Case Information

*1 June 2, 1939 Hon. Tom L. Beauchamp

secretary of state Austin, Texas

Dear Sir:

Opinion No. O-747 Fkl: Incorporation of American Legion Corporations.

We are In r&klpt of your lettbr of May 3, 1939, in which you request an opinion from this department upon the following questions:

"The typical purpose clause of applica- %ions for charter for the American Legion cor- porations reads as follows:

"'It shall have all the rights powers and privileges granted to and conferred upon corporations by provision of Subdiv- ision 2, Article 1302, Chapter 1, Title 32, of the Revised Civil Statutes the State of Texas, which reads in haec verba: ""The support of any benevolent, .cheritable, educational or missionary un- dertaking" and particularly including the following:

'I'(e) To preserve and strengthen com- radeship among its members; to perpetu- ate the memory and history of our dead; to support and maintain education in the moral, intellectual atid physical de- velopment of those who served in, or who mag.serve in, the Army, Navy, Marine .Corps or Coast Guards the United States of'dmerica, in any foreign war, insurrection or expedition, which ser- vice shall be governed by the issuance of a campaign badge by the Government of the United States of America; and to maintain true allegiance to the Govern- *2 Hon. Tom L. Beauchamp, June 2, 1939, Page 2, (O-747)

ment of the Unlted States of America, and fidelity to Its Constitution and Laws; to foster true patriotism; and to malnt&l'n a'nd extend the institution of American freedom:

"'l(b) To act as a charitable and benev- olent organization for the purpose of pro- moting the welfare, alleviating the suffering, and assisting and aiding those who have served, or may serve, with the military forces of the United States of America In foreign lands, their widows, orphans and dependants and relations." "This department reqriests tha% you amwer the following questions:

"1 . In suoh corporatton, with purpose as outlined above, authorlaed to incorporate un- der subdivision 2 of article 13029 “2 , Are our fees for filing a charter containing the same or Lmllar purpose clauses $10.00 or $50.001

"3. Is such a corporation entitled to be exempt from the payment of franchise tax under the provisions of article 70947"

The purposes for which corporations may be formed in the state of Texas are enUner8teQ In Article 1302, Vernont8 Annotated Civil Statutes.

Section 2 of said article readp as follows: "The support of any bdnevolent, charlta- ble, educational or mlseilonary UndertakIng." The first question 1s whether or not reotlon 2 Is statutory authority for the lnoorporatlon of American Legion oorporatlons whom typical purpose clause 18 set forth in your letter of request quoted at the outaet of thi8 opinion. ,

We don not think there la any doubt that suoh

objective an the following fall within the category of “educational” purposes :

,

.-- --

Hon. Tom L. Beauchamp, June 2, 1939, Page 3, (O-747)

' l ** to perpetuate the memory and hls- tory of our dead; l l l It

' l * l to support and malntaln education in the moral, intellectual and physical develop- ment of those who served in, or who may serve in, the Army, Navy, Marine Corps or Coast Guards of the United States of America, in any foreign war, insurrection or expedition, which service shall be governed by the issuance of a campaign badge by the.Go~ernment of the United States of America; * l l " l * *and to maintain true allegiance to the Government of the United ftates of Amer- ica, and fidelity to its Constitution and Laws; to foster true patriotism; and to maintain and extend the institution of America freedom: l l l "fl Furthermore, the following aim of an American Legion Cor- poration is undoubtedly "charitable":

" l * l To act as a charitable and benev- olent organization for the purpose of promoting the welfare, alleviating the suffering, and as- sisting and aiding those who have served, or may serve, with the military forces of the Unit- ed States of America in foreign lands. their wldowsn orphans and dependants and reiatlons. +)o+

It la not placing a strained construction upon the following purpose clauses to hold that they are "benev- olent' in their nature:

It l l l To preserve and stnrengthen comrade- ship among its members; l l l and, of course:

It l l l To act as a charitable and benev- olent organization for the purpose of promoting the welfare, alleviating the suffering, and as- sisting and aiding those who have served, or may serve, with the military forces of~the United States of Amerloa in foreign lands, their ,, orphans and dependants and relations. widows *it* *4 - *. .-.

Ron. Tom L. Beauchamp, June 2, 1939, Page 4, (O-747)

Thus, an analysis of the typical purpose clause

of an American Legion Corporation reveal8 that the manl- fold objectives are each and every one wlthlh the purview of Section 2 of Article 1302, Vernon's Annotated Civil Statutes.

We wish to cite one Supreme Court-.of Texas au- t$r;t; in this matter. We feel that the case of Conley,

Daughters of the Republic (1913) 156 SW 197 (SU rem; Court of Texas, Brown, C.J., delivering the opln- ion is very much in point in its elucidation of the P phrase "educational undertaking" used in Section 2 of ar-

tlcle 1302, Vernon'8 Annotated Civil Statutes.

In the cane of Conley v. Daughter8 of the Re- publlo, the Daughter8 of the Republic of Texas which was organleed as a corporation for the declared purpose of perpetuating the memory and spirit of the men who achieved Texas' Independence, and to encourage historical research into the early history of Texas, and promote the celebra- tion of Independence Day of the Texas Republic, and erect monument8 upon place8 made historic in the war for Texas Independence, was held a corporation organleed for "educa- tional" purposes within the second subdlvl8lon of Article 1121, Revised Statutes, which wording is identical with that of Section 2 of Article 1302, Vernon'8 Annotated Clv- 11 Statutes. The court held that "education" in a etatu- tory sense meant not merely instruction received at school, but the whole oour8e of training, both moral, intellectual, and physical. The following explanation of the term "ed- ucational" by the Supreme Court is governing in the present instance.

"ihe Attorney General asserts that the corporation wa8 not lawfully created under the statute of thin atate, because the law does not authorlte the creation uuch corporation for the purpose8 named In its charter. The eecond subdlvl8lon of article 1121, Revised Statutes, reada: 'The purposes for which private corpor- ations may be formed are: l l * (2) The support of any benevolent, charitable, educational or missionary undertaking.' The purpose of this corporation is clearly 'educational.' Whatever educates &within the meanlnq 'educational undertakl!U.' Education in thesense as used in the statute includes: "In its broadest sense, l * l not merely the instruction received at school or college, but the whole course of traln- lng, moral, intellectual and physical; is not *5 Hon. Tom L. Beauchamp, June 2, 1939, Page 5, (O-747)

limited to the ordinary instruction of the child in the pursuits of literature. It comprehends a proper attention to the moral and religious sentiments of the child. And it Is sometimes used as synonymous with 'learning'." 14 Cyc. p. 1230. The sentiment of regard for the mem- -m-

m of tho=who Rave their lives for the bless- u of this nreat state stimulates patriotism, and is in the h*hest sense educational. The facts to be preserved furnish the means of the best education for the young men and women of this state. The purRos6 is laudable in its in- fluence won the present Enoration; it is

laudable, educational, g&benevolent for the future citizens. This qU08tion 18 asked: 'Should a state commit 138 interests to corpor- I This court has naught to do with the ations? policy of the state on that question. All lltl- ganta 'look alike' here. However, we will say that this is not 8UCh a SOU~~SsS Corporation as needs to have a watch upon its actions. The heart, the soul, and splrlt of patrlotl8m are

the capital employed by those women which would not detract from the authority and power of the state. On the contrary, those ladies, wlth no hope of gain to themselves, undertook to sub- stitute for the state18 fund, which would have been created by taxation, the voluntary offer- ings of the people - a tribute of patrlotlsm, sanctified by love for the state, and reverence for the memory of her heroic dead. Can there be danger from such a car oration? We think not . ” (Underscoring ours P .

It is our opinion, in answer to your first question, that American Legion Corporations, with the typical purpose clause set forth in the letter of request, derive and possess the necessary authority to lnoorporate under Subdivision 2 of Article 1302, Vernon's Annotated Civil Statutes, whloh reads:

"The support any benevolent, cbarltable, educational or mlsslonary undertaking.

Your second question asked whether the fees of the Secretary State for filing a charter containing the same or elmllar purpose clauses to that quoted in your letter of request are $10.00 or $50.00, .

Article 3914, Vernon's Annotated Civil Statutes, prescribing fees of the Secretary of State, provid68, in part as follows:

Hon. Tom L. Beauchamp; June 2, 1979, Page 6, (O-747)

'Upon filing each-charter, amendment, or supplement thereto of a corporation for the

support of public worship, any benevolent, char- itable, educational, missionary, literary or

sclentlflc undertaking, the maintenance of a

library, the promotloc of public cemetery not for profit and the encouragement of agriculture and horticulture, to aid its 'members in produc- ing and marke~tlng agricultural products, or for acquiring, raising, breeding, fattening or mar- keting live stock, a filing fee of Ten ($10.00) I)OllarB, end for filing the seml~annual flnan- Cfal 8tat6m6nt Of such 6SgrfCUltUral prOdUCt

or live Stock corporation, Ten ($10.00) Dollars, which shall include the annual license fee."

Since we have held'thet an American Legion Corpo- ration with the purpose clause as set forth in your letter of request, may bs incorporated under Section 2"of Article 1302, as within the purview of "any benevolent;charltable, edu- cational or mlsslonary undertaking", it follows that in answer to your second question the fee of the Secretary of State for the flllngof the charter of such corporations would be $10.00, as prescribed in the second 8 article 3914,‘above quoted. See "opinions of Attorney General, biennial report, 1914-1916, p. 471." In this opinion it was held that a corporation, the purpose of which is stated to be the accumulation end loan of money to young men to defray their expenses while studying for the christian mlnlstry and to young women to defray their expensea while studying to be christian missionarlee, where such corporation is organiced for charitable purposes and not for profit, may be incorporated under SubdiViSiOn 2 of article 1121, Revised Civil Statutes; and that the fees for filing the charter of such corporation is $10.00; and finally that such corporation 18 nO$ subject t0 8 franchise tax. ArtfClSs 1121, 3838 and 7403, ROViSOd Statutes, 1911, were considered.

The~thlrd' question asked in your letter of request Is whether or not such a corporation incorporated with a pur- such es that quoted in the letter of request, is pose clause, entltled'to be exempt from the payment of a franchise tax under the provlslons of artlole 7094, Revised Civil Statutes, 1925.

Artlhle 7094, Revised Civil Statutes, 1925, read8 88 fOllOW8 I

"CorDoration exempt.- The franchise tax lm- 8 posed by this chapter shall not apply to any insur- ance company, surety, guaranty or fidelity company, or any transportation company, or any sleeping, *7 . . *m-. .‘i-

.

Hon. Tom L. Beauchamp, June 2, 1939, Page 7, (O-747)

palace car and dining car company which is now required to pay an annual tax measured by their gross receipts, or to corporations having no capital stock and organized for the exclusive purpose of promoting the public interest of any city or town, or to corporations organized for the purpose of religious worship, or for pro- viding places of burial not for private profit, or corporations organized for the purpose of holding agrlcultural,falrs and encouraging agrl- cultural pursuits, or for strictly educational purposes, or for purely public charity." Under this statute corporations organized "for strictly educational purposes, orfor purely public charity" are exempt from the payment of a franchise tax. The corpo- rations under consideration are formed for educational and charitable purposes. It is our opinion that the American Legion corporations with purpose clause set forth in your letter are brought within the exemption, and ere excused from payment of the franchise tax under the provisions of article 7094. It wes within legislative contemplation that just such American Legion Corporations be exempted, since they are to a high degree of a benevolent, charitable, edu- cational and patriotic nature. See opinions of Attorney General, biennial report, 1914-1916, p. 471, supra.

It is, of course, recognized that corporations organized under Section 2 of Article 1302 have no capital stock and are non-profit legal entitles.

Trusting that the above fully answers your ln- qulries, we are

Yours very truly ATTORNEY GENERAL OF TEXAS /s/ Dick Stout DS:omb:eac BY

Dick Stout Assistant APPROVED: APPROVED /s/ Gerald C. Mann

OPINION COMMITTEE

ATTORNEY GENERAL OF TEXAS.

BY /a/ H.Q.B.

CHAIRMAN