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OFFICE OF THE ATTORNEY GENERAL OF TEXAS 

I 

AUSTIN 

Honorable Wm. J. Esvaon 

Secretary OS State 

Au8 tin, Texar 

Dear SIra 

Ue aoknovledge reoei 

ion OS to vhether or not The 

from payment OS franohiae t 

of Artl.ole 7084 of the Rev1 

eQ by the 47th Leglrlature, 

The Union T 

Pettlbone, and other 

poaea : 

r the~purpore 

ce ati operation of 

t the City of Dalgae, :I’ 

country eurtiou@ing 

a, ath all of the 

on terniinal railveya 

tutee of the stats 

0 relating to railroads; fmQ eeight to lesue bonds In exceaa of lte 

authoriteU capital stock and of conatruating, melntaining and operating paseenger and freight eta-. 

tiono, railroad yards md other facilities neceesary or proper to afford mrminal faciLltiea to 

all railroade nov or here e&ering the City of 
Honorable Wm. J. Lavaon, page 2 

Dallae, Texan, and the right.to exercise a.&1 other pavers nov or hereafter waiferred by the Zave 

of the State of Texa& on terminal rsllvay compenLee and aubjeot to the provlsione of an aot 

8 

taaeed by the 32nd Isgialmture af the State of +xea 

and approved by the Qovernor of Texas on tfLe POth 

day of March, 1911, relating to wharf and terminal 

compmnien. * 

The artlulea of lmorporatlckq provided for the iesutmoe of 480 eharee of stoak vlth a par value of $100 each. 

On April 1, 1912, the terminal company, 8 railroads 

and Continents1 and Commerolcrl Trust and Savlqa Bank, entered 

Into whet ~88 known ar mn “Operating, Agreement vherein it ir 

etated that mid rallvay companlee vere lntereeted in reouring 

an eaommloal, efficient and eatl8faotory eyatem of handl%ng 

railvay traffic vlthln and through the City of Dells6 .&nd that 

the rallvmy mmpanler derired, to unite Lo the eatabliebment of. 

joint tbrmlnal pmrrcrenger faeilltles and In the cont?true$l& uld 

Oper8tiOn of a union atatlon Sor the uae of .rald reilvay aompaniee and other railvay oompanler vhioh might be admltted. 

That’ in order to effectuate such purporea and deetie the railvay companS.ea had oaueed to be organized The Union Terminal Company, the et@c of vhioh vae owned 60 nhmree by each of the 8 

railvmy companlea. 

Tb further effectuate eaid dealrea and pwosea The 

Unlon Termhal Company negotlsted a loan of $5,000,000 from 

the Continental end Commeroial Trurt and Saving8 BE& and exeouted bonds. and a mortgage on all property then wmed or thereafter applied to secure aald indebtedneae. Eaoh rallvay oomp8ny alao agreed to and did tranel’er and aealgn to the Continental and Commercial Trust and Savings Bank, ae trustee, 5% of ite 

60 aharea cif stock in The Union Terminal Gompeny to aeoure the 

due and punctual peri’ormanoe of the agreement betveen the partie@ thereto. The railway companlea further agreed to pay the 

intereet and principle on said bonde and on other fixed charges 

and taxes in the maintenance and operation of’ The Union TermiMl company. 

Article 7084, R,evleed Civil Statutee, 1925, Subaeotlon (a) provldee for a fianehiae tax on all domeatlo and foreign corporation8 chartered or authorized to do buairiese in 

Texas. 
Honorable Urn. J. Lawron, p8ge 3. 

Subaeotlon (c) of said Article areatee 8n exemption 

88 follolirI 

"Provided, h&ever, thet thin article ah811 

not apply to oorporationa organized 8a termln81 

oompanies not organired for profit, mnd h8vlng 

no lnaome from the burlness done by them. . . ." 

It her been held m8ny tlmen that the fr8nehlee t8x 1s 

not 8 tmx on property or lnoome, but that it lr 8 ohrrge rude 

by the State agalnrt 8 oorpor8tlon for the privilege granted 

to do business in the State. United llorth 8nd South l?evelo$ment 

Co. ,v. Heath, 78 5. Y. (2d) 650. 

But the Leglelature h8a l een fit by Artlole 7084 rubre@ilon (o), wpr8, to exempt thore aorpowtionfi whlahr (15 8re L 

orgenlted ar termln81 oomp8nler; (2) h8ve no lneome from burlnerr 

'done by them, 8nd (3) not organlred for profit. 

It 18 element8ry that t8x8tlon la the gener+l ru&e 8nd 

exeniptlon from tustlon the exoeptlon. All perrom or aorpormtlona olalmlng 8n exemption from tmxatio@ muat bring.themrelver 

Olearly vlthln the exoeptlon beasuoe the rtetute grmntlng ruoh 

exemption murt be rtrlctly oonetrued. 

The feat that The Union Termln81 Oemp8ny 18 a oorporrflon orgmnlaed aa a termln81 oomp8n3 need8 no dlma~rlon~ 

The eeoond faot to be detemlmd 18 vhether & not 

Ifb;" Union Tersainrl Company has inoome from the bualnear d&e by 

. 

e. 

The Legialatwe h88 not eeen fit to define Wh8t 10 

memnt by the term "lnoome." Thet being true ve are required br 

the ruler of statutory oonstruotlon to give the term it8 aomiaon 

8nd ordinary aaceptatlon. 

In Volume 4, Worda mnd Phr88011, FlrUt Series, pegs 3504, 

it la stated: 

"The term ~Inaome* ordln8rlly mew ithat 

whloh comes Into or la received. -by..- buainese 

or Investment of aapltal, rithout referenfae to 

outgoing expenditures. ( ". 
Honorable MU. J. UWMn, Ppge 4 

In the oeae of Eouaton Belt and Termin Comp8ny v. 

Clark, 122 S. W. (26) 358, the Court of Civil Appeala, ln diaaurrring the exemption here in quaation on 8n OrgMit8tiOn very 

similar to The Union Terminal Cornpang, held that: 

"The etstutea used the vord 'lnoome@ or the 

phreae *income from bualneaa done by them,@ in the 

aenae of 8Il.y inCOme, 6s dlMd.ngulrh6d from net 

Income. * 

Aa.heretofope ahovn The Union Termin Compmy vm; organized to aonduct 6 term&81 aad it h8a ereoted buildinga, treaka, 

aheda, eta., to carry on itr tex%&81 bualneaa. 

It appe8ra from the f8ota~ aubmltted that The Union Terminal Compeny h8a received lnaome frqm bualneaa dono by It. Among 

other iteme OS inoome ir the sum of 4272,671.07 total rent inoome from January l., 1940, to m,ember 31, 1940. There 8ri 8bJ 

ltema for rental of 8p8ee, rush 88 43500 from the Union Reur.Compony, 900 from bonded Tranalt Comp8ny, @50 from Interstate Compay, 1 900 from Pullman Oompuny sad $l200 from Da11813 Interahmge 

mnd Inspeation Bureau. It m8y be srgued that the money reoolred 

from rental of office ap8oe la aot lnoome from bualnera done. If 

the money reoeived for rental of offloe apace la not oonaldereb 

8 p8rt of the revenue from then operation of the termlnel f6ollltier auah f8ot does not preol&@e the lnol~alon of auoh inoome be08~8 the 8t8tUte doee not requ$re *8t only the money it reo8lvea 

'from the opamtlon of the termln81 hollltlea,but fsom 8Zl~bualnear done by the aOrpOr8tiOn. In the ueae of Potom80,glsctrlc 

'.Pover Co. v. Rudolph, 29 Fed. (ad) 6226 (aertlor8rl denied, -278 

U. 8. 656) the aourt arida 

"There la no rule vhiah petit.0 8 aou& to 68y 

that the meemre of 8 tPX for the privil6ge Of dobualneaa, vhere income from property la the baala, 

muat be limited to that derived fmui property vhi&. 

nay be atrlotly smld to be actually used in the 

bualnees.' 

..' 

Certainly the a8m~ rule vould apply to the oonatruatlon 

of 6 tax exempt atatute unleaa 8 olear l&tint to the oontrsry 18 

shown. Suoh intent Is not ahovn In the &state here under oonalderatlon. 
lionorable Wm. J Zaveon, page 5 

6‘ 

It la therefore apparent th8t The Union Termin Oompany hma Income from buelneea done by It. 

Uhether or not the Union Terminal Company vae 'organised for profit" present8 a more difficult problem. 

The Union Termin Company~lr entitled to all of the 

.prlvilegee granted It qnder the etrtute vhereby It v8a lnoorpormted 8nd 18 burdened by the dutlea required of It by l8v. For lnetanoe 8lI auoh termiM1 OOI&p8Iii80 8re 88 8 m8tter of lav aoIpplon 

omrrlara 8nd at much me aubjeat to regulmtlon by the Rell.vomd 

Uormieelon. It m8y be requlr&d to not only furnlrh Its faaflltie8 to Rallromds vho 8re not-ovnera of its etoek, but the revenues 

it, reoelvee ah811 be fixed by l&e C~eeion. Certmlnlg 8ny rate8 

for the use of the fmcU.ltlee vhlah ml$ht be fixed by*the.B811- 

romd Commlaalon would bg 8~ 8 m8tter of lav; required to be rush 

ti 8aount~ as to lnaure to The Terminal Oompeny 8 re4aonable+eturn an Its lnveatment. The rellny aomp8nler and The Unlcin Ter- 

,&181 Company agreed that the termln81 00apMy vould 8qqtIh8,’ 

oanetruot and operate neaesaary treeka, lmndu 8nd ather~termh8l 

~trcrllltlea and oonetruat a pmrrrenger atetlon in order to furnleh 

th6 8811~8~ ccq8nlea l n eaonomloel, efffaient and ctmtlafurtory 

ay8tem of h8ndlN their peeaenger trefflo. 

By the Operating Agreement of Ap~ll 1, 19X!, r Unlon 

Tsrminml. Camp8ny, ln oonelder8tlon of the rua-66 be & by the 

Nllvey aompM.iea, 8greed to MQu3xe neaeae8ry reti estate 8nd 

ooamtruat the neae888ry union at8tiona aa& 8180 iw8nted:the use 

of ita termlxwl Seollitlea, eubjeat to aertejn c&lltlonaj to 

iald railvmy oompsniea for 99 years. By asid.agreement the.~ 8 

roilv8y aomp8nlea e8Oh agreed to p8y, seveP411$ 118th of the 

tiount of Interest and px%nalple of the &5,000,000 Firit 9lortg8ge 

Bandaj to pay, aeverelly, l/&h of the 8mount, prlnalple 8nd lntereat, of 811 other bonds; to p8y 1/8tb of 8U ewe SoPtfre 

'Le88lng or aaqulrltlon.of f8ollltlea for the uee of the rsilvey 

a6mpsnlee; to pay l/&h of 811 t8xe8, rates, levieo, benefit,., 

isreesmenta 8nd other government81 oh8rges of every kindi It VI8 

further agreed thrt all income or oherges vould be used to defrmy 

the operation expenaea aa far 8a possible and th8t the remainder 

tiould be p8ld by the rallvay oomp6nlea on a monthly UeeF b8sl8. 

Bat only hmr The Union Termln81 Compang provided for 

all of ita initial ooate or oapital, lntereet ah It8 indebtednear 
h 225 .,,,.,,ii 

Eonorable Wm. J. I,ayaon, page 6 

and all operating expenses but it hze mzde provirion for the 

retirement of Its bonded lndebtednesr vhlch vould at maturity 

thereof leeve all of ite aasetr free of debt. 

The term “profit’ az applied to a burlners organlzstion i& held to lnolude and cover benefit6 of every kind in 

exaeaa of coete or expenses, and profit in burinesc has been 

held to include all gain, advanoe In the value of,auaeta, good 

vi13 and dividende, in exceze of and beyond e 

ume 6, Uorda and Phrarer, First 8erlez, page 

z$ltures. VolThe Union Temlnal Company haa taken care in a rather 

Lngeniour manner to eee that it dooe make a profit. St ham contraated to the effect thet et some time in the future it will 

.ovn p;11 of ite very valuable property vlthout a debt of zny kind. 

In faot on April 1, 1942, it would have acoomplizhed thlr rezult, 

iiut “out of the goodneer of It8 heart’ it granted to the railway 

oompaniea on February 1, 1937, an extenzion of the time for the 

payment of the 45,000,OOO bonded lndebtedneze by refundlng the 

Wtidt vlth another $5,000,000 bond izaue to mature on February 

a;. 1967. 

lie do not think it van the Intention OS the Leglelature to require a termlnEi1 oompzny to not make a profit on a 

dally, monthly or yearly bazie. But on the oontrmy that if 

it mar vithln the oontemplation of the partlee prior to and at the 

time OS the organization that a profit zhould be ma& or that the 

orgzulzat$on van oapzble of meking a profit then it should not 

be exempt:. 

Rot only will The Union Terminal Company- zmke a very 

rubztantlal prof,lt but the oontemplzttion of the parties vho incorporated The Union Terminzl Company I.8 very forcefully rhovn 

vhen they oontracted to deliver all of the aherea of etoak, exoept 2 for each railway oompzny, to the trustee noml.nated in 

the trust agreement of April 1, 1912, and agreed In mid agreement. that ruch trurtee would receive and oolleot all dividend*. 

Mhzt are dividends if not profit. 

In the eaee of Houeton Belt and TermIns Railway Co. 

v. Unlted States, 250 Fed. 4, the court ssidr 

“It may be that the tenant oompaulee (reilvay compznlea), orgaulzed the terminal compzxqto 

provide a convenient joint a enoy for the perforarante of certain of their dut f 8s as oarrlerk!, and 
Bonorable Wm. J. Idwon, pzge 7 

with no view to profit to be derived fran! ltz 

organlzetlon. It VW, however, legally organized 

ae a oorporat.ion oapable of earning and paying 

dlvldenda to lta stookholdere, and the fact that 

It hae not done eo doee not make It the leez a 

oorporatlon engaged In the burlnezm and organized 

Sor profit, vlthln the meaning of the corporation 

tax law. .Proflt from an organleation and operation could result with etookholdera in other vzya 

than ln dlvldendr.’ 

We are therefore of the opinion that The Union Terminal 

C0mp8ny vae OrgEd.Zed iOr profit. 

In view of the foregoing you fuw rezpeotfully sdvlaed 

tlacst The Union Terminal Oompany lr got oxem t from the payment 

of frenchlee tax ae provided by Article 70 SE , Revlred Givll Statutea, 1925, 88 amended. 

Youra very truly 

ATTCBllgy OBBBtAL OF TFZAB 

RHC;db