THEA~TORNEYGENERAL 

OF TEXAS 

.~ 

December 5, 1961 

Honorable’Robert S. Calvert Opinion No. W-1208 

Comptroller of Public Accounts 

Capitol Station Re: Proper method for 

Austin, Texas assessing value of 

shares of bank stock 

for ad valorem tax 

purposes In view of 

Attorney General 

Opinions Nos. V-315 

Dear Mr. Calvert: and WW-439. 

In your letter requesting our opinion on the above 

captioned matter, you state: 

“It has been the long standing practice 

of the Tax Assessor-Collectors in the 

State of Texas to assess the shares of 

stock of a bank as the par value of 

capital stock, plus the surplus and 

undivided profit, less the assessed 

value of real estate. Attorney General 

opinion No. WW-439 says that the method 

for assessing such stock Is based upon 

the actual cash value of the stock less 

the value of the proportionate amount 

per share of the real estate owned by -'the bak. It 

You further state that in connection with this question 

you are having difficulty In reconciling Attorney General 

Opinions Nos. V-315 and WW-439. 

In Opinion NG. V-315, the state banking corporation in 

question had been granted its charter In September 1946. The 

Banking Comm$sslon’s permit gave January 2, 1947, as the 

opening date of the bank, which did In fact open on that date. 

The capital stock had been subscribed.to by the stockholders 

prior to January 1; 1947, and the bank’s capital as well as 

surplus and undivided profits was set up prior to January 1, 

1947. A certain portion of the llndlvided profits had been 

used for the purpose of furniture and fixtures for the bank. 

The bank did not own any real estate. The precise question 

presented for consideration was: 
Honorable Robert S. Calvert, Page 2’ Opinion No. W-1208 

“In view of the fact that the capital, 

surplus and undfvlded profits were In 

being prior to January 1, 1947 an8 some 

of the monles and the roflts were used 

prior to Jar.uary 1, 19 fl 7, is this capital 

the surplus and. undivided profits taxable 

property for the year 1947 even though the 

State Banking Commission’s permit gives 

the opening date as January 2, 1947 and 

the bank In fact started operating as a 

bank as of January 2, 1947?” 

The specific anawer’to this que?tlon and, therefore, the 

specific holding of Oplnlon No, V-315 1s contained ln~the 

following paragraph: 

“These ,bank shares under the express 

provisions of Article 7145, V.C.S., above 

quoted are subject to taxation. They are 

‘property; real* personal or mixed.’ They 

were in existence on January~lat and the 

fact that the bank Itself did not open 

Its ~doors for business until January 2 Is 

lmmaterLa1 B ” 

It is true that the Opinion states that the’ “i . .value 

of the capital, surplus and undivided profits (being personal 

property) Is used as a,baale for determining the value of the 

shares for taxation ~purposes *” However, this statement was 

not necessary to a determination of the question iLnddr.-conslderatlon and Is therefore not a part of the apeelflc holding 

of Opinion No. V-315. In view of the Pacts which were presented 

in connection with the opinion request* that method of valuation 

would probably have been the correct method of valuatfon In 

that particular case. 

We agree with the following statement contained in Attorney 

General’s Opinion No. O-5258: 

“Although the aggregate ‘actual cash 

value I of the shares of g bank normally ” 

Is based upon %he value of Its franchises 

capital, and property of all kinds, less 

the amount of Its debts Rosenber v. 

Ueekes, 67 Tex. 578, 584, 4 S.Y. 899, ‘it 

Is proper for the assessor or the board 

to consider all elements which tend to 

compose.or augment the value of the stock 

in the hands of the individual stockholder. t 

6 Tex.Jur., p* 348. From the value thus 
Honorable Robert S. Calvert, Page 3 Opinion No. w-1208 

obtained is to be deducted the proportionate 

amount per share at which the real estate 

of the bank is assessed. See our Opinions 

Nos. o-2406, 0-3563 and O-1214, enclosed 

herewith, for different applications of 

this formula. The obvious purpose of the 

formula was to obtain the value of all 

assets of the bank, except real estate, 

and to tax such assets proportionately 

against then shareholders. ” 

In other words, we are of the opinion, as was held In 

Attorney General’s Opinion No. o-4869, that there Is no 

exclusive method for determining the fair cash market value 

of shares of bank stock. 

the holding of WW-439 ‘I. 

Generally speaking, we reaf f lrm 

the value of the stock rather 

that such stock value would be 

than the value that would be 

obtained by adding the value of the capital. stock, the amount 

of surplus, undivided profits or reserve funds and dividing 

this by the number of shares of stock.” But this la not to 

say that the latter method of valuation could never result 

In a determination of the actual cash value of the stock. As 

stated in Opinion No. O-4869: 

I, 

. . . any method reasonably calculated 

to reach a correct conclusion as to value 

Is sufficient for the taxing authorities. 

The laws of this state place the duty of 

determining the value of such stock within 

the discretion of the local assessing 

authorities. The Legislature has vested 

In boards of equalization, as constituted 

by statute, the sole discretion In the 

valuation and the equalization of values 

of property subject to ad valorem taxation. 

Their action is clothed with the presumption 

that It has been rightfully made on the 

basis of actual value and the courts will 

decline to disturb such assessments unless 

shown to be arbitrary and grossly excessive 

or fraudulent or based upon a fundamental1 

wrong principle or method. 40 Tex.Jur. 15 ii . 

Further than this the courts have not gone 

nor can this department In stating the rule.” 

SUMMARY 

The value of shares of bank stock 

for ad valorem tax purposes should be 
Honorable Robert S. Calvert, Page 4 Opinion No. W-1208 

based upon the actual cash value of the 

stock less the value of the proportionate 

amount per ahare of the real estate owned 

by the bank. Depending upon the facta of 

each case, this actual cash value may or 

may not be obtained by adding the value 

of the capital stocks the amount of surplus, 

undivided proffts OP reserve funds and 

dividing this amount by the number of sharee 

of stock. 

Your5 very truly, 

WILL WILSON 

Attorney General of Texas 

MMP:cm 

APPROVED: 

OPINION COMMITTBE: 

W. V. Geppert, Chairman 

F. C. Jack Goodman 

Leon Pesek 

Llnward Shivers 

REVIEWEDFOR THE ATTORNBYQEMERAL : 

By: Houghton Brownlee, YP.