             .‘::. OFFICE            OF ‘THE                       GENERAL,   OF TEXAS
                                                      .~’,AUSTXN




‘., &l8tin,
;: ,:
     Honorable
    ‘comptroller of




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             Taaa :
  .~.Doai Siri
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                                                                 oritlea upon whioh we                        ~.;
                                                               llevs it may ‘be helpful                         -I
                                                               ubaoription warrantam.
                                                              o bs wnrraata lseued by a
                                                                         et to atoak etidoaa-                       .!
                                                                         .
                                                      Artlalo 15, R; B. S ROE. Se88.r                          .i
                                                    ioh your request is ahated,     was
                                                     AOL A aomparleon Of the pertinent                              ,!
                                            ,, ro rtwenu~ m3afwe8. f5eom8roquielta.   Thus0               :
   POF~~OJI? r0ii0w:
                                                                                                ,-'
              .. *Art. 7047111. Stools trausror en4 saXerr tax-  - I:‘~ ’
            Tax irqoaa4~   afrixlng   atampa; mamorandum0r sale ‘.
  .~            ~aSeotlOn 1.. Thoro I8 hereby imposed an4 levied                                                i
        * a tax’ a8 herelaaftar provided on all tsal+m, agreomeata                                             ;j .
           to oell, or nionoraa6a of salefi sad all~~4ellverle8 or
       ’ ~.tnaoSoro or. &area, Or ar~tdoates     of atoak, .or:~’._                                   -       j i
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         Bon. thorgo     8.       Shoppar4, Page   p!
        . <’ .’ ~’

               oertiti atao for rlghta to’etook:, or owtirl-
               oaten 0f dopooit rapresentla~ an intarest la
               or reprooeatlag    oortltloates  kado taxable under
               thla Sootioa ln any doneof       or r0r0ir4 aesoola-
               tlon, oozpany, or aorporatloa, or aertlrloateo       0r
               lnteroot la any bueiaeoo oonduotod by truoteo or
               truatoeo made aftor the 0rrOOtivd.9   Cat0 .horoor,
              whether UT&I upon or shown by th.3 books or the          .
             ~aoeoalation, donpeny, aorporatlon, or trustee,
               or by any asolgamcmt la bl’enk or by ‘any do1.ivez-y
              or any pagoro or egreomnt .or m0oorana0t3      or other         ..
              srldonae or sale or transfer or order ror or agree-
              mnt to buy, whethor iatermadiata or rinal, and
              wbethar lnvsotlng the holdor.uith the beneflolal
              late&A      la or legal title to ouob atook or other
              oortifioate    taxable horeundor, or wlth tho posses-           .‘..
            : olon or ~86 thsroot ror any purpose, or to oooura
              the rOm0.     payment oi ~onoy or tbs ruture txwno-
              tar of any ouah otock,, or aertiriaato,     oa each      : * *..‘.,:~
              hun4rs4 4ollaro of faoa~.valua or traatlon thereof, ~;;.                                    I;’


                           oonto, ercrept in cases where tho shares
                                                                                                          1

             ‘tbrss.(S)
              or oartfffaatao    ar6 loauo4 wfthcut dealgnats      moaa-            :,
              tary voluo, ln wblah aaoe the tax, shall be at .tho .,                 -
             $Fate ff thrqe (J) oonto to? eaoh and, avery.ahme.                                           ::


              * . .
                       IChapter50 Civil ‘IA&J Uow York.     *Tranofero
        8ubjeOt to      Tax- provldos ati iOliOw8:
                      “SOO. 270. Amount of tax - 1. There la hereby               ,”
                impose4 au4 shall Sxae4latoly accrue an4 be aolleatod
                a tax, a8 herein provided, oa ~811 sale8 or s&room.i#o
            ” to ~311, or me8ioranda 0r oale‘e an8 all .dellv~rieo or                          ..

            : tranofero OS shares or a0rtlilosteo         ot otoak, or oortl-
                rloateo oi rlghta to atook, or aertlfloatoo        of intorest
                ia property or aooumulatlons, or aortiiioatss         0r depoolt
                reprooontlng aertlfloateo       taxable under tblo artlolo,    in
                any 4omaotio or foreign neeoolation,        oo~~ptny or oorpora-
                tloa, or oortlfloatoo       0r interest la buaincoa oooduote6
                by a trustee     or trustees    msde artor the ilrot day or
         ,..~ June, aiaotoea hundrad five, whether uado upoa or                                          ‘.’

               .ohownmbythe. bOOk8of thea aeeoalat~on, aozipany., apr- ,..
                poratlon or truotdo, or by any aoslfgumnt 1x1blank, or
         :. .. by any dellvory,      or by say paper or a&reom+at or niouo-.:. ‘.
         .; raadum or 4thor ~vl4enoo or sale or traaorer, whetheq : “.                              ‘.


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        .   lntamrodlate or final., ‘end ahether lnve6ting                          :.
.‘. . .i ’ .tha holder wlth the bannefioial Intereat la or
      .*. leeal’tit&     to said otook, or other oortlSloetos
            tarable hefaun&er, or merely orith tho poe6e66lon.
            or me thoreOS for any purpose, or to Beauro the
            Suture paynen~ or money’, or t&e Sututa tranator
            of any such stock,       or oort~tioatea.~
.
              We obeervo that the longuagd.os the tuo hots. do-
   scribing the tranoaotiono taxable seeagpbroood in exactly tho                         ’
   #arm uord6, though not arranead. In tbe eaaio oontlnulty.   9io
’ ;Seif.to rind exgreas laLan(;uapin either of tbmo statutes at-
   trmptlne to. levy a tar upon Ytlfihtn to aubecribe to stock.*
:                   SUma tho United States      Xnternnl iiovenuo Aot, Title              .
     26, pqrqraph          lf302b, U. S. C. A.. had Its lnaeption  prior to
     the   p66aee      of the Toxaa statute, we nust grasumo that the
     :eglslatura      bad ouoh Aot before     It at .the tlma It adopted thm .
     RowYork statute as the          model for lts‘aSSort6.        The exprers
     16nguage of f’ pert of the Federal         Aot i0 a9     follows;         ,, .-
                    -(b)Sales and tranofoars.   On all mlea,   or
           agreemeat    to aell,, or monrorando0S eslos or. de-
          livarlee   or, or trapsfort   of leg61 tltl@ to any ~0S
          tho~rbfnw or oert$Slaatas mcntlonad or described
          id euboootlon     (e), oc to xkhta to subsdribe for       ’
    . .:  or reoeloo’suoh ahares or oartlSlcate6~      whether
          m6tYeupon or shown by the. book0 of the oorporatlon                                          :
      , : or .othpr: Organl68tlOn, or by’anp 6t36lgUi~~nt in      .
          bleak, or by any delivery,,    Or by any paper or agree- ’:                         ’            .
          meat or memorandumor other evldenaa of tran6SOr or                              :       .~
        : sale (whether ontitling   the holder ia any uonnor to ,,’                      .:            s
          the bobeflt oS suoh ahaT oertlfioate,     interest Or .
          rlehti,   or not), on eoob &lob of per or faoo ,oalu6                      :
          or Sreotion thereof of the aertifloats6   OS suah
          oorcoratlon or other or&ealzatlon (or OS the 6haroe :
          wbero no’oertifioatoa   were iesueb) . . .*'
             In ~o&Hzulng a etatute, the .gurpo~e    lo to. eeaertaln
  the lo&lative     intent end from ou,r oboorvatlon of the ex~resa
   rcvi~ions oS the tbres revenue maasure6, we Sind that      mnse
+-ST---
  ‘IfIr ta to subsaribe to etoOk* though InelUded in the Podoral
  et?Auto in onritted Sran the fiat York and Tours statutes and we
  muetkeep tb~tinotlon         oloarly in dad in soeking to tletor;
  tin0the intentionor tho Lei3lalatUrO~
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    ~0s. Coorgo 8. Shoppard, Page 4


               The Texas law being oS rOOat orluln, ha6 not been
    ;ntorprett?d by Our OOUrt6, sad for that FeaBon, we mot turn
    to Now York dooIsion6 and ruleo and rogulotlano of Ite tax
    suthoritiee for a oomtruotlon of the quoatlon herein pro6ent-
         The60, or oour60, aro not'conolu6Ive but are pOr6U6aIVO
    :% rhoulb bo 61vea @oat woI&ht.
               Conmonpanotloe end prooeaure of aorporatlons doing
    busineos  tbroueh the New York Etook Pxchan(~e uni!er nsthodr ap-
    proved by the New York Tax Co~~~~lsslonshould be oonsldercd      Ja
    doterdnlne   ~ranseotione taxable and tranoaotlona not taxable
    unbar Now York furlsprudonoe.    Oboarvlng the rU1tl6 68 inter-
    protod by ParagraFhh8600000,60-300,   InolusIre,  the Corporation
    Tax Servlae, C. 0. Ii., 11. Y. 1; paragraph8 41004l34,      Inolu-
    ei+e, Corporatloa Servloe,. Yrentioe-Hall,   Vol. 1; knaChrl6ty
    &XoLoaa, Tbo Tranofer of Stook, 2ntl Ed.; we observe thotr
                    I. Subaorlptlon werrant 16 a oertISloato                 . ..
              ~srld~nolag tha right to aubeoribe to stook and Is'          t
              Issued by the oorporatlon to the titookholder ontitled             *
              to the prlvllege   of subscrIbIng to the stock to be la*-
              rutid. I”oragraFh 4108 and I’sragraph 4205, Premtlao-,
          .   Hall Corp. Serv., Vol. 1.
                                                                    ;.
                   ‘XL Fresentatlon of warrant.
                    (a) Tbo,warrant shall be preaeated to tho
              oorporatlon before tlio expiration date shownon
    ,a.       the SaOe of ouohwarrantaad      upon suoh prO6Ont6-
     .:       tlon the bearer nay 6ub6OrIbO to etook. ,fS full        .:..
    .“:.      paymentI6 made IOr the shares to .be iosued     6ub-
              6oriber la delivered a reoeI$ OvIdenolng hi6 rI&ht
              to the otook, entItlIng   him on a spsoiflad datd~‘to
              uortaln full share6 or Sraotloa6l 6heres Of atOOk,
              subroquentlp bolng i66Ued OOrtlfiO6tO8 OS atook.
              F6ragraph 4208, Prontloo-Xall    Corp. serv., Vol. 1.
                (b) .fn evant bearer eleots to pay for suoh    ~’
           share6 llr Inetallmeats be IS laouod a negotfablo  '.
          .MOelpt, ovIdonoInghi6 right to the stoak, entitl-
    *. '. ing the holdor on a 6peaIsIed date t0 OertalXi full
           ohare or .sraotlonal eharos~ or atook, and upon
    : -bin61 pqwmt, at the the an&In the mannoropeol- :
          ‘Slad,&e ia iosuod, oortUloato8 of 6took.      .
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               son. Gaor~e Ii., ShepDard,              Peg9 s



                         Upon the tranarer by sala or otherwise of subsorlp-
               tlon nrrants,  datlnad in Paragraph I above, the Federal Tax
               rppller and stampeara roqulrad to be arrlxed and oanoalled.
    ’          Tba Uaw Yor& tax doae not apply to this’ transaotloa.   Para-
               graph 601lC9, C. .a.~ X., B. Y. 1; ,Paragreph 4205 and pa80 4148,
               Praatl00-Hall Corp.Sarv?, :Yol..l;    Ohrioty & UoLaan, Paraereph
               563, page 834.
                   Subsaquant to tha aot or subsoiibina to the atook by
    *.*a bolder oi a subscription warrant ,as described In Paragraph II.
     * (II) and (b) tbaraof, eny trensaotloa.involving   the traoarar of
        the rl&ht- held by tha subsorlba~ requires the arrlxln6  and oan-
      .oallatlon of Unltad Stotae Revenue Staops and New York Revenue
       stamps. : Sohmar v. Rarflaa, 1m-a;    ParaCrapb 4205, Sea. 7,
       Prantloa-Ralf Corp. Serv., Vol. 1; and Pnragraph 60-301, ~The
      .Qorporatlon   Tax Servlo~,0. 0. ?.. X.-Y;1;           .‘,
            ” : The State oi Naw York ‘Tax Department, Albanp;Naw York
                 l
       in ‘,la.tter to the New York Stook Exchange, dated Kay S, 1922,. r&t
                         “Ey ‘CartlilOata Of Richtis to Steak* IS meant              ._
                   o& sudh. oertlrloatas      wbloh ontltla tha holder on
                   a apsoiri6d d&e to oartaln run share8 op rrsatlolul
                   share8 of atook.      *Rights to oubacrlba’ to stock do’
                   not oozaa within   this meanidaare
                                                 n
                   the statute.W     (Undarsoorlng our5J
                         Pursuant  to a wzlttan request by the) wrltor tha State
               oi New York Dapartmant or .Taxetlon and Pinanaa answered by’latter
              .&to6 l!?ar0hl;-1944, advlsl& u5 further +th refaronoa     tb rub-
               rorlptlon warrantethat 8uah are not taxableunder New )lOrk Law.
               The partlnont. part or auoh. latter reads as lollowsr
                         *The raderei rtook transrar tax law 40rititaly       ‘.
                   provides ior a tax on tranafers of laplal title to
                   *rlp,hts to subeorlbe ror*atook. The New York law.
                   has no slaillar provision.   It does tax trauerara or 1~’*
                  .*oartirloatea ‘or ~rlghts to steak’ but tha Tax Corn-
                   mla8l0n has held that a oortltioate    giVin6    tkP right
                   ;;o~$?Ohaer atook 1s not T oartirloote       or A6hts t
                         .
                         *I osmiot rerer you’to any oginlon. of our             ,.
                   2ttfkney Caneral: or to any dooleion of our ooUrt8 ,.,
                   on the quo&lo&    : ?y way or- r.aaeonlng it   may be.     ..’             -
                      .                       *
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   ..” pointed out that~ a right to subearlba So= stoak . .
        ‘or a rjght to purchase stock is likely            to be of’ .
                           The aoaaldaratlon      whloh must be
            Id for thi subeorlption       or the purchase will
          n many oases, at least,        represent    as much as the
  :   :  stock  1s  worth.    It  saama   highly   lnaquitabla~,                                         .

         tbaratora,   to impose the 6ama tax on a transfer                       . .
                                                                                    I

         OS a stook purohasa warrant, (a oertlrlcate           or a
  ..~~rl&ht to rooaiva stook after paying <or It) as on
      . a transrar 0r a’.~artSriaatd        giving a right to, ra- .
         oalva stoak without paying snything nor possibly
         some small amount ror axpanaas as in the ease,
        r0r axsmpla, or. a oorporata raorga;anlzatlon In
        whloh the holder of a bond is antltlad            to receive
        stook. upon paying certain expans&s.            It is believed
    .’ that New ,Pork never Intended to tax transtars             OS
        tights to. aubecrlbe for stook and’ that the. Lmguaga
        oi the statute      80 lndloatas.~~          : i                                .        :

           Mtar amsidarlng     all .ot the above, we must readily’     -                                 ,.:
aonolude that the transiar    OS subsorlptlon     warranta, though                               :
taxed under l&a Federal Act, Is not tsxabla under .tha New. York                             ”
Aot, Rowever, It follows    .that subsequent to the aotlori or t@                                    .
bearer OS suc& warrant ,ti subscrlblng     Sor the stock that any
transactiOA relating   to the sale or other transfer       oS.any OS
the rights. or lntannedlata   aartlSicatai    avldanoing suoh rights
is tqxs3le both ,undar; the Federal anil NWJ York lawsr              :
           Froi the “l&ant     ‘or subsoriblng    to’the stoak until
the aotual issuanoe   OS certlPioatas     OS stock; the transiar        OS                               ,.
the rights  evidenced by lntarnediate       oartlSlaatas    is taxable.                 . :’
In New York, whether Sull payment is made at .the time oS sub-
aorlblng or whether a .por$lon oS the payment fe deferred.            The
leading. oasa In New York. touahing’ this ~point ‘1~s Sobmar vs;
Herden, at.al,   216 N. Y1 ,728, ,111 N. R:llOO;       reversing   165
Appellate Dlvfsf’on, 855, ..151 N. Y. Suppi i 346i       The par. ouri*
opinion oS the Court or .Appeals adopted .as ‘Its oplnSon the
diseaatlng opinion oS the lower Oourt; thataxt OS which is
ZaOitad in rull .ln OUT ffpin+.to       you, ~NoTiO-4026, ,:
            IA~tha  s”hiaer’ oisa supra *be r&llPta+ corn ani in-
      its
Oreased       oapitaf. stook and paa&ttad lts etockbo Eders the
p~lpiollage OS puro&asing his portion Or the stook at’9175 par               ,.
ahare tha payma@.a. be!%9 ~darorred~ ., The .ogurt aald,. in
                                                           ..,part,
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66.$OhOWt”                                                                   .
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‘,     ~on.!,Oaorga 8.’ Sbqqnril,Page 7
        _.        .-
                        II         There were 51an8 llmltatlons             on the   ..
       -. ” .*
       I..:..: holder; &*thtwe now aheros. They were not to
        ...: hav0 ail 0r tba privllaga8 0r atoakholders until
               the tine1 payments, but ln the meentlxe they were
     .’ “’ pivea lntermodlata   aortlfloatea,  which satltled
 .. . I ‘:‘- them to reaeloe 7 par cent Interost upon the per-
           tlon paid in, together with the right or making
     . . ‘ the flnsl pnymoats and reoelvlng the rlnal certI-
          .      rioatba.       Theea lntennerdlate       c0rtirio~m        were
                 etook 0ertlrIcatee;    thoy were transrorabls,    and
       : .(‘2   .gave ~fo the holder the rights or a otoakholder
       -:.       upon the porf~rsmnc~o or the oonditloao.     The foot   ~.*    ...
       ;.: ,     that they did not IrmadlatcQ invest tho holder with
       .. .;     all of the grivileeeo   or the old oortlCIoatea IS or              ’
                 no Iaportanoei    oaoh or them ocrrtirlcatee   ~.a:218
                                                                     a
                 ‘paper or a(2reemeAt oraoziormlum    or other evidence      ‘.
                 0r odle or timmrer~    Iatarzimllate to the rlael~ oer-
                 tliioatee,  and It (POadesigned Co saoure the Wuturo
                tramfor aJ’any ~t.ook,~ %hIch mipbt heve been soourod
                to,tho holdor thepaot. . i .*                                                    ..
                 Tba 6soI6Ion ik thi S&mr COJB, cu&a.doa8~not
       diaows the ‘queotlon herein r&104, but wo molto It aa ohola-
       In6 a distlnotioA between rights   to otook evidenced by Inter-
      ‘msdiste‘oertifloatee  Iaauod artor aubeorlotion,   therein dlri-
       ouased, ead ri&hts ‘to aubsorlbe to ntook, o~idenoed by sub-
       rorlptlon warnrnto Itmuod before subticrlntion.

                       SlAOO there haye bOaA A0 OOUrt dcolaloas                 or ruloe
      or re~ulatloas presorLbed by our taxing authorltles     rolotlng
      to this  subject, wo h8ve ttWAed to the rules and re&UlatiOAA
      Of the Now York Tax AUthorItlea. and .lnterpretntIon8   .Or the OOurtO
      in thet jurieprudance to datomlda tho aonetruotloa plcroed upoa                                     :
      the provlalons of the New York Aot that wore rollowod as a model
      tOr the Texas rtatute..  Alter a study Of. the available    authorl-
      the,    the      ou8tcxaaand owmon cueage approved by the Kew York Tar
      Dt?psrtceAt, ‘we flad that the tMln?der Or oubecrlptlon y18rXfint8
      la not taxable ia New York. It .hna long been the ouetom In Texar
      to &vs the s:&meooaatruatlon    to on Act that it roaelvsd in tho
      8tats where 8UOh Aat has been conetrued.                     Kay V. Sahnsider,         2Sl
      6, W. 680)’           18 Corpus Jurie      717, olting     owe0   tram    22 rtatea.

                       w0 th0reror~     ad&e       you   that   the trftneror or *sub-                ”
      roriptloa        wacraata*~Io     not taxable under         Artlole     7047% VerAotP8
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     .             Boa. OeOr60~IL .8bO~Paril, Patis ‘8                       .
                       ;.   .
..                 &notated     Civil Statute&                a’s again dsrlns    ~suhaoriptloa
              . ~rrantd*        t0 be w6rraAta i6SUdd by a oorporatlon to those
                    matitled to oubaoribe                to atook   eoidoaolag   their    VI2hta    to
                    aubaOrib8 rOr atook.”                                                                             .
                 Opfnlon No. O-4029; delivered’ to you on Novsuther
       0, 1941, in60r6ras It la :n oonrllat horevrith, is heroby
      ovwnlled . In such opln~on rerereaoo was frequently made by
      ua to riqulatlona and Ioterpratatlona    of the Unltod States
    . Troaaury Department rsgardlne tranaaotlona taxable under the
   . ~?eUeral Act. Since the Federal Act ooatalned express la-age
   1 levying a tax on rluhts to aubacrlbo to at-oak, and slaoe no auoh .
      express language la o~ta3Aea lo either tha Tetie or Now York
, ~ .6tat~tea, we believe Opinion No. O-4029, ~Insorer an it oonatrusb
      the Aot to Qupoae a tax on the traaarer or subscription warranta,
      ta haVe been fn arror.  In OVQrrt?liw   Opinion No. 04029, wo rest ~,’
      upon the presumption tbat the le&latum       had before It, at the
      ' . tiai, (d the adoption 4                         the Texas a$t%tute, the’exprsas          lmgtmgo.           f : __
              .oontainod In tho Unltod State6 Revenue ‘meamre and la the New
              .York statute and that it wari.aware of! the Iaterpreta~loa given
               ia $bo Nesw-York jurIsdiotIoa, from whloh our atatutp lW6 takea,
             : anU that IB          adOptb&~ .atmh &atUtO,, &j ++&a.                     alSO t0 OOgeOpt .            .
                 rpoh 0oa&ru0t10a.               ~;I. . *’ .. ?.:>‘-- . . .     ; -
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