Hon. John Ben Shepperd 

Secretary of State 

Austin, Texas 

Dear Mr. Shepperd: 

Opinion No. V-1248 

Re: Effective dates of increases 

in corporation franchise taxes under House Bill ,285,Acts 

52nd Legislature, 1951. 

Your letter requesting our opinion in reference to the 

above captioned matter reads as follows: 

“In House Bill 285, of the 52nd Legislature., Article 7084, R.C.S., was amended by providing that, 

. . . every domestic and foreign corporation heretofore or hereafter chartered or authorized to do business in Texas, or doing business in Texas, shall, on 

or before May first of each year, pay in advance to 

the Secretary of State a franchise tax for the year following . . . which tax shall be computed on the basis 

of One Dollar and Twenty-five Gents ($1.25) per One 

Thousand Dollars ($1000.00) or fractional part thereof; provided, that such tax shall not be less than Twentyfive Dollars ($25.00) in the case of any corporation . . .’ 

The effective date of this Act isSeptem&er 1. 19,5.1. The 

present effective rate of tax under Article 7084 is One 

Dollar ($1.00) per One Thousand Dollars ($1000.00) 

and a minimum of Twenty Dollars ($20.00). 

“Article 7086, chapter 3, title 122, provides in 

part that ‘wherever a foreign corporation applying for 

a permit has theretofore done no business in Texas, 

such initial tax shall not be payable until the end of one 

11) year from the date of such permit, at which time the 

tax shall be computed according to the first year’s business as prescribed, in Article 7084, Revised Civil Statutes 

of Texas, as amended; and, at the same time, such corporation shall also pay its tax in advance, based upon the 

first year’s business, for the period from the end of the 

first year to and including May first following.’ (Under- 
. ._. 

Hon. John Ben Shepperd, Page 2 (V-1248) 

scoring ours.) 

“Article 7089, R.C.S., as amended, provides in 

part that ‘where a foreign corporation has not heretofore done business in this State and is granted a permit to do business in Texas, it shall file its first report as of one (1) year from the date such permit was 

granted, within ninety (90) days of such date.’ 

“It has become necessary that we have printed 

the required forms for ‘First Year Franchise Tax Reports.’ The order for these forms must be placed immediately ,and.the new rate Will be shown for the applicable period or periods. 

“We are uncertain as to the proper method of 

computing the franchise tax due by a foreign corporation that qualifies, for example, on June 30, 1950. 

Its first franchise tax payment would be due ofi or before ninety (90) days after June 30, 1951, making the 

final date of filing and payment before the accrual of 

penalties, September 30, 1951. This latter date is thirty (30) days past the effective date of House Bill 285. 

Actually, of course, the report could be filed and the 

tax paid immediately after June 30, 1951, and before 

September 1951. Bearing in mind the date, of levy, as 

contemplated by statute, we respectively ask that you 

answer tb,e following questions: 

“1. In the foregoing hypothetical case, is the tax 

to be paid at the $1.00 rate for not only the first permit year ending June 30, 1951 but also for the period 

from June 30, 1951 to May 1, 19521 

“2. Or, is the tax to be computed at the $1.00 

rate for the period from June 30, 1951 to September 1, 

1951 and then at the $1.25 rate from September 1, 1951 

to May 1, 1952? 

“In another hypothetical case which will arise in 

the printing of these forms, we are confronted with 

another problem. A foreign corporation qualifies on 

November 1, 1950, thus making its first return; and 

tax payment due on or before ninety (90) days after 
Hon. John Ben Shepperd, Page 3 (V-1248) 

November 1, 1951. 

“1. Would the tax in this case be computed at 

$1.00 only from the period Novembers 1, 1950 to September 1, 1951 and at the rate of $1.25 for the period 

from September 1, 1951 to May 1, 19521 

“2. Or, would the tax be computed at $1.00 for 

the full first permit year &ding November 1, 1951 and 

at $1.25 for the following period to May 1, 1952 ? 

“‘3. Or, would the tax be computed at the rate of 

$1.00 for the entire period from November 1, 1950 to 

May 1, 1952? 

“4. Or, would the tax be computed at the rate of 

$1.25 for the entire period from November 1, 1950 t0 

May 1, 1952? 

“In still another situation a foreign corporation 

qualifies on July 15, 1951, thus making its first return 

and tax payment due on or before 90 days after July 15, 

1952. 

“‘1. Would the tax in this case be computed at 

$1.00 from July 15, 1951 to September 1, 1951 and 

thereafter at $1.257 

‘2. Or would the tax be computed at $1.00 for 

the entire period ? 

“3. Or would the tax be computed at $1.25 for 

the entire period ? 

“4. Or would the tax be computed at $1.00 to 

May 1, 1952.and at $1.25 thereafter?” 

The rate to be used in computing the franchise tax 

depends upon the rate in effect at the time the tax liability is 

determined. If the tax liability attaches prior to September 1, 

1951, the effective date of House Bill 285, the rate in effect at 

that time should be used in computing the tax, which would be 

the rates prescribed by Article 7084, V.C.S., and Article 7084i, 

V.C.S., or a total rate of $1.10. If such tax liability attaches on 
Hon. John Ben Shepperd, Page 4 (V-1248) 

or after September 1, 1951, the $1.25 rate shouldbeused in 

computing the tax. The time the taxpayer makes his report and 

pays the tax is wholly immaterial in determining the tax rate to 

be applied. In other’words, the law in force at the time the tax 

liability is determined should be looked to in order to determine 

the tax rate. Kansas City Life Ins. Co. v. Love, 101 Tex. 531, 

109 S.W. 863. 

In Opinion V-1246, dated August 21, 1951, addressed to 

Hon. Robert S. Calvert, Comptroller of Public Accounts, this office held that House Bill 285 became effective from and after 

September 1, 1951, and all taxes of whatever kind or nature included therein should be levied and collected at the rates therein prescribed without regard to wfiether such tax was levied on 

an annual, quarterly, or monthly basis. Hence, House Bill 285 

imposes an additional franchise tax at the rate of 25$ upon all 

corporations for the privilege of doing business in Texas in corporate form for the period commencing September 1, 195 1, 

through May 1, 1952. 

It is clear to us that the initial tax of a foreign corporation applying for a permit to do business in Texas accrue3 

at the end of one year from the date the permit is issued; and it 

is likewise clear that the tax liability of the corporation for the 

period from the end of the first year to and including May 1 following, likewise attaches at the end of one year from the date 

the permit is issued. This is evident from that part of Article 

7086, V.C.S., which reads as follows: 

“Wherever a foreign corporation applying for a 

permit has theretofore done no business in Texas, such 

initial tax shall not be payable until the end of one (1) 

year from the date of such permit, at which time the 

tax shall be computed according to the first year’s business as prescribed by Article 7084, Revised Civil Statutes of Texas, as amended; and, at the same time, such 

corporation shall also pay its tax in advance, based upon the first year’s business, for the period from the 

end of the first year to and including May first follow- 

&” (Emphasis added.) 

Applying the above rule, we answer your questions as 
Hon. John Ben Shepperd, Page 5 (V-1248) 

follows : 

Where a foreign corporation secures a permit to do 

business in Texas on June 30, 1950, you should use the $1.10 

rate in computing the tax due for the first permit year ending 

June 30, 1951; and for the period from June 30, 1951, through 

May 1, 1952, you should use the $1.10 tax rate through August 

31, 1951, and the $1.25 rate from September i, 1951, through 

May 1, 1952, in computing the tax due for such period. Mann 

v. Gulf States Utilities Co., 167 S.W.2d 557 (Tex. Civ. App. 

1942, error ref.). 

Where a foreign corporation secures a permit on 

November 1, 1950, you should use the $1.25 rate in computing 

the tax due for the first permit year ending November 1, 1951; 

and for the period November ,l, 1951, through May 1, 1952, you 

should use the $1.25 rate in computing the franchise tax due 

for such period. 

Where a foreign corporation secures a permit on July 

15, 1951, you should use the $1.25 rate in computing the tax 

due for the first permit year ending July 15, 1952. 

SUMMARY 

1.n computing the franchise tax liability of a 

foreign corporation which secured its initial permit before September 1, 1950, the $1.10 rate prescribed by Article 7084, V.C.S., prior to its amendment by House Bill 285, and by Article 7084i,V.C.S., 

should be used in calculating the tax for the initial 

year. In computing the franchise tax liability of a 

foreign corporation which secured its initial permit 

on or after September 1, 1950, the $1.25 rate prescribed by Article 7084, V.C.S., as amended by 

House Bill 285, should be used in calculating the tax 
Hon. John Ben Shepperd, Page 6 (V-1248) 

for the initial year and for the period from the end 

of the initial year up to and including May 1st following. 

APPROVED: 

Everett Hutchinson 

Executive Assistant 

Charles D. Mathews 

First Assistant 

Yours very truly, 

PRICE DANIEL 

Attorney General 

BV 

Price Daniel 

Attorney General 

I 

C. K. Richards 

Assistant 

CKR:mf