## 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: andWW-439. In your letter requesting our opinion on the above captioned matter, you state:

“It has been the long standing practice of the TaxAssessor-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-439says 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 Youfurther state that in connection with this question you are having difficulty In reconciling Attorney General Opinions Nos. 

### V-315andWW-439. In Opinion NG.

### V-315,the state banking corporation in question hadbeen 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 hadbeen subscribed.to by the stockholders prior to January 1; 1947, and the bank’s capital as well as surplus and undivided profits was set upprior to January 1, 

### 1947. Acertain portion of the llndlvided profits had been used for the purpose of furniture andfixtures for the bank. Thebank did not ownany real estate. Theprecise question presented for consideration was:Honorable Robert S. Calvert, Page 2’ Opinion No. W-1208

“In view of the fact that the capital, surplus andundfvlded profits were In being prior to January 1, 1947 an8 some of the monles and the roflts were used prior to Jar.uary 1, fl 19 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. Theyare
‘property; real* personal or mixed.’ They were in existence on January~lat andthe fact that the bank Itself did not open Its ~doors for business until January 2 Is lmmaterLa1B

” 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. Weagree with the following statement contained in Attorney General’s Opinion No. O-5258:

“Although the aggregate ‘actual cash valueI of the shares of gbank normally ” Is based upon%hevalue of Its franchises capital, andproperty of all kinds, less the amountof Its debts Rosenber v. Ueekes, 67Tex. 578, 584, 4 S.Y. 899, ‘it Is proper for the assessor or the board to consider all elements which tend to compose.or augmentthe value of the stock in the hands of the individual stockholder. t 6Tex.Jur., p* 348. Fromthe value thusHonorable Robert S. Calvert, Page

## 3 Opinion No.

## w-1208

obtained is to be deducted the proportionate amountper 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. Theobvious 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 thenshareholders. ” In other words, weare 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, wereafflrm 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 numberof 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,

. . . anymethod 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. TheLegislature has vested In boards of equalization, as constituted by statute, the sole discretion In the valuation and theequalization of values of property subject to ad valorem taxation. Their action is clothed with the presumption that It has been rightfully madeon the basis of actual value and the courts will decline to disturb such assessments unless shownto be arbitrary andgrossly excessive or fraudulent or based upon a fundamental1 wrong principle or method. 40Tex.Jur. 15ii

. Further than this the courts have not gone nor can this department 

### In stating the rule.”

SUMMARY Thevalue of shares of bank stock for ad valorem tax purposes should beHonorable Robert S. Calvert, Page 4 Opinion No. W-1208

based upon the actual cash value of the stock less the value of the proportionate amountper ahare of the real estate owned by the bank. Depending upon the facta of each case, this actual 

### cash value 

### may or maynot be obtained by adding the value of the capital stocks the amountof surplus, undivided proffts OP reserve funds **and** dividing this amountby the numberof sharee of stock. Your5 very truly, WILLWILSON Attorney General of Texas

MMP:cm APPROVED: OPINIONCOMMITTBE: W.V. Geppert, Chairman F. C. Jack Goodman Leon Pesek Llnward Shivers REVIEWEDFOR

THEATTORNBYQEMERAL : By: Houghton Brownlee, YP.