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                         THEATTORNEY      GENERAL.
                                 OP TEXAS

    AT-roRNEYGENERAl.
                                  December 12,   1962

          Honorable James A. Morris          Opinion No, WW-1492
          District Attorney
          Courthouse                         Ae:   (1) Whether the value of
          Orange, Texas                            real estate occupied by a
                                                   National Bank under a leaae-
                                                   purchase agreement pursuant
                                                   to which agreement the Bank
                                                   pays taxes thereon may be
                                                   deducted from the value of
                                                   the capital Stock, surplus
                                                   and undivided profits in
                                                   determining the value of
                                                   the shares of stock of
                                                   said Bank when the value
                                                   of such real estate was
                                                   not taken into consideral
                                                   tlon in arriving at the
                                                   actual cash value of the
                                                   aharea. (2) Whether a
                                                   back-assessment may be
                                                   made against the ahare-
                                                   holders under submitted
          Dear Mr. Morris:                         facts.
                 We quote the following excerpt from the statement
          attached to your letter requeating the opinion of this office
          on the above captioned matters:
                           "The County National Bank of Orange,
                        Texas was organized and began operations
                        during the year 1960.The real estate
                        and Improvements occupied by the bank aa
                        Its banking house are owned in fee by
                        Mr. E. W. Brown, Jr., who ha8 leased the
                        property to County National Bank by the
                        attached lease-purchase agreement. In
                        addition to,.astipulated monthly rental,
                        the bank ia obligated to pay certain
                        insurance premiuma, a0 well as all taxes
                        upon the property Involved. The land
                        and improvements were rendered by the
                        bank for the year 1961and 1962  and the
                        1961taxes were paid by the bank, The
                        bank has also furnished the Tax Aaaessor-
                        Collector of Orange Independent School
                        District with a list ahowing Its capital,
Honorable James A. Morris, Page 2          Opinion No. WW-1492


         surplus and undivided profits and a list
         of the names and addresses of its share-
         holders and the number of shares owned by
         each. In determining the value of the per-
         sonal property to be assessed to the share-
         holders, the bank has subtracted from its
         capital structure the value of the real
         estate upon which it paid the taxes. The
         bank's published statement of condition
         does not list any real estate among its
         resources.
             "Our first question is:
             "Where a National Bank occupies real
          property under such a lease-purchase
          agreement and pays the taxes thereon in
          compliance with the lease, should the
          value of the real estate [which was
          not taken Into consideration in arrlvin
          at the actual cash value of the shares-7
          be deducted from the value of the capi-
          tal stock, surplus and undivided profits
          in determining the value of personal
          property to be asaeaaed to the share-
          holders?"
       The lease-purchase agreement is for a term of five years.
The lessor agreed to construct the bank building and improve-
ments according to certain plans and specifications. At any
time prior to the expiration of the original term of the lease,
the lessee has an option to renew the lease for a further term
of five years upon the original expiration date of the agree-
ment with a further option to renew the lease for a third five-
year period. Lessee has the right and option to purchase the
leased premises during the various terms of the lease.
       Article   7166,
                     Vernon's   Civil Statutes, reads, in part,
as follows:
             "Every banking corporation, State or
          national doing bualneas in this State
          shall, in the city or town in which it
          is located, render its real estate to
          the tax assessor at the time and in the
          manner required of individuals. At the
          time of making such rendition the presi-       ,
          dent or some other officer of said bank
          shall file with said assessor a sworn
          statement showing the number and amount
          of the shares of said bank, the name and
Honorable James A. Morris, Page 3         Opinion No. WW-1492


          residence of each shareholder, and the
          number and amount of shares owned by
          him. Every shareholder of said bank
          shall, in the city or town where said
          bank Is located, render,at their actual
          value to the tax assessor all shares
          owned by him in such bank; and in case
          of his failure 30 to do, the assessor
          shall assess such unrendered shares as
          other unrendered property. Each share
          in such bank shall be taxed only for
          the difference between its actual cash
          value and the proportionate amount per
          share at which its real estate is as-.
          aessed. The taxes due upon the shares
          of banking corporations shall be a lien
          thereon, and no banking corporation shall
          pay any dividend to any shareholder who
          is In default in the payment of taxes
          due on his shares; nor shall any banking
          corporation permit the transfer upon its
          books of any share, the owner of which
          is In default in the payment of his
          taxes upon the same. . . ."
       We call your attention to the fact that the value of
shares of bank stock for ad valorem tax purposes should be
based upon the actual cash value of the Stock, leas the value
of the proportionate amount per share of the real estate owned:
by the,bank.,.Attorney Geheral's.Opfnlon No. WW-1208 pointed
out that depending upon the facts of each case, the actual cash
value of the shares might or might not be obtained by adding
the value of the capital stock, the amount of surplus. undivided
profits or reserve funds. As stated in Rosenburg-v. Weekes,
67 Tex. 578. 4 S.W. 899. "The value of a bank share deuends
upon the-value of its-franchise, capital, and_property-of all
kinds, leas the amount of its debts." We assume that the
m-d    which has been followed In this case does, in fact,
arrive at the actual cash value of the stock. However, it Is
noted that the value of the leasehold Interest in the real
estate, if any, waa not taken into consideration in arriving
at the actual cash value of the ahares.
       We think that the provisions    of Article 7166 are clear
and unambiguous, and each share in a bank shall be taxed only
for the difference between Its actual cash value and the
proportionate amount per ahare at which real estate actually
owned by the bank is asseased.     It has been held that the
effect of Article 7165, V.C.S. and Article 7166, V.C.S;, is to
require the banking corporation to pay taxes on all of its real
estate and the shareholders to pay the taxes on the personal
Honorable James A. Morris, Page 4           Opinion No, WW-1492


property. Engelgeke v. Schlenker, 12 S.W. ggg,&idgo); ;ity of
Marshall ,v: State Bank of Marshall, 127 S.W. 10 3 (Civ. pp.
   910, error ref.-)-.Implicit in the holdings of theae cases,
is   the requirement of actual ownership by the banking corpora-
tion.
       Attorney General's Oplnlon No. O-1214 held that the
leglalatlve purpose in permitting the deduction of the assessed
valuation of real estate owned by the bank in arriving at the
value of the aharea waa to prevent double taxation of the real
estate owned by the bank. In the instant case, the taxes paid
by the bank amount to nothing more than a part of the considera-
tion paid for the lease. Thus refusing to allow deduction for
the assessed valuation of the real estate In this case in
valuing the shares of stock does not result in double taxation
since the real estate isnot taxed again through the shareholders
as a part of the assets of the bank, as the value of the real
estate, if any, was not taken into consideration in arriving
at the actual value of the shares.
         We quote again from the statement attached to your re-
quest:
              "Our second question results from the
           failure of the school district to make
           any aaaeaament against the shareholder.3
           for the year 1961. Along with its real
           estate rendition, the bank furnished a
           statement of its capital, surplus and
           undivided profits, a copy of which is
           attached, as well as a list of its share-
           holders and the number of shares owned
           by each. Since the omission was dis-
           covered within two years, we infer that
           It is proper to make a back-assessment
           for the year 1961 against the share-
           holders at the value determined to be
           correct by your anawer to the first
           question. The bank contends that the
           unsigned list showing capital, surplus
           and undivided profits, together with the
           list of shareholders, constituted a ren-
           dition of the personal property on be-
           half of the shareholders and further
           contend8 that such property cannot now
           be back-assessed.
               "Our second question   is:


               "Should the school tax anaessor-
            collector make a back-assessment for
Honorable James A. Morris, Page 5         OPin,ionNo. WW-1492


          the year 1961 against the shareholders
          in the manner provided in Article 7208?”
       The provisions of Article 7208, V.C.S., read   as follows:
             “If the assessor of taxes shall dis-
          cover in his county any property, or
          outside of his county but belonging to
          a resident of the county, any personal
          property which has not been assessed or
          rendered for taxation every year for
          two years past, he shall list and assess
          the same for each year thus omitted
          which it has belonged to said resident,
          in the manner prescribed for assessing
          other property; and such assessment
          shall be as valid and binding as though
          it had been rendered by the owner there-
          of.”
       In Republic Ins. Co. v. Highland Park Independent School
District, 141 Tex. 224 171 S W 2d 342 (1943) the court held
that Article 7208 has Ao application to schooi district asses-
sora, but only to county assessors in assessing taxes due the
state and county. In that case the attempted back-assessment
involved taxes more than two years past due. We quote the
following excerpt from page 348 of the court’s opinion:
             II
              . . .We have said that Art. 2791,
          aupra, gives the assessor and ~01:~
          lector of an independent school dia-
          trict the aame powers and duties with
          respect to assessing and collecting
          taxes as are vested in the tax officials
          of towns and villages. The very next
          article (2792, R.S. 1925) authorizes
          the school districts to have their taxes
          assessed and collected by the county
          assessor and collector, or collected
          only by the county collector, and the
          only limitation placed upon the county
          official, when he thus becomes ex offi-
          cio assessor and collector for the
          school district, is that he cannot as-
          8888 the taxable property In the dis-
          trict at a greater value than that as-
          sessed for county and state purposes.
          We think 1t is clear that if the legls-
          lature had meant that his powers and
          duties should otherwise be different
          from those given a duly constituted
                                                                .


                                                                    ,

Honorable James A. Morris, Page 6         Opinion No. WW-1492


          school district assessor and collector
          under Art. 2791, the limitation would
          appear in Art. 2792. Therefore, the
          county assessor and collector, in dla-
          charging his duty to ass~essand collect
          for respondent during the years in ques-
          tion, was governed by Art. 1047 and not
          by Art. 7208; in ao far as his power
          to 'back' assess for school taxes was
          concerned. And, as we have said, if
          he suffered taxable personal property
          to be omitted from the rolls during
          those years, his action was in no wise
          binding on the school district and did
          not affect the right and duty of some
          successor in office to 'back' assess
          it, under Art. 1047."
       Article 1047, V.C.S., reads as follows:

            "Whenever.the assessor and collector
         shall ascertain that any taxable pro-
         w*ty, real or personal, has not been
         assessed for any previous year, he
         shall assess the same in a supplement
         to his next assessment roll, at the
         same rate under which such property
         should have been assessed for such
         year, stating the year for which such
         property should have been assessed;
         and the taxes thereon shall be col-
         lected in the same manner as other
         assessments. In any case where any
         party has omitted to render property
         for taxation for any former year or
         years, and such taxes have not been
         paid, such party shall give such pro-
         perty in for assessment for the years
         thus omitted and pay such taxes; and
         the assessor and collector shall enter
         all such property in a supplement to
         his next assessment roll, under the
         head of payments for former years."
       Under the plaln'terms of the above quoted statute the
Tax Assessor-Collector of the Orange Independent School Dis-
trict has a clear duty to make the back-assessments for the
year 1961 against the shareholders and should proceed accord-
ing to the provisions of the statute.
    .


,

        Honorable James A. Morris, Page   7        Opinion No. WW-1492


                              SUMMARY
                       The value of real estate occupied by a
               National Bank under a lease-purchase agreement
               pursuant to which agreement the Bank pays
               taxes thereon may not be deducted from the
               value of the capital stock, surplus and un-
               divided profits in determining the value of
               the shares of stock of said Bank, as the value
                If any, of~the.real property was not taken
               into consideration in arriving at the actual
               cash value of the shares. Under the submitted
               facts, a back-assessment may be made against
               the shareholders pursuant to the provisions of
               Art iC le 1047, V.C.S.
                                          Yours very truly,
                                          WILL WILSON
                                          Attorney General of Texas




        MMP/j
           P
        APPROVED:
        OPINION COMMITTEE
        W. V. Geppert, Chairman
        Charles Llnd
        Frank Booth
        W. E. Allen
        Vernon Teofan
        REVIEWED FOR THE ATTORNEY GENERAL
        By: Leonard Paaamore
