GERALDC. MARR , AUSTINI~.%'EXAEI
Bon. Wm. J. Lawson opinion No. Q-3754
Secretary of State Ret Assessment of 25% penalty for
Bust in, Texas late payment franchise tax--Con-
struction of H.B. No. 8, Article
Dear Sir: VIII, Acts 47th Legislature.
We are in receipt of your letter of June 20, 1941,
requesting an opinion concerning the collection of the 25%
penalty for late payment of franchise for the current fran-
chise tax year in view of the amendment of ,Article 7084, Re-
vised Civil Statutes 1925, by Article VIII, House Bill Noi
8 Forty-seventh Legislature, which became effective May 1,
1441.
The question involved is one of statutory construc-
tion and it therefore becomes material to carefully consider
the various statutory provisions and their history.
Prior to May 1, 1941, Article 7084, R.C.S., 192.5, as
amended 1931, l#vieda franchise tax upon domestic and foreign
corporations at the rate of sixty cents. per thousand dollars
of the capital stock of such corporations from one dollar to
one million dollars and at the rate of thirty cents per thou-
sand on capital in excess of one million dollars. The minimum
tax was $10.00.
Each corporation was required to file a sworn report
with ,the Secretary of State as a basis for computing its tax
between January 1st and March 15th of each year and upon its
failure to file such report within the time required by law
became subject to a penalty in the amount of ten per cent of
the tax due. Article 7089 Revised Civil Statutes 1925, as
amended. ,Article 7091, Revised Civil Statutes, 1425, provides
that, “Any corporation, either domestic or foreign, which shall
fail to pay any franchise tax provided for in this chapter when
the same shall become due and payable under the provisions of
this chapter, shall thereupon become liable to a penalty of
twenty-five per cent of the amount of such franchise tax due
by such corporation.” Under Article 7084 the tax at the rate
mentioned was due and payable “on or before May 1st of each
year. . . in advance. It
Effective May 1, 1941, however, Article 7084 was amend-
ed by the Forty-seventh Legislature so as to povide a flat
Hon. Wm. J. Lawson, page 2 (O-3754)
rate of one dollar per thousand dollars taxable capital,
provide a $20.00 minimum tax and other changes not mater-
ial here. The provision tha 4 the tax is due and payable on
or before May 1st each year was left unchanged. The follow-
ing provision was also added to the statute:
“Sect ion la. It is further provided that
upon the passage of this Act or as soon after
as is feasible, the Secretary of State shall
mail to all corporations required to pay the
franchise tax under the provisions of this Act,
supplemental forms for the purpose of computing
franchise taxes as provided by this Act for per-
iods from the effective date of this Act to May
1, 1942 and he shall also mail notice to the
effect c hat for failure to file the necessary
report and for failure to pay additional amounts
which shall accrue as a result of the passage
of this Act the right of such corporations to do
business will be forfeited on September 1st next;
provided that the statutory penalty of twenty-
five (25) per cent shall not accrue against such
additional amounts for failure to pay on or be-
fore May 1, 1943. The Secretary of State shall
have the authority to promulgate such rules and
regulations necessary to the immediate enforce-
ment of this Act.”
The Secretary of State has construed the statutes
to mean that corporations are required to pay that portion of
the tax which would have accrued under old Article 7084 on or
before May 1, 1941, or become subject to a 25% penalty to that
extent of the tax and that they have until September 1st to
pay, without pena t that portion of the tax imposed by the
amended Article 708
i t’ which is in excess of the amount which
would have been due under the Article before its amendment”
On the other hand it is contended by the taxpa er
that the amendment completely superseded old Article 708 2: so
that no tax actually accrued thereunder but the tax was levied
by virtue of the amendment so that the “tax liability on the
basis of which the penalty is calculated and claimed in fact
never accrued, ” and that the “corporation never became indebted
for franchise tax in the amount on which pen.alty is claimed.”
It is further urged that the effect of the Secretary of State’s
construction is to “impose a penalty for non-payment of a ‘lia-
bili,ty which had in fact never accrued,” and that “additional
amounts” as used in Section la has reference to the entire tax
imposed in Article VIII of House Bill No. 8. The meaning of
Hon. Wm, J. Lawson, page 3 (O-3754)
“such additional amounts” as used in Section la of the amend-
atory Act depends upon and must be determined by the context
and subject matter, and the evident intention of the Legis-
lature e Every word of an enactment is intended to have been
used for a purpose and the statute will be construed with ref-
erence to its scope, general purpose, and the ends or objects
sought to be attained. It is proper to consider the title
contemporaneous history and conditions and facts then exis e ing
and within the knowledge of the Legislature. 39 Tex.Jur. pp*
196, 2,36, 217 and 229.
As pointed out above corporations were required to
file their franchise tax reports by March lsp 1941, as a basis
for computing the tax at the rate provided in Article 7084 as
it the,n existed and those reports were on file with the Secre-
tary of State, except as to those corporations which were de-
linquent and had become subject to a ten per cent penalty for
late reports. The tax based upon information contained in
those reports at the rate prescribed prior to the amendment was
payable on or before Way 1, 1941, and large numbers of taxpay-
ers had made payment under that statute, as in former years,
except those who were waiting until the last day to pay the tax
or who would become delinquent under the law as it then existed.
These are facts which the Legislature undoubtedly knew and which
we must presume it took into consideration when enacting House
Bill No. 8.
It will be noted that subdivision (a) of the statute
as amended does not provide that the tax therein levied shall
be due and payable to the Secretary of State on or before Sep-
tember lst, but provides that each corporation “shall, on or
before Mav 1st of each veaE., pay in advance to the Secretary of
State a franchise tax for the year following.“’ Following the
taxpayer’s reasoning that since the amendment became effective
on May 1st and superseded the former statute so that the fren-
chise tax for the current year accrued and was levied by virtue
of the amendment effective May lst, it must be borne in mind
that under the express language of House Bill No. 8 the full
amount of the tax at the rate provided in the amendment became
due on May lst, 1941, for the year ending April 309 1942. We
must presume the Legislature knew the provisions of our fran-
chise tax laws. It was increasing the corporate franchise tax
and retaining the same delinquent date at a time when reports
for the lesser rate had been filed, large numbers of corpora-
tions had paid under the old rate in good faith and it would be
practically a physical impossibility for new reports to be filed
and taxes computed and paid at the increased rates for the cur-
rent year within the regular period provided by law. This is
emphasized by the fact that House Bill No. 8 became effective
on the very last day that franchise taxes could be paid without
- ._ _
Hon. Wm. J. Lawson, page 4 (O-3754)
penalty. It was the obvious purpose of Section la of the
amended Act to relieve against this situation.
Section la provides for “supplemental forms” for
computing the tax under the amended statute from its effective
date to May 1, 1942. It further provides that the right of a
corporation to do business shall be forfeited on September 1st
next9 for failure to file the necessary report or to “pay
additional amounts which shall accrue as a result of the ass-
age of this Act.” It is also provided that the usual 25 B pen-
alty for late payment “shall not accrue against such addition.&
w for failure to pay on or before May 1, 1941.”
When viewed in the light of the facts and circumstances
surrounding the enactment of House Bill No, 8 we think it is
clear that the l~aaditional amounts” referred to in Section la of
the amendatory Act has reference to only that portion of the tax
levied therein which is in excess of the amount computed at the
rate theretofore provided in the statute which it superseded.
It vi.11 also be noted that Section la does not expressly alter
the provisions in subdivision (a), that the tax shall be paid on
or before May 1st each year in advance, but merely postpones the
date of forfeiture from July 1st to September 1st ae;ld exempts
the corporation from the penalty provisions on the
m” required to be paid by reason of the increased tax.
It is our opinion that under the provisions of Article
7084, Revised Civil Statutes, 1925, as amended by House Bill No.
8, Ac:ts Forty-seventh Legislature, the 25% penalty for late pay-
ment provided in Artici1.e 7091 for failure to pay the franchise
tax c,n May 1, l941, was suspended only as to such amosunt of the
tax l.evied under House Bill No. 8 which is in excess of what the
tax would have been., computed upon the basis provided i.n Article
7084 prior to its amendment; and that the Secretary of State
has properly demanded such penalty for late payment upon the
amounts which wo?uld have accrued under the prior law where such
sums were not paid on OP before May 1, l%,l.
APPROVED JUL 28, 1941 Yours very tmdy
/s/ Grover Sellers ATTORNEY GENERAL OF TEXAS
FIRST ASSISTANT By is/” Cecil C. Cammack
ATTORNEYGENERAL Cecil C. Cammaek, Assistant
APPROVED:OPINIONCOMMITTEE
BY: BWB, CHAIRMAN
CCC:LM:wb