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                       OFFICE                OF THE A7TQRNEY                   GENERAL
                                                                                            OF-
            .--                *.                                    AUSTIN
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        Eonorablo George II. Sheppard
        ccqtrollsr                  of,Publlo.A~oounta
        Austin, Toxae                                                      .
        Deor Sirl.                                  ':           Opinion       No. 04,027
                                     .                           Ret' Fhot 1s the 8iffere~:oe bet-men
                                                                      a tranarer "to seoure the fu-
                       .:
                                                             .   ,    ture pcment 0r noney* whioh
                                             .           ,
                  .’      ,.                                          IS apparently made taxable
                       .,“.              :   : :.            I    '.  under the TGXC?JRook Trans%r
                                                                      law and the exemption or 9m
                                                                      nt3wement evidencing the'dek
                                                                      posit or, GertifioateEi as oo&-
                                                                      lateral aoourity ror money
                                                                      loaned thereon"?

                  Ee are In reoeipk ot.Four lett&r in vihioh you rt?-’                                              ‘:    ‘--
        quest the Opinion Of this department on the question set Out                                                          .
        therein ac railowc:                         .

                  "1 riould cppreolatc your 0frloIal opinion
             on the tollowlng question whloh has been ralsed      :
             by the National Aeaooiation  of Seouritles I;ealcro,   ~I*
             Ino.; TActriot Committee 50. 6, pertaining to
             Artlolc 15, or Iiouae Bill 8, this being the stools
             @anafar                     Tax Law:.               ,                                   ,
                                     Wmt    Is the dlrrorenoe between a
                               transror 'to seouze the rutme gayxiant
                               of money or the ruture, transfer or say
                               such atoak’, whloh io enparaatly nade                                                     1.
                               tenable under the aot, and the exanptlon
                               or 'an QlW6l!V3Ilt uvidenoiing tho dal;oslt
                               or oortirloatas a3 oollatoral seourity
                               for money loaned taerpon'?"

                 3eotlon 1 or Artlole 15 or ?Iouse Bill                                            8, Aota or
      the 47th Laglslfiture, Regular ::ennlon, oomouly                                             nalled the
      Texas Etook Trarrarur Tax Law, reaGo in port es                                             i0ii0w8:
                  'Yhotlon 1. ‘L’hhorois hereby 1nposed'anC
             10~104 a tax as hereIn+tcr   providep wa all soles;
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              Eonorable G-SOrge 11. Sheppard, +ge           2   *



                   atireomonts to sell, or norloranda of nolea, and
                   011 dt?llvcrIes or transfers OS nharos, or certi- ~
                   rlcatos or stool;. or cortificctoo for rI&ts to
                   atook, or oertlfioatos or deposit reprooiitlng            .

                   en intersst ln.or repre3ontinG certiflcatcs made
                   tsxabla una6r this Rsctlon In any doseatlo or
                   rorolgn assoolatlon, coompany, or corporation,
                   OF certIrloat6s of lntercnt in any buslnass oon-
                   duotad by trustoc 6r trustoeo made artor the ef-
                   rootlve data heroof, whether naae upon or show+
                ~' by the,books of the associctlon, oam:peny, cor-
                   poration, or trustee, or by any aoslgnnunt in
                   blank or by any dollvery of any pnpern or agree-
                   n6At or zemorandum or other.cvIdenoo of sale of
                   transfer or order for or agreement to buy, whether
                   Intermediate or final, and whether Inventing the                . .
                 ,.holder with the bensriolal lnteront In or legal
                   tIil6 to such stock or 'other certifloate taxable
                   herounder.or with the possesslo~ or use thereof
                   for any ptirpiso, or to tiecure the future peyment
                   0r 7.onox or tha rutur0 transrer of any suoh stook,
                   qr oertltloiite, . . ." (Underlining ours)
                      In order to ancwer the question you ask it is first
         .~ neoe3oary to oonslder th6 portion 0r th6 tax statute above
            quoted v&lch taxes transfersmade to aeour6 the future paywnt
            or moonor. In order to,do so it Is neo6ssary to understand
            th6 partictiar.type of tax levy under oonsIderr*tlon. IA opln-'
            Ion Xo. O-3594, thls departnent oonstruod the nature of the
              TOXPDzb00k TMMJ~OXnix      II~.I imwd         15 rOg0wai
                                                                    ..
                          (1      It should be 6v6r kept in mind that
                  the taii L&y under oimsideratlon is, actually and
                  rundamentally, an exolse tax upon th6 priVileg6
                  or transferring    shares of oertifioates or stook.
                  Tha tefil 'transter' is used her6 in Its broad and
                  oomprehenslve sense to &an the ~ossinr~lof the
                  &al    or eqult3ble title to sheresT     oertifI6at66.,.
                  of stook from one aerson.to another, by sale or
                  rlrt. rather than the narrower m;eanlns of tha mere
                  Feoo$dIng of such transter upon the siiook transter
                  reoords~ or the oorporatlon. '... .'I (Underlining
                  ours)

                          In any Went before  8 tax b6OOm6a due'there must be
              a hansier    as that term la broadly defined In its varloua pheses
                                                       ..
                                                      .:

                                                                    :
Honorable Oeorga a. Sheppard, Page 3

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1s Seotldn 1, oupra. There must be a paaaIng of the loeel
or equitable title in shares or atook from one person to
another by one or the various means apeolrioallg enumerated
In said Seotion.

          The Court of Appeals Of N0w York In the oaae or
Phalps’ Stokes l?State Va* Nixon, 118 N. E. 2l+l, oonaldered
the tax levying aeotlon of the Kew York Ftook Tranaier Tax,            ‘.
being Feotlon 270 of the Mew York Tax Law, whloh Eeotion la
for all~purposea of this dlaousslon ldontloal with the tax
lovying aeotlon of the Texas eot, and the Court stated in
dIaouaai.n&the type of transfer neoeaaary In order ror a
tax to ,beoome due on the partloular tranaaotion as tollowa:
          ”      It la such a triinsrer ai la rererred
     to in k&ion  162’or the Ptirsonal Property Lan.
    A tranorer la derlned In the Century Dlotlonary
    ~88:

          **The oonveyanbe or right, title 'or property,
    ‘either real or personal, rrOm one person to another,
     either by sale, by ~glft or otherwlae. *

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                   ‘W
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           Baaed on the above dlaouaaion, it Is the opinion
of this department..that to come within the term “transfer
to aeoure .tho future payment of money” as used in the tax
levying aeotion of the Texas Stook Trtlnafer Tax Law, it la
neoeoaary that there aotually be a trnnsfer   of either the
ledaX or equitable title in atook ira one lndlvIdua1 to
another. Under the plain wording ot thla motion     where auoh
e transrer oooura, it would not bo a deiense to the payment
or tho tax that auoh transfer was made only for the purpose
of scouring the ruture  payment or money.   The arux of the
question however la that thero must aotually be a transfer
wlthln ths neanlng or that term as dlaouaaed above rrcn one
lndlvidual to another regardleaa of for what purpose auoh             ..J
transfer ia made.

          Section 1 of Artlole 15; aupra, also oontaina ‘the      ’
following exemption rrm the tax statute:
         ”            It la not intended  by thla Artlole
    to imp&~       i tax .upon an agreement evldenolng the    .
fronorable.
          George &      Sheppard, Page 4


        deposit 0r oertlfloatea as oollatcral aeourity ror
        money loaned theroon, which oertltloatea are not
                        nor upon suoh certlfloates 50 de-
                           tra%?%fera of auoh certlfloatoa
                             a nomlnoe of tho lendor or
        rrom one nominee of the lander to another, pro-
        vided the acme oontinue to be held by auoh lander.
        or nominee or nomineea. as’ oollatcral aeourlty as.
        aforesaid, nor upon the retrenafar or such oerti-
        rloates ~to the borrower, . . ;6 (Underlining
        ourrr)

          The above quoted exahption of’ the Texas Stook Trana-
rer Tex Law la ldontlcol word for word with the same exemption.
contained in Seotlon 270 oi the New York Stock .Transter Tax
Law. Apparently the worda in said exemption whloh distinguish
It rrom a trenater made’ toxablo are the words vwhloh oertlrl-
oatea are not aotually nold”.

         ~‘Sn dlacuaalng tho above mentioned exemption, the
Attorney General of New York in an opinion  dated September 110,
19&O, stated a8 rollowar                                     ._
               n     .--A transaotloa InvolvlnF: no aale of a
        stock, &&ifloete      but a mire transfer and depoalt
        thereof as oollatersl aoourlty ln the name of the
        lender’s    nominee who endorses the oertlfioate end     ‘~
        lehv6e It with tho lender doea~not oonatltute a
        taxable transaotlon.      Upon the Eerault or tha bar-        .
        rouer’ and biddIn& in of the stook by the lender,
        a atook. transfer tax Is due. Anothar stool: trans-
        ;z. fsaxls due when ouch atook is later sold by
                 -.    (1940) .Op. Atty. &en., December 10.”
        (Underllnla~ ours)

          The Federal Stock tiansfer Tax is Sootion 1802 or
Tftle    26 of the United States Oode Annotate&.
                                               Said law eon-
telns a almller examptlon to th6 one dlaouased.hereln whloh
reads as rollowsi
             n’      Provided rurther,  That it is not in- ’
        tended*b; ihis ohaptor to lmpoae a tax’upon en
        agreement ovidonolng a deposit of oortlfloatea
        as oollaterel aeourlty f’or money loaned thereon,
        whloh oertiflcetea are not aotuolly sold, nor upon                _
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         Honorable George Hi Sheppard,          Page. 5                 -                              i
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                -the delivery or transfer for such purpose or oer-
                 tlrloates so deposited nor upon the return ‘or atook
                 loaned;  . . .” (Ceoond underlining ours)                            ‘.

                   This exemption was dlaouased In the oaae of Dean                                .
         va. Celdwell k Company, 9 Fed. Sup. 177. The Court atetsd
         a~ rollows :
                      *        Ii Caldwell k Co. should aoll &co
                 of the*a~o&ltlos   plodged to the Bank of Tennessee,
                 prior to the pay-izontor ~the indebtedness for whioh
                 they were pledgod,’ it would take them down snd aub-
                .atltute other securltlea. Lfaybo tliore would bo a
                 number of aubatltutlona ot acouritles in this man-
                 ner beSore the lndebtodneaa was entirely wiped* out.
                 The transeotlon waa’nover conslderod e sale.
                       * . . .”   (Underl&lng     oura)    ‘,

        T& lest aontenoe used by the Court la the one wh3ht ‘,tWy                         -
        most relevant to the question dlaoussed horaln.
        atatod that the transeotlon waa never oogsiderod i sale. On
        the other hand the Court conalders the ontlre tranaaotion aa                          ‘,
        tho pledge or as the deposit ot aeourltles with no transfer
        ot any lqtereat or title in said aacurltl68 to an&her Indl-
        vldual. This aaema to bo the distinction made by this Federal
        Court oonsldering the same exemption to the Federal Stook
        Transfer Tax Law.          *                                                          >
                  Vie.also da11 your attent:on to the raot ‘that the
        &?assachusetta Stook Trenarer Tax Law and the Pennsylvania
        Stook Transfer Tax Law contain axemptlona elmoat ldentlool                    ’                ,
        with the one dlsouaaad in this question and’ln eeoh oese the
        pertinent feature  or the exemption soema to be ‘that the shares                      .
        or stook are merely deposited aa ogllateral  aeourlty and are                         .
        novtw aotualljr auld.    . ,,-

                  It la the opinion of this dopartment~, thorerore,
        that in the .oeaa wheke an aotuol trenater of either thclegal
        or equitable interests is ‘shares of atook within the ,meanin&
        dt the Texas Stook Trtinafer Tax Law takea plaoe from one ln-
        dIvIdua1 to another for the purposes of aeourlng tho ruture
        payaont or moneg, auoh transfera Wuld be subjeot to the
        Texas Stook Transfer Tax. Bowevor, where no suoh taxable
        treasier oaoura but the atooks are zierely depoaltod as ool-
        lateral aeourfty ror money-loaned,. we ,aro or the opinion               .




                          1
that suoh deposit Or agrsement'or nemorandum made in 00~80~
t$on therewith would not be subjeot to the Texas Stools Tram-
fer Tax but would oome within the oxesptlon dlaousss4 above.

          r/e trua$ that the goregoing ia sufrloi~d, to BII-
lighten y0.u in this mdter.
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            ,                          .Yours vary   truly




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