Case Information
*1 .‘::. OFFICE OF ‘THE GENERAL, OF TEXAS
.~’ ,AUSTXN
‘., &l8tin,
Honorable
‘comptroller of
Taaa :
.~ .Doai Siri I. : i’
;: ,:
;: :. oritlea upon whioh we ~. ;
llevs it may ‘be helpful -I ubaoription warrantam.
o bs wnrraata lseued by a .! et to atoak etidoaa-
Artlalo 15, R; B. S ROE. Se88.r .i ioh your request is ahated, was AOL A aomparleon Of the pertinent ,!
,, ro rtwenu~ m3afwe8. f5eom8 roquielta. Thus0 POF~~OJI? r0ii0w: ,-' - I:‘~ ’
.. *Art. 7047111. Stools trausror en4 saXerr tax- Tax irqoaa4~ afrixlng atampa; mamorandum 0r sale .~ i ~aSeotlOn 1.. Thoro I8 hereby imposed an4 levied ;j . * a tax’ a8 herelaaftar provided on all tsal+m, agreomeata
to oell, or nionoraa6a of salefi sad all~~4ellverle8 ’ ~.tnaoSoro or. &area, Or ar~tdoates of atoak, .or: ~’ ._ j i .~ ‘* .’ ‘,: . . ..’ .’ j ; *2 , 165 , !1
i .,’ Bon. thorgo 8. Shoppar4, Page p! . <’ .’ ~’
oertiti atao for rlghta to’etook:, or owtirl-
oaten 0 f dopooit rapresentla~ an intarest la
or reprooeatlag oortltloates kado taxable under or r0r0ir4 aesoola- thla Sootioa ln any doneof
tlon, oozpany, or aorporatloa, or aertlrloateo 0r
lnteroot la any bueiaeoo oonduotod by truoteo or truatoeo made aftor 0rrOOtivd.9 Cat0 .horoor,
whether UT&I upon or shown by th.3 books or the
~aoeoalation, donpeny, aorporatlon, or trustee, or by any asolgamcmt la bl’enk or by ‘any do1.ivez-y or any pagoro or egreomnt .or m0oorana0t3 or other . .
srldonae or sale or transfer or order ror or agree- mnt to buy, whethor iatermadiata or rinal, and
wbethar lnvsotlng the holdor.uith the beneflolal
late&A la or legal title ouob atook or other .‘..
oortifioate taxable horeundor, or wlth tho posses-
: olon or ~86 thsroot ror any purpose, or to oooura rOm0. payment oi ~onoy or tbs ruture txwno-
tar of any ouah otock,, or aertiriaato, oa each : * *.. ‘.,: ~ ‘tbrss.(S) hun4rs4 of faoa~.valua or traatlon 4ollaro oonto, ercrept where cases tho shares thereof, ~;;. I;’ :, or oartfffaatao ar6 loauo4 wfthcut dealgnats moaa- tary voluo, ln wblah aaoe the tax, shall be at .tho ., $Fate ff thrqe (J) oonto to? eaoh and, avery.ahme. :: * . .
IChapter 50 Civil ‘IA&J Uow York. *Tranofero 8ubjeOt Tax- provldos ati iOliOw8:
“SOO. 270. Amount of tax - 1. There la hereby ,” impose4 au4 shall Sxae4latoly accrue an4 be aolleatod a tax, a8 herein provided, oa ~811 sale8 or s&room.i#o ” to ~311, or me8ioranda 0r oale‘e an8 all .dellv~rieo or : tranofero OS shares or a0rtlilosteo ot otoak, or oortl-
rloateo oi rlghta to atook, or aertlfloatoo of intorest ia property or aooumulatlons, or aortiiioatss 0r depoolt reprooontlng aertlfloateo taxable under tblo artlolo, in any 4omaotio or foreign neeoolation, oo~~ptny or oorpora- tloa, or oortlfloatoo 0r interest la buaincoa oooduote6 trustee trustees msde artor ilrot day or ,..~ June, aiaotoea hundrad five, whether uado upoa ‘.’ .ohownmby the. bOOk8 of thea aeeoalat~on, aozipany., apr- ,.. poratlon or truotdo, by any aoslfgumnt 1x1 blank, or :. . . by any dellvory, or by say paper or a&reom+at or niouo-.:. ‘. .; raadum or 4thor ~vl4enoo or sale or traaorer, whetheq : “. ” , . . ‘. ‘..
: .I lntamrodlate or final., ‘end ahether lnve6ting : . .‘. . .i ’ .tha holder wlth the bannefioial Intereat la or .*. leeal’tit& to said otook, or other oortlSloetos
tarable hefaun&er, or merely orith tho poe6e66lon.
or me thoreOS for any purpose, or to Beauro the Suture paynen~ or money’, or t&e Sututa tranator
of any such stock, or oort~tioatea.~
We obeervo that the longuagd.os the tuo hots. do- exactly scribing taxable seeagpbroood tho ’ the tranoaotiono #arm uord6, though not arranead. In tbe eaaio oontlnulty. 9io ’ ;Seif.to rind exgreas laLan(;uap in either of tbmo statutes at-
trmptlne to. levy tar upon Ytlfihtn to aubecribe to stock.* : SUma tho United States Xnternnl iiovenuo Aot, Title lf302b, U. S. C. A.. had Its lnaeption prior to
26, pqrqraph the p66aee of the Toxaa statute, we nust grasumo that the bad ouoh Aot before It at .the tlma It adopted thm . :eglslatura Row York statute as the model for lts‘aSSort6. The exprers 16nguage of f’ pert of the Federal Aot i0 a9 follows; ,, .-
-(b) Sales and tranofoars. On all mlea, agreemeat aell,, or monrorando 0S eslos or. de- or, or trapsfort livarlee of leg61 tltl@ any ~0S tho~rbfnw or oert$Slaatas mcntlonad or described id euboootlon (e), oc to xkhta to subsdribe for ’ . .: or reoeloo’suoh ahares or oartlSlcate6~ whether m6tYe upon or shown by the. book0 of the oorporatlon : , : or .othpr: Organl68tlOn, or by’anp 6t36lgUi~~nt in
bleak, or any delivery,, Or by any paper or agree- ’ : ’ meat or memorandum or other evldenaa of tran6SOr or : .~ : sale (whether ontitling the holder ia any uonnor to ,,’ .: s
the bobeflt oS suoh ahaT oertlfioate, interest Or . not), on eoob &lob of per faoo ,oalu6
rlehti, or Sreotion thereof of the aertifloats6 OS suah
oorcoratlon or other or&ealzatlon (or OS the 6haroe wbero no’ oertifioatoa were iesueb) . . .*'
In ~o&Hzulng a etatute, the .gurpo~e lo to. eeaertaln the lo&lative intent end from ou,r oboorvatlon of ex~resa
rcvi~ions oS the tbres revenue maasure6, we Sind that mnse +-ST--- ‘IfIr ta to subsaribe to etoOk* though InelUded in the Podoral
et?Auto in onritted Sran fiat York and Tours statutes and we muet keep tb~tinotlon oloarly in dad in soeking tletor; to tin0 intention or tho Lei3lalatUrO~
:..
~0s. Coorgo 8. Shoppard, Page 4
The Texas law being oS rOOat orluln, ha6 not been ;ntorprett?d by Our OOUrt6, sad for that FeaBon, we mot turn to Now York dooIsion6 and ruleo and rogulotlano of Ite tax suthoritiee for oomtruotlon of the quoatlon herein pro6ent-
The60, or oour60, aro not'conolu6Ive but are pOr6U6aIVO :% rhoulb bo 61vea @oat woI&ht.
Conmon panotloe end prooeaure of aorporatlons doing busineos tbroueh the New York Etook Pxchan(~e uni!er nsthodr ap- proved the New York Tax Co~~~~lsslon should be oonsldercd Ja doterdnlne ~ranseotione taxable and tranoaotlona not taxable unbar Now York furlsprudonoe. Oboarvlng the rU1tl6 68 inter- protod by ParagraFhh8 600000,60-300, InolusIre, the Corporation Tax Servlae, C. 0. Ii., 11. Y. 1; paragraph8 41004l34, Inolu- ei+e, Corporatloa Servloe,. Yrentioe-Hall, Vol. 1; kna Chrl6ty &XoLoaa, Tbo Tranofer of Stook, 2ntl Ed.; we observe thotr I. Subaorlptlon werrant 16 a oertISloato . . .
~srld~nolag tha right to aubeoribe to stook and Is' t Issued by the oorporatlon the titookholder ontitled * to the prlvllege of subscrIbIng to the stock to be la*- rutid. I”oragraFh 4108 and I’sragraph 4205, Premtlao-, Hall Corp. Serv., Vol. 1. ;. Fresentatlon of warrant.
‘XL (a) Tbo,warrant shall be preaeated to tho oorporatlon before tlio expiration date shown on ,a. the SaOe of ouohwarrantaad upon suoh prO6Ont6-
.: tlon the bearer nay 6ub6OrIbO to etook. ,fS full .:.. .“:. payment I6 made IOr shares to .be iosued 6ub-
6oriber la delivered a reoeI$ OvIdenolng hi6 rI&ht the otook, entItlIng him on a spsoiflad datd~‘to uortaln full share6 or Sraotloa6l 6heres Of atOOk, subroquentlp bolng i66Ued OOrtlfiO6tO8 OS atook.
F6ragraph 4208, Prontloo-Xall Corp. serv., Vol. 1.
(b) .fn evant bearer eleots to pay for suoh ~’ share6 llr Inetallmeats be IS laouod a negotfablo '.
.MOelpt, ovIdonoIng hi6 right to the stoak, entitl- *. '. ing the holdor on a 6peaIsIed date t0 OertalXi full
ohare or .sraotlonal eharos~ atook, and upon : -bin61 pqwmt, at the an&In mannor opeol-
‘Slad, &e ia iosuod, oortUloato8 of 6took. 4 *.
_’ ’ *5 ‘. 168 , ,’ I. ,
son. Gaor~e Ii., ShepDard, Peg9 s
Upon the tranarer by sala or otherwise of subsorlp- tlon nrrants, datlnad in Paragraph I above, the Federal Tax rppller and stampe ara roqulrad to be arrlxed and oanoalled.
’ Tba Uaw Yor& tax doae not apply to this’ transaotloa. Para-
graph 601lC9, C. .a.~ X., B. Y. 1; ,Paragreph 4205 and pa80 4148, Praatl00-Hall Corp. Sarv?, :Yol..l; Ohrioty & UoLaan, Paraereph 563, page 834.
Subsaquant to tha aot or subsoiibina to the atook by *.* a bolder oi a subscription warrant ,as described In Paragraph II.
* (II) and (b) tbaraof, eny trensaotloa.involving the traoarar of the rl&ht- held by tha subsorlba~ and oan- requires arrlxln6
.oallatlon of Unltad Stotae Revenue Staops and New York Revenue stamps. : Sohmar v. Rarflaa, 1m-a; ParaCrapb 4205, Sea. 7, Prantloa-Ralf Corp. Serv., Vol. 1; and Pnragraph 60-301, ~The .Qorporatlon Tax Servlo~, 0. 0. ?.. X.-Y; 1; .‘, ” : The State oi Naw York ‘Tax Department, Albanp;Naw York l ‘,la.tter to the New York Stook Exchange, dated Kay S, 1922,. r&t “Ey ‘CartlilOata Of Richtis to Steak* IS meant ._
o& sudh. oertlrloatas wbloh ontltla tha holder on a apsoiri6d d&e to oartaln run share8 op rrsatlolul *Rights to oubacrlba’ stock do’ share8 of atook. this mean idaare
not oozaa within n the statute.W (Undarsoorlng our5J Pursuant to a wzlttan request by the) wrltor tha State oi New York Dapartmant or .Taxetlon and Pinanaa answered by’ latter .&to6 l!?ar0h l;-1944, advlsl& u5 further +th tb rub- refaronoa rorlptlon warrante that 8 uah are not taxable under New )lOrk Law.
The partlnont. part or auoh. latter reads as lollowsr
*The raderei rtook transrar tax law 40rititaly
provides ior a tax on tranafers of laplal title to
*rlp,hts to subeorlbe ror* atook. The New York law. It does tax trauerara or 1~’ *
has no slaillar provision. .*oartirloatea ‘or ~rlghts to steak’ but tha Tax Corn- mla8l0n has held that oortltioate tkP right giVin6 ;;o~$?Ohaer atook 1s not T oartirloote A6hts t ,.
*I osmiot rerer you’ to any oginlon. of our 2ttfkney Caneral: to any dooleion of our ooUrt8 ,., on the quo&lo& : ?y way or- r.aaeonlng it may be. ..’ * i i i ; “. ,::. ,. ., (_ I. *6 :
..” pointed out that~ a right to subearlba So= stoak ‘or a rjght to purchase stock is likely to be of’ . The aoaaldaratlon whloh must be
Id for thi subeorlption or the purchase will n many oases, at least, represent as much as the : : stock 1s worth. It saama highly lnaquitabla~, . tbaratora, to impose the 6ama tax on a transfer . . I OS a stook purohasa warrant, (a oertlrlcate or a ..~~ rl&ht to rooaiva stook after paying <or It) as on . a transrar 0r a’ .~artSriaatd giving a right to, ra- .
oalva stoak without paying snything nor possibly some small amount ror axpanaas as in the ease,
r0r axsmpla, or. a oorporata raorga;anlzatlon In
whloh the holder of a bond is antltlad to receive
stook. upon paying certain expans&s. It is believed .’ that New ,Pork never Intended to tax transtars OS
tights to. aubecrlbe for stook and’ that the. Lmguaga oi the statute 80 lndloatas.~~ : i : ,.: Mtar amsidarlng all .ot the above, we must readily’ : aonolude that the transiar OS subsorlptlon warranta, though ” taxed under l&a Federal Act, Is not tsxabla under .tha New. York Aot, Rowever, It follows .that subsequent to the aotlori or t@ bearer OS suc& warrant ,ti subscrlblng Sor the stock that any transactiOA relating to the sale or other transfer oS.any OS rights. or lntannedlata aartlSicatai avldanoing suoh rights is tqxs3le both ,undar; the Federal anil NWJ York lawsr Froi the “l&ant ‘or subsoriblng to’the stoak until ,.
the aotual issuanoe OS certlPioatas OS stock; the transiar OS . :’ the rights evidenced by lntarnediate oartlSlaatas is taxable. In New York, whether Sull payment is made at .the time oS sub- aorlblng or whether a .por$lon oS the payment fe deferred. The leading. oasa In New York. touahing’ this ~point ‘1~s Sobmar vs; Herden, at.al, 216 N. Y1 ,728, ,111 N. R:llOO; reversing
Appellate Dlvfsf’on, 855, ..151 N. Y. Suppi i 346i The par. ouri* opinion oS the Court or .Appeals adopted .as ‘Its oplnSon the diseaatlng opinion oS the lower Oourt; thataxt OS which is ZaOitad in rull .ln OUT ffpin+.to you, ~NoTi O-4026, ,:
IA ~tha s”hiaer’ oisa supra *be r&llPta+ corn ani in- Oreased its oapitaf. E stook and paa&ttad lts etockbo ders the
p~lpiollage OS puro&asing his portion Or the stook at’9175 par ,. ahare tha payma@.a. be!%9 ~darorred~ ., The .ogurt aald,. in part, .., .
66.$OhOWt ”
,.
‘, ~on.!,Oaorga 8.’ Sbqqnril, Page 7
_. .- II There were 51an8 llmltatlons on the .. -. ” .* I..:..: holder; &*thtwe now aheros. They were not to . . . : hav0 ail 0r tba privllaga8 0r atoakholders until
the tine1 payments, but ln the meentlxe they were .’ “’ pivea lntermodlata aortlfloatea, which satltled
. . . I ‘:‘- them to reaeloe 7 par cent Interost upon the per-
tlon paid in, together with the right or making . . ‘ the flnsl pnymoats and reoelvlng the rlnal certI- Theea lntennerdlate c0rtirio~m were . rioatba.
etook 0ertlrIcatee; thoy were transrorabls, and : .( ‘2 .gave ~fo the holder the rights or a otoakholder upon the porf~rsmnc~o or the oonditloao. The foot ~.* . . . :. ;. : , that they did not IrmadlatcQ invest tho holder with
. . .; all of the grivileeeo or the old oortlCIoatea IS ’
no Iaportanoei oaoh or them ocrrtirlcatee ~.a:218 a ‘paper or a(2reemeAt oraoziormlum other evidence Iatarzimllate to the rlael~ oer- 0r odle or timmrer~ and It (POa designed Co saoure the Wuturo tliioatee, tramfor aJ’ any ~t.ook,~ %hIch mipbt heve been soourod to,tho holdor thepaot. . i .*
Tba 6soI6Ion ik thi S&mr COJB, cu&a.doa8~not diaows the ‘queotlon herein r&104, but wo molto It aa ohola- In6 a distlnotioA between rights to otook evidenced Inter- ‘msdiste ‘oertifloatee Iaauod artor aubeorlotion, therein dlri- ouased, ead ri&hts ‘to aubsorlbe to ntook, o~idenoed by sub- rorlptlon warnrnto Itmuod before subticrlntion.
SlAOO there haye bOaA A0 OOUrt dcolaloas ruloe or re~ulatloas presorLbed by our taxing authorltles rolotlng this subject, wo h8ve ttWAed to the rules and re&UlatiOAA Of the Now York Tax AUthorItlea. and .lnterpretntIon8
.Or the OOurtO tho aonetruotloa plcroed upoa in thet jurieprudance to datomlda the provlalons of the New York Aot that wore rollowod as a model tOr the Texas rtatute.. Alter study Of. available authorl- the ou8tcxaa and owmon cueage approved by the Kew York Tar the, ‘we flad that the tMln?der Or oubecrlptlon y18rXfint8 Dt?psrtceAt, .hna long been ouetom In Texar la not taxable ia New York. It &vs the s:&me ooaatruatlon to on Act that it roaelvsd tho 8tats where 8UOh Aat has been conetrued. Kay V. Sahnsider, 2Sl 6, W. 680)’ 18 Corpus Jurie 717, olting owe0 tram 22 rtatea.
w0 th0reror~ ad&e you that trftneror or *sub- ” roriptloa wacraata*~Io not taxable under Artlole 7047% VerAotP8 <
!. ,..: *8 . . . . . :_ . _.‘I. . I-‘.. ,. . . :. . ‘. *
. Boa. OeOr60~ IL .8bO~Paril, Patis ‘8 .
;. . .. ¬ated Civil Statute& a’s again dsrlns ~suhaoriptloa
. ~rrantd* t0 be w6rraAta i6SUdd by a oorporatlon to those
matitled to oubaoribe to atook eoidoaolag their VI2hta to aubaOrib8 rOr atook.” Opfnlon No. O-4029; delivered’ you on Novsuther
0, 1941, in60r6r as It la :n oonrllat horevrith, is heroby ovwnlled . In such opln~on rerereaoo was frequently made by ua to riqulatlona and Ioterpratatlona of the Unltod States . Troaaury Department rsgardlne tranaaotlona taxable under the . ~?eUeral Act. Since the Federal Act ooatalned express la-age 1 levying a tax on rluhts to aubacrlbo to at-oak, and slaoe no auoh .
express language la o~ta3Aea lo either tha Tetie or Now York , ~ .6tat~tea, we believe Opinion No. O-4029, ~Insorer an it oonatrusb Aot Qupoae a tax on the traaarer or subscription warranta,
ta haVe been fn arror. In OVQrrt?liw Opinion No. 04029, wo rest ~, ’ upon the presumption tbat the le&latum had before It, at the ' . tiai, (d the adoption 4 the Texas a$t%tute, the’exprsas lmgtmgo. f : __
.oontainod In tho Unltod State6 Revenue ‘meamre and la the New .York statute and that it wari. aware of! the Iaterpreta~loa given ia $bo Nesw- York jurIsdiotIoa, from whloh our atatutp lW6 takea, : anU that IB adOptb&~ .atmh &atUtO,, &j ++&a. alSO t0 OOgeOpt . rpoh 0oa&ru0t10a. ~;I. . *’ .. ?.: >‘-- . . . ; - :. .:. .;’ *.
: - . . . Aiiiatant