THEATIYORNEP GENERAL 

OFTEXAS 

Honorable 0. P. Lockhart 

Chairman, Board of Insurance Commissioners 

Austin, Texas 

Dear Sir; Opinion No. O-4375 

R0: Whether revenue bonds issued by 

local Texas.Houslng authbrltles lncorporated under the.Texas Housing 

Act, not secured.'bg valid-first 

lien on Texas'real estate are 

ellgible.as tax reducing I'Texas 

securities" under the Rob.ertson 

Lawi Articles 4765-4769, as amended, 

and as tax reducing b&ciwltles 

under ArtFcle 7064, as amended. 

Your letter of January 19, 'L942,-.submlttlng in substance the above question to this Department- for an oplnlon is 

quoted as follows: 

"Please advise whether revenue bonds issued by 

local Texas Housing Authorities incorporated under 

the Texas Rousing Authority Act (Article 1269k, 

Vernon's Texas Civil Statutes, H.B. 821 Acts~l937, 

45th Legislature, Chapter 462, pages 1144-1157; 

Sets. l-26, as amended by B.B. 102; Acts 1937;&th 

Legislature, Second called session, Chapter 41, 

pages 1924-1939, Sets. 1 and 2), which bonds are 

not secured by valid first liens upon Texas real 

estate but are secured only by pledges of (1) 

annual contributions of funds from the United States 

Housing Authority under its assistance contract illth 

the local Texas Housing Authority at San Antonio; 

(2) rents and revenues from the San Antonio prboject 

properties themselves; (3) reserve funds set aside 

by the issuing local San Antonio Authorlty~ for maintenance, repairs, replacements, vacancies and collection losses; (4) as to a series A, a special find 

set aslde,by the issuing San Antonio local authority 

with.l'ts fiscal agent equal in amount to the prlnclpal'afid interest maturing for the first nine 

years, are eligible as tax reducing 'Texas seburltles' 

tinder the Robertson Law, Articles 4765-4769, as amended, 

and as tax reducing securities under Article 7064 as 
Honorable 0. P. Lockhart, page 2 o-4375 

amended. In this connection we invite your attention 

to Art. 1269k-1." (Acts 1939, Leg. p. 427, et seq.) 

Under the terms of your letter we must assume that such 

bonds have been issued in full conformity wlth the law, but we 

learn from our records that they have not been submitted to the 

Attorney General's Department for approval, and nothing contained 

herein is to be interpreted as passing on the legality or val1dLt.y 

of these bonds. 

Chapter 4 of Title 78, Vernon's Civil Statutes of the 

State of Texas, I'Texas Securities and Gross Receipts Tax'! known 

as the "Robertson Law"; as originally enacted and as amended, 

provided for and required of life insurance companies engaged in 

transacting the business of writing life insurance in this State 

the investment of a sum of money equal to at least seventy-five 

per cent of the aggregate amount of the legal reserve required by 

the laws of the state of lts domicile in "Texas securltles" and 

in "Texas real estate". Such Investments to be made and maintained 

on account of Its policies of insurance in force written on the 

lives of citizens of this State consltutlng the reserve denomlnated 

by the act as its "Texas reserves". 

The act defined the term "Texas securities" as 

follows: 

"The term 'Texas Securities,' as used.ln~thls.,.~, 

Chapter, shall be held to include all bonds issued 

under and by virtue of the Federal Farm Loan Act 

approved July 17, 1916, when such bonds are issued 

against and secured by promissory notes or other 

obligations the payment of which is secured by 

mortgage, deed of trust. or other valid lien upon 

unencumbered real estate situated in this State; 

bonds of the~State of Texas; bonds or lnterestbearing warrants of any county, city, town, school 

district or other Im*nlclpality or subdivision which 

1s now or may hereafter be constituted or organized 

and authorized to issue such bonds or warrants under 

the Constitution and laws of this State; notes or 

bonds secured by mortgage or trust deed insured by 

the Federal Housing Administrator; promissory notes 

and other obligations, the payment of which Is 

secured by a mortgage, deed of trust, or other valid 

llen upon unencumbered real estate situated In this 

State, the title to which real estate is valid and 

the market value of which is forty (40) per cent 

more than the amount loaned thereon, exclusive of 

buildings unless such buildings are insured against 

fire and kept insured in some company authorized to 
Honorable 0. P. Lockhart, page 3 o-4375 

transact business ln the State of Texas, and the 

policy or policies transferred to the company 

taking such mortgage or lien; or upon first liens 

upon leasehold estates in real property and improvements situated thereon, the title to which Is valid, 

and the leasehold has not less than thirty (30) 

years to run before expiration, provided that the 

duration of any loan upon such leasehold estates shall 

not exceed a period of ten (10) years. If any part 

of the value of such real estate Is in buildings, 

such buildings shall be insured against fire and 

kept insured for at least fifty (50) per cent of the 

value thereof in some company authorized to transact 

business In this State and the policy or policies 

shall be transferred to the company taking such 

mortgage or lien. 

"The term 'Texas Securities,' as used ln'this 

Chapter, shall also be held to include obligations 

secured collaterally by such first lien notes-; flrst 

mortgage bonds of any solvent Corporation lncorporated under the laws of this State and doing business 

in this State, and which has pal&out of Its actual 

earning, dividends of an average of at least five (5) 

per cent per a@umpn the par value of all of its 

par value stock outstanding and on the sale value 

of .a&? ofL$i~. t-icxm W.ue stock outa_ta~Wf3.f?r. a~ 

period of at least five '(5)years next~F&edlng 

the date of such investment, and which has not at 

any time defaulted In the payment of interest on any 

of its obligations, any such investment In the bonds 

of any one such corporation not to exceed five (5) 

per cent of the admitted assets of the Insurance company making the investment, and loans made to pollcyholders on the sole security of the reserve values 

of their policies. The investments required by this 

Chapter may be made by the purchase of not more than 

one building site, and ln the erection thereon of 

not more than one office building, or in the purchase, 

at Its reasonable market value, of such office bulldlng already constructed and the ground upon which the 

same 1s located in any city of the State of more than 

four thousand (4,000) inhabitants. All real estate 

owned by life insurance companies in this State on 

December 31, 1909, and all thereafter acquired under 

the provisions of this Chapter, or by foreclosure of 

a lien thereon shall be treated, to the extent of its 

reasonable market value, as a part of the investment 

required by this Chapter. And 'Texas Securities' 

shall be held to include every character of lnvestment 
Honorable 0. P. Lockhart, page 4 O-4375 

authorized by the terms of . . . _ . . 

this Article; provided 

tnat tne aoove restrlctlons concerning mortgage 

loans shall not apply to loans insured by the Federal 

Housing Administrator. As amended Acts 1941, 47th 

Leg., P. 848, ch. 524, 11." 

The above paragraph contains in substance the provlslons of Article 4766, Vernon's Clvll Statutes of Texas, and 

sets out in detail the character of investment that may be made 

by life insurance companies operating in Texas under the Robertson 

law. This article does not. mention the matters of~taxatlon. The 

article of the Robertson Law relating to taxation, the amount of 

taxes to be paid by such life insurance companies operating in 

Texas, and the reductions to be allowed such companies under the 

law, when certain investments are made by them in the State of 

Texas, is Article No. 4769, and for your 

Article No. 4769 in full as follows: 

information we quote 

"Each life insurance company not organized 

under the laws of this StBte, transacting buslnessin this State, shalI annually, on or bef,ore the 1st 

day of March, make a report to the Commissioner; 

which report shall be sworn to by either the presldent or vice-president and secretary or treasurer of 

such company,'whlch shall show the gross amount of 

premiums colle‘cted during the year ending on December 

31st, ~precedlng,~.from~citlzens of~thls State upon 

policies of insurance. Each such company shall pay 

annually a tax equal to four and sixty-five hundredths 

(4.65) per cent of such gross premium receipts. When 

the report of the Investment in Texas securities, as 

deflned by law, of any such companies as of December 

31st of any year shall show that it has invested on 

said date as much as thirty (30) per cent of its 

total Texas reserves as defined by law, in promissory 

notes or other obligations secured by mortasa 

deed of trust, or other lien on Texas real esi%te 

and/or in loans to residents or citizens of Texas 

secured by the legal reserve on the respective policies 

held by such borrowers, the rate of occupation tax 

shall be reduced to four and five one hundredths 

34.05 per cent; and when such report shall show that 

such company has so Invested on said date as much as 

sixty (60) per cent of its total Texas reserve, the 

rate of such tax shall be reduced to three and six 

tenths (3.6) per cent; and when such report shall 

show that such company has so invested, on said date, 

as'much as seventy-five (75) per cent of its total 

Texas reserve, the rate of such tax shall be reduced 

to three and one tenth (3.1) per cent. All such companies shall, In any event, make the investments ln 
Honorable 0. P. Lockhart, page 5 0 -4375 

Texas securities in proportion to the amount of 

Texas reserves as required by law. Such taxes 

shall be for and on account of the business transacted within this State during the calendar year 

in which such premiums were collected, or for that 

portion thereof during which the company shall 

have transacted business in this State. This Act 

shall not in any manner affect the obligation for 

the payment of any taxes that have accrued and that 

are now due or owing, but the obligation as now 

provided by law for the payment of such taxes shall 

continue-in full force and effect. As amended Acts 

1941, 47th Leg. 

(Emphasis addedj 

H. B. #8, Art. XVIII, 3. 3." 

We have underlined in the above paragraph the parts 

which we think bear most directly on your question. We think 

it 1s also well to mention in this connection that this article 

was last amended by the 47th session of the legislature, under 

the Acts of 1941, and~to point-out that such amendment is later 

in time than.elther Article 1269k or Article 1269k-1, herein- 

-after referred to, lndlcatlng that the legislature did not intend 

to include the Housing Authority bonds in the terms of Art. 4769. 

1937; and 

Article 1269k, as enacted by the 45th Legislature, in 

as amended by the 2nd Called Session of the 45th Legls: 

lature, In 1937, provided for the organization of local housing ~_

aiithorStSes, ---~~~~~.eli~ __- such _.__ Tocal -houtiIns' -tiuthorrtless~~su-e 

bonds and to make provisions for the payment thereof. Article 

1269k-1, enacted by the 46th Legislature, in 1939, provides that 

such bonds shall be valid and legal Investments for life insurance 

companies, other organlzatlons and individuals, the relevant part 

of said article being as follows: 

"Notwithstanding any restrictions on investments 

contained in any laws.of this State, the State and all 

public officers, mnlcipal corporations, political subdivisions, and public bodies, all banks, bankers, trust 

companies, savings banks and institutions, building and 

loan associations, savings and loan associations, investment companies, and other persons carrying on a 

banking business, all insurance companies, insurance 

associations and other persons carrying on an Insurance 

business and all executors, administrators, guardians, 

trustees and other fiduciaries may legally invest any 

sinking funds, moneys or other funds belonging to them 

or within their control in any bonds or other obligations 

Issued by a housing authority pursuant to the Housing 

Authorities Law (Chapter 462, Regular Session of the 

Forty-fifth Legislature, as amended by House Bill No. 102, 
Honorable 0. P. Lockhart, page 6 o-4375 

Second Called Session of the Forty-fifth Legislature, 

and amendments thereto) or issued by any public housing 

authority or agency in the United States, when such 

bonds or other obligations are secured by a pledge of 

annual contributions to be paid by the United States 

Government or any agency thereof, and such bonds and 

other obligations shall be authorized security for all 

public deposits; it being the purpose of this Act to 

authorize all persons, firms, corporations, associations, 

political subdivisions, bodies and officers, public or 

private, to use any funds owned or controlled by them, 

:lnclualng (but not limited to sinking, issuance, Invest: 

ment, retirement, compensation, pension and trust funds, 

and funds held on deposit, for the purchase of any such 

bonds or other obligations; provided however, that 

nothing contained in this Act shall be construed as 

relieving any person, firm, or corporation from any 

duty of exercising reasonable care in selecting securities." 

You will-note that this article makes no special reference to taxation nor to the ellglblllty of such bond~s for use as 

tax reducing "Texas securities" 

quoted hereinabove. 

as .descrlbed in Article 4769, 

.~ 

The Commission of Appeals of the Supreme Courts of Texas _ 

in Santa Rosa Infirmary v. City of San Antonio, 259 3.X. 926, in 

passingon the provisions-of-Article ,a, Section 2,.~of-~the Constltutlon of Texas, holds as follows: 

"Exemptions from taxation are never favored and 

in construing laws exempting any citizen or class of 

property all doubts are resolved against the exemption." 

It is our view that the rule of statutory construction 

here expressed would apply with equal force In the interpretation 

of laws reducing taxation. 

It 1s therefore our opinion that the answer to the first 

part of your question should be in the negative, That is, that 

the bonds in questlon Issued by local Texas housing authorities, 

not secured by valid first liens on Texas real estate, are not 

eligible as tax reducing "Texas securities" under the Robertson 

Law, Articles 4765-4769, as amended. 

We think, however, that it is correct to take a different view in regard to the eligibility of such bonds as tax reducing "Texas securities" under Article 7064, as amended. 

Article 7064, as amended, Acts 1941, 47th Legislature, 

H.B. No. 8, Art. XVIII, Section 1, applies to insurance companies, 
Honorable 0. P. Lockhart, page 7 o-4375 

other than life and other than fraternal benefit associations, 

and provides for a tax on gross premiums. The applicable part 

of said article, as it relates to your question Is quoted as 

follows: 

"If any such insurance carrier shall have as 

much as one-fourth of its entire assets, as shown 

by said sworn statement, invested in any or all of 

the following securities: real estate in this State, 

bonds of this State, or any county, incorporated city 

or town of this State, or other property In this State 

In which by law such insurance carriers mar invest 

their funds, the annual tax-of any such~lnsurance 

carrier shall be one and one-half per cent of its 

gross premium receipts; and if any such insurance 

carrier shall invest as aforesaid as much as onehalf of Its assets, then the annual tax on such lnsurance carrier shall be three fourths of one per 

cent of its gross premium receipts as above defined." 

(Emphasis added) 

We have underlined the part of the above quotation 

which we think applies most directly to your question, and we 

believe that Article 1269k-1, quoted hereinabove, brings the 

-- 

bonds referred to in your question within the classlflcat-Ion contemplated by the clause: or other property in this State 1; 

which by law such insurance carriers may invest .~. _.. their funds. ' 

We are therefore of the opinion that the second part of 

your question should be answered in the affirmative, and that the 

bonds in question are eligible as tax reducing "Texas securities" 

under the provisions of Article 7064, as amended, provided the 

bonds have been legally Issued. 

We do not however here pass on the question as to whether 

the San Antonio bonds to which you refer are legal investments 

for Insurance companies since we do not know whether they were 

issued as the law directs and in view of the fact that their 

validity has not been passed on by the Attorney General's Department. 

We trust that we have satisfactorily answered your lnquiry. 
. . 

Honorable 0. P. Lockhart, page 8 o-4375 

Yours very truly 

ATTORNEYGENERAL OF TEXAS 

By s/Robert F. Cherry 

Assistant 

RF'C:AMM:wc 

APPROVED MARCR 16, 1942 

s/Grover Sellers 

FIRST ASSISTANT 

ATTORNEY GENERAL 

Approved Opinion Committee By s/GWB Chairman