        PRICE  DANIEL
        ATTORNBYOENERAL

                                        June 18, 1948


          Hon. C. Hi Cavness                   Opinion No. V-611
          State Auditor
          Austin, Texas                        Re:   The inclusion of bonds,
                                                     notes, and debentures
                                                     originally maturing a
                                                     year or more from date
                                                     of issue, but now past
                                                     due, in determining tax-
                                                     able capital for franchise
                                                     tax purposes.

:i...     Dear Mr.   Cavness:

                    You have requested our opinion’as to which of two di-
          vergent opinions by former Attorneys General would govern in
          determining   the amount of notes, bonds, or ~debentures, which
          originally became due and matured one year or more from date
          of issue but which are still outstanding and unpaid, to be consid-
          ered as taxable capital for franchise tax purposes under tha pro-
          visions of Article  7084, Revised Civil Statutes, as amended,

                  The part of Article   7084, Revised Civil Statutes, i925,
          as amended by Acts 1930, 41st Legislature,    5th C.S., page 220,
          Chapter 68, Sec. 2, pertinent to this opinion is as’follows:

                      “Except as herein provided, every ‘domestic .and
               foreign corporation    heretofore or hereafter charter-
               ed or authorized to do business in Texas, shall, on or’
               before May 1st of each year, pay in advance to the Sec-
               retary of State a franchise tax for the year following,
               based upon that proportion of the outstanding capital
               stock, surplus and undivided profits, plus the amount of       ‘_
               outstanding bonds, notes and debentures,     other than
               chase maturing in less than a year from ,date of issue,
                . . .

                   The,opiriion of Hon. Same6 V. Allred, Attorney General, ad-
          dressed to Hon. W. W. Heath, Secretary     of State, Austin, Texas. ap-
          proved April 30, 1934, referred  to in your request, cantafns the fol-
          lowing question:

                     “3. Shall bonds, notes and debentures which or&-
               inally matured one year or more from date of issue and
                 i


      Hon..C.   @, Cavness.   Page   2 (V-611.)



          ‘have since matured and are now past due on the books
           of the corporation  be considered a part of taxable capi-,
           tal within the meaning of Article 70847 ”

                The answer    thereto   is as follows:

                “It is our opinion that such bonds, notes and deben-
           tures that Driginally matured one year or more from
           date of issue and have matured and are past due at the
           time the corporate books are closed for the fiscal year,
           should not be considered   in measuring  the franchise tax
           due by a corporation.”

               On March 27. 1935, the Hon. William McGraw, Attorney
      General of Texas, delivered an opinion to the Hon. Gerald C. Mann,
      Secretary of State, in answer to tllv. following question:

                “Shall bonds, notes and debentures which origin-
           ally matured one year or more from date of issue and
           have since matured and are now past duet on the books
           of the corporation, be considered a part of the taxable
           capital within the meaning of Article 70847 *

               After referring  to the opinion addressed   to the I-Ion. W. W.
$2,   Heath, under date of April 30, 1934, supra, and stating that a ‘diver-
      gent view” to that opinion must be registered,   the then Attorney Gerry      ..
      era1 made the following holding:

                 “Therefore,     it is our opinion and you are so ad-
           vised, that notes, bonds, and debentures originally
           maturing one year or more from date of issue, but
           pastdue,   should be considered as taxable”capi,tal     of
           a corporation     fork franchise tax purposes.

                You request ,advice as to which of the two foregoing opinions
      shall govern in determining   the amount of notes, bonds, and deben-
      tures subject, to franchise tax by corporations.

                The Office of the Secretary of State advises that it has con-
      sistently followed the opinion rendered by the Hon. William McGraw.
      dated March 27, 1935, from the time it was received by that office up
      to the effective date of Article VIII, Sec. 1, Chap. 184. Acts 47th Leg.,
      1941, p. 269, which materially   changed the verbiage of that part of Ar-
      ticle 7084 above quoted. Since such change there has been no ques-
      tion but that such outstanding and unpaid sums are considered      as tax-’
      able capital for franchise tax purposes.

               The holding contained in the opinion of the Hon. William MC-
      Craw, Attorney General, approved March 27, 1935, in limited confer-           .”
       Hon. C. H. Cavness,    Page 3 (V-611)



       ence, is ‘in accord with the plain and unmistakable     phraseology    of
       the statute as evidenced by the intention of the Legislature      in its
       e.nactment.    Although the opinion of the Hon. William h&Craw did
       not specifically   overrule the opinion rendered by the Hon, Jamaa
       V. Allred. dated April 30, 1934. nevertheless,     the language therein’
       contained is conclusive    that such was the intention of the Attorney
       General in rendering the opinion approved March 27, 1935; and it
       is the opinion of this Department    that the holding in the opinion of
       the Attorney General dated March 27, 1935, is correct.,

                  The departmental    construction   of the Secretary of State
        based upon the opinion of the Attorney General approved March 27.
        1935, having been tionsistently followed for a period of more than
        thirteen years, and the Legislature     having met many times since
        the rendition of the opinion, the following rule enunciated by the
       Supreme Court of Texas in the’ case of Isbell vs. Gulf Union Oil
       ,Company, 209 S.W. (2d) 762, would govern:

                  *While the Legislature    has met many times since
            Article  7092 was construed as above indicated, it has
            not undertaken to change the statute so as to alter the
            construction   which had been given it. If the Legislature
            did not approve ,the construction   which bad been given
            the statute, it could have easily amended the.law.     This
            was not done. This Court does not feel justified to hold
            now that the Secretary    of State was in error in the con-
:f          struction of this statute.”

                 You are therefore advised that notes. bonds, and debea-
       turea originally maturing one year or more from date of,isrue,
       but now past due, should be considered as taxable capital for iran-.
       cbise tax purposes under the provisions  of~Article 7084,~Reviaid
       Civil statutes.

                                     SUMMARY

                  Notes ,. bonds, and debentures   originally maturing
            one year or more from date of ‘issue but since rnatur-
            cd and past due on the books of the corporation       are
            part of the taxable capital within the meaning of Art.
             7084, R.C.S. of Texas, 1925, as amended by Acts 1930,
            41st Leg., 5th C.S., p, 220. Ch. 68, Sec. 2. Isbell vi
             Gulf Union Oil Co., 209 S.W. (2d) 762; Attorney, Gen-
            eral’s opinion addressed      to Hon. W. W. Heath, Secre-
            tary of State, dated April 30, 1934, overruled;     Attorney
             General’s   opinion addressed    to Hon. Gerald C. Mann,
            ‘Secretary of State, dated March Z?, 1935, approved.

                                                Yours   ,very truly

                                       ATTORNEY      G,ENEF&L      OF   TEXAS


., ,
                                       BY         C. K. Richards
       CKR/JCP                                       Assistant
