GERALDC. MARR    ,        AUSTINI~.%'EXAEI




    Bon. Wm. J. Lawson         opinion No. Q-3754
    Secretary of State         Ret Assessment of 25% penalty for
    Bust in, Texas             late payment franchise   tax--Con-
                               struction of H.B. No. 8, Article
     Dear Sir:                 VIII, Acts 47th Legislature.
               We are in receipt of your letter    of June 20, 1941,
    requesting  an opinion concerning the collection     of the 25%
    penalty for late payment of franchise     for the current fran-
    chise tax year in view of the amendment of ,Article 7084, Re-
    vised Civil Statutes     1925, by Article VIII, House Bill Noi
    8 Forty-seventh    Legislature,  which became effective   May 1,
    1441.
               The question involved is one of statutory     construc-
    tion and it therefore  becomes material to carefully     consider
    the various statutory provisions  and their history.
                 Prior to May 1, 1941, Article 7084, R.C.S.,    192.5, as
    amended 1931, l#vieda       franchise tax upon domestic and foreign
    corporations     at the rate of sixty cents. per thousand dollars
    of the capital     stock of such corporations  from one dollar to
    one million dollars     and at the rate of thirty cents per thou-
    sand on capital     in excess of one million dollars.    The minimum
    tax was $10.00.
                Each corporation    was required to file a sworn report
    with ,the Secretary of State as a basis for computing its tax
    between January 1st and March 15th of each year and upon its
    failure to file such report within the time required by law
    became subject to a penalty in the amount of ten per cent of
    the tax due.    Article 7089 Revised Civil Statutes      1925, as
    amended. ,Article 7091, Revised Civil Statutes,       1425, provides
    that, “Any corporation,     either domestic or foreign,   which shall
    fail to pay any franchise      tax provided for in this chapter when
    the same shall become due and payable under the provisions        of
    this chapter, shall thereupon become liable       to a penalty of
    twenty-five   per cent of the amount of such franchise     tax due
    by such corporation.”      Under Article 7084 the tax at the rate
    mentioned was due and payable “on or before May 1st of each
    year. . . in advance. It
               Effective   May 1, 1941, however, Article  7084 was amend-
     ed by the Forty-seventh   Legislature so as to povide   a flat
Hon. Wm. J. Lawson, page 2      (O-3754)


rate of one dollar per thousand dollars    taxable capital,
provide a $20.00 minimum tax and other changes not mater-
ial here.    The provision tha 4 the tax is due and payable on
or before May 1st each year was left unchanged.     The follow-
ing provision was also added to the statute:
            “Sect ion la.    It is further provided that
     upon the passage of this Act or as soon after
     as is feasible,      the Secretary of State shall
     mail to all corporations       required to pay the
     franchise    tax under the provisions      of this Act,
     supplemental forms for the purpose of computing
     franchise    taxes as provided by this Act for per-
     iods from the effective       date of this Act to May
     1, 1942 and he shall also mail notice to the
     effect   c hat for failure    to file the necessary
     report and for failure      to pay additional     amounts
     which shall accrue as a result of the passage
     of this Act the right of such corporations          to do
     business will be forfeited       on September 1st next;
     provided that the statutory        penalty of twenty-
     five (25) per cent shall not accrue against such
     additional    amounts for failure     to pay on or be-
     fore May 1, 1943.       The Secretary of State shall
     have the authority to promulgate such rules and
     regulations    necessary to the immediate enforce-
     ment of this Act.”
           The Secretary of State has construed the statutes
to mean that corporations   are required to pay that portion of
the tax which would have accrued under old Article 7084 on or
before May 1, 1941, or become subject to a 25% penalty to that
extent of the tax and that they have until September 1st to
pay, without pena t     that portion of the tax imposed by the
amended Article 708
                  i t’ which is in excess of the amount which
would have been due under the Article before its amendment”
             On the other hand it is contended by the taxpa er
that the amendment completely superseded old Article 708 2: so
that no tax actually     accrued thereunder but the tax was levied
by virtue of the amendment so that the “tax liability      on the
basis of which the penalty is calculated      and claimed in fact
never accrued, ” and that the “corporation     never became indebted
for franchise    tax in the amount on which pen.alty is claimed.”
It is further urged that the effect      of the Secretary of State’s
construction    is to “impose a penalty for non-payment of a ‘lia-
bili,ty which had in fact never accrued,” and that “additional
amounts” as used in Section la has reference      to the entire tax
imposed in Article VIII of House Bill No. 8.       The meaning of
Hon. Wm, J. Lawson, page 3     (O-3754)


“such additional   amounts” as used in Section la of the amend-
atory Act depends upon and must be determined by the context
and subject matter, and the evident intention    of the Legis-
lature e Every word of an enactment is intended to have been
used for a purpose and the statute will be construed with ref-
erence to its scope, general purpose, and the ends or objects
sought to be attained.    It is proper to consider the title
contemporaneous history and conditions   and facts then exis e ing
and within the knowledge of the Legislature.     39 Tex.Jur. pp*
196,  2,36, 217 and 229.

            As pointed out above corporations    were required to
file their franchise    tax reports by March lsp 1941, as a basis
for computing the tax at the rate provided in Article 7084 as
it the,n existed and those reports were on file with the Secre-
tary of State, except as to those corporations      which were de-
linquent and had become subject to a ten per cent penalty for
late reports.    The tax based upon information     contained in
those reports at the rate prescribed    prior to the amendment was
payable on or before Way 1, 1941, and large numbers of taxpay-
ers had made payment under that statute,      as in former years,
except those who were waiting until the last day to pay the tax
or who would become delinquent under the law as it then existed.
These are facts which the Legislature     undoubtedly knew and which
we must presume it took into consideration      when enacting House
Bill No. 8.
            It will be noted that subdivision      (a) of the statute
as amended does not provide that the tax therein levied shall
be due and payable to the Secretary of State on or before Sep-
tember lst, but provides that each corporation        “shall,  on or
before Mav 1st of each veaE., pay in advance to the Secretary of
State a franchise     tax for the year following.“’    Following the
taxpayer’s    reasoning that since the amendment became effective
on May 1st and superseded the former statute so that the fren-
chise tax for the current year accrued and was levied by virtue
of the amendment effective      May lst,  it must be borne in mind
that under the express language of House Bill No. 8 the full
amount of the tax at the rate provided in the amendment became
due on May lst, 1941, for the year ending April 309 1942.           We
must presume the Legislature      knew the provisions    of our fran-
chise tax laws.      It was increasing   the corporate franchise    tax
and retaining    the same delinquent date at a time when reports
for the lesser rate had been filed,       large numbers of corpora-
tions had paid under the old rate in good faith and it would be
practically    a physical impossibility     for new reports to be filed
and taxes computed and paid at the increased rates for the cur-
rent year within the regular period provided by law.          This is
emphasized by the fact that House Bill No. 8 became effective
on the very last day that franchise       taxes could be paid without
                                                                    -   ._ _




Hon. Wm. J. Lawson, page 4     (O-3754)


penalty.  It was the obvious purpose of Section      la of the
amended Act to relieve against this situation.
             Section la provides for “supplemental forms” for
computing the tax under the amended statute from its effective
date to May 1, 1942.       It further provides that the right of a
corporation    to do business shall be forfeited   on September 1st
next9 for failure     to file the necessary report or to “pay
additional    amounts which shall accrue as a result of the ass-
age of this Act.”      It is also provided that the usual 25 B pen-
alty for late payment “shall not accrue against such addition.&
w         for failure    to pay on or before May 1, 1941.”
           When viewed in the light of the facts and circumstances
surrounding the enactment of House Bill No, 8 we think it is
clear that the l~aaditional amounts” referred      to in Section la of
the amendatory Act has reference      to only that portion of the tax
levied therein which is in excess of the amount computed at the
rate theretofore     provided in the statute which it superseded.
It vi.11 also be noted that Section la does not expressly       alter
the provisions    in subdivision  (a), that the tax shall be paid on
or before May 1st each year in advance, but merely postpones the
date of forfeiture     from July 1st to September 1st ae;ld exempts
the corporation    from the penalty provisions    on the
m”        required to be paid by reason of the increased tax.
            It is our opinion that under the provisions      of Article
7084,  Revised Civil Statutes,     1925,  as amended by House  Bill No.
8, Ac:ts Forty-seventh   Legislature,    the 25% penalty for late pay-
ment provided in Artici1.e 7091 for failure     to pay the franchise
tax c,n May 1, l941,   was suspended only as to such amosunt of the
tax l.evied under House Bill No. 8 which is in excess of what the
tax would have been., computed upon the basis provided i.n Article
7084 prior to its amendment; and that the Secretary        of State
has properly demanded such penalty for late payment upon the
amounts which wo?uld have accrued under the prior law where such
sums were not paid on OP before May 1, l%,l.
APPROVED JUL 28, 1941                 Yours very tmdy
/s/ Grover Sellers                    ATTORNEY  GENERAL OF TEXAS
FIRST ASSISTANT                       By is/” Cecil C. Cammack
 ATTORNEYGENERAL                      Cecil C. Cammaek, Assistant
APPROVED:OPINIONCOMMITTEE
BY:     BWB, CHAIRMAN
CCC:LM:wb