            THEATIYORNEP              GENERAL
                       OFTEXAS




Honorable 0. P. Lockhart
Chairman, Board of Insurance Commissioners
Austin, Texas
Dear Sir;                  Opinion No. O-4375
                           R0: Whether revenue bonds issued by
                                 local Texas.Houslng authbrltles ln-
                                 corporated under the.Texas Housing
                                 Act, not secured.'bgvalid-first
                                 lien on Texas'real estate are
                                 ellgible.as tax reducing I'Texas
                                 securities" under the Rob.ertson
                                 Lawi Articles 4765-4769, as amended,
                                 and as tax reducing b&ciwltles
                                 under ArtFcle 7064, as amended.
         Your letter of January 19, 'L942,-.submlttlng
                                                     in sub-
stance the above question to this Department-for an oplnlon is
quoted as follows:
         "Please advise whether revenue bonds issued by
    local Texas Housing Authorities incorporated under
    the Texas Rousing Authority Act (Article 1269k,
    Vernon's Texas Civil Statutes, H.B. 821 Acts~l937,
    45th Legislature, Chapter 462, pages 1144-1157;
    Sets. l-26, as amended by B.B. 102; Acts 1937;&th
    Legislature, Second called session, Chapter 41,
    pages 1924-1939, Sets. 1 and 2), which bonds are
    not secured by valid first liens upon Texas real
    estate but are secured only by pledges of (1)
    annual contributions of funds from the United States
    Housing Authority under its assistance contract illth
    the local Texas Housing Authority at San Antonio;
    (2) rents and revenues from the San Antonio prboject
    properties themselves; (3) reserve funds set aside
    by the issuing local San Antonio Authorlty~for main-
    tenance, repairs, replacements, vacancies and col-
    lection losses; (4) as to a series A, a special find
    set aslde,by the issuing San Antonio local authority
    with.l'tsfiscal agent equal in amount to the prln-
    clpal'afidinterest maturing for the first nine
    years, are eligible as tax reducing 'Texas seburltles'
    tinder the Robertson Law, Articles 4765-4769, as amended,
    and as tax reducing securities under Article 7064 as
Honorable 0. P. Lockhart, page 2        o-4375


    amended. In this connection we invite your attention
    to Art. 1269k-1." (Acts 1939, Leg. p. 427, et seq.)
         Under the terms of your letter we must assume that such
bonds have been issued in full conformity wlth the law, but we
learn from our records that they have not been submitted to the
Attorney General's Department for approval, and nothing contained
herein is to be interpreted as passing on the legality or val1dLt.y
of these bonds.
         Chapter 4 of Title 78, Vernon's Civil Statutes of the
State of Texas, I'TexasSecurities and Gross Receipts Tax'! known
as the "Robertson Law"; as originally enacted and as amended,
provided for and required of life insurance companies engaged in
transacting the business of writing life insurance in this State
the investment of a sum of money equal to at least seventy-five
per cent of the aggregate amount of the legal reserve required by
the laws of the state of lts domicile in "Texas securltles" and
in "Texas real estate". Such Investments to be made and maintained
on account of Its policies of insurance in force written on the
lives of citizens of this State consltutlng the reserve denomlnated
by the act as its "Texas reserves".
           The act defined the term "Texas securities" as
follows:
          "The term 'Texas Securities,' as used.ln~thls.,.~,
    Chapter, shall be held to include all bonds issued
    under and by virtue of the Federal Farm Loan Act
    approved July 17, 1916, when such bonds are issued
    against and secured by promissory notes or other
    obligations the payment of which is secured by
    mortgage, deed of trust. or other valid lien upon
    unencumbered real estate situated in this State;
    bonds of the~State of Texas; bonds or lnterest-
    bearing warrants of any county, city, town, school
    district or other Im*nlclpalityor subdivision which
    1s now or may hereafter be constituted or organized
    and authorized to issue such bonds or warrants under
    the Constitution and laws of this State; notes or
    bonds secured by mortgage or trust deed insured by
    the Federal Housing Administrator; promissory notes
    and other obligations, the payment of which Is
     secured by a mortgage, deed of trust, or other valid
     llen upon unencumbered real estate situated In this
    State, the title to which real estate is valid and
     the market value of which is forty (40) per cent
    more than the amount loaned thereon, exclusive of
     buildings unless such buildings are insured against
     fire and kept insured in some company authorized to
Honorable 0. P. Lockhart, page 3       o-4375


    transact business ln the State of Texas, and the
    policy or policies transferred to the company
    taking such mortgage or lien; or upon first liens
    upon leasehold estates in real property and improve-
    ments situated thereon, the title to which Is valid,
    and the leasehold has not less than thirty (30)
    years to run before expiration, provided that the
    duration of any loan upon such leasehold estates shall
    not exceed a period of ten (10) years. If any part
    of the value of such real estate Is in buildings,
    such buildings shall be insured against fire and
    kept insured for at least fifty (50) per cent of the
    value thereof in some company authorized to transact
    business In this State and the policy or policies
    shall be transferred to the company taking such
    mortgage or lien.
         "The term 'Texas Securities,' as used ln'this
    Chapter, shall also be held to include obligations
    secured collaterally by such first lien notes-;flrst
    mortgage bonds of any solvent Corporation lncorpor-
    ated under the laws of this State and doing business
    in this State, and which has pal&out of Its actual
    earning, dividends of an average of at least five (5)
    per cent per a@umpn    the par value of all of its
    par value stock outstanding and on the sale value
    of .a&? ofL$i~.t-icxm W.ue stock outa_ta~Wf3.f?r.a~
    period of at least five '(5)years next~F&edlng
    the date of such investment, and which has not at
    any time defaulted In the payment of interest on any
    of its obligations, any such investment In the bonds
    of any one such corporation not to exceed five (5)
    per cent of the admitted assets of the Insurance com-
    pany making the investment, and loans made to pollcy-
    holders on the sole security of the reserve values
    of their policies. The investments required by this
    Chapter may be made by the purchase of not more than
    one building site, and ln the erection thereon of
    not more than one office building, or in the purchase,
    at Its reasonable market value, of such office bulld-
    lng already constructed and the ground upon which the
    same 1s located in any city of the State of more than
    four thousand (4,000) inhabitants. All real estate
    owned by life insurance companies in this State on
    December 31, 1909, and all thereafter acquired under
    the provisions of this Chapter, or by foreclosure of
    a lien thereon shall be treated, to the extent of its
    reasonable market value, as a part of the investment
    required by this Chapter. And 'Texas Securities'
    shall be held to include every character of lnvestment
Honorable 0. P. Lockhart, page 4        O-4375


   authorized
    .    .   .by the terms
                       _ ..of this Article; provided
   tnat tne aoove restrlctlons concerning mortgage
   loans shall not apply to loans insured by the Federal
   Housing Administrator. As amended Acts 1941, 47th
   Leg., P. 848, ch. 524, 11."
         The above paragraph contains in substance the provl-
slons of Article 4766, Vernon's Clvll Statutes of Texas, and
sets out in detail the character of investment that may be made
by life insurance companies operating in Texas under the Robertson
law. This article does not.mention the mattersof~taxatlon. The
article of the Robertson Law relating to taxation, the amount of
taxes to be paid by such life insurance companies operating in
Texas, and the reductions to be allowed such companies under the
law, when certain investments are made by them in the State of
Texas, is Article No. 4769, and for your information we quote
Article No. 4769 in full as follows:
        "Each life insurance company not organized
   under the laws of this StBte, transacting buslness-
   in this State, shalI annually, on or bef,orethe 1st
   day of March, make a report to the Commissioner;
   which report shall be sworn to by either the presl-
   dent or vice-president and secretary or treasurer of
   such company,'whlch shall show the gross amount of
   premiums colle‘ctedduring the year ending on December
   31st, ~precedlng,~.from~citlzens
                                  of~thls State upon
   policies of insurance. Each such company shall pay
   annually a tax equal to four and sixty-five hundredths
   (4.65) per cent of such gross premium receipts. When
   the report of the Investment in Texas securities, as
   deflned by law, of any such companies as of December
   31st of any year shall show that it has invested on
   said date as much as thirty (30) per cent of its
   total Texas reserves as defined by law, in promissory
   notes or other obligations secured by mortasa
   deed of trust, or other lien on Texas real esi%te
   and/or in loans to residents or citizens of Texas
   secured by the legal reserve on the respective policies
   held by such borrowers, the rate of occupation tax
   shall be reduced to four and five one hundredths
   34.05 per cent; and when such report shall show that
   such company has so Invested on said date as much as
   sixty (60) per cent of its total Texas reserve,  the
   rate of such tax shall be reduced to three and six
   tenths (3.6) per cent; and when such report shall
   show that such company has so invested, on said date,
   as'much as seventy-five (75) per cent of its total
   Texas reserve, the rate of such tax shall be reduced
   to three and one tenth (3.1) per cent. All such com-
   panies shall, In any event, make the investments ln
Honorable 0. P. Lockhart, page 5         0 -4375


    Texas securities in proportion to the amount of
    Texas reserves as required by law. Such taxes
    shall be for and on account of the business trans-
    acted within this State during the calendar year
    in which such premiums were collected, or for that
    portion thereof during which the company shall
    have transacted business in this State. This Act
    shall not in any manner affect the obligation for
    the payment of any taxes that have accrued and that
    are now due or owing, but the obligation as now
    provided by law for the payment of such taxes shall
    continue-in full force and effect. As amended Acts
    1941, 47th Leg. H. B. #8, Art. XVIII, 3. 3."
    (Emphasis addedj
          We have underlined in the above paragraph the parts
 which we think bear most directly on your question. We think
 it 1s also well to mention in this connection that this article
 was last amended by the 47th session of the legislature, under
 the Acts of 1941, and~to point-out that such amendment is later
 in time than.elther Article 1269k or Article 1269k-1, herein-
-after referred to, lndlcatlng that the legislature did not intend
 to include the Housing Authority bonds in the terms of Art. 4769.
         Article 1269k, as enacted by the 45th Legislature, in
1937; and as amended by the 2nd Called Session of the 45th Legls:
lature, In 1937, provided
                      __-
           ---~~~~~.eli~   for
                          _.__
                       such    the -houtiIns'
                             Tocal  organization of local housing
                                           -tiuthorrtless~~su-e    ~_
aiithorStSes,
bonds and to make provisions for the payment thereof. Article
1269k-1, enacted by the 46th Legislature, in 1939, provides that
such bonds shall be valid and legal Investments for life insurance
companies, other organlzatlons and individuals, the relevant part
of said article being as follows:
          "Notwithstanding any restrictions on investments
     contained in any laws.of this State, the State and all
     public officers, mnlcipal corporations, political sub-
     divisions, and public bodies, all banks, bankers, trust
     companies, savings banks and institutions, building and
     loan associations, savings and loan associations, in-
     vestment companies, and other persons carrying on a
     banking business, all insurance companies, insurance
     associations and other persons carrying on an Insurance
     business and all executors, administrators, guardians,
     trustees and other fiduciaries may legally invest any
     sinking funds, moneys or other funds belonging to them
     or within their control in any bonds or other obligations
     Issued by a housing authority pursuant to the Housing
     Authorities Law (Chapter 462, Regular Session of the
     Forty-fifth Legislature, as amended by House Bill No. 102,
Honorable 0. P. Lockhart, page 6        o-4375



    Second Called Session of the Forty-fifth Legislature,
    and amendments thereto) or issued by any public housing
    authority or agency in the United States, when such
    bonds or other obligations are secured by a pledge of
    annual contributions to be paid by the United States
    Government or any agency thereof, and such bonds and
    other obligations shall be authorized security for all
    public deposits; it being the purpose of this Act to
    authorize all persons, firms, corporations, associations,
    political subdivisions, bodies and officers, public or
    private, to use any funds owned or controlled by them,
   :lnclualng (but not limited to sinking, issuance, Invest:
    ment, retirement, compensation, pension and trust funds,
    and funds held on deposit, for the purchase of any such
    bonds or other obligations; provided however, that
    nothing contained in this Act shall be construed as
    relieving any person, firm, or corporation from any
    duty of exercising reasonable care in selecting securities."
         You will-note that this article makes no special refer-
ence to taxation nor to the ellglblllty of such bond~sfor use as
tax reducing "Texas securities" as .descrlbedin Article 4769,
quoted hereinabove.                                           .~
         The Commission of Appeals of the Supreme Courtsof Texas _
in Santa Rosa Infirmary v. City of San Antonio, 259 3.X. 926, in
passingon the provisions-of-Article  ,a, Section 2,.~of-~the
                                                           Constl-
tutlon of Texas, holds as follows:
         "Exemptions from taxation are never favored and
    in construing laws exempting any citizen or class of
    property all doubts are resolved against the exemption."
         It is our view that the rule of statutory construction
here expressed would apply with equal force In the interpretation
of laws reducing taxation.
         It 1s therefore our opinion that the answer to the first
part of your question should be in the negative, That is, that
the bonds in questlon Issued by local Texas housing authorities,
not secured by valid first liens on Texas real estate, are not
eligible as tax reducing "Texas securities" under the Robertson
Law, Articles 4765-4769, as amended.
         We think, however, that it is correct to take a differ-
ent view in regard to the eligibility of such bonds as tax re-
ducing "Texas securities" under Article 7064, as amended.
         Article 7064, as amended, Acts 1941, 47th Legislature,
H.B. No. 8, Art. XVIII, Section 1, applies to insurance companies,
     Honorable 0. P. Lockhart, page 7        o-4375



     other than life and other than fraternal benefit associations,
     and provides for a tax on gross premiums. The applicable part
     of said article, as it relates to your question Is quoted as
     follows:
              "If any such insurance carrier shall have as
         much as one-fourth of its entire assets, as shown
         by said sworn statement, invested in any or all of
         the following securities: real estate in this State,
         bonds of this State, or any county, incorporated city
         or town of this State, or other property In this State
         In which by law such insurance carriers mar invest
         their funds, the annual tax-of any such~lnsurance
         carrier shall be one and one-half per cent of its
         gross premium receipts; and if any such insurance
         carrier shall invest as aforesaid as much as one-
         half of Its assets, then the annual tax on such ln-
         surance carrier shall be three fourths of one per
         cent of its gross premium receipts as above defined."
         (Emphasis added)
              We have underlined the part of the above quotation
     which we think applies most directly to your question, and we
     believe that Article 1269k-1, quoted hereinabove, brings the
--   bonds referred to in your question within the classlflcat-Ioncon-
     templated by the clause:   or other property in this State 1;
     which by law such insurance carriers may invest
                                                _.. their funds.
                                              .~.                      '
              We are therefore of the opinion that the second part of
     your question should be answered in the affirmative, and that the
     bonds in question are eligible as tax reducing "Texas securities"
     under the provisions of Article 7064, as amended, provided the
     bonds have been legally Issued.
              We do not however here pass on the question as to whether
     the San Antonio bonds to which you refer are legal investments
     for Insurance companies since we do not know whether they were
     issued as the law directs and in view of the fact that their
     validity has not been passed on by the Attorney General's Depart-
     ment.
              We trust that we have satisfactorily answered your ln-
     quiry.
                                                        .   .




Honorable 0. P. Lockhart, page 8            o-4375



                             Yours very truly
                          ATTORNEYGENERAL    OF TEXAS
                             By s/Robert F. Cherry
                                  Assistant

RF'C:AMM:wc

APPROVED MARCR 16, 1942
s/Grover Sellers
FIRST ASSISTANT
ATTORNEY GENERAL
Approved Opinion Committee By s/GWB Chairman
