    -      .




                       The Attorney              General         of Texas
                                          octaber   10, 1980
MARK WHITE
Attorney General


                   Honorable Bob Bullock                     Opinion No. W-256
                   Comptroller of Public Accounts
                   LBJ State Office Building                 Re: Assessment ratio applicable
                   Austin, Texas ‘I8774                      in calculating the alternative state
                                                             franchise     tax base in article
                                                             12.01(l)(b), Taxation General

                   Dear Me. Bullock:

                          You inquire about the proper method of determine         the value of
                   property owned by corpaations     in this state in order to determine their
                   franchise tax liability under article 12.01(l)(b), TaxationGeneraL       This
                   statute provides that corporations    shall pay franchise tax according to
                   whichever of three alternative methods yields the greatest tax:

                                  (1) Except as otherwise provided in this chapter,
                              every domestic and foreign corporation heretofore or
                              hereafter chartered or authorized to do business in
                              Texas or doing business in Texas shall file such
                              reports as are required by Articles 12.08 and 12.19 and
                              pay to the Comptroller a franchise tax for the period
                              from May 1 of each year to and includiq April 30 of
                              the following year, based an whichever of the
                              following Subsections (a), (b), or (c) shall yield the
                              greatest tax:

                                      (a) Basic Tax. Four Dollars and Twenty-five
                                  Cents ($4.25) per $1,000 or fractional part thereof
                                  applied to that portion of the sum of the stated
                                  capital, surplus, and undivided profits the sum of
                                  which for the purpcses of this chapter is hereafter
                                  referred to as ‘taxable capital,’ allocable to Texas
                                  in accordance with Article 12.02. As used in this
                                  chapter, the phrase ‘stated capital’ shall have the
                                  same meaning as defined in Article LO2 of the
                                  Texas Business Corporation Act;

                                      (b) Four Dollars and Twenty-five Cents ($4.25)
                                  per $1,000 or fractional part thereof applied to the




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Honorable Bob Bullock - Page Two           (W-256)




               assessed value for county ad valcrem tax purposes of the
               real and personal property owned by the corporation of this
               state; or

                   (c) Fifty-five   Dollars ($55).

        At present, 4.7 percent of all corporations pay the amount of tax determined
under article 12.01(l)(b). See “S.B. 621; Implications for the State Franchise Tax,” w
_Notes, (May, 1980) (publication of Comptroller’s Office of Planning and Research). You
wish to know how the tax should be computed urder article 12.01(l)(b) after the
effective dates of the following provisions of the Property Tax Code:

               Section 26.02. ASSESSMENT RATIOS PROHIBITED. Except
           as provided by Section 26.03 of this code, the assessment of
           property tax for taxation on the basis of a percentage of its
           appraised value is prohibited. All property shall be assessed on
           the basis of 100 percent of its appraised value.

               Section 26.03. STATE ASSESSMENT RATIO. The assess-
           ment ratio for calculating taxes for state purpcses is .OOOl
           percent.

Section 26.03 took effect cn January 1, 1980 and section 26.02 will take effect on
January 1, 1981. Acts 1979, 66th Leg., ch. 841, S3(g), (i), at 2315. You specifically
inquire whether the assessment ratio for calculating the alternative state franchise tax
base provided in article 12.01(l)(b) TaxationGeneral will be 100% or .OOOl%.

       Prior to passage of the Property Tax Code, each county assessed real property at
some percentage of appraised market value and this assessed value became the basis
for the alternative computation under the franchise tax. In enacting the Property Tax
Code, the Legislature placed all units of government on a market value basis and
declared assessment ratios unlawful except for computation of state taxes. Because of
the invalidation of assessment ratios, a county’s assessed value within the meaning of
art. 12.01(l)(b) becomes fair market value since counties will cease to bve any
assessment ratio yieldhg an assessed value different from market value. However, it
is clear that the county assessed value Is used to calculate a state tax and therefore
applying the Property Tax Code as written, the county market value is to be used but
the state assessment ratio provided in section 26.03 thereof is then applied to
determine the assessed value for state tax purposes within the meaning of article
12.01(l)(b).

       Not only &es this construction give effect to the language of both statutes, but
it also complies with the clear legislative intent of the 66th Legislature. In construing
the provisions of the Property Tax Code together with article 12.01(l)(b), it is necessary
not only to give effect to the language of both statutes but also to consider Legislative
history, the reasons for enactment of the statute, and the consequences of a particular
construction.  -See art. 5429b-2, S3.03(1), (3), (5X V.T.C.S. An analysis of the legislative




                                           p. 810
Honorable Bob Bullock - Page Three            N-256)




history of the Property Tax Code fails to reveal any intent to affect the franchise tax
computation based on real estate at all. Nowhere in the fiscal note, debate or public
discussion was any mention made of increasing the franchise tax or changing the basis
of computing the tax from some percentage of market value. See Fiscal Note of May
16, 1979, bill fle for Senate Bill 621, Legislative Reference Librai

       While it might be argued that 12.01(l)(b) requires that the franchise tax be
computed on the county assessed value, and in view of the repeal of assessment ratios
that that value is now 100% of market value, it is clear that was not a consequence
intended by the Legislature from both the language of section 26.03 and the legislative
history behind the statute.  Even if the statute were sbject to that construction, we
would feel compelled to follow the rule that where interpretation    of a statute leads to
consequences which the Legislature did not contemplate, the courts (and this office)
will adopt a construction consistent with the intention of the Legislature in passing the
legislation.  As the Supreme Court of Texas held long ago in Edwards v. Morton, 46
S.W. 792, 793 (Tex. 1898):

                The intention of the legislature ln enacting a law is the law
                itself, and must be enforced when ascertained, although it may
                not be consistent with the strict letter of the statute.   Courts
                will not follow the letter of a statute when it leads away from
                the true intent and purpose of the legislature,      and to con-
                clusions inconsistent with the general purpose of the act. . . .

This principle has been reaffirmed in numerous cases since that time and Is the guiding
principle in making statutory interpretations.

       It is the duty of this office and the courts of this state to follow the paramount
rule of statutory construction,      and that is to determine and follow the legislative
intention in enacting a particular statute.             See Calvert v. BritisbAmerican          Oil
Producing CO., 397 S.W. 2d 839, 842 (Tex. 1965);city of Mason v. West Texas Utilities
mm&e        v. Waples,
Co.. 237 S.W.          188278
                  2d 273.   S.W.   1037,
                               (Tex.     1038
                                      1951);    (Tex.v. :1916
                                             State       Dye: , 200
                                                                Tex. S.W.
                                                                      - Louisiana
                                                                          24 813, 815
                                                                                   Power
                                                                                      (Tex. Co.  v.
                                                                                             1947);

Farmersville,     67 S.W. 2d 235, 237 (Tex. Comm’n App. 19332

       In enacting sections 26.02 and 26.03, we believe that the Legislature intended to
declare all assessment ratios, other than assessment ratios for state tax purposes,
invalid and had no intent to affect franchise tax collections or the alternative basis of
the computation of that tax under 12.01(l)(b). We hold that these statutes should be
construed consistently and in a manner to minimize any unintended effect on franchise
tax collections.

       Section 26.03 applies the .OOOl percent assessment ratio to the calculation of
“taxes for state purposes.” We construe the quoted language to include the state
franchise tax. It is our opinion that you should use the .OOOl assessment ratio in
calculating the state franchise tax under article 12.01(l)(b), TaxationGeneraL




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Honorable Bob Bullock - Page Four       (I4+256)




                                    SUMMARY
               Franchise tax liability rnder article 12.01(l)(b), Taxation-
           General, is to be computed on the basis of .OOOlpercent of the
           appraised Value of the corporation’s property.




                                             MARK        WHITE
                                             Attorney   General of Texas
JOHN W. FAINTER, JR.
First Assistant Attorney General

RICHARD E. GRAY III
Executive Assistant Attorney General

Prepared by Susan Garrison
Assistant Attorney General

APPROVED:
OPINION COMMITTEE

Susan Garrison, Acting Chairman
Jon Bible
Rick Gllpin




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