Untitled Texas Attorney General Opinion

Honorable George H. Sheppard Comntroller of Public Accounts Ausiin, Texas Dear Sir: ginion No.'O-4029 : Is the transfer of the right to subscribe to stock taxable under Article 15 of House Bill 8i~~Acts, Regular Session, Forty-seventh Legislature, where such~~~right1B‘not evidenced by a,rrcertificate for rights to stock,";'providedfor in such Act? _ Your letter of September 22, 1941, submits for our opinion the following question which we quote therefrom: e1 would appreciate your official opini,on on the following question which has been raised by the National Association of Securities Dealers, Inc., District Committee No. 5, pertaining to Article 15, of House Bill 8, this being the Stock Transfer Tax Law. "'The act imposes a tax on sales of 'certificates for rights to stock.' Is the transfer of the right to'subscribe to stock taxable where such right is not evidenced by a 'certificate for rights to stock?' r In our Opinion No. o-ko26, directed to you, this department held that the sale, agreement or contract to sell, delivery or transfer upon the books of the corporation, of certificates of subscription or "certificates for rights to stock" or of the right, however manifested, of an original subscriber to receive original Issue stock, is a taxable transaction or transfer within the incidence of the stock transfer tax levied by Section d of the above cited Act, despite the fact that it had been theretofore held by this department that such tax does not apply to the original issuance of stock by a corporation. As recognized in your inquiry, Section 1 of the Stock Transfer Tax Act expressly levies and imposes a tax "on all sales, agreements to sell,, or memoranda of sales, and all deliveries Honorable George H. Sheppard, Page 2, O-4029 or transfers of at -Z9 certificates for rights to stock." But you desire to be advised if the transfer of the right to subscribe to stock is a taxable transaction, where such right: is not evidenced or supported by the usual formal "certificate for rights to stock," expressly named in the Act. Article 34, Subdivision (f) of %gulations 71 of the U.S. Treasury aepartment regarding sales and transfers of stock .(and similar interests) provides: "The followin are examples of transactions subject to the tax: 3 jt* (fk The transfer of the interest of a .subscriber ::- for stock, however such interest may be evidenced or condi- tioned upon further payments." The same Regulations set out in Subdivision (g), as a trans- action subject to the tax, "the transfer of the right to subscribe for stock, whether or not evidenced." Article 15 (1) of the Information Relating to the 3tock Transfer ~Tax Law issued by the Stock Transfer Tax Bureau of the State of New York, gives, as an example of.a taxable transaction, "the transfer of shares of stocks whether or not represented by certificate." We think these established interpretations of substantially identical provisions of the Stock Transfer Tax Laws of Federal and State jurisdictions by the administrative officials, bureaus and departments charged with the enforcement of said measures, and in existence at the time of the enactment of the Texas Stock Transfer Tax Law with similar provisions, must be deemed to have been within the Legislative cognizance in the enactment of said Act and is entitled to great weight in its interpretation. Moreover, aside from these considerations, we think the bare text of Section 1 of the Act impels our conclusion of the taxa- bility of the instant transfer. We quote: "Section 1. There is hereby imposed and levied a tax as hereinafter provided on all sales, agreements to sell, or memoranda of sales, and all deliveries or transfers of shares, or certificates of stock, or certificates for rights to stock, or certificates of deposit representing an interest in or representing certificates made taxable under this Section in any domestic or foreign association, company, or cor,poratlon, or certificates of interest in any business conducted by trustee or trustees made after the effective date hereof, whether made upon or shown by the books 88 the association, company, corporation, or trustee, ?k -21P." Honorable George R. Sheppard, Page 3, O-4029 It is readily apparent from the foregoing that the legislative intent was to levy and impose an excise or privilege tax upon the transfer, by sale or gift, of 'shares or certificates of stock or certificates for rights to stock,' or certificates of subscription or any rights to subscribe for stock or for a future transfer of stock, howsoever such right may be evidenced, and Mhether evidenced'or recorded by any instruments, agreements, stock certificate books or transfer records at all. In other words, it is the actual transfer of stock, or rights to subscribe for or receive stock which is taxable rather than the mere evidence of such right. We accordingly answer your question in the affirmative. Trusting the foregoing fully answers your inquiry, we are Yours very truly ATTORREY GENZRAL OF TEXAS s)'%t~M. Neff,. Jr. BY Pat M. Neff, Jr. Assistant PMN:ej/cg APPROVED NOV. 7, 1941 s/ Grover Sellers FIRST ASSISTANT ATTORNEY GENERAL Approved opinion committee BY Bm, Chairman