraarrhise tax baa been
variously computed. Jn 1930 fog the dirrt time thr, tax was ttased
on a corporation’s outatandinng capital rtock, aorplua, aud uadtvided
profits lus the amount of outstanding bomlr, ILLO~~@~ and dabmatums
%h ose maturtng in less than a year from date of barue.
other than
Hon. John Ben Shepperd, Page 2 (v-1066)
Acts 4Ist Leg., 5th C.S. 1930, ch. 68, p, 220. The pertinent p~ovi-
slons of the 1941 amendment to Article 7084, K.C.S., referred to
in your letter, read as follows:
“Except ae herein provided, every domestic and
foreign corporation heretofore or hereafter chartered
or authoriced to do business in Texas, or doing buai-
ness in Tcxar,~rhaU, on or before May 1st of each year,
pay in advance to the Secretary of State a franchise tax
for the year follow-, based upon that proportioa of
the outstanding capital stock, surplus and undivided prof-
its, plus ths amount of outstanding bonds, notes and de-
bentures, (outstanding bonds, notes, and debentures shall
include all written evidencer of indebtedness ,which bear
a maturity date of one (1) year or more from date of
issue, and all such instruments which bear a maturity
date of less than 0150 (1) par from date of issue but
which represent indebtedness which has remained out-
standing for a period of one (1) year or more ,from date
of inception, but which have been renewed or extended,
or refinanced by the issuance of other evidences of the
indebtedness, whether to the same or other parties and
it is further provided that ‘thir term ahall not include
instruments which have previourly been classified as
surplusi) . . .” Acts 47th Lea., R.S. 1941, ch. 184, pq 289,
Article VIII, Sec. 1.
Shortly after the statute was amended the Attorney Gen-
eral advised the Secretary of State that he should not include in the
basis for franchise tax purposes “notes, bonds and debentures which
are issued for a period of less than one year from the date of issue,
and which represent an indebtedness which has been in existence
for a period of one year or more from the date of inception of the
indebtedness, but which have not been renewed or extended, or ~ D ~
refinanced by the issuance of other evidence of indebtedness.” We
enclose a copy of this opinion, No. o-3330, dated July l!, 1941.
The 1949 amendment of Article 7084 reworded this pro-
vision of the statute so that it now reads as follows:
“Except as herein provided, every domestic and
foreign corporation heretofore or hereafter chartered
or aothorieed to do buriners in Texas, or doing busi-
ness in Texas, &all, on or before May first of each
year, pay in advance to the Secretary of State a franc :=
chise tax for the year following, based upon that pro-
portion of the outstanding capital stock, rurplus and
undivided profits, plus the amount of outstanding bonds,
notes and debentures (outstanding bonds, notes and de-
Hon. John Ben Shepperd, Page 3 (V-1066)
bentures shall include all written evidences of indebt-
edness which bear a maturity date of one (1) year or
more from date of issue, and all such instruments which
bear a maturity date of less than one (1) year from date
of issue which represent fndebtednesa which has ramain-
ed continuously outstanding for a period of one (1) year
or more from date of inception whether or not said in-
debtedness has been renewed or extended by the issu-
ance of other ev%dences of the same indebtedness to the
same or other parties, and it is further provided that
this term shall not include instruments which have been
previously classified as surplus), . ~ 0n Acts 51et Leg.
1949, ch. 536, pe 975, sec. 1.
Under the change made by this amendment (underscor-
ed above) the demand note described in your request is clearly in-
cluded in the basis for computing franchise tax liability subsequent
to the effective date of the amendment. This change was recom-
mended to the Legislature by your predecessor and the present At-
torney General.
Whether we OP the Legislature disapproved of the con-
struction placed upon the 1941 act by Opinion No, O-3330 (see Is-
bell v. Gulf Union Oil Co., 147 Tex. 6, 209 S.W.Ld 762 (1948) ),ob
whether such construction merely served to call to the attention of
the legislative body the need for special legislation to include such
instruments is immaterial. In either event it is evident that the
legislative interpretation of the provision of the 1941 act is in ac-
cordance with ttiatpreviously given by the Attorney General in said
opinion. Had the Legislature thought that notes maturing in less
than one year, but remaining outstanding for one year or more with-
out subsequent renewal or extention were included in the basis for
the tax as provided by the 1941 act, there would have been no need
to amend the statute in this particular.
You are therefore advised that a demand note executed
and extended prior to the 1941 amendment but not since renewed,
extended, or refinanced should not be included in the basis for com-
puting a corporation’s franchise tax liability for the years between
the effective date of the 1941 amendment and the edfective date of
the 1949 amendment to Article 7084. It should be included after the
effective date of the 1949 amendment.
SUMMARY
A demand note executed prior to 1941 but not re-
newed, extended, or refinanced after such date should
not be included in the basis for computing franchise tax
Hon. John Ben Shrpperd, Pa80 4 (V-1066)
tiability for the par8 betwoo. the effective date of the
lg4t atmndment to Attkla 7084, V&.8,, and t&e efiee-
ttva date of the 1949 amendment to Actkk 7Oa4, V.G.S.
ophh NO. 0-33301 Act8 47th LO&, ad 1941, Ch. m,
p, 289, Art. VIlI,.Soc. 1. It rhmld be inclnded aftor the
effectiva d8ta of the 1949, lm#ldmo nt.
Yours very truly,
PRICE DAMEL
Attorney Canard
APPROVED:
W. V, Geppert
Taxation Divirion
Joe R. Greenhill
Firrt Aesistant
Price Dantat
Attorney General
MMG/mwb