             THE          ATTORXE~
                                ~~TExAs




The Honorable      Henry Wade                        Opinion   No.   H-   124
District  Attorney
Dallas County                                        Re:       Applicability   of Article
Dallas   County Government    Center                           7166, Vernon’s     Texas
Dallas,   Texas 75202                                          Civil Statutes,   to real
                                                               estate owned by a bank’s
Dear   Mr.   Wade:                                             subsidiary

      You have asked our opinion as to whether    the value of real estate
owned by a subeidiary  of a bank or held in trust for a bank may be deducted.
from the value of the bank’s shares of stock for ad valorem    tax purposes
under Article 7166, Vernon’s   Texas Civil Statutes.   Your questions   are:

                 “1.     May a deduction   from the amount of the share
                         tax be had for real estate taxes when the real
                         estate is held in the name of a wholly owned
                         subsidiary  of the bank, if the real estate held
                         in the name of the subsidiary   might legally  be
                         owned and carried    as an asset by the bank?

                 “2.     May deduction    from the amount        of the share
                         tax be had for real estate taxes        when the real
                         estate is held in the name of a       trustee  who holds
                         the property  for the beneficial      interest   of the
                         bank, if the real estate held in       the name of the
                         trustee  might legally  be owned       and carried    as
                         an asset by the bank?”

       Article     7166, V. T. C.S. ,, reads    as follows:

                         “Every   banking corporation,      State or national,
                 doing   business  in this State shall,    in the city or town




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The    Honorable   Henry    Wade,   page    2    (H-124)




               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 president     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 residence         of each shareholder,      and the num-
               ber and amount of shares           owned by him.     Every  share-
               holder of said bank, sha,ll, 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        so 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 assessed.    . . . !’ (emphasis     added)

       The Texas statutory     scheme for the ad valorem       taxation    of banks
operates   so that the only property     of a bank that is taxable    to the bank is
its real estate; its personal    property   is subject to tax through a Levy on
shareholders    in an amount proportionate      to the shares held.      The history
of the Texas legislation    on this subject is discussed     in City of Marshall     v.
State Bank, 127 S. W. 1083 (Tex. Civ. App.,        1910, error   ref’d).    The appa-
rent purpose    is to avoid double taxation    on the value of real property      owned
by a bank.

       Our conclusion    is that Article  7166 plainly  contemplates    real property
upon which the bank itself has paid taxes,       so that the shareholders    may not
deduct from the taxable value of the bank’s shares of stock the value of real
property   not directly  owned by the bank and upon which the bank has not
itself directly  paid taxes,   regardless   of the fact that the bank might have
done    so under   other   circumstances.

       The first sentence    of Article    7166 states, “Every    banking corporation
State or national,   doing business     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.    ”




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,   .   .’




             The Honorable          Henry   Wade,page     3        (H-124)




                     “[IIts real estate” unquestionably    means real estate directly    owned
             by the bank.      There  is no requirement   that the bank  render  real estate
             owned by other entities      such as a subsidiary   or a trustee.   The statute
             further     says, “Each share in such bank shall be taxed only for the differ-
             ence between the actual cash value and the proportionate          amount per share
             at which its real estate is assessed.      ”

                      A bank’s property        interest   in the real        estate     of a subsidiary    is not
             “its   real estate. ”

                     In Attorney   General    Opinion No. WW-1492 (1962), the question     was
             whether    the value of real estate occupied     by a national bank under a lease
             purchase    agreement,    which required     the bank to pay taxes on the real
             estate,   could be deducted from the value of the bank shares in arriving
             at their taxable value.       This office said:

                                      “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
                             share at which real estate actually        owned by the bank
                             is assessed.      It has been held that the effect of Articles
                             7165, V. C.S. and Article      7166, V. C.S. is to require
                             the banking corporation      to pay the taxes on all of its
                             real estate and the shareholders        to pay the taxes on
                             the personal     property.   Engelgeke     v. Schlenker,     12
                             S. W. 999 (1890); City of Marshall        v. State Bank of
                             Marshall,      127 S. W. 1083 (Civ.App.      1910, error   ref.)
                             Implicit    in the holdings  of these cases,     is the require-
                              ment of actual ownership      by the banking corporation.       ”

                      Authorities      impliedly    supporting         our view       that actual   ownership   of
             real estate is contemplated      by Article    7166 are El Paso National   Bank v.
             United States,    335 F. Supp. 490 (W.D.        Tex. 1971), affirmed   453 F. 2d
             1313 (5th Cir. 1972); City of Abilene       v. Meek,   311 S. W. 2d 654 (Tex. Civ.
             APP. s  Eastland,   1958, error,    ref’
                                                    d.).




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    The Honorable    Henry   Wade, page   4    (H-124)




           Your second question   involving   the deduction    of the value of real
    estate held in trust for the bank, in our opinion,      calls for the same
    answer.     The same reasons   for denying deductions       with respect to real
    estate owned by a subsidiary    corporation   would apply to property      owned
    by a trust.

                                       SUMMARY

                         Article   7166, Vernon’s    Texas Civil Statutes,
                 permits     the reduction   of the actual cash value of bank
                 shares    by the proportionate     amount per share at which
                 the real estate directly      and actually owned by the bank
                 is assessed     to it for taxes and does not permit    the de-
                 duction of the value of real property       owned by a subsi-
                 diary of the bank or held in trust for the bank.


                                               Very   truly     yours,




                                               Attorney       General    of Texas




    DAVID M. KENDALL,          Chairman
    Opinion Committee




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