I. 

May 14, 1956 

Hon. Tom Reavley 

Secretary of State 

Capitol Station 

Austin, Texas 

Opinion No. S-196 

Re: Use of assessed property 

value in computation of 

the franchise tax. 

Dear Mr. Reavley: 

You have requested an opinion of this Office as 

follows: 

“A question has arisen as to the proper basis of 

computing the franchise tax for certain periods where the 

assessed value is the factor rather than the taxable capital. 

“There is a foreign corporation that was granted 

a permit to transact business in Texas March 19, 1952. The 

first franchise tax return was filed within 90 days after 

March 19, 1953 in accordance with the provisions of Article 

:;C$ V.C.S. of Texas, as amended by the .5Lst Legislature, 

. The return shows no gross receipts, either in Texas 

or elsewhere, and the minimum tax of $25 was paid for the 

first permit year ended March J9, 19.53, the proportionate 

part of $25 for the period to May 1, 19.53 and $25 for the 

year beginning May 1, 1953. The corporation also reported 

that there was no assessed value of property for County ad 

valorem tax purposes. Under the schedule for furnishing 

such information as of January 1, 1953, the date we requested, 

the corporation made the following statement: 

rAt the date of this return property has not 

been assessed for 195301 

Although the return was presented with a balance sheet as of 

March 31, 195’3, it was signed before a notary public June 9, 

1953, at which time it can be assumed the ad valorem assessment had been made. 
Hon. Tom Reavley, page 2. (Opinion No. S-196) 

“Upon comparing this return against the March 15, 

1954 return, which shows a close of December 31, 1953, it 

was discovered that there was an assessed value as of January 1, 1953 amounting to $2,000,040.00. Incidentally, the 

report form called for the assessed value as of January 1, 

1953. It appearing that such assessed value should have 

been reported in the first year tax return and the tax computed thereon, additional tax has been proposed for the three 

periods mentioned in the second paragraph hereof. . . . 

“. . . 

“It is agreed that the corporation owned no property 

in Texas January 1, 1952. The corporation did, however, own 

property subject to ad valorem tax assessment on January 1, 

1953. . . . 

“With the foregoing facts before you, please give 

us your opinion on the following: 

“(1) Should the assessed value for County 

advalorem tax purposes as of January 1, 1953, be 

used in computing the tax under the first year 

return? 

“(2) If your answer is in the affirmative, 

should the assessed value be used for all three 

periods, namely March 19, ,1952 to March 19, 1953, 

for the short period from that date to May 1, 

1953 and for the year beginning May 1, 19.53? 

“(3) If not for all three periods, then what 

specific period or periods?” 

We answer your first and second questions in the 

affirmative. The assessed value, for county ad valorem tax 

purposes, of the property owned by the corporation in this 

State as of January 1, 1953, should be used in computing the 

franchise taxes for all three periods, namely March 19, 1952, 

to March 19, 1953, for the period from March 19, 19.53, to 

May 1, 1953, and for the year beginning May 1, 1953. 

The 47th Legislature, in its Regular Session in 

1941, 

added 

reenacted Article 7084, Vertonrs Civil Statutes and 

thereto the provision that . . . and provided further 

that the tax shall in no case be computed on a sum less than 

the assessed value, for State ad valorem tax purposes, of 

the property owned by the corporation in this State. . . .‘I 
Hon. Tom Reavley, page 3 (Opinion No. S-196) 

The departmental construction of the Secretary of 

State placed upon this amendment to Article 7084 is that the 

corporation should show in its first year franchise tax report the total assessed value, for county ad valorem tax 

purposes of all property owned by the corporation on the first 

day of January occurring within said first year after the date 

of the filing of its charter or the granting of its permit, as 

the case may be. 

Since this departmental construction of the Secretary of State has been consistently followed for a period of 

more than fifteen years, and, the Legislature has met many 

times since the establishment of this departmental construction, the following rule enunciated by the Supreme Court of 

Texas in the case of Isbell v. Gulf Union Oil Company, 147 

Tex. 6, 209 S.W.2d 762 (194b), would govern: 

“While the Legislature has met many times since 

Article 7092 was construed as above indicated, it has 

not undertaken to change the statute so as to alter 

the construction which had been given it. If the 

Legislature did not approve the construction which 

had been given the statute, it could have easily amended the law. This was not done. This Court does 

not feel Justified to hold now that the Secretary of 

State was in error in the construction of this 

statute.” 

You are advised, therefore, that a corporation should 

include in its first year franchise tax return the assessed 

value of its property held or owned in this State, for county 

ad valorem tax purposes, on the first day of January occurring 

within the first year after the filing of its charter or the 

granting of its permit, as the case may be. 

In the case of the corporat.ion in question, the 

first year of the granting of its permit ended on March 19, 

19.53. This corporation did not file its first year franchise 

tax return or pay its initial tax unti1~June 9, 1953. This 

corporation reported, as of June 9, 1953, that no property had 

been assessed as of January 1, 1953. However, in its franchise 

tax return, filed March 15, 19.54, it showed an assessed value 

as of January 1, 1953, of $2,OOO,OhO. Therefore, the first 

year franchise tax return of said corporation was improper 

and incorrect wherein it showed that no property was assessed 

as of January 1, 1953. 
Hon. Tom Reavley, page 4 (Opinion No. S-196) 

The corporation having been derelict in its duty to 

properly an,d correctly report all items on which its franchise 

taxes in question were to be computed, owes the State additional franch,ise taxes for all three periods, namely, the first 

initial tax year from March 19, 1952 to March 19, 1953, for the 

short period from March 19, 19.53, to May 1, 1953, and for the 

tax year beginning May 1, 19.53. These additional taxes are 

to be computed on the basis of the assessed value, for county 

ad valorem tax purposes, of the property held or owned by it 

in this State as of January 1, 1953. The reason for this is 

that the said tax return, as filed by this corporation, sho,wed 

no business done in Texas; therefore, there was no taxable 

capital allocable to this State upon which to compute said 

taxes. These franchise taxes would, therefore, have to be 

computed on the ad valorem assessments as provided by Article 

7084, wherein it is provided that the franchise tax shall in 

no case be computed on a sum less than the assessed value, 

for county ad valorem tax purposes, of the property owned by 

the corporation in this State. 

As the date for timely payment of these franchise 

taxes has passed, the statutory penalty df twenty-five (25%) 

per cent of the taxes due has accrued by operation of law. 

This statutory penalty is provided for in Article 7091, 

v. c. 5. 

Where a corporation had no gross receipts 

from business done in this State during the first 

year following the granting of the charter or permit, the franchise taxes of the corporation for the 

initial tax year, for the additional period (if 

any) between January 1, and May 1 followtng the 

end of the f,frst year, and for t~he year beginning 

May 1 following the end of the first, year should be 
. . 

Hon. Tom Reavley, page 5, (Opinion No. S-196) 

computed on the basis of the assessed value, fcr 

county ad valorem tax purposes, of the property held 

or owned by it in this State as of the date of January 1 which falls within the first tax year. 

APPROVED: 

W. V. GEPPERT 

Taxation Division 

MARY K. WALL 

Reviewer 

Yours very truly, 

JOHN BEN SHEPPERD 

Attorney General of Texas 

BY 

J. ARTHUR SANDLIN 

Reviewer 

L. W. GRAY 

Special Reviewer 

DAVIS GRANT 

First Assistant 

JOHN BEN SHEPPERD 

At to,rney General