& 

THEATTORNEY GENERAL. 

OP TEXAS 

AT-roRNEYGENERAl. 

December 12, 1962 

Honorable James A. Morris Opinion No, WW-1492 

District Attorney 

Courthouse Ae: (1) Whether the value of 

Orange, Texas real estate occupied by a 

National Bank under a leaaepurchase agreement pursuant 

to which agreement the Bank 

pays taxes thereon may be 

deducted from the value of 

the capital Stock, surplus 

and undivided profits in 

determining the value of 

the shares of stock of 

said Bank when the value 

of such real estate was 

not taken into consideral 

tlon in arriving at the 

actual cash value of the 

aharea. (2) Whether a 

back-assessment may be 

made against the ahareholders under submitted 

Dear Mr. Morris: facts. 

We quote the following excerpt from the statement 

attached to your letter requeating the opinion of this office 

on the above captioned matters: 

"The County National Bank of Orange, 

Texas was organized and began operations 

during the year 1960. The real estate 

and Improvements occupied by the bank aa 

Its banking house are owned in fee by 

Mr. E. W. Brown, Jr., who ha8 leased the 

property to County National Bank by the 

attached lease-purchase agreement. In 

addition to,.a stipulated monthly rental, 

the bank ia obligated to pay certain 

insurance premiuma, a0 well as all taxes 

upon the property Involved. The land 

and improvements were rendered by the 

bank for the year 1961 and 1962 and the 

1961 taxes were paid by the bank, The 

bank has also furnished the Tax AaaessorCollector of Orange Independent School 

District with a list ahowing Its capital, 
Honorable James A. Morris, Page 2 Opinion No. WW-1492 

surplus and undivided profits and a list 

of the names and addresses of its shareholders and the number of shares owned by 

each. In determining the value of the personal property to be assessed to the shareholders, the bank has subtracted from its 

capital structure the value of the real 

estate upon which it paid the taxes. The 

bank's published statement of condition 

does not list any real estate among its 

resources. 

"Our first question is: 

"Where a National Bank occupies real 

property under such a lease-purchase 

agreement and pays the taxes thereon in 

compliance with the lease, should the 

value of the real estate [which was 

not taken Into consideration in arrlvin 

at the actual cash value of the shares -7 

be deducted from the value of the capital stock, surplus and undivided profits 

in determining the value of personal 

property to be asaeaaed to the shareholders?" 

The lease-purchase agreement is for a term of five years. 

The lessor agreed to construct the bank building and improvements according to certain plans and specifications. At any 

time prior to the expiration of the original term of the lease, 

the lessee has an option to renew the lease for a further term 

of five years upon the original expiration date of the agreement with a further option to renew the lease for a third fiveyear period. Lessee has the right and option to purchase the 

leased premises during the various terms of the lease. 

Article 7166, Vernon's Civil Statutes, reads, in part, 

as follows: 

"Every banking corporation, State or 

national doing bualneas in this State 

shall, in the city or town in which it 

is located, render its real estate to 

the tax assessor at the time and in the 

manner required of individuals. At the 

time of making such rendition the president or some other officer of said bank 

shall file with said assessor a sworn 

statement showing the number and amount 

of the shares of said bank, the name and 

, 
Honorable James A. Morris, Page 3 Opinion No. WW-1492 

residence of each shareholder, and the 

number and amount of shares owned by 

him. Every shareholder of said bank 

shall, in the city or town where said 

bank Is located, render,at their actual 

value to the tax assessor all shares 

owned by him in such bank; and in case 

of his failure 30 to do, the assessor 

shall assess such unrendered shares as 

other unrendered property. Each share 

in such bank shall be taxed only for 

the difference between its actual cash 

value and the proportionate amount per 

share at which its real estate is as-. 

aessed. The taxes due upon the shares 

of banking corporations shall be a lien 

thereon, and no banking corporation shall 

pay any dividend to any shareholder who 

is In default in the payment of taxes 

due on his shares; nor shall any banking 

corporation permit the transfer upon its 

books of any share, the owner of which 

is In default in the payment of his 

taxes upon the same. . . ." 

We call your attention to the fact that the value of 

shares of bank stock for ad valorem tax purposes should be 

based upon the actual cash value of the Stock, leas the value 

of the proportionate amount per share of the real estate owned: 

by the,bank.,.Attorney Geheral's.Opfnlon No. WW-1208 pointed 

out that depending upon the facts of each case, the actual cash 

value of the shares might or might not be obtained by adding 

the value of the capital stock, the amount of surplus. undivided 

profits or reserve funds. As stated in Rosenburg-v. Weekes, 

67 Tex. 578. 4 S.W. 899. "The value of a bank share deuends 

upon the-value of its-franchise, capital, and_property-of all 

kinds, leas the amount of its debts." We assume that the 

m-d which has been followed In this case does, in fact, 

arrive at the actual cash value of the stock. However, it Is 

noted that the value of the leasehold Interest in the real 

estate, if any, waa not taken into consideration in arriving 

at the actual cash value of the ahares. 

We think that the provisions of Article 7166 are clear 

and unambiguous, and each share in a bank shall be taxed only 

for the difference between Its actual cash value and the 

proportionate amount per ahare at which real estate actually 

owned by the bank is asseased. It has been held that the 

effect of Article 7165, V.C.S. and Article 7166, V.C.S;, is to 

require the banking corporation to pay taxes on all of its real 

estate and the shareholders to pay the taxes on the personal 
Honorable James A. Morris, Page 4 Opinion No, WW-1492 

property. 

Marshall ,v: 

Engelgeke v. Schlenker, 12 S.W. ggg,&idgo); ;ity of 

State Bank of Marshall, 127 S.W. 10 3 (Civ. pp. 

910, error ref.-)-. Implicit in the holdings of theae cases, 

is the requirement of actual ownership by the banking corporation. 

Attorney General's Oplnlon No. O-1214 held that the 

leglalatlve purpose in permitting the deduction of the assessed 

valuation of real estate owned by the bank in arriving at the 

value of the aharea waa to prevent double taxation of the real 

estate owned by the bank. In the instant case, the taxes paid 

by the bank amount to nothing more than a part of the consideration paid for the lease. Thus refusing to allow deduction for 

the assessed valuation of the real estate In this case in 

valuing the shares of stock does not result in double taxation 

since the real estate isnot taxed again through the shareholders 

as a part of the assets of the bank, as the value of the real 

estate, if any, was not taken into consideration in arriving 

at the actual value of the shares. 

We quote again from the statement attached to your request: 

"Our second question results from the 

failure of the school district to make 

any aaaeaament against the shareholder.3 

for the year 1961. Along with its real 

estate rendition, the bank furnished a 

statement of its capital, surplus and 

undivided profits, a copy of which is 

attached, as well as a list of its shareholders and the number of shares owned 

by each. Since the omission was discovered within two years, we infer that 

It is proper to make a back-assessment 

for the year 1961 against the shareholders at the value determined to be 

correct by your anawer to the first 

question. The bank contends that the 

unsigned list showing capital, surplus 

and undivided profits, together with the 

list of shareholders, constituted a rendition of the personal property on behalf of the shareholders and further 

contend8 that such property cannot now 

be back-assessed. 

"Our second question is: 

"Should the school tax anaessorcollector make a back-assessment for 
Honorable James A. Morris, Page 5 OP in ,ion No. WW-1492 

the year 1961 against the shareholders 

in the manner provided in Article 7208?” 

The provisions of Article 7208, V.C.S., read as follows: 

“If the assessor of taxes shall discover in his county any property, or 

outside of his county but belonging to 

a resident of the county, any personal 

property which has not been assessed or 

rendered for taxation every year for 

two years past, he shall list and assess 

the same for each year thus omitted 

which it has belonged to said resident, 

in the manner prescribed for assessing 

other property; and such assessment 

shall be as valid and binding as though 

it had been rendered by the owner thereof. ” 

In Republic Ins. Co. v. Highland Park Independent School 

District, 141 Tex. 224 171 S W 2d 342 (1943) th e court held 

that Article 7208 has Ao application to schooi district assessora, but only to county assessors in assessing taxes due the 

state and county. In that case the attempted back-assessment 

involved taxes more than two years past due. We quote the 

following excerpt from page 348 of the court’s opinion: 

II 

. . .We have said that Art. 2791, 

aupra, gives the assessor and ~01:~ 

lector of an independent school diatrict the aame powers and duties with 

respect to assessing and collecting 

taxes as are vested in the tax officials 

of towns and villages. The very next 

article (2792, R.S. 1925) authorizes 

the school districts to have their taxes 

assessed and collected by the county 

assessor and collector, or collected 

only by the county collector, and the 

only limitation placed upon the county 

official, when he thus becomes ex officio assessor and collector for the 

school district, is that he cannot as8888 the taxable property In the district at a greater value than that assessed for county and state purposes. 

We think 1t is clear that if the leglslature had meant that his powers and 

duties should otherwise be different 

from those given a duly constituted 
. 

, 

Honorable James A. Morris, Page 6 Opinion No. WW-1492 

school district assessor and collector 

under Art. 2791, the limitation would 

appear in Art. 2792. Therefore, the 

county assessor and collector, in dlacharging his duty to ass~ess and collect 

for respondent during the years in question, was governed by Art. 1047 and not 

by Art. 7208; in ao far as his power 

to 'back' assess for school taxes was 

concerned. And, as we have said, if 

he suffered taxable personal property 

to be omitted from the rolls during 

those years, his action was in no wise 

binding on the school district and did 

not affect the right and duty of some 

successor in office to 'back' assess 

it, under Art. 1047." 

Article 1047, V.C.S., reads as follows: 

"Whenever.the assessor and collector 

shall ascertain that any taxable prow*ty, real or personal, has not been 

assessed for any previous year, he 

shall assess the same in a supplement 

to his next assessment roll, at the 

same rate under which such property 

should have been assessed for such 

year, stating the year for which such 

property should have been assessed; 

and the taxes thereon shall be collected in the same manner as other 

assessments. In any case where any 

party has omitted to render property 

for taxation for any former year or 

years, and such taxes have not been 

paid, such party shall give such property in for assessment for the years 

thus omitted and pay such taxes; and 

the assessor and collector shall enter 

all such property in a supplement to 

his next assessment roll, under the 

head of payments for former years." 

Under the plaln'terms of the above quoted statute the 

Tax Assessor-Collector of the Orange Independent School District has a clear duty to make the back-assessments for the 

year 1961 against the shareholders and should proceed according to the provisions of the statute. 
. 

, 

Honorable James A. Morris, Page 7 Opinion No. WW-1492 

SUMMARY 

The value of real estate occupied by a 

National Bank under a lease-purchase agreement 

pursuant to which agreement the Bank pays 

taxes thereon may not be deducted from the 

value of the capital stock, surplus and undivided profits in determining the value of 

the shares of stock of said Bank, as the value 

If any, of~the.real property was not taken 

into consideration in arriving at the actual 

cash value of the shares. Under the submitted 

facts, a back-assessment may be made against 

shareholders pursuant to the provisions of 

iC le 1047, V.C.S. 

Yours very truly, 

the 

Art 

WILL WILSON 

Attorney General of Texas 

MMP/j P 

APPROVED: 

OPINION COMMITTEE 

W. V. Geppert, Chairman 

Charles Llnd 

Frank Booth 

W. E. Allen 

Vernon Teofan 

REVIEWED FOR THE ATTORNEY GENERAL 

By: Leonard Paaamore