### THEATTOECNEY GENERAL OF%%XAS

Honorable Ben Atwell, Chairman OpinionNo. 

### 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 captionedmatter reads as follows:

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

### ofthe franchise tax. A question has been raised as to whether non-profit corporationswithout capital stockwho~secharters contain the followingpurpose 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 disseminatevaluable 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 corporationbeing to develop themanufacturing lnduatry In Texas and in aid of cities and towns of Texas In the eetabllshmentof manufacturing In Texas.'
"Such corporationsoperate on a state-widebasis and have as one of their principalpurposes the encouragingand attracting of new Industry to the state,and aiding In the expansion of existing industry.
"AttorneyGeneral's Opinionsw'W-106 and O-7240, Inmy opinion, are not controlling on this question,



### -370-Honorable Ben Atwell, page 2 (C-76)

sfnce they pertafn to a regionaland a county chamber of commerceand not to an organization state-wide In scope.

"An opinion from your office answering this questionwould be appreciated."
Article 12.03, Chapter 12, Title 122A, 2OA, TaxationGeneral,Vernon'sAnnotated Texas Statutes, reads as follows:

"The franchfse tax imposedby this Chapter shall not apply to any insurance company, surety,guaranty or fidelity company, transportationcompany or sleeping,palace car and dining car company now required to pay an annual taxmeasured by their gross receipts, or to any corporationorganizedas a railway terminal corporationand having no annual net income from the business done by it, or to corporations having no capital stock and organizedfor the exclusivepurpose of promoting the public lnterest of any county> city, or town, or other area within the state OP to corporationsorganized for the purpose of religiousworship or for providing places of burial not for private profit, or to corporations organized for the purpose o&' holding agricultural fairs and encouragingagricultural pursuits, or for strictlyeducationalpurposes, or for purely public charity, or to state-chartered bufldfng and loan associations; or to any 'mutual investment company registeredunder the Federal Investment CompanyAct cf 1940, as from time to time amended, which holds stocks;bonds or other securities of other compan%es solely formutual investment purposes9 or for nonprofit corporationshaving no capital stock organized for the purpose of the education of the public In the protectionand conservation of fish, game and other wildlife, grass-
. lands and forests, or"to nonprofitwater supply or sewer servfce corporationsorganized 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 comewithin the provisions for D u e corporationshavingHonorable Ben Atwell,page 

### 3 (C-76)

: ._

no capital stock and organized for the exclusivepurpose 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 corporationswith stock. McCallum v. Associated Retail Credit Men of Austin, 41 S.W.2d '45(Comm.App. 1931). Prior to 1957, the exemptionunder this provision of the statutewas limited to corporationsorganized for the exclusive town. purpose of promoting the public Interest "ofany city or Under that language,the Attorney General's Office had held that chambers of commerce of citiesand towns were exempt but that county or regional chambers of commercewere not exempt. Att'y. Gen. Ops. O-7240 

### (1946), ~~-106 (1957). In 1957 this provision of the statutewas amended to read 'any county, city, or town, or other area within the State," and these opinionsare 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 "otherarea within the State" includes the entire State as well as atlon is not precluded from are state-wide. lesser regions and that a corporexemptionbecause its activities

It is also our opinion purpose clause set forth in

_. .^ _- that there is nothing else in the your requestwhich, on its face, would prevent exemption. Although the charter recites that the corporation is formed for the organizationof 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 Industrialdevelopment 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 largewithout exceeding its charterpowers. We do not think it is necessary that the corporate charterbe so worded that any function not designed primarily for the promotion of the

-372-Honorable Ben Atwell, page 4 (C- 76)

public interestwould.be In violation of Its charterprovisions,but in order for the corporation to be exempt from the franchise tax It Is essential that the functions actuallyperformed can be confined to thosewhich have as their purpose the promotion of the public Interest. McCallum v. Associated Retail Credit Men of Austin, aupra.
On the basis of the charterprovision alone, It is not possible to statewhether a particular corporationwould qualify for the exemption,as complete Information on all activities actually carried on by the corporationwould have to be known in order to determinewhether it was exempt. Therefore,we 

### cananswer your Inquiry only by a general statement of the prlnclpleswhich we think to be controllingand cannot state categoricallywhether a corporationhaving this purpose clause in Its charter.wouldor would not be exempt from the franchise tax.

In connectionwith your opinion request, a corporation whose charter contains the purpose clause quoted In your requesthas submitteda brief which, among other things, describes various activities OS the corporation to distinguish It from a trade association organizedprimarily for the benefit of itsmembers. Weare not Informedwhether this corporation carries on any other actlvltles,and In the absence of complete Informationwe are not In a posltlon to express an opinion as to whether this particular corporationqualifies for the exemptlon.
SUMMARY

The development of Industry Is In the public interest; and a nonprofit corporationhaving no capital stock,whose charter 

### statesthat Its primary purpose Is to develop the manufacturing industry In Texas and In aid of cities

### and townaInTexas In the establishment of manufacturing in Texas, la exempt from franchise 

### taxunder the provisions of Article 12.03, Tax.-&an.,V.A.T.S., if all of Its activities are "for the exclusivepurpose of promoting the public Interest." It is not exempt If any of its activities are primarily for the promotion of private interests,

-373-. .

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
GordonAppleman Paul Robertson J. Arthur Sandlfn

APPROVED FOR TKE ATTORNEY GENERAL By: Stanton Stone

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