THEATTOECNEY GENERAL 

OF%%XAS 

Honorable Ben Atwell, Chairman Opinion No. c-76 

Revenue and Taxation Committee 

House of Representatives Re: Exemption from f'ranAustin, Texas chise tax of nonprofit corporations 

Dear Mr. Atwell: under submitted facts. 

Your letter requesting the opinion of this office on the 

above captioned matter reads as follows: 

"Article 12.03, Taxation-Qeneral, V.A.T.S., exempts certain corporations from the payment of the 

franchise tax. A question has been raised as to 

whether non-profit corporations without capital 

stock who~se charters contain the following purpose 

clause, would be exempt under this provision: 

"'This corporation Is formed for the organization of a Chamber of Commerce, with 

power to provide and maintain suitable rooms 

for the conduct of Its business, and to establlsh and mallitaln uniformity In the commercial usages of cities and towns, to acquire, preserve and disseminate valuable 

business Information, and to adopt rules and 

regulations to promote the Interest of trade 

and Increase the facilities of commercial 

transactions. The primary purpose of said 

corporation being to develop the manufacturing lnduatry In Texas and in aid of cities 

and towns of Texas In the eetabllshment of 

manufacturing In Texas.' 

"Such corporations operate on a state-wide basis 

and have as one of their principal purposes the encouraging and attracting of new Industry to the 

state, and aiding In the expansion of existing industry. 

"Attorney General's Opinions w'W-106 and O-7240, 

In my opinion, are not controlling on this question, 

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Honorable Ben Atwell, page 2 (C-76) 

sfnce they pertafn to a regional and a county 

chamber of commerce and not to an organization 

state-wide In scope. 

"An opinion from your office answering this 

question would be appreciated." 

Article 12.03, Chapter 12, Title 122A, 2OA, TaxationGeneral, Vernon's Annotated Texas Statutes, reads as follows: 

"The franchfse tax imposed by this Chapter shall 

not apply to any insurance company, surety, guaranty or fidelity company, transportation company or 

sleeping, palace car and dining car company now required to pay an annual tax measured by their gross 

receipts, or to any corporation organized as a 

railway terminal corporation and having no annual 

net income from the business done by it, or to corporations having no capital stock and organized for 

the exclusive purpose of promoting the public lnterest of any county> city, or town, or other area 

within the state OP to corporations organized for 

the purpose of religious worship or for providing 

places of burial not for private profit, or to corporations organized for the purpose o&' holding 

agricultural fairs and encouraging agricultural 

pursuits, or for strictly educational purposes, or 

for purely public charity, or to state-chartered 

bufldfng and loan associations; or to any 'mutual 

investment company registered under the Federal Investment Company Act cf 1940, as from time to time 

amended, which holds stocks;bonds or other securities of other compan%es solely for mutual investment 

purposes9 or for nonprofit corporations having no 

capital stock organized for the purpose of the 

education of the public In the protection and conservation of fish, game and other wildlife, grass- . 

lands and forests, or" to nonprofit water supply or 

sewer servfce corporations organized on behalf of 

cities or tovns pursuant to Acts of 1933, 43rd Legislature, 1st Called Sessfon, Chapter 76, as amended. I" 

In order to be entitled to exemfjtfon, the corporation 

must come within the provisions for D u e corporations having 
Honorable Ben Atwell, page 3 (C-76) 

: ._ 

no capital stock and organized for the exclusive purpose of 

promoting the public Interest of a? county, city, or town, 

or other area within the state. . D since It ls'well settled 

that Article 12.01 leviesa franchise tax on corporations 

without capital stock as Gel1 as corporations with stock. 

McCallum v. Associated Retail Credit Men of Austin, 41 S.W.2d 

'45 (Comm.App. 1931). 

Prior to 1957, the exemption under this provision of the 

statute was limited to corporations organized for the exclusive 

town. 

purpose of promoting the public Interest "of any city or 

Under that language, the Attorney General's Office 

had held that chambers of commerce of cities and towns were 

exempt but that county or regional chambers of commerce were 

not exempt. Att'y. Gen. Ops. O-7240 (1946), ~~-106 (1957). 

In 1957 this provision of the statute was amended to read 'any 

county, city, or town, or other area within the State," and 

these opinions are now obsolete. However, your opinion request raises the question, among others, of whether a statewide organization can qualify for exemption. We are of the 

opinion that the phrase "other area within the State" includes 

the entire State as well as 

atlon is not precluded from 

are state-wide. 

lesser regions and that a corporexemption because its activities 

It is also our opinion 

purpose clause set forth in _ . . ^ _- 

that there is nothing else in the 

your request which, on its face, 

would prevent exemption. Although the charter recites that 

the corporation is formed for the organization of a chamber 

of commerce, the further recitations show that the corporation 

is not intended to operate as do usual chambers of commerce, 

which function not primarily to promote any one industry but 

rather to promote the general interests of the public In the 

areas which they serve. However, a purpose of a more speclalized nature is sufficient so long as it la exclusively In the 

public interest. The promotion of the Industrial development 

of an area is in the public interest. 

Within the orbit of the purpose clause under consideration, a corporation could carry on some activities designed 

primarily to benefit the private interests of those engaged 

in the industry rather than the interests of the public at 

large without exceeding its charter powers. We do not think 

it is necessary that the corporate charter be so worded that 

any function not designed primarily for the promotion of the 

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Honorable Ben Atwell, page 4 (C- 76) 

public interest would.be In violation of Its charter provisions, but in order for the corporation to be exempt from the 

franchise tax It Is essential that the functions actually performed can be confined to those which have as their purpose 

the promotion of the public Interest. McCallum v. Associated 

Retail Credit Men of Austin, aupra. 

On the basis of the charter provision alone, It is not 

possible to state whether a particular corporation would 

qualify for the exemption, as complete Information on all 

activities actually carried on by the corporation would have 

to be known in order to determine whether it was exempt. 

Therefore, we can answer your Inquiry only by a general statement of the prlnclples which we think to be controlling and 

cannot state categorically whether a corporation having this 

purpose clause in Its charter.would or would not be exempt 

from the franchise tax. 

In connection with your opinion request, a corporation 

whose charter contains the purpose clause quoted In your request has submitted a brief which, among other things, describes various activities OS the corporation to distinguish 

It from a trade association organized primarily for the benefit of its members. We are not Informed whether this corporation carries on any other actlvltles, and In the absence of 

complete Information we are not In a posltlon to express an 

opinion as to whether this particular corporation qualifies 

for the exemptlon. 

SUMMARY 

The development of Industry Is In the public interest; and a nonprofit corporation having no 

capital stock, whose charter states that Its primary 

purpose Is to develop the manufacturing industry In 

Texas and In aid of cities and towna In Texas In the 

establishment of manufacturing in Texas, la exempt 

from franchise tax under the provisions of Article 

12.03, Tax.-&an., V.A.T.S., if all of Its activities 

are "for the exclusive purpose of promoting the 

public Interest." It is not exempt If any of its 

activities are primarily for the promotion of private interests, 

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. . 

Honorable Ben Atwell, page 5 (c-76) 

Yours very truly, 

WAGGONER CARR 

Attorney General of Texas 

Attorney General 

MMP:MKW:da 

APPROVED: 

OPINION COMMITTEE; 

W. V. Geppert, Chairman 

Gordon Appleman 

Paul Robertson 

J. Arthur Sandlfn 

APPROVED FOR TKE ATTORNEY GENERAL 

By: Stanton Stone 

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