Hon. 0. P, Lockhart Opinion No. 

### O-5473

Chairman Re: Dothe Texas andPacific RailBoard of Insurance way CompanyFfrst 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 onthe above stated question reads as fol1owsr

“Your opinion is requested as to whether or not Texas andPacfffc RaLlway CompanyFirst Mortgage 

### 5sBonds due 2000 qualify as tax reducing securftfes under Article 

### 7064. We are giving you some general information about the nature of this company andthe 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 inwhich by law such lnsurante carriers mayinvest ,theEr funds.’ The quoted phrase names atype of securfty which is classed as tax reducfng.

“The homeoffice of the Texas andPacific Raflway Companyis enDallas, Texas.

“Out of the total mileage, 1,800, about 1,200 mfles o,fthe Railway are located fn Texas.

“Beca,use of the condftions listed in the next preceding paragraph amajority of the employees are residents of Texas andmost of the money disbursed bythe company is spent in Texas.

“The company operates under aFederal charter, but some other securi,ties qualify as tax reducing where the corporateons or associations have Federal charters such as Savings andLoan 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:

DueJ\ana1. 2004

“$24,989,000 outstanding - Closed Mortgage (no further bonds ranking equally with or prior to this mortgage can be issued.)

“Secured by afirst lien on 1394.38 miles of railroad from Texarkana Texas, via Marshall and Whitesboro, to Sierra B5. anca, Texas (near El Paso), with branch from Marshall to Thurber, Texas, from Marshall to Reisor, La., and from Shreveport, La. to NewOrleans, La. with branches to Port Allen and Indian Village, La.; a second lien on387.96 miles of road.

“Legal for pu.rchase by savings banks in California, Maine, Massachusetts, NewHampshire, NewYork andRhode Island.

“Total value of road and equipment approximately $19090009000 Q

“First Mortgage Bonds are followed byjunior 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) commonstock.

“Interest onall debt earned as follows: 

### 1930 1.36times 3: 

### 1.92times ;;g x2 )’ 

### 3.34”

11 0 

### 1943 3.49times (12 mos. ending May 

### 31,1943) Interest payments have been madepromptly, when due, for the past ten years.” Article 7064, Vernon’s Annotated Civil Statutes, provides in part:

“Every insurance corporation, Lloyds or reciprocals, andany other organization or concern transacting the business of fire, marine, marine inland, accident 9credit title, livestock, fidelity, guaranty, surety, casualty, or any other kind or character of insurance business other ,thanthe 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 anannual 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 afurther 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&tiesthe securities in which Insurance companies, except companies writing life, health and accident insurance, may invest their funds over andabove their paid up capital stock.

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

“No company, except anywriting Life, Health, andAccident 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 aperiod of five (5) years; provided that no such insurance company shall invest in its ownstock, andprovided 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 inHon. 0. P. Lockhart, page 4 (O-5473)

the stock of any oil manufacturing or mercantile corporation organize !iunder the laws of this 3tate unless such corporation had anet worth of not less than TwoHundred Fifty Thousand ($25O,OGO.O0) Dollars provided that such corporation is solvent, dividend paying, andhas not defaulted in the’payment of any of Its obligations for aperiod 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 acapital stock of not less than Five Million ($5,000,000.00) Dollars and unless such corporation is solvent, dividend paying, andhas not defaulted in the payment of any of its obligations for aperiod of five (5) years.” Arepresentative 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 adividend 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 adividend paying corporation which has not defaulted in the payment 01any of its obligations for aperiod 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 andprovided, as above stated, that the corporation selling such bonds is adividend paying corporation which has not defaulted in the payment of any of its obligations for aperiod of five years. Yours very truly ATTORNEY

GENERAL

OFTEXAS By/s/ Ardell Williams APPROVED

WC 12, 1943 Ardell Williams, Assistant /s/ Grover Sellers FIRST ASSISTANTATTORNEY GENERAL (This opinion considered andapproved in limited conference) AW: dbrwb