     Non, C, H. Cavnaes                Opinion No, V- 1114
     State Auditor
     Au&in, Texas                      Re;   The barb for franchise taxee
                                             tuxler the submitted facts rel-
                                             ativeto the refinancing of an
                                             outstanding indebtedness.

     Dear Mr. Cavneee:

                YOUhave requested our opiniqn with I
     ment of franchise taxes and submit the @owing

                “A certala domestic corporation made the fol-
         lowing borrowing8 from 8 comrnercial’bank,  giving
         its noteP therefor:

                     Auguet %h, 1946          s   fgm~~;
                     Oat&et 19th. 1946
                             tsth, 1947           100:000:00
                     March
                     Feb7 1 47                    105,000.00
                                 Total

         All of the above lndebtednese    bore maturity dates ln
         excem     of om year from the dates incurred, and was
         correctly    reported for Fpanchiae Tax purpoaeo.

                “On Nwember 6u4 1947 the above notes were
         refinanced with an Insurance Company and an addi-
         tional $195,000.00 was obtained, making a total in-
         debtedness of $60@.@@0,00. The $195,000.00 reppe-
         sented new indebtednese   at the time of refinancing,

                ‘The total hdebtednere   was incorporated in
         one note for $600,000.00 payable in monthly prin-
         cipal installments of $!i,OOO,OO,the first of which
         was paid on November 29&, 1947, leaving a bal-
         ance outstanding at November 30th. 1947, the close
         of the corpo~ation%i firoal year, of $595,000,00,'

                Based upon these frcta, your question is ‘whether the
     payments should be prorated between the $405,000,00 indebted-
     ness and the $195,000.00 lndebtednesr in the absence of any pro-
‘.   visions in We contract tq the0 effect, or whether the entire $595,-
     000.00 was mabject to franchise tcuc on Nwember 30% 1947.”
Hon. C. Ii. Camea*, Page 2 (V-1114)



           Artkk    7064, V.C.S., thr 8t~trrk fanol~ed ia’i’ detarmin-
ationef your queeth,    prior fo its amendment bi 1949, provided in
part2

           ‘(a) Except as herein provided, wepry domee-
    tic end forolga corporation       heretotom oe heree#er
    chertared or autlwized         to do hei-es     in Texae* or
    ddng bue4meee tn TexaP, shall, on ot before May 1st
    of eech year, pa in edvance to the $eeretiey of State
    a frawU*e      tex r08 the par fdlowbg,        heed w       that
    proportion of a0 outetaadin         capi+el *took, l  wplue
    and aadbidod prdtts,        plue & e amount d o~tetaading
    boade, plue the amount of outeteWU8g blmde, We
    end debewoe,         (outeN         bonde, tie     and d&es-
    twee shall isclude all written evldeacer of indebted-
    neae wh 4 c h b ea r l maturity dab at on (1) year or,
    more from date of iaeue, ud all luch iutrume&e
    wh4ch bear a makrity date of leer than me,:‘(l) year
    from date of ieeue but wblch repre8snt indebtedneee
    which hae remained outetanding for a poaiod of one
    (1) year or more from date od iecept&oa, but which
    have been renewed or sxtemded, or refineneed by the
    ieeueme of other evtdeasoe       d the Wbtedaeee,         whatl-
    ertotheeemeorahipwUeeo                ,.*

            lhwld
           It         be noted *at    the flret two $lOO,OOO.OO
                                                              loeu,    hop-
wowed w August 9.1946, er& Odaber 19.1946, reepectirely,    were*
at the the they wese alhawed     a~ Novembes 6.1947, outetanding
for a period af otm year or mope from the d#s of their 4ncepUom.
The eeeond two obligatioae, wbioh amormB to $205,000.00, were not
outetand4ng for one year 8t the tfme of tbetr zef4aewilog on Novem-
ber 6,1947. It ehould ate&be notsd that all the indebtedneeeee   in
question bore a maturity date *of one (1) year or more from date of
ieeue” at the time of their imceptioao The fiecel year of the corpop-
aflon involved 4s from December 1 through November 30.

            The $600,000.00 n#e, which Locludee $405,000,00 of old
obligatlone and $195r000000 of new obligafione, 46 payable in monthly
inetallmente of $5rOO0.00 rr& M f4aet installment having been paid
on November 29, 1947, pri& to M ilecal year in queetion.       Thue, at
the cloee of the corporet&m’e f4ecal year on November 30, 1947, thexe
wae outetanding a note repWeent4ng en Mebtedneee       of $595,000.00,
From the face of &e note it ie Weaalaed     @at during the flecal year
ha queetl-   WI peyxne8te wfll be made, the rodocisg the amomrt of
thenindebtedneee at Ih, end of tW fiecal yeq In question to $541,000.-
00. Your quart&on cone8ene (Irs tuab4Mty of the tea8 monthly inetall-
meate patd durin&%e flecal year. If there payments are to be ap-
plied to the 4ndebtedneee wb4sh wae not wrtetredin   for me year or
more pr4or to the rwfixnaciag w to the new obliga %one, they should
Hon. C. H. Ciwnoer,     Pago 3 (V-1.114)             ’




not be included  4~ tba UIloIIllt UM In a    tiq the franchise taxa
On the other hand, ii these peymente are  -r be applied to the old-
est obligations,  as yw state PI State Aud4br ed the Secretary
of Stek have doa8 4~ ovary #sali caeo irr #N pert, the tote1 taxable
amount would be $S95,000.00, tbo total emorurt of the obligation
lees the one payment made ia the precedkeg flecal year,


           11 should Da mted also tit no a pl46atlon ol paymente
is provided for im the sob ifeelf or, lo Rr as we kow. ia any
othar mewer       between Wee debior   eorrpomtlor   amI Us   ersditor in-
surance   company,     it 4e wel4ewttUid*at4ei   the ebemi     of am agrte-
                                                              themdelve0,
                                                                              0




mental interprebtiaa    whiab you and #e SecreQlry of State have
followed since the amwdmd       of Aa%& TO84 Ln 1941 to inelnde rep
24nanced obligations la In tmnpl4a~n  ~4th l&e metfled law.


           It La, thermfore, abr eorcloa4~1 ybt (k ha&n for dekr-
miuing tb amQwt of tu llahluty       of #a  awpw8utm   4a qw*t&oa ia
en amoont of $598,06o,QO~ T& emt4re amowt of the $595,000.00
remain48g at the etert d lls(, iyacal yWr 48 qwetloe is taxable ae
a written ev4dence d 4~bdlBene         kari~g *a mcrbiw date ol one
(1) par w more loom datn e# ie8w00 eamep) for those amaamb pay-
able w4tb4n a yoaPaP,Tbnse 4etkr aRllOtULe#wm app44ed to the old-
est 4tiebteduee, make the ad, in that ~UWQ& ome whch repre-
lentmindeb tedma we
                  & h   b ea m .ama Cu4 tydeino flo w th a ao ne
0)    lr ~POWdh  of @~pcLoo~  lnrt WrLM W  Lww  naiuacod     by
th erl8amO ef o&w ov4do~ea of da9 4ms+3&.ro,    Wha(LcP to tie
same o* other partion, o .*
Hoe c. H. CwmoW*   P8go 4 (V.1114)




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