           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
        -'thebak. 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, 19fl7, 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.-con-
slderatlon   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.    Generally speaking, we reaf f lrm
the holding of WW-439 ‘I.       that such stock value would be
the value of the stock rather 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
REVIEWEDFORTHE ATTORNBYQEMERAL                 :
By: Houghton Brownlee, YP.
