Case Information
*1 Opinion No. O-5473 Hon. 0. P, Lockhart Re: Do the Texas and Pacific Rail- Chairman Board of Insurance way Company Ffrst Mortgage 5% Bonds qualffy as tax reducing Commissioners under Article 7064, Vernon’s Annotated Austin, Texas
Civil Statutes?
Dear Sir: of July 20, 1943> requesting
Your letter the opinion of this department on the above stated question reads as fol- 1owsr
“Your opinion is requested as to whether or not Texas and Pacfffc RaLlway Company First Mort- gage 5s Bonds due 2000 qualify as tax reducing under Article 7064. We are giving you securftfes some general information about the nature of this company and the nature of the bond issue. It may be that this bond issue qualifies as tax reducing under the term in said Article 7064: Ior other fn this in which by law such lnsur- The quoted ante carriers may invest ,theEr funds.’ phrase names a type of securfty which is classed as tax reducfng.
“The home office of the Texas and Pacific Raflway Company is en Dallas, Texas.
“Out of the total mileage, 1,800, about 1,200 mfles o,f the Railway are located fn Texas. “Beca,use of the condftions listed in the next preceding paragraph a majority of the employees are residents of Texas and most of the money dis- bursed by the company is spent in Texas.
“The company operates under a Federal charter, but some other securi,ties qualify where the corporateons or associations have Federal charters such as Savings and Loan Associations. “There is also attached for your a detailed of this particular bona issue.” *2 -- page 2 (o-5473) The detailed of the bonds under considera- tion which is attached to your inquiry is as follows:
Due J\ana 1. 2004 “$24,989,000 outstanding - Closed Mortgage (no bonds ranking equally with or prior to this mortgage can be issued.)
“Secured by a first lien on 1394.38 miles of railroad from Texarkana Texas, via Marshall and Whitesboro, to Sierra B 5. anca, Texas (near El Paso), with branch from Marshall to Thurber, Texas, from Marshall to Reisor, La., and from Shreveport, La.
to New Orleans, La. with branches to Port Allen and La.; a second lien on 387.96 miles Indian Village, of road.
“Legal for pu.rchase by savings banks in Cali- fornia, Maine, Massachusetts, New Hampshire, New York and Rhode Island.
“Total value of road and equipment approximately $19090009000 Q “First Mortgage Bonds are followed by junior in the amount of about ~52,000,000, by $23,-
debt (Par $100) 5% non-cumulative 703,000 preferred and $,38,755,000 (Par $100) common stock. “Interest on all debt earned as follows: 1.92 times 3.34 ” 1.36 times
1930 3: ;;g 11 3.49 times 0 1943 (12 x2 )’
mos. ending May 31, 1943) Interest payments have been made promptly, when due, the past ten years.” in part:
“Every insurance corporation, Lloyds or recip- rocals, and any other organization or concern trans- acting the business of fire, marine, marine inland, accident 9 credit title, livestock, fidelity, guaranty, or any other kind or character surety, casualty, business other ,than the business of life *3 - Hon. 0. P. Lockhart, (0-5473)
insurance, and other than fraternal benefit asso- ciations, within this State at the time of filing its annual statement , shall report to the Board of Insurance Commissioners the gross amount of premiums received upon property located in this or on risks located in this State during the preceding year, and each of such insurance carriers shall pay an annual tax upon such gross premium receipts as follows : If any such insurance
shall have’ag &ch as one-fourth its ‘entire as- sets, 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 of any county, incorporated city or town of this 3tate, or other in this State in which by law such insur- ance carriersmay invest their funds, then the annual tax of any such insurance carrier shall be one and one-half cl*) percent of its said gross premium re- ceipts; . . .I’
Article 7064, supra, provides for a further reduc- in taxes where greater amounts of the funds mentioned in said statute are invested in securities therein named.
Article 4706, Vernon’s Annotated Civil 3tatutes, sets forth or n&ties the securities in which Insurance companies, ex- health and accident insurance, may cept companies writing life, invest their funds over and above their paid up capital stock. in partr
“No company, except any writing Life, Health, and Accident Insurance, organized under the provi- sions of this Chapter shall Invest its funds over and above its paid-up capital in any other manner than as follows: In the capital stock, bonds, debentures,
“cd) bills of exchange or other commercial notes or bills and securities of any solvent dividend paying cor- poration which has not defaulted in the payment of any of its o’bligations (5) years; provided that no such insurance company shall in its own stock, and provided no such insurance company shall invest any of its funds in any stock on account of which the holders or owners thereof may, in any event, be or become liable to any ,assessment except for taxes, nor in *4 (O-5473) the stock of any oil manufacturing or mercantile corporation organize !i under the laws of this 3tate unless such corporation had a net worth of not less than Two Hundred Fifty Thousand ($25O,OGO.O0) Dol- lars provided that such corporation is solvent, dividend paying, and has not defaulted in the’pay- ment of any of Its obligations for a period of five (5) years, nor in the stock of any oil, manufactur- ing or mercantile corporation not organized under the laws of this State unless such corporation has a capital stock of not less than Five Million ($5,000,000.00) Dollars and unless such corpora- tion is solvent, dividend paying, and has not de- faulted in the payment of any of its obligations for a period of five (5) years.”
A representative of your department has informed us orally that there is no available in the insurance department reflecting whether or not the corporation whose bonds are offered for sale is a dividend paying corporation which has not defaulted in the payment of any of its obligations for a period of five years.
In view of the foregoing statutes, you are respectful- ly advised that it is our opinion that the
mentioned in Article
are authorized to in such bonds provided the corpora- selling or offering to sell such bonds is a dividend pay- ing corporation which has not defaulted in the payment 01 any its obligations for a period of five years. It is our opinion the above mentioned bonds are eligible securities under Article 7064, supra, provided, such bonds are within the State of Texas for any tax year which they are offered or claimed as tax reducing and provided, as above stated, that the corporation selling such bonds is a dividend paying corporation which has not defaulted in the payment of any of its obligations
years.
Yours very truly ATTORNEY GENERAL OF TEXAS By /s/ Ardell Williams Ardell Williams, Assistant APPROVED WC 12, 1943
/s/ Grover Sellers
FIRST ASSISTANT ATTORNEY GENERAL
(This opinion considered and approved in limited conference) AW: db rwb