Case Information
*1 OFFICE OF THE ATTORNEY GENERAL OF TEXAS
AUSTIN
GERALD C. MANN ATTORNEY GENERAL
Bonorable O. P. Lockhart, Chairman Board of Insurance Commissioners Austin, Texas
Dear Sir:
Opinion No. 6-5397
No: Mottuary funds of mutual assessment associations; whether in 1960 of Chapter 388, Acts of the 48th Legislature, 1943, (Article 8988-9, Vernon's A. C. 8) such funds or additions thereto are taxable as income under the Federal Revenue Act of 1938, and related questions.
We have considered all of the questions propounded in your letter relating to the above subject and we are of the opinion that mortuary or relief funds of mutual assessment associations; not accumulated, or contributions that may be made thereto; should not be treated as taxable income.
This very question, involving the Texas statutes regulating the affairs of such associations, is answered by General Life Insurance Company v. Commissioner of Internal Revenue, v. 8. Circuit Court of Appeals for the Fifth Circuit, Opinion No. 19828, decided July 8, 1943.
Referring to the tax liability of a Texas company mortuary fund, under the Federal Revenue Act of 1936, the court said in part:
"e. . The fact that it is called a mortuary fund instead of a Reserve Fund is of no consequence. e. . ."
"e. . If it is irrevocably dedicated for the use and protection of the policy holders, it is not income of the company. e. . ."
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Nonorable O. P. Lookhart, Chairman - page 2
"o o o. Since the reserve is held for the policy holders and not for the
Company, Congress has not taxed this reserve as income to the Company. o o o.
The Texas Legislature know of the efforts being made by Federal revenue agents to tax these funds. In May, 1943, it enacted the following: "Section 1. Any company o o may pay from the mortuary or relief funds o o any taxes that may be required because of income to such funds." "Section 3. The fact that these companies - - are threatened with taxes on their mortuary funds - - creates an emergency. - - . Chapter 286, Acts of the 48 th Legislature. Article 8068-8, Vernon's A.C.S.
This Act, of course, merely permits the use of mortuary funds in payment of income taxes that are required to be paid. [2] It is not intended to relax the inviolability of such funds for any other purpose. See our Opinion No.
Very truly yours