Hon. John Ben Shepperd                  Opinion   No. V-1248
Secretary of State
Austin, Texas                           Re:   Effective dates of increases
                                              in corporation   franchise tax-
                                              es under House Bill ,285,Acts
Dear    Mr.   Shepperd:                       52nd Legislature,    1951.

         Your letter requesting our opinion in reference               to the
above captioned matter reads as follows:

             “In House Bill 285, of the 52nd Legislature.,         Ar-
       ticle 7084, R.C.S.,   was amended by providing that,
         . . . every domestic     and foreign corporation      hereto-
       fore or hereafter    chartered or authorized to do busi-
       ness in Texas, or doing business in Texas, shall, on
       or before May first of each year, pay in advance to
       the Secretary   of State a franchise tax for the year fol-
       lowing . . . which tax shall be computed on the basis
       of One Dollar and Twenty-five        Gents ($1.25)     per One
       Thousand Dollars      ($1000.00)    or fractional part there-
       of; provided, that such tax shall not be less than Twenty-
       five Dollars  ($25.00)    in the case of any corporation        . . .’
       The effective date of this Act isSeptem&er           1. 19,5.1. The
       present effective rate of tax under Article 7084 is One
       Dollar ($1.00) per One Thousand Dollars            ($1000.00)
       and a minimum of Twenty Dollars          ($20.00).

             “Article 7086, chapter 3, title 122, provides in
       part that ‘wherever    a foreign corporation  applying for
       a permit has theretofore     done no business in Texas,
       such initial tax shall not be payable until the end of one
       11) year from the date of such permit, at which time the
       tax shall be computed according to the first year’s busi-
       ness as prescribed,   in Article 7084, Revised Civil Statutes
       of Texas, as amended; and, at the same time, such cor-
       poration shall also pay its tax in advance, based upon the
       first year’s business,    for the period from the end of the
       first year to and including May first following.’     (Under-
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Hon. John Ben Shepperd,    Page 2 (V-1248)



    scoring   ours.)

          “Article 7089, R.C.S.,  as amended, provides in
    part that ‘where a foreign corporation    has not here-
    tofore done business   in this State and is granted a per-
    mit to do business in Texas, it shall file its first re-
    port as of one (1) year from the date such permit was
    granted, within ninety (90) days of such date.’

          “It has become necessary   that we have printed
    the required forms for ‘First Year Franchise     Tax Re-
    ports.’   The order for these forms must be placed im-
    mediately ,and.the new rate Will be shown for the appli-
    cable period or periods.

          “We are uncertain as to the proper method of
    computing the franchise tax due by a foreign corpora-
    tion that qualifies,   for example,  on June 30, 1950.
    Its first franchise tax payment would be due ofi or be-
    fore ninety (90) days after June 30, 1951, making the
    final date of filing and payment before the accrual of
    penalties,   September    30, 1951.  This latter date is thir-
    ty (30) days past the effective date of House Bill 285.
    Actually,   of course, the report could be filed and the
    tax paid immediately      after June 30, 1951, and before
    September     1951.   Bearing in mind the date, of levy, as
    contemplated     by statute, we respectively    ask that you
    answer tb,e following questions:

         “1. In the foregoing hypothetical  case, is the tax
    to be paid at the $1.00 rate for not only the first per-
    mit year ending June 30, 1951 but also for the period
    from June 30, 1951 to May 1, 19521

         “2. Or, is the tax to be computed at the $1.00
    rate for the period from June 30, 1951 to September    1,
    1951 and then at the $1.25 rate from September    1, 1951
    to May 1, 1952?

         “In another hypothetical case which will arise in
    the printing of these forms, we are confronted with
    another problem.    A foreign corporation  qualifies on
    November    1, 1950, thus making its first return; and
    tax payment due on or before ninety (90) days after
Hon. John Ben Shepperd,     Page   3 (V-1248)



    November     1, 1951.

         “1. Would the tax in this case be computed at
    $1.00 only from the period Novembers 1, 1950 to Sep-
    tember 1, 1951 and at the rate of $1.25 for the period
    from September   1, 1951 to May 1, 19521

         “2. Or, would the tax be computed at $1.00 for
    the full first permit year &ding November   1, 1951 and
    at $1.25 for the following period to May 1, 1952 ?

         “‘3. Or, would the tax be computed at the rate of
    $1.00 for the entire period from November    1, 1950 to
    May 1, 1952?

          “4. Or, would the tax be computed at the rate of
     $1.25 for the entire period from November   1, 1950 t0
     May 1, 1952?

          “In still another situation a foreign corporation
    qualifies on July 15, 1951, thus making its first return
    and tax payment due on or before 90 days after July 15,
    1952.

         “‘1. Would the tax in this case be computed at
    $1.00 from July 15, 1951 to September    1, 1951 and
    thereafter at $1.257

         ‘2.  Or would the tax be computed      at $1.00   for
    the entire period ?

         “3. Or would the tax be computed       at $1.25   for
    the entire period ?

         “4. Or would the tax be computed       at $1.00   to
     May 1, 1952.and at $1.25 thereafter?”

          The rate to be used in computing the franchise tax
depends upon the rate in effect at the time the tax liability is
determined.    If the tax liability attaches prior to September     1,
1951, the effective date of House Bill 285, the rate in effect at
that time should be used in computing the tax, which would be
the rates prescribed    by Article 7084, V.C.S.,    and Article 7084i,
V.C.S.,  or a total rate of $1.10.    If such tax liability attaches on
Hon.    John Ben Shepperd,   Page 4 (V-1248)



or after September     1, 1951, the $1.25 rate shouldbeused       in
computing the tax. The time the taxpayer makes his report and
pays the tax is wholly immaterial       in determining  the tax rate to
be applied.   In other’words,    the law in force at the time the tax
liability is determined    should be looked to in order to determine
the tax rate.   Kansas City Life Ins. Co. v. Love, 101 Tex. 531,
109 S.W. 863.

           In Opinion V-1246,      dated August 21, 1951, addressed     to
Hon. Robert S. Calvert,      Comptroller     of Public Accounts,   this of-
fice held that House Bill 285 became effective from and after
September     1, 1951, and all taxes of whatever kind or nature in-
cluded therein should be levied and collected at the rates there-
in prescribed     without regard to wfiether such tax was levied on
an annual, quarterly,     or monthly basis.      Hence, House Bill 285
imposes    an additional franchise tax at the rate of 25$ upon all
corporations     for the privilege   of doing business in Texas in cor-
porate form for the period commencing           September   1, 195 1,
through May 1, 1952.

          It is clear to us that the initial tax of a foreign cor-
poration applying for a permit to do business in Texas accrue3
at the end of one year from the date the permit is issued; and it
is likewise clear that the tax liability of the corporation   for the
period from the end of the first year to and including May 1 fol-
lowing, likewise attaches at the end of one year from the date
the permit is issued.    This is evident from that part of Article
7086, V.C.S.,   which reads as follows:

             “Wherever    a foreign corporation   applying for a
       permit has theretofore      done no business  in Texas, such
       initial tax shall not be payable until the end of one (1)
       year from the date of such permit, at which time the
       tax shall be computed according to the first year’s busi-
       ness as prescribed     by Article 7084, Revised Civil Stat-
       utes of Texas, as amended; and, at the same time, such
       corporation   shall also pay its tax in advance, based up-
       on the first year’s business,    for the period from the
       end of the first year to and including May first follow-
       &”      (Emphasis    added.)

           Applying   the above   rule,   we answer   your questions   as
Hon. John Ben Shepperd,     Page   5 (V-1248)



follows :


          Where a foreign corporation    secures   a permit to do
business  in Texas on June 30, 1950, you should use the $1.10
rate in computing the tax due for the first permit year ending
June 30, 1951; and for the period from June 30, 1951, through
May 1, 1952, you should use the $1.10 tax rate through August
31, 1951, and the $1.25 rate from September      i, 1951, through
May 1, 1952, in computing the tax due for such period.      Mann
v. Gulf States Utilities Co., 167 S.W.2d   557 (Tex. Civ. App.
1942, error ref.).


          Where a foreign corporation   secures a permit on
November    1, 1950, you should use the $1.25 rate in computing
the tax due for the first permit year ending November    1, 1951;
and for the period November ,l, 1951, through May 1, 1952, you
should use the $1.25 rate in computing the franchise tax due
for such period.


          Where a foreign corporation  secures a permit on July
15, 1951, you should use the $1.25 rate in computing the tax
due for the first permit year ending July 15, 1952.



                            SUMMARY



           1.n computing the franchise tax liability of a
     foreign corporation    which secured     its initial per-
     mit before September     1, 1950, the $1.10 rate pre-
     scribed by Article 7084, V.C.S.,     prior to its amend-
     ment by House Bill 285, and by Article 7084i,V.C.S.,
     should be used in calculating    the tax for the initial
     year.    In computing the franchise tax liability of a
     foreign corporation    which secured its initial permit
     on or after September     1, 1950, the $1.25 rate pre-
     scribed by Article     7084, V.C.S.,  as amended by
     House Bill 285, should be used in calculating        the tax
Hon.   John Ben Shepperd,   Page   6 (V-1248)




       for the initial year and for the period from the end
       of the initial year up to and including May 1st fol-
       lowing.

APPROVED:                               Yours      very truly,

Everett Hutchinson                       PRICE DANIEL
Executive Assistant                     Attorney General

Charles D. Mathews
First Assistant
                                        BV   I



Price Daniel                                     C. K. Richards
Attorney General                                       Assistant

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