Honorable Ben Atwell
Chairman, Revenue and Tax Committee
House of Representatives
Austin, Texas                     Opinion No. M-443
                                            Re: Constitutionality of
                                                H.B. 25, 6k.t Leg.,
Dear Representative Atwell:                     1st C.S. 1969
      You have asked our opinion whether House Bill No. 25,
61st Legislature, First Called Session, 1969, is constitu-
tional.
           Our opinion is that this Bill is constitutional.
      The Bill amends Title 122-A, Taxation-General, Re-
vised Civil Statutes of Texas, 1925 by adding a new
Chapter 16, which imposes a tax of $2.50 on each trane-
action of sale or transfer of shares, certificates, bonds
or securities issued by certain entities and under specified
conditions.
      The Bill provides definitions of terms and for collect-
ion and payment of the tax, for allocation of the revenues
received and other relevant provisions,
           The formal provisions of the Bill are constitutional:
      (1) The Bill contains only one subject and its
caption is sufficient (Art. III, Sec. 35),
      (2) The Bill is a revenue measure and it originated
in the House (Art. III, Sec. 33), and

Set 2$3) The enacting       clause is in proper form (Art. III,
       .     .
      We have considered the substance of the Bill with refer-
ence to the following constitutional provisions:
      (1) That portion of Article VIII, Section 1, which pro-
vides that,

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Honorable Ben Atwell,   page 2 (M-443)


      "Taxation shall be equal and uniform. . . .'
      (2) Article I, Section 3 which reads as follows:
      "All free men, when they form a social compact,
      have equal rights, and no man, or set of men,
      is entitled to exclusive separate public emolu-
      ments, or privileges, but in consideration of
      public services."
      (3)   Article I, Section 19 which reads as follows:
      "No citizen of this State shall be deprived of
      life, liberty, property, privileges or im-
      munities, or in any manner disfranchised, ex-
      cept by the due course of the law of the land."
      (4) The due process and equal protection clauses of
Section 1 of the Fourteenth Amendment of the United States
Constitution which read as follows:
      "Section 1. . . . nor shall any State deprive
      any person of life, liberty, or property, with-
      out due process of law; nor deny to any person
      within its jurisdiction the equal protection of
      the law."
      The provisions of the Bill to which we have directed
our more particular considerations are those contained in
Article 16.02 thereof which reads as follows:
      "Article 16.02.  Imposition of Tax; Exceptions.
      (a) There is imposed a tax of $2.50 on each
      transaction of sale or transfer of shares, certi-
      ficates, bonds, or securities, issued by the same
      company or governmental entity when the sale or pur-
      chase, or transfer occurs within six months of the
      acquisition of the shares, certificates, bonds, or
      securities.
      (b) The tax imposed by this Article does not apply to:
          1 The initial issue of stocks by a corporation;
         [I The sale of stocks owned by a mutual fund
          2
             so long as it is not the stocks of the mutual
             fund itself which are sold; or
         (3) bonds or securities issued by the United
             States government, a state or local govern-
             ment, a county, or any political subdivision."


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Honorable Ben Atwell, page 3     (M- 443)


      The classification of the transactions taxed and of
those exempt has been our principle concern in considering
your question.              we believe the case of Hurt v.
Cype;, 130 Tex.1~3$~E?~0W.2d     836 (1937) supportsthese
c ass fications made by the Pill. Of more particular concern
is the provision which imposes a tax of $2.50 on each of the
taxable transactions enumerated, in view of the fact that
some securities, at times, sell on the open market for sums
which are very near or at times less than the amount of $2.50
per share, which amount is the amount of the tax for a trans-
fer of one or more shares of a company.
      The holding in New York, ex rel. Hatch v. Reardon,
204 U.S. 152, 159-160 (lgv() resolves our question in favor
of the constitutionality of House Bill 25 under considera-
tion. The Court upheld the New York tax of two cents on
each hundred dollars of face value of stock for every sale,
etc thereof. One of the stocks transferred was worth $30.75
a share of its face value of $100.00 while the other share
transferred was worth $172.00. The Court stated that while
the inequality of the tax, so far as actual values are con-
cerned, was manifest, yet equality had to yield to practical
considerations and usage and that there must be a fixed and
indisputable mode of ascertaining a stamp tax. The Court
further held and stated as follows:
             .Valuation is not the only thing to
        bi ionsidered. As was pointed out by the
        Court of Appeals, the familiar stamp tax
        of two cents on checks, irrespective of
        amount, the poll tax of a fixed sum, irre-
        spective of income or earning capacity,
        and many others, illustrate the necessity
        and practice of sometimes substituting
        count for weight.
        Co. v. Pennsylvania, 13a U
        and Manufacturers' Bank v.
        %'/ U.S. 4bl. e s on (p.159-160)
In the subsequent case of Carmichael v. Southern Coal Co.,
301 U.S. 495, 511-512 (1937) the Court again held that the
administrative convenience and expense in the collection or
measurement of a tax are alone a sufficient justification
for the difference between the treatment of those who would
pay a small amount of tax and those who would pay larger
amounts. Accord: Clay Productzs,Inc. v. U.S., 52 F.2d 1033
 Ct. of Claims, 193)   Vaughan v. New York, 5 N.E.2d 53
 N.Y. Ct. of App., l&6), 108 A.L.R. 950 and the annotation

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Honorable Ben Atwell, page 4 (M-443)


immediately following; New York v. Latrobe, 279 U.S. 421
      * and International Shoe Co., v. Shartel, 279 U.S.

      Under the authorities cited in the immediately pre-
ceding paragraph, we believe the relationship between the
amount of the tax imposed by House Bill 25 and the value
of property transferred, or of the privileged exercised,
is within that degree of power inherent in the Le islature.
Panhandle Oil Co. v. Knox, 277 U.S. 218, 223 (1928).
                      SUMMARY
          House Bill 25, 61st Legislature, First
          Called Session, 1969, is constitutional.~
          Its classification as to transactions
          which are taxable and those which are
          exempt, as well as the amount of the
          tax with reference to the value of
          properties transferred, are within con-
          stitutional limitations.




Prepared by: W. i. Allen
Assistant Attorney General
APPROVED:
OPINION COMMITTEE
Kerns Taylor, Chairman
George Kelton, Co-Chairman
James Broadhurst
Alfred Walker
John Banks
Jim Swearingen
W. V. Geppert
Staff Legal Assistant
Hawthorne Phillips
Executive Assistant



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