Honorable Robert S. Calvert      Opinion No. w-819
Comptroller of Public Accounts
Capitol Station                  Re:   Applicability of the
Austin 11, Texas                       Texas stock transfer
                                       ;z ;C;. 16, H.B. 11,
                                                  56th Leg
                                       codified’as Title ii2A,
                                       Taxation-General, R.C.
                                       S.) to joint tenancy
                                       arrangements under em-
                                       ployees a stock purchase
Dear Mr. Calvert:                      plan.
         Your request for our opinion upon the referenced
subject reads as follows:
    “Article 16.01.; Title 122A, Taxation-General,
    Revised Civil Statutes of Texas, reads In part
    a6 follows~
        “OThere is hereby imposed and levied’s tax
         as hereinafter provfded on all sales;
         agreements to sell; or memoranda of sales;
         and all deliveries or transfers of shares;
         or certlfieates of stock; or certificates
         for rights to stock; or certificates of
         deposit representing an interest in or
         representing certificates made taxable un-
         der this section in any domestic or for-
         eign assoolatfon, companyP or corporation;
         or certificates of interest in any busi-
         ness conducted by trustee or trustees made
         after the effective date hereof, whether
         made upon or shown by the books of the as-
         sociation, company, corporation or trustee,
         or by any assignment in blank or by any
         delivery of any papers or agreement or
         memorandum or other evidence of sale or
         transfer or order for or agreement to buy,
         whether Intermediate or final, and whether
         investing the holder with the beneficial
         interest In or legal title to such stock
         or other certificate taxable hereuuder, or
         with the possession or use thereof for any
Hon. Robert S. Calvert        Page 2      Opinion No. w-819


          purpose, or to secure the future payment
          of money or the future transfer of any
          such stock, or certificate on each hundred
          dollars of face value or fraction thereof,
          3.3 cents except in cases where the shares
          or certificates are Issued without desig-
          nated monetary value, in which case the
          tax shall be at the rate of 3.3 cents for
          each and every share,O---
    "A question has arisen In connection with an
    Employee Stock Option Purchase Plan in cases
    where the employee directs that the shares of
    stock be issued in the name of himself and an-
    other as joint tenants.
    "In connection with this request I am enclosing
    copy of letter to me from Kemp, Smith, Brown,
    Goggln & White, Attorneys at Law, El Paso,
    Texas, Also, I am enclosing a Prospectus which
    sets out the terms of the Employee Stock Pur-
    chase Plan in question.
    "I will appreciate your opinion as to whether
    or not the stock transfer tax accrues on the
    following transactions:
        "(1)   If the employeeus nauthorisations
               specifies that the shares of stock be
               issued in the name of the employee
               and another person as joint tenants,
               does this constitute a transfer re-
               quiring the affixing of stock trans-
               fer tax stamps to the authorization?

        “(2)   If the purchase price of the stock is
               paid for with community funds and
               the stock, by virtue of the employee
               authorization, is issued to the em-
               ployee and his or her spouse as joint
               tenants, should the stamps be affixed
               to this authorization; if so, on the
               whole amount of shares of corg   on
               one-half the amount of shares?
        “(3)   If the shares under the authorization
               are to be issued In the name of the
               employee and a person not his spouse,
               should the stamps be affixed to this
               authorization; if so, on the whole
Hon. Robert S. Calvert          Page 3      Opinion No. w-819


                  amount of shares or on one-half the
                  shares?"
         The following information is discernible from the
prospectus:
           1.   The Company has reserved 50,000 shares of un-
                issued Common Stock for sale to employees
                through this plan.
           2.   Participation in the plan is through authori-
                zation by the employee of a stated payroll
                deduction, to accumulate throughout the option
                period.

           3.   The option price is determinable as a percent-
                age of the over-sne-counter market average;
                however, should such option price on the exer-
                cisable date exceed the closing bid price, the
                Company will purchase for the employee, in lieu
                of the option exercise, the number of shares
                which his accumulated deductions will buy.
           4.   An employeeas rights are non-assignable; how-
                ever, he may direct that the stock be issued
                in the names of himself and another as joint
                tenants.
           Our opinion is that, where the original stock set
aslde Is   issued pursuant to the employee's authorization and
exercise   of option, to the employee and another as joint
tenants,   there has been no "transfer" within the meaning of
the Act    and no tax thereon is due.
         Attorney GeneralIs Opinion No. O-3594 (1941) held
that no tax accrues hereunder upon the Issuance by a corpo-
ration of original (previously unissued) stock. Opinion No.
O-4026 (1941) held that the sale or transfer of certificates
for rights to stock by an original subscriber to receive
original issue stock, is a taxable incident. Opinion No.
O-4029 (1941) extended this holding of taxability to a trans-
fer of a right to subscribe to stock even where such right is
not evidenced bra "certificate for rights to stock," basing
this conclusion primarily upon the wording and construction
of the Federal stock transfer tax act, However, this latter
opinion was overruled by Opinion No, O-5833 (1944), holding
that such rights to subscribe are not taxable under the Texas
law, supporting its conclusion with a careful comparison of
the wording of the Texas, Federal, and New York Acts, and ju-
dicial and administrative constructions of the latter.
Hon. Robert 5. Calvert         Page 4         Opinion No. m-819


         In the present situation, the employee, by author-
izing an issue of stock in the name of himself and another
as joint tenants, has implicitly transferred to the joint
tenant a portion of his exclusive right under the option
plan to subscribe to stock.  However, an application of the
reasoning of Opinion No. o-5833 would declare such a trans-
fer non-taxable under the Texas law. Sinee, as pointed out
above, it is contemplated that sueh subscriptions will be
filled with reserved original Issue stock, no transfer tax
will accrue under the State act upon such issue. It should
be apparent, however, that, in the event a situation arises
as in point 3 above, where the employee receives over-the-
counter stock, purchased by the Company, In lieu of the ex-
ercise of his option, a transfer tax will accrue.
         In view of our answer to your first question, it
becomes unnecessary to consider herein your questions two
and three.
                          SUMMARY
           Where an employee elects, under a stock
      purchase plan, of the type submitted, to have
      original stock issued in the name of himself
      and another as joint tenants, no tax accrues
      under the Texas stock transfer tax law (Ch. 16,
      H.B, 11, 3rd C.S., 56th Leg., Title 122A, R,C.S.)
                                    Very truly yours,
                                    WILL WILSON
                                    Attorney General



JRIzbct
APPROVED:
OPINION COMMITTEE:
W. V, Ceppert, Chairman
James M. Farris
J. Arthur Sandlin
John C. Steinberger
Zellner J. Turlington
REVIEWED FOR THE ATTORNEY CENERAL:
By; Leonard Passmore
