Non, C, H. Cavnaes Opinion No, V- 1114 

State Auditor 

Au&in, Texas Re; The barb for franchise taxee 

tuxler the submitted facts relative to the refinancing of an 

outstanding indebtedness. 

Dear Mr. Cavneee: 

YOU have requested our opiniqn with I 

ment of franchise taxes and submit the @owing 

“A certala domestic corporation made the following borrowing8 from 8 comrnercial’bank, giving 

its noteP therefor: 

Auguet %h, 1946 

Oat&et 19th. 1946 

s fgm~~; 

Feb7 

tsth, 1947 100:000:00 

March 1 47 105,000.00 

Total 

All of the above lndebtednese bore maturity dates ln 

excem of om year from the dates incurred, and was 

correctly reported for Fpanchiae Tax purpoaeo. 

“On Nwember 6u4 1947 the above notes were 

refinanced with an Insurance Company and an additional $195,000.00 was obtained, making a total indebtedness of $60@.@@0,00. The $195,000.00 reppesented new indebtednese at the time of refinancing, 

‘The total hdebtednere was incorporated in 

one note for $600,000.00 payable in monthly principal installments of $!i,OOO,OO, the first of which 

was paid on November 29&, 1947, leaving a balance outstanding at November 30th. 1947, the close 

of the corpo~ation%i firoal year, of $595,000,00,' 

‘. 

Based upon these frcta, your question is ‘whether the 

payments should be prorated between the $405,000,00 indebtedness and the $195,000.00 lndebtednesr in the absence of any provisions in We contract tq the0 effect, or whether the entire $595,- 

000.00 was mabject to franchise tcuc on Nwember 30% 1947.” 
Hon. C. Ii. Camea*, Page 2 (V-1114) 

Artkk 7064, V.C.S., thr 8t~trrk fanol~ed ia’i’ detarmination ef your queeth, prior fo its amendment bi 1949, provided in 

part2 

‘(a) Except as herein provided, wepry domeetic end forolga corporation heretotom oe heree#er 

chertared or autlwized to do hei-es in Texae* or 

ddng bue4meee tn TexaP, shall, on ot before May 1st 

of eech year, pa in edvance to the $eeretiey of State 

a frawU*e tex r 08 the par fdlowbg, heed w that 

proportion of a0 outetaadin 

and aadbidod prdtts, plue & 

capi+el *took, l wplue 

e amount d o~tetaading 

boade, plue the amount of outeteWU8g blmde, We 

end debewoe, (outeN bonde, tie and d&estwee shall isclude all written evldeacer of indebtedneae wh 4 c h b ea r l maturity dab at on (1) year or, 

more from date of iaeue, ud all l uch iutrume&e 

wh4ch bear a makrity date of leer than me,:‘(l) year 

from date of ieeue but wblch repre8snt indebtedneee 

which hae remained outetanding for a poaiod of one 

(1) year or more from date od iecept&oa, but which 

have been renewed or sxtemded, or refineneed by the 

ieeueme of other evtdeasoe d the Wbtedaeee, whatlertotheeemeorahipwUeeo ,.* 

wowed 

It l hwld be noted *at the flret two $lOO,OOO.OO loeu, hopw August 9.1946, er& Odaber 19.1946, reepectirely, were* 

at the the they wese alhawed a~ Novembes 6.1947, outetanding 

for a period af otm year or mope from the d#s of their 4ncepUom. 

The eeeond two obligatioae, wbioh amormB to $205,000.00, were not 

outetand4ng for one year 8t the tfme of tbetr zef4aewilog on November 6,1947. It ehould ate&be notsd that all the indebtedneeeee in 

question bore a maturity date *of one (1) year or more from date of 

ieeue” at the time of their imceptioao The fiecel year of the corpopaflon involved 4s from December 1 through November 30. 

The $600,000.00 n#e, which Locludee $405,000,00 of old 

obligatlone and $195r000000 of new obligafione, 46 payable in monthly 

inetallmente of $5rOO0.00 rr& M f4aet installment having been paid 

on November 29, 1947, pri& to M ilecal year in queetion. Thue, at 

the cloee of the corporet&m’e f4ecal year on November 30, 1947, thexe 

wae outetanding a note repWeent4ng en Mebtedneee of $595,000.00, 

From the face of &e note it ie Weaalaed @at during the flecal year 

ha queetl- WI peyxne8te wfll be made, the rodocisg the amomrt of 

then indebtedneee at Ih, end of tW fiecal yeq In question to $541,000.- 

00. Your quart&on cone8ene (Irs tuab4Mty of the tea8 monthly inetallmeate patd durin&%e flecal year. If there payments are to be applied to the 4ndebtedneee wb4sh wae not wrtetredin 

more pr4or to the rwfixnaciag w to the new obliga % 

for me year or 

one, they should 
Hon. C. H. Ciwnoer, Pago 3 (V-1.114) ’ 

not be included 4~ tba UIloIIllt UM In a 

On the other hand, ii these peymente are -r 

tiq the franchise taxa 

be applied to the oldest obligations, as yw state PI State Aud4br ed the Secretary 

of Stek have doa8 4~ ovary #sali caeo irr #N pert, the tote1 taxable 

amount would be $S95,000.00, tbo total emorurt of the obligation 

lees the one payment made ia the precedkeg flecal year, 

11 should Da mted also tit no a pl46atlon ol paymente 

is provided for im the sob ifeelf or, l o Rr as we kow. ia any 

othar mewer between Wee debior eorrpomtlor amI Us ersditor insurance company, it 4e wel4ewttUid*at4ei the ebemi of am agrtethemdelve0, 

0 

mental interprebtiaa whiab you and #e SecreQlry of State have 

followed since the amwdmd of Aa%& TO84 Ln 1941 to inelnde rep 

24nanced obligations la In tmnpl4a~n ~4th l&e metfled law. 

It La, thermfore, abr eorcloa4~1 ybt (k ha&n for dekrmiuing tb amQwt of tu llahluty of #a awpw8utm 4a qw*t&oa ia 

en amoont of $598,06o,QO~ T& emt4re amowt of the $595,000.00 

remain48g at the etert d lls(, iyacal yWr 48 qwetloe is taxable ae 

a written ev4dence d 4~bdlBene kari~g *a mcrbiw date ol one 

(1) par w more loom datn e# ie8w00 eamep) for those amaamb payable w4tb4n a yoaPaP, Tbnse 4etkr aRllOtULe# wm app44ed to the oldest 4tiebteduee, make the ad, in that ~UWQ& ome whch reprel entm indeb tedmawe & h b ea m .a ma Cu4 ty dein o f lo w th aa o ne 

0) 

r 

l r ~POW dh of @~pcLoo~ lnrt WrLM W Lww naiuacod by 

the l 8amO ef o&w ov4do~ea of da9 4ms+3&.ro, Wha(LcP to tie 

same o* other partion, o .* 
Hoe c. H. CwmoW* P8go 4 (V.1114) 

c