Hon. John H. Bickett, Jr. Opinion No, O-4997 

Chairman, Board of Regents Re: Authority of the Board of ReUniversity of Texas gents of the University of Texas 

Telephone Building to organize the corporation known 

Dallas, Texas as the Texas Research Corporation 

and to appropriate funds of the 

University in the furtherance: of 

Dear Sir: its objects. 

Your letter addressed to Honorable Gerald C. Xann, 

Attorney General of Texas, dated February 23, 19Li3. requesting 

the opinion of this department on the above subject, has been 

received from which letter we quote: 

“The Board of Regents of The University of 

Texas respectfully presents, and requests your 

opinion upon, the following questions, to-wit: 

“1 . Did The Board of Hegents of the Univsrsity of Texas have the authority to organize the 

corporation k.mwn as Texas Research Corporation, 

the charter of which was filed by the Secretary 

of State, of the State of Texas, Karch 1, 134W 

“2 . Does The Board of Regents of The Uhiversity of Texas have the authority to appropriate 

and to pay over to Texas Research Corporation public funds belonging to The University of Texas to 

be used by the corporation for costs and expenses 

incident. .to obtaining and acquir,lng patents and 

copyrights? 

"3. Does Texas Research Corporation, orgauised under Article 1302, Section 3, Revised Civil 

Statutes of Texas, as a corporation for educational 

purposes, have the power to purchase, acquire, and 

own patents or copyrights, to manufacture and sell 

products under patents owned by it, and to license 

manufacturers or others under patents owned by it, 

and to exercise the incidental powers of such corporations as are authorized by Article 1302 Section 101 Revised Civil Statutes of Texas (Acts 

1937, 45&h Legislature, p. 654, ch. 323, Section I)? i 

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Hon. John H. Bickett, Jr. - Page 2 

“4. Is Texas Research Corporation subject 

to taxes, Including federal income tax? 

“Copies of the charter and the by-laws of 

Texas Research Corporation sre hereto attached. 

“The University has for many years conducted 

and will continue to conduct scientific research 

In many fields through the usual administrative 

and faculty organleatlons under the supervision 

of The Board of Regents. 

“The corporation was, In fact, organized for 

the principal purpose of acquiring end owning the 

patents that might be obtained by members of the 

faculty of the Unlverslty, covering the discoveries 

or inventions made by them in the course of their 

scientific research work in the laboratories of the 

University. 

“A few patents obtained by members of the faculty have been assigned by them to the corporation 

under agreements providing for psrtlclpation by the 

patentee In future royaltles. 

(‘The Board of Regents of the University of 

Texas appropriated $20 000 of University funds to 

Texas Research Corporation upon the forming of the 

corporation. 

f’If ‘;he corporation continues to exist, additlonal ap roprlatlons of the funds of the University 

wll.lf dou ! tless, be made to it f?om time to time. 

“The co oration has made and, if it continues 

to exist, wll ‘p from time to time make contracts 

with natural persons and other corporations looking 

to the us& and development of the atents and the 

granting licenses thereunder. Sue R activities may 

involve many of the problems of business and industry end may lead to litigation by or against the 

corporation! The corporation, of course, can sue 

and be suedr The University could not be sued wlthout the consent of the state. 

“The views of those favoring the organization 

of the corporatloa and its continued existence are: 

that The Board of Regents may resort to any appropriate business method or instrumentality; that a 
Hon. John H. Bickett, Jr. - Page 3 

corporation is a customary instrumentelity for 

acquiring, owning, and utilizing patents and 

copyrights; that a corporation organized for research purposes under one section of the statute 

may have the power to acquire, own, and use patents as an incident to its declared purpoaes 

w.ithout violating the rule of law that a corporation may not be organized for separate purposes 

permitted by a different section of the statute; 

and that there Is no proNbit.lon by constitution 

or statute in Texas against the organizing of 

such a state or government owned corporation. 

“Serious doubt is entertained by some of the 

present members of The Board of Regents as to 

whether, in view of their duties as prescribed by 

the constitution and the statute, they can lawfully 

create a private corporation and delegate the performance of their duties to the corporation and its 

agents. 

“Similar doubt exists as to the authority to 

transfer money and other assets of the University 

to the corporation. 

t’Apprehenslon is also, felt by some that, 

the course Indicated by this corporation Is susIf 

tained and continued other activities and properties of the University may from time to time be 

transferred Prom the University to other corporations. 

‘Those who entertain such objections, doubts, 

and fears, have In mind the foll~lngr the prescribed constitutional and statutory duties of the 

regents as individual officers of the state; the absence of any affirmative constitutional or statutory 

authorization for the creation of a private corporation as an agency of the state government; the absence of any such precedent in the governmental affairs of this state; the statutory requirement that 

state funds must be deposited with the state treasurer; and the prohibition of Article III, Section 

!jl of the Constitution of Texas, that: ‘The Leglsla4ure shall have no power to make any grant or authorize the making of any grant of public moneys to 

any individual, association or individuals, munlcipal or other corporations whatsoever.’ 
.I 

Hon. John Ii. Bickett, Jr. - Page 4 

“For your information, some of the different 

points of view, heretofore expressed, are herewith 

presented to you for whatever they may be worth 

by the following letters1 (1) from I*. Scott &aines 

to Dr. J. \i. Calhoun, President of The University of 

Texas, Xay 27, 1939; (2) from Xr. Ira P. Hildebrand, 

of the law faculty of the University to Dr. Homer ?. 

Rainey, President of The University of Texas, September 1, 1939; (3) from John H. Bickett, Jr., to Hr. 

D. F. Strickland, October 15, 1942.” 

The copies of the letters accompanying your request 

as well as the copy of the Charter of the Texas Research Corporation have been valuable to us in preparing the answer of this 

department to the questions propounded, for which we thank you. 

The University of Texas authorized and established by 

the Constitution and Statutes of this State is an agency of the 

State existing in virtue of biennial appropriations made by the 

Legislature. 

The University is governed by a Board of Regents appointed by the Governor and confirmed by the Senate who are State 

officials exercising only such ‘authority and performing only such 

duties as prescribed by the statutes of this State. 

Article 2584, Vernon’s Revised Texas Civil Statutes, 

pertaining to the government of the University reads: 

“The government of the University of Texas shall 

be vested in a Board of Regents composed of nine persons. They shall elect a chairman from their number 

who shall serve at the pleasure of the Board. The 

%$ Treasurer shall be the treasurer of the UniverThe board shall have the right to make and use 

a cohon seal and may alter the same at pleasure.” 

.-* _,_J_ Article 2585, .Vernonts Revised Texas Civil Statutes, 

YuA Ib.,,.Ag to she -dut$es of the Board. sf, Regents of the Unlversity, reads:~ _, 

“They shall establish the departments of a flrstclass university, determine the offices and professorships, appoint a president, who shall, If they think 

it advisable, also discharge the duties of a professor, 

appoint the professors and ‘other ,offlcers, fix their 

respective salaries; and they shall enact such by-laws, 

rules and regulations as may be necessary for the successful management and government of the University; 
Hon. John H. Bickett, Jr. - Page 5 

they shall have power to regulate the course of 

instruction and prescribe, by and with the advice 

of the professors, the books and authorities used 

l.n the several departments, and to confer such degrees and to grant such diplomas as are usually 

conferred and granted by universltles.1l 

We have not found any authority in this state that 

would authorize the Board of Regents of the University of Texas 

In their official capacity to organize and establish the corporation in question and transfer to such corporation for the 

furtherance of Its object and purpose a part of the funds appropriated to the University of Texas by the Legislature for its 

maintenance and support, and we think no such authority exists. 

i;;;efore, we answer your questions NOS. 1 and 2 in the nega- 

. 

The purposes for which a corporation may be formed In 

this State are set out In A rticle 1302, Revised Civil Statutes. 

Section 3 of said article reads: 

“The support of any literary and scientific 

undertaking, the maintenance of a library, or Rromotion of painting, mu&o and other fine arts. 

Article 1302, Sec. 101 Revised Civil Statutes of 

Texas (Acts 45th Leg., p* 654, ch. 323, Sec. 1) reads: 

%orporatlons may be created for the purpose 

of purchasing and owning patents wlth all rights lncldental thereto, and to manufacture products and 

processes thereunder and to market 

such products, and license dealers i 

sell, distribute 

o use such procesaes in prescribed territories on a royalty baals.t8 

It is our opinion that a corporation that is organized 

for the purposes authorlzed by Section 2 or for the purposes 

authorized by Section 3 .of said Article 1302, R.C.S., would not 

be authorized to exercise the powers conferred by Section 101 

of said article. 

124 S.W. 417. 

Tex.Jur., Vol. 10, p. 625; Johnson V. Townsend, 

tie, therefore answer your question No. 3 in the 

negative. 

We think that in view of what has been said that it 1s 

unnecessary to answer your fourth question. However we will add 

that it is our opinion that a corporation organized #or ‘scientific, literary or educational purposes would not be subject to 

taxation so long as it is operated exclusively for those purposes, 

or either of them, and not for profit, but should Its net earnings, 
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Hon. John Ii. Blckett, Jr. - Page 6 

If any, or any part thereof inure to the benefit of gyotgt;- 

vlduel, 3.t would be subject to federal. Income tax. 

words, an exempt corporation must keep its activities within 

the scope of the exemption or it will be subject to the tax. 

Santee Club v. White, 87 Fed. (2) 5. 

Yours very truly 

ATTORNEY GENERAL OFTEXAS 

By /s/ E. P. Price 

E. P. Price, Assistant 

APPROVED MAR 12, 19b3 

/s/ Grover Sellers 

FIRST ASSISTANT ATTORNEY GENERAL 

APPROVEVt OPINION COMMITTEE 

BY: GWB, CHAIRMAN 

EPP:BT:wb