QBffice of tip Elttornep @merat 

DAN MORALES 

.ATTORNEY CLNERAL 

&ate of QLexae 

December 22, 1992 

Honorable John Sharp 

Comptroller of Public Accounts 

State of Texas 

L. B. J. State Office Buikihtg 

111Bast7thstreet 

Auatin, Texas 78774 

Opinion No. DM 192 

Re: Betimd of franchise tax collections to banking corporations, and 

related questions (RQ-2127) 

Dear Mr. sharp: 

You have asked several questions concerning retimds of franchise tax owed to 

banking corporations or their successors. The franchise tax was 6rst imposed on banking 

corporations in 1985, a&r the United States Supreme Court invalidated the method used 

by most Texas jurisdictions to value bank stock for purposes of ad valorem taxation. See 

American Bank & Tmti Co. v. Dallas Cow@, 463 U.S. 855 (1983). To replace the ad 

valorem tax revenues lost to local taxing units as a result of this decision, the legislature 

l&d the ad valorem tax from banking corporations and subjected them to the franchise 

tax imposed by chapter 171 of the Tax Code. Acts 1984,68th Leg., 2d C.S., ch. 31, art. 

3, pt. B, 8 1, at 212 (repealing Tw Code 8 171.078, which had exempted banking 

wrporations gem the franchise tax). The same enactment established the local 

govemment corporate banking franchise tax fund, to which revenues 6om the franchise 

tax on banking corporations were to be deposited, for allocation to local taxing units. Id. 

Q 8, at 213-14 (formerly coditled at V.T.C.S. art. 4366e (1925); recodified as Gov’t Code 

8 403.105). The provision establishing the local’govemment corporate franchise tax fimd, 

which had been codiied as section 403.105 of the Government Code, was repealed in 

1991. Acts 1991. 72d Leg., 1st C.S., ch. 5. 0 8.24.’ Jn the same enactment. the 

legislature amended section 171.401 of the Tax Code to require the deposit of all franchise 

tax revenues in the general revenue fund. Id. 6 8.23 1. 

Afkr banks became subject to the franchise tax, a series of judicial decisions 

adverse to the state on application of the franchise tax to other kinds of corporations 

required extensive tax refunds and credits. See, e.g., Srare v. Sun Ref. & Mktg., Inc., 740 

S.W.Zd 552 (Tex. App.-Austin 1987. writ denied); Bullock v. Sage Enew Co., 728 

‘Although formu rcction 403.105 oftk Govanmcnt ccdcbasbearcqcalcd,forbmitywcwill 

lCfCItOthiSptOViSlOlIbythC Govemmtccdooitation,rathorthanbycitingthosasionlawthatadoptod 

it. 

p. 1011 
Honorable John Sharp - Page 2 (DM-192) 

S.W.Zd 465 (Tex. App.-Austin 1987, writ refd n.r.e.),s Because the adverse franchise 

tax decisions apply to banking corporations in the same manner that they apply to the 

other corporations, your 05ce has determined that banking corporations are entitled to 

substantial tax re8mds or credits against ti~ture taxes. Most of your questions relate to the 

tax retimds or credits; however, you tirst ask whether the provisions authorizing the 

distribution of 8anchise tax revenues to local taxing units are consistent with article III, 

sections 50 and 5 1 of the Texas Constitution. 

Article JJI, section 51 of the Texas Constitution, provides in part: 

TheLegislatureshallhavenopowertomakeanygrant...of 

public moneys to any individual, association of individuals, municipal 

or other corporations whatsoever. . 

See ulso Tex. Const. art. JII, 5 50 (prohibits loan of the state’s credit “to any person, 

association, or corporation, whether municipal or other. . .“). 

You ask whether these provisions are violated by the disbursement to local taxing 

units of the state 8anchis.e tax imposed on banking corporations. As already pointed out, 

section 403.105 of the Government Code, the provision that formerly authorized this 

disposition of the 8anchise tax revenues, has been repealed. Acts 1991, 72d Leg., 1st 

C.S., ch. 5, 0 8.24. Thus, your question is relevant only to d&ibutions of the tax that 

weremadeinthepast. 

Sections 50 and 51 of article III prohibit the legislature from making gratuitous 

donations to individuals, asso&tions, and all kinds of corporations, including municipal 

and political corporations. Rand Dist. No. 4, Shelby Cow@ v. Allred, 68 S.W.Zd 164 

(Tex. 1934). However, they do not deny the legislature. the power to use state funds for 

govcmme& purposes. State v. Ci@ o/Austin, 331 S.W.2d 737 (T’ex. 1960). The state 

may allocate state funds to political subdivisions to use in carrying out duties that properly 

rest on the state. Jefferson Count v. Board of Cow@ & Dist. Road Imkbtehess, 182 

S.W.2d 908 (Tex. 1944); see ah San Antonio River Auth. v. Shepperd, 299 S.W.Zd 920 

(Tex. 1957). Franchise tax revenues distributed to taxing units3 under section 403.105 

~frPnchisctaxir~onthvPluedtbcprivilegeoT~budnasinT~, 

Bulkk v. Nonon Bancshores Corp., 584 S.W.2d 268 (Tar. 1979). ti is based upoll tbc corporstion’r 

taxable capital. Tax Code 00 171.002. 171.101. Tk cues, taken to@cr, bzld that the comptroUdr 

meuKdforlktemh@whatwnstitotaitaxablecapitalwas- 

“%%ing unit” nwaos a aalaty, iauaporatcd city, school diuric& county educatioo district a 

rpedsldirtridorautbority(arhisrbospitaldisbid,rwatcrdirtrid,arfirrprrvcntiondirtrid),or~ 

otkrpoWcaluaitoftbcstatcthatimposesdvPlonm~mpropcrty. G0~?code~403.103(@0(); 

Tax Code 0 1.04(12). 

p. 1012 
Honorable John Sharp - Page 3 (DM-192) 

could be used “only by the taxing unit and only for public purposes.” Gov’t Code 

5 403.105(i). The staMe set out specitic purposes for which municipalities, counties, and 

school districts each could use the funds, purposes which were proper for the state as well 

as the local taxing unit to carry out! For example, former section 403.105(j) provided 

that franchise tax revenues distributed to a municipality could be used only for the 

foUowing purposes: 

(1) payment of &ties and beneths of municipal law 

enforcement 05ccrs having a duty to enforce or engaged in the 

enforcement of state law; 

(2) payment of salaries and be&Its to municipal fire-fighters 

having a duty to protect or engaged in the protection of state or 

wunty property, including public roadways and rights-of-way for 

public roadways; 

(3) purchase of law enforcement and fire-fighting equipment 

reasonably related to the services provided to the state under 

Subdivisions (1) and (2); 

(4) aquisition of rights-of-way for, and the construction and 

maintenance of. municipal streets that provide access to and 

departure from the state highway system; 

(5) provision of health protection services, including the 

removsJ and disposition of hazardous and solid wastes, and disease 

prevention services; and 

(6) protection of the public safety through the adoption and 

enforcement of building codes. 

Id. Q 403.105(j); see also id. 8 403.105(k) (school districts may use money to wmpensate 

employees and to maintain schools and school district property), (I) (wunties may use 

money to wmpensate law enforcement personnel involved in enforcing state law). In Our 

opinioq the disbursement of franchise tax revenues to local taxing units pursuant to 

section 403.105 of the Government Code did not violate article IIJ, section 51 of the 

Texas Constitution. 

p. 1013 
Honorable John Sharp - Page 4 (DM-192) 

We will next address your third, fourth, tX.h, and sixth questions,’ which wncern 

the sources of statutory authority for retimding overpayments of t?anchise taxes to banks. 

You ask how to reconcile the wmptroller’s general authority to give refunds under section 

111.104 of the Tax Code with the authority under subsections (e) and (0) of section 

403.105 of the Government Code to give credits and make regmds t+om the local 

government corporate banking franchise tax tkd. Section 111.104 of the Tax Code, 

which provides for tax credits and refunds, states in part: 

(a) If the comptroller finds that an amount of tax, penalty, or 

interest has been unlawtkUy or erroneously wkcted, the wmptroUer 

shall credit the amount against any other amount when due and 

payable by the taxpayes from whom the amount was wllected. The 

remainder of the amount, if any, may be refunded to the taxpayer 

from money appropriated for tax refund purposes. 

. . . 

(e) This section applies to all taxes and license fees collected 

or administered by the comptroller. ~mphask added.] 

Former section 403.105 of the Government Code created the “local government 

corporate banking ftanchise tax fund” in the state treaamy. Gdt Code 0 403.105(a). 

Subsection (e) of section 403.105 required the wmptrolkr to send each taxing unit its 

share of the banking corporation tbanchise tax. It fiuther provided in part as follows: 

The wmptrolla may retain in the local government wrporate 

banking franchise tax tknd a portion not to exceed five percent of 

each taxing unit’s share and mqy use this amount to make refunds of 

overpayments ma& to the fund and redeem dishonored checks and 

drafts deposited to the credit of the fund. [Emphasis added.16 

This quoted language of former section 403.105(e) shows that a reknd fkom the local 

government corporate banking fkanchiise tax fund was one legal remedy available to a 

banking wrporation in the event of an overpayment of finnchise taxes. 

p. 1014 
Honorable John Sharp - Page 5 (DM-192) 

Subsection (0) of section 403.105 of the Government Code provided in part: 

Should it be determined that taxes assessed under Chapter 171, Tax 

Code, have been unlawfblly or erroneously wlkcted gem a banking 

wrporation (or its predecessor by merger, wnsolidation, or transfer 

of assets), then rhe knking cotporation may...make an 

irrevocable election to either 0) pursue legal remediIes other than 

taking credits against current or fiture taxes; or (ii) fire with the 

&mpWoIler a clpinr for a credit for all amounts unknvfil& or 

erroneous& collected against current or frrture taxes payable by the 

banking corporation under Chqter 171, . . Tm Co& The 

comptroller shall, on behalf of the state and the taxing unit& receive 

and administer all such claims for credit f&d by banking corporations 

for taxes assessed against banking corporations under Chapter 171, 

Tax Code, and shall verify credits claimed for such taxes that have 

been unlawfblly or erroneously wlkcted. Any credit shall be 

deducted from the tax due by the banking corporation in the manner 

specSed in this subsection.. . If the amount of uniawtblly or 

erroneously wllected tax exceeds Sl.000, the portion of the credit 

deducted on the tax report will be (i) for the Srst tax report’ due 

following the veritication of such credit, 25 percent of the amount of 

tax unlawfully or erroneously collected, (ii) for the second tax 

report. .35 percent. ; (iii) for the third tax report. .40 

percent . . ; and (iv) for tax reported due thereafter, any part of the 

remain@ amount. . which was not deducted as a credit on 

previous reports. [Emphasis added.] 

Despite the repeal of section 403.105, subsection (0) still has some etfect, 

according to the following savings clause included in the repealing statute: 

(c) This article does not fleet the eligibility of a person to 

pursue legal remedies agatnst the state, or to app& for mtd receive 

a crea&, under Section 403.105(o), Govwnment Code, es that 

section existed immediately before the effective date of this article, 

for taxes assessed under Chapter 171. Tax Code, that have been 

unlawfitUy or erroneously wkcted before the e&ctive date of this 

article, and the former law is wntinued in effect for that purpose. 

Notwithstanding Section 403.105(o), Government Code, as that 

section existed immediately before the effective date of this article, a 

locd taxing unit is not liable for taxes assessed under Chapter 171, 

‘.4ma1rep,3rtingoffranchisctaxliahilityisrrquircd. TaxCade~ 171.202. 

p. 1015 
Honorable John Sharp - Page 6 (DM-192) 

Tax Code, that have been unlawtirlly or erroneously wllected before 

the e&ctive date of this article. This subsection does not @xt a 

claim fm a refundfired or other legal action commenced again a 

local taxing unit before the e&&e date of this article. 

Acts 1991,72d Leg., 1st C.S., ch. 5, 5 8.27(c) (emphasis added). 

Subsection (0) of section 403.105 requires the banking corporation to choose 

between filing a claim with the comptroller for tax credits or pursuing legal remedies 

against the state other than taking credits against current or fitture taxes. Under the 

savings clause, banking corporations remain eligible for these options, except that they 

may not claim a retimd from or initiate a legal action against a local taxing unit after the 

efkctive date of the statute. 

In our opinion, the election under section 403.105(o) of taking tax credits against 

current or tuture taxes refers to the tax credits authorized by subsection (0). The 

subsection (0) provision for tax credits is a provision specific to the S-anchise tax and 

prevails over section 111.104 of the Tax Code, the earlier-enacted,* general provision for 

tax credits, to the extent of inwnsisten9 between the two. Goti Code 5 3 11.026(b). 

If a banking corporation does not elect to take tax credits, it may pursue other 

legal remedies including the retimd remedy available under section 111.104 of the Tax 

Code. The bank’s right to seek rettmds is apparent fkom the savings clause. The savings 

clause g&s local taxing units a prospective exemption t+om Uabiity for unlawtbUy or 

erroneously wUected franchise taxes, but leaves in effect “claim[s] for a re%nd tiled or 

other legal action wmmenced against a local taxing unit” before the effective date of the 

statute. This language shows that the legislature considered a claim for a refbnd to be a 

“legal action” and thus a “legal remedy” available to a bank under subsection (0). 

Thus, a banking corporation may elect to take the tax credits offered by subsection 

(o), in accordance with the tax credit schedule set out in subsection (0). or it may elect to 

pursue other legal remedies against the state, including the remedy of Sling a claim for a 

retimd under section 111.104 of the Tax Code.9 Section 111.104, which applies to aJl 

‘ThpleduraofIcdios,403.105oftk cnwnmmtC4ldcw1p~inl984,~e~~a 

9.1, while tbc pmiuaaor of section 111.104 of the Tax CJJ& was adopted in 1959. Acts 1959. 56th 

Leg., 3d C.S., ch. 1. at 187, 194. 

slider my inmpmtion of section 111.104 of tbc Tax Code and saztion 403.105 of the 

GovanmntC4dc,a~should,rccordingtoduepromsw~~be~~toreamrtbc 

full ammmt overpaid to the state provided all state pm are follow& McKesson Cop. Y. Division 

o/AlcoholicBewrages & Tobocw, Dep’t ofBusi~~ssRegulation of Florkzia. 4% U.S. 18 (1990). 

p. 1016 
Honorable John Sharp - Page 7 (DM-192) 

taxes wllected and administered by the wmptroller, is a legal remedy within section 

403.1 OS(o). Thus, as to the availabiity of a refund, the two provisions are not in wntlict. 

The second question wncems the sources for payment of franchise tax refunds to 

banks. Until January 1, 1988, alI revenues of the &anchise tax on banking corporations 

were distributed to local units of governments a&r deducting two percent for deposit in 

the wmptroUer’s operating fund and mtaining five percent in the local government 

corporate banking franchise tax t?md to refund tax overpayments and to redeem 

dishonored checks and drags deposited to the tbnd. Acts 1984. 68th Leg., 2d C.S., ch. 

31, art. 3, pt. B, 3 7, at 213; see Goti Code 5 403.105(e). The finnchise tax was 

increased ILS of January 1, 1988, and the increase was credited to the general revenue 

fund.tO Acts 1987, 70th Leg., 2d C.S.. ch. 5, art. 2, pt. 1, 8 1. at 22. You ask whether 

retkds should be drawn from these funds according to the same percentage in which the 

tax was ailocated to them. This question involves a wnstruction of article V, section 30 

of the current general appropriations act, Acts 1991. 72d Leg., 1st C.S.. ch. 19. a 

provision that appropriates money to pay tax rethnds. 

Article III, section 44 of the Texas Constitution prohibits the appropriation of 

money from the treasury to pay a claim, unless it has been *provided for by pm-existing 

law.” As we have found, section 111.104 of the Tax Code authorizes the wmptroller to 

retknd uniawfbUy or erroneously wkcted taxes “from money appropriated for tax refund 

purposes.” It is preexisting law which authorizes the legislature to appropriate money for 

tax re8mds. 

Under article VIII, section 6 of the Texas Constitution, “[n]o money shall be 

drawn from the Treasury but in pursuance of specitic appropriations made by 

law. . .” The general appropriations act includes the following provision, which 

appropriates money to pay tax retknds: 

1. Any money deposited into the State Treasury which is subject to 

re8md as provided by law” shali be refunded from the iknd into 

which such money was deposited, transferred, or otherwise 

‘?heplwisionautborizingdishibutionoftllcfranchisctaxtolocal -~rcptalcd 

etfcuivc haamy 1. 1992. Acts 1991,72dLcg., 1st C.S.. ch 5, 0 8.231. Tk m fnunthceanchisc 

taxisnow&positaltotbccreditoftbegmrPlrwawfimd. TaxCukp171.401. 

‘IFor example, s&on 111.104 oftbc Tax Code is a law pnwidiq authority for tbc zdund of 

taxes unhklly er ermnmdy dkotcd. See atsa Austin Nat7 Bank v. Sheppard, 71 S.W.zd 242 (Tcx. 

1934); Attomcy rhncral opinirm WW-749 (1959) at 4 (common 46~ authority for lppropriation of 

mwtrom1&trrpsury). 

p. 1017 
Honorable John Sharp - Page 8 (DM-192) 

crea?ted, and so much as is necessary for said refirnds is hereby 

appropriated. 

. . . . 

3. As a specific Umitation to the amount of refunds paid from fimds 

appropriated in this Act during the 1992-93 biennium, the 

Comptroller shall not approve claims or issue warrants for 

refmds in excess of the ~antount of revenue estimated to be 

available from the tax, fee, or other revenue source during the 

biennium according to the Biennial Revenue Estimate of the 

Comptroller of public Accounts used for certiiication of this 

Act. Aty &aim or portion of a claim which is in excess of this 

limitation shall be presented to the next legi&ure far a 

spec@c qprqvriation in or&r fov pigment to be made. This 

limitation shall not qply to any taxes or fees paid under 

protest. 

Acts 1991, 72d Leg., 1st C.S., ch. 19, art. V, 0 30, at 1024 (emphasis added). Prior 

appropriations acts have included provisions vhtually identical to subdivision 1 of section 

30. See Acts 1989.71st Leg., ch. 1263, art. V, 9 30, at 5786. 

Since the franchise tax on hanking wrporations was deposited into various funds, 

you inquire whether article V, section 30 of the appropriations act requires retbnds of the 

tax to be drawn from each such gmd at the same ratio in which the tax was placed in it. 

You inform us that it is the long-standing interpretation of the wmptroller’s office to 

interpret the above-quoted provision of the appropriations act in this way. We believe that 

this interpmmtion is wnsistent with the language of article V, section 30 of the general 

appropriations act.12 

APPROFlUATION OF TAX REFUNDS. Asmucbeftherospa4htaxes 

c&ctedud-bythccomptrouer6smrybcacwsmryirhereby 

rppmpriatcdUtdrtlridclOpayRfuadE~pmvidtdbyhW,#UbjtCtlOtbC 

followiq limitaticms awl conditions: 

a. [tiIuelimitation6] 

b. [rdimdslimitedbyunountdrevuw e3timadteksvailablefortheux. 

bc+,oraba revemc -I. 

Aots 1991, 72d Leg., lrt C.S., cb. 19, UL I, at 422-23. U&kc lbc qqaiatien found in se&en 30 of 

rrticlcV,therbove~ndoeollotpmvidcthatrefunb~kmadc~Uwfuadintowhicb 

tbelnoncywasdepo6itcd,lTwsf~erolhuwiwueditat. ThisrpproprLtionmoypmvidcawthcr 

xUIWoffaodstepeyrefimdsoffmncbiwtaxer. 

p. 1018 
Honorable John Sharp - Page 9 (DM-192) 

You suggested that franchise tax revenues placed in the wmptroller’s operating 

fund may not be used to pay Eanchise tax re&nds, because no statute provides for refbnds 

from that tImd. Express language authorizing the appropriation of retimds from the 

wmptrollerk operating fbnd is unnecessary, as long as no statute or wnstitutional 

provision restricts the purposes for which the legislature may appropriate that fund. See 

genera& Attorney General Opinion JM-321 (1985) (restrictions on use of wnstitutional 

highway lid). We find no statute or wnstitutionai provision restricting the use of the 

opera&g fknd. Article V, section 30 appropriates money for refunds from any timd to 

which money subject to refund was deposited, including the comptroller’s operating 

fknd.‘s 

Your remainhg questions arise from the failure of banks that paid franchise taxes 

now subject to retimd. The Federai Deposit Insurance Corporation (hereit&er FDIC) 

became the receiver of the failed banks, taking possession of their assets and Uabiities, 

which were ultimately transferred to successor banks. You state that it is unclear whether 

the FDIC or the successor banks are entitled to the retimds of franchise taxes paid by 

failed banks, and that you have received many duplicate claims gem the FDIC and 

successor banks for the same 6anchise tax refunds. You ask us to review the agreements 

by which the IDIC transferred the assets and Uabiities of fhiled banks to successor banks 

and to answer questions about the application of the merger credit authorized by section 

171.1531 oftheTsxCode. 

Your questions sevw nine, and ten are as foUows: 

Under each set of documents, is the FDIC or ‘the successor bank 

entitled to any credit or refund owed the faiied bank? 

Reviewing the documents submitted in Question Seven, which, if 

any, of the successor banks are entitled to the merger credit? 

If you conclude gem the documents submitted that the successor 

bank was formed through any means other than a merger (i.e., 

transfers of assets, purchase or wnsolidation), is the successor bank 

precluded from claiming a merger credit under Tax Code Section 

171.1531? 

p. 1019 
Honorable John Sharp - Page 10 (DM-192) 

You ask us to construe the agreements because their intent as to the mhntds of 

6anchise taxes is unclear. This office, in the exercise of its authority to issue legal 

opinions, does not wnstrue contracts. I4 Where the meaning of wntract language is 

tmcehn, a court will hear evidence of the parties’ intention in choosing the language. R 

&P Enters. v. La Guarta, Gavreldt Kirk, Inc., 5% S.W.Zd 517 (Tex. 1980); 14 Tur. 

JUR. 3d Conrracrs 4 184, at 303. This office cannot evaiuate evidence or make fact 

lMittgs in the opinion process, and thus cannot determine the et&t of agreements 

between the PDIC and successor banks as to the disposition of the credit or refund owed 

to the tkiied bank, or whether the formation of the successor bank may be characterized as 

a merger for purposes of the merger credit under section 171.1531 of the Tax Code. 

Section 111.105 of the Tax Code provides for a hearing on the request of a person 

claiming a retimd under section 111.104 of the Tax Code. This might be. an appropriate 

procedure for resolving disputes as to whether the PDIC or the successor bank is entitled 

to retimds of 6anchise tax wllected from failed banks. 

You also ask the following question: 

May the Comptroller offset claims of the State of Texas against 

a failed bank on any retbnds or credits that may be due? 

Section 403.055 of the Texas Government Code provides in part: 

(a) The wmptroiier may not issue a warrant to a person’s ifthe 

person is indebted or owes delinquent taxes to the state. . . until the 

debt or taxes are paid. 

. . . . 

Cg)Ifapersonowesdelinquenttaxesundaataxthatthe 

wmptroller administers or wUec& the wmptrokr may s&tract the 

delinquent amount from the total amount due the person from the 

state,. . . and issue a warrant for the difUbrence. The delinquent 

person is entitled to written notice of at least 20 days before the date 

‘~~wdoaisnwopinionronibcauthority~aplMiccntitytoEmtrsctwitbrcspdto 

p6rtiwlarsubjectmttcrerteagrwtoapartiwlarwntrwtterm See,e.g.,AUorwyOwudOpinioas 

JM-65, JM-57 (1983); H-966 (1977); see ah Attemcy Oewral Opinitm MW-290 (1981) (dclcrmining 

~dit0fsdutic6witbre3pwttefmwcialmmmcdowuidngfrnmalwscbyacamining 

~g~~~lar~pmvirions). Suchqucsioascankanswadasanmtwoflaw,witinwtamsbinga 

amirauerrc6o~dirprtesa6tethcintalticmsdthe~. 

p. 1020 
Honorable John Sharp - Page 11 (DM-192) 

of the offset. The notice must conform to the notice requirements 

under Sections 111.018(b)(l) through (3). Tax Code. The 

wmptrokr may promulgate rules for the admbtistration of this 

aection. Footnote added.] 

This provision authorizes the comptroller to subtract the amount of delinquent taxes that a 

person owes the state from the amount of a state warrant payable to that person and issue 

a warrant for the difference. Thus, if a bank is entitled to a rettmd of gawhise taxes, but 

is delinquent in paying another tax administered or wUected by the comptroller, the 

comptroller may offset the delinquent taxes against the reknd warrant. For section 

403.055(g) to apply to an entity, it must be both entitled to the retimd warrant and liable 

for the delinquent taxes. 

Section 403.055(g) of the Government Code does not authorize the comptroller to 

offset claims the state may have against a bank, other than claims for delinquent taxes. 

We have found no statute or judicial decision authorizing a setoff of other debts owed the 

state by a bank against tax retimds due the bank, nor have you directed us to any. In the 

absence of a statute authorizing such offsets, we camtot conclude that you have general 

authority to do so. But see generally State v. Now, 422 S.W.2d 594 (Tex. Civ. App.- 

Corpus Christi 1967. writ refd n.r.e.); State v. Martin, 347 S.W.Zd 809 (Tex. Civ. App.- 

Austin 1961, writ refd n.r.e.) (once state vohmtarily files a lawsuit, defendant may tile 

wunterclaims wnnected to the lawsuit). Soction 403.055(a), quoted above, does require 

the comptroller to withhold warrants from a person indebted to the state until the debt is 

paid. 

SUMMARY 

Former section 403.105 of the Government Code, which created 

the local government corporate banking franchise tax fund and 

provided for its disbursement to local taxing units, did not violate 

section 5 1 of article JII of the Texas Constitution. 

Section 403.105(o) of the Government Code, which provides 

remedies in the event franchise taxes have been unlawfully or 

erroneously wkcted from a banking wrporation, remains in effect 

for some purposes. A banking corporation that is entitled to tax 

credits or a retknd for overpayment of 6anchise taxes may elect to 

claim the tax credits authorized by former section 403.105 or pursue 

other legal remedies against the state, including the remedy of Sling a 

claimforarefbndundersection111.104oftheTaxCode. 

Article V, section 30 of the current general appropriations act 

provides that money in the State Treasury that is subject to refund 

p. 1021 
Honorable John Sharp - Page 12 (DM-192) 

my be re-knded from the M into which the money was deposited, 

transferred, or otherwise credited. Article V, section 30 wnstitutes 

an appropriation for the purposes of paying tax refunds. The 

comptroller interprets article V, section 30 as mquirkg him to draw 

m~dsoftaxfromeachfUndinthetreaPuryintheMmemtioin 

which the tax was deposited in the knd. This long-standing 

interpretation of ar&icle V. section 30 and its predecessors is 

consistent with the language of that provision. 

Section 403.055(g) pamits the wmptrokr to deduct the 

amount of delinquent taxes a person owc8 under a tax administered 

or wkted by the states from a state warrant owing that perso% and 

issue a warrant for the difference. 

DAN MORALES 

Attorney General of Texas 

WILL. PRYOR 

Fii Assistant Attorney General 

MARYKELLER 

Deputy Assistant Attorney General 

RENEAHIcKs 

Special Assistant Attorney General 

MADELEINE B. JOHNSON 

Chair, Opiion Committee 

Prepared by Susan L. Garrison 

Assistant Attorney GeneraJ 

p. 1022