Prior to 1893 there was no special taxation of franchises, but they were subject to taxation as property under the property tax. Governor Hogg suggested in 1891 an annual franchise tax, but it was not until 1893 that one was enacted.1 It was then provided that each domestic corporation and every foreign corporation doing business in Texas should as a condition precedent to doing business pay on or before May 1 to the secretary of state an annual franchise tax of $10. Corporations organized for the purpose of religious worship, or for holding burial places not for private profit, or for school purposes, or for purely public charity were exempt. In 1897 graduation of the tax on domestic corporations from $10 to $50 according to the amount of capital stock was introduced.'2 Different graduation and higher rates were applied to foreign corporations, and there was no maximum payment fixed for them as was done for domestic corporations. Railroad corporations paying the gross passenger earnings tax, and corporations organized for the purpose of holding agricultural fairs and encouraging agricultural pursuits were added to the list of exempt corporations. Greater refinements of graduation which resulted in an increase in the tax were made in 1905, and it was also provided then that the tax should be computed upon the basis of the authorized capital stock, unless the aggregate amount of the capital stock issued plus the surplus and undivided profits exceeded the authorized capital stock, in which case the larger amount should be the basis.1 In 1907 the rates were changed and increased.2

1 Messages of Governor Hogg, January 21, 1891 and January 12, 1893. Laws of 1893, p. 156.

2 Laws of 1897, Reg. Sess., pp. 140, 168. Report of Secretary of State, 1898, p. 4, and 1904, p. 5. Report of the Attorney General, 1898, p. 11; 1900, p. 12. Arkansas Building and Loan Asso. v. J. W. Madden, 91 Tex., 461 (1898).

The rates on domestic corporations enacted in 1907 which are still in effect are 50 cents on each $1,000 of authorized capital stock up to and including $1,000,000, and 25 cents on each $1,000 of stock in excess of $1,000,000. Should the total amount of capital stock issued and outstanding plus the surplus and undivided profits exceed the authorized capital stock, the tax is 50 cents on each $1,000 of stock, surplus, and undivided profits. The minimum tax on domestic corporations is $10. The rates on foreign corporations are $1 on each $1,000 of authorized capital stock up to and including $100,000; $2 on each $5,000 of stock over $100,000 and up to and including $1,000,000; $2 on each $20,000 of stock over $1,000,000 and up to and including $10,-000,000; and $2 on each $50,000 of stock in excess of $10,000,000. Should the capital stock issued and outstanding plus the surplus and undivided profits exceed the authorized capital stock, the rates on the combined amount remain the same as above except that $2 is levied on each $1,000 up to and including $100,000. The minimum tax on a foreign corporation was fixed at $25. In addition to corporations organized for religious worship, for providing places of burial not for private profit, for the purpose of holding agricultural fairs and encouraging agricultural pursuits, or for purely public charity, there are exemptions of corporations which have no capital stock and which are organized for the exclusive purpose of promoting the public interest of any city or town. Insurance companies, surety, guaranty, fidelity companies, transportation companies, and sleeping, palace and dining car companies which pay the gross receipts taxes are exempt from the franchise tax. Fraternal organizations also are exempt. To these exemptions specifically made in the act should be added those corporations which operate under Federal franchises, such as national banks. The Western Union Telegraph Company was judicially declared exempt, because the tax would constitute a burden on interstate commerce.1

1 Laws of 1905, pp. 21, 100. Gaar Scott and Co. v. O. K. Shannon, 52 Tex. Civ. App., 634 (1909); 223 U. S., 468 (1911). Report of the Attorney General, 1904-6, p. 34; 1906-8, p. 35; 1908-10, p. 42. The Scott case does not involve the question of the right of Texas to levy a franchise tax upon a corporation engaged in interstate commerce but merely the right of a company engaged only in interstate commerce to recover the tax when it had been voluntarily paid.

2 Laws of 1907, p. 502. See also Laws of 1911, Reg. Sess., p. 91. Rev. Civil Stats., 1911, arts. 7393-7406.

The future of the franchise tax is seriously threatened in a case in which there is contested the right of the state to tax a foreign corporation on the basis of all of its capital stock instead of on such amount only as is employed within the state. A Federal district court granted a preliminary injunction restraining the collection of the tax on the ground that "an imposition which is based, whether in whole or in substantial part, on the value of the property outside of the state, or on interstate or foreign commerce engaged in, so that the amount of it grows in exact proportion to the growth of such property or commerce, is a burden on such property or commerce."2

In 1915 the receipts from domestic franchises were $401,367, and those from foreign franchises were $112,618.