Hon. 0. P, Lockhart Opinion No. O-5473 

Chairman Re: Do the Texas and Pacific RailBoard of Insurance way Company Ffrst Mortgage 5% Bonds 

Commissioners qualffy as tax reducing securities 

Austin, Texas under Article 7064, Vernon’s Annotated 

Civil Statutes? 

Dear Sir: 

Your letter of July 20, 1943> requesting the opinion 

of this department on the above stated question reads as fol1owsr 

“Your opinion is requested as to whether or 

not Texas and Pacfffc RaLlway Company First Mortgage 5s Bonds due 2000 qualify as tax reducing 

securftfes under Article 7064. We are giving you 

some general information about the nature of this 

company and the nature of the bond issue. It may 

be that this bond issue qualifies as tax reducing 

under the term in said Article 7064: Ior other 

property fn this state in which by law such lnsurante carriers may invest ,theEr funds.’ The quoted 

phrase names a type of securfty which is classed 

as tax reducfng. 

“The home office of the Texas and Pacific 

Raflway Company is en Dallas, Texas. 

“Out of the total mileage, 1,800, about 1,200 

mfles o,f the Railway are located fn Texas. 

“Beca,use of the condftions listed in the next 

preceding paragraph a majority of the employees 

are residents of Texas and most of the money disbursed by the company is spent in Texas. 

“The company operates under a Federal charter, 

but some other securi,ties qualify as tax reducing 

where the corporateons or associations have Federal 

charters such as Savings and Loan Associations. 

“There is also attached for your information a 

detailed statement of this particular bona issue.” 
-- - 

Hon. 0. P. Lockhart, page 2 (o-5473) 

The detailed statement of the bonds under consideration which is attached to your inquiry is as follows: 

Due J\ana 1. 2004 

“$24,989,000 outstanding - Closed Mortgage (no 

further bonds ranking equally with or prior to this 

mortgage can be issued.) 

“Secured by a first lien on 1394.38 miles of 

railroad from Texarkana Texas, via Marshall and 

Whitesboro, to Sierra B 5. anca, Texas (near El Paso), 

with branch from Marshall to Thurber, Texas, from 

Marshall to Reisor, La., and from Shreveport, La. 

to New Orleans, La. with branches to Port Allen and 

Indian Village, La.; a second lien on 387.96 miles 

of road. 

“Legal for pu.rchase by savings banks in California, Maine, Massachusetts, New Hampshire, New York 

and Rhode Island. 

“Total value of road and equipment approximately 

$19090009000 Q 

“First Mortgage Bonds are followed by junior 

debt in the amount of about ~52,000,000, by $23,- 

703,000 (Par $100) 5% non-cumulative preferred stock 

and $,38,755,000 (Par $100) common stock. 

“Interest on all debt earned as follows: 

1930 1.36 times 

3: 

1.92 times 

;;g x2 )’ 

3.34 ” 

11 0 1943 3.49 times (12 

mos. ending May 

31, 1943) 

Interest payments have been made promptly, when 

due, for the past ten years.” 

Article 7064, Vernon’s Annotated Civil Statutes, provides in part: 

“Every insurance corporation, Lloyds or reciprocals, and any other organization or concern transacting the business of fire, marine, marine inland, 

accident 9 credit title, livestock, fidelity, guaranty, 

surety, casualty, or any other kind or character of 

insurance business other ,than the business of life 
- - 

Hon. 0. P. Lockhart, page 3 (0-5473) 

insurance, and other than fraternal benefit associations, within this State at the time of filing 

its annual statement , shall report to the Board of 

Insurance Commissioners the gross amount of premiums 

received upon property located in this state or on 

risks located in this State during the preceding 

year, and each of such insurance carriers shall pay 

an annual tax upon such gross premium receipts as 

follows : If any such insurance carriers 

shall have’ag &ch 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 of any county, 

incorporated city or town of this 3tate, or other 

property in this State in which by law such insurance carriersmay invest their funds, then the annual 

tax of any such insurance carrier shall be one and 

one-half cl*) percent of its said gross premium receipts; . . .I’ 

Article 7064, supra, provides for a further reduction in taxes where greater amounts of the funds mentioned in 

said statute are invested in securities therein named. 

Article 4706, Vernon’s Annotated Civil 3tatutes, sets 

forth or n&ties the securities in which Insurance companies, except companies writing life, health and accident insurance, may 

invest their funds over and above their paid up capital stock. 

Article 4706, Vernon’s Annotated Civil Statutes, provides in partr 

“No company, except any writing Life, Health, 

and Accident Insurance, organized under the provisions of this Chapter shall Invest its funds over 

and above its paid-up capital stock in any other 

manner than as follows: 

“cd) In the capital stock, bonds, debentures, 

bills of exchange or other commercial notes or bills 

and securities of any solvent dividend paying corporation which has not defaulted in the payment of 

any of its o’bligations for a period of five (5) 

years; provided that no such insurance company 

shall invest in its own stock, and provided that 

no such insurance company shall invest any of its 

funds in any stock on account of which the holders 

or owners thereof may, in any event, be or become 

liable to any ,assessment except for taxes, nor in 
Hon. 0. P. Lockhart, page 4 (O-5473) 

the stock of any oil manufacturing or mercantile 

corporation organize !i under the laws of this 3tate 

unless such corporation had a net worth of not less 

than Two Hundred Fifty Thousand ($25O,OGO.O0) Dollars provided that such corporation is solvent, 

dividend paying, and has not defaulted in the’payment of any of Its obligations for a period of five 

(5) years, nor in the stock of any oil, manufacturing or mercantile corporation not organized under 

the laws of this State unless such corporation has 

a capital stock of not less than Five Million 

($5,000,000.00) Dollars and unless such corporation is solvent, dividend paying, and has not defaulted in the payment of any of its obligations 

for a period of five (5) years.” 

A representative of your department has informed us 

orally that there is no available information in the insurance 

department reflecting whether or not the corporation whose bonds 

are offered for sale is a dividend paying corporation which has 

not defaulted in the payment of any of its obligations for a 

period of five years. 

In view of the foregoing statutes, you are respectfully advised that it is our opinion that the insurance carriers 

mentioned in Article 4706, Vernon’s Annotated Civil Statutes, 

are authorized to invest in such bonds provided the corporation selling or offering to sell such bonds is a dividend paying corporation which has not defaulted in the payment 01 any 

of its obligations for a period of five years. It is our 

further opinion that the above mentioned bonds are eligible 

as tax reducing securities under Article 7064, supra, provided, 

such bonds are within the State of Texas for any tax year for 

which they are offered or claimed as tax reducing securities 

and provided, as above stated, that the corporation selling such 

bonds is a dividend paying corporation which has not defaulted 

in the payment of any of its obligations for a period of five 

years. 

Yours very truly 

ATTORNEY GENERAL OF TEXAS 

By /s/ Ardell Williams 

APPROVED WC 12, 1943 

Ardell Williams, Assistant 

/s/ Grover Sellers 

FIRST ASSISTANT ATTORNEY GENERAL 

(This opinion considered and approved in limited conference) 

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