### THE ATTOR-VEY GENERAL OF TEXAS
February16,1988

Honorable Gary Garrison Ector County Attorney Room 218, Courthouse Odessa, Texas 79761

Honorable Billy Ray Stubblefield Williamson County Attorney P. 0. Drawer 1139 Georgetown, Texas 78627

,- Opinion.No. (.I+857)

Re: Whether a taxing unit that contracts with
aprivate attorney pursuant to section 6.30 of the Tax Code may impose the additional penalty of 15percent authorized by section 33.07 of the Tax Code in an instance in which the section 6.30 contract provides that the delinquent tax attorney will be compensated by apercentage of less than 15percent (RQ-984)

Gentlemen:

You request anopinion on the authorized expenditure ofpenalties imposed pursuant to section 33.07 of the Tax Code,which permits taxing units to provide that delinquent advalorem taxes incur "an todefray costs of collection" if additional penalty the taxing unit has contracted with anattorney under section 6.30 of the Tax Code. See aenerally Attorney General Opinion JM-285 (1984) (discussing circumstances underwhich section 33.07 penalty may be applied todelinquent taxes). Section 6.30 of the Tax Codeprovides inpart:

(a) The county attorney or, ifthere is
no county attorney, the district attorney shall represent the county to enforce the collection of delinquent taxes if the commissioners court does not contract with a private attorney as provided by Subsection (c)of this section.

. . . .

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(c) The governing body of ataxing unit may contract with any competent attorney to represent the unit to enforce the collection ofdelinquent taxes. The attornev's compensation isset inthe contract. but the total amount ofComDensation Drovided may not exceed 20 Dercent of the amount of delinouent tax, Denaltv. and interest collected. (Emphasis added.)

Tax Code 56.30; see alsoAttorney General Opinion JM-135 (1984) (neither county attorney nor city attorney may enter into acontract pursuant to section 6.30(c) of the Tax Code).

Section 33.01 of the Tax Code establishes the penalty and interest imposed ondelinquent taxes. Section 33.07 of the Tax Code authorizes the additional penalty as follows:

I (a) A taxing unit orappraisal district may provide, inthe manner required by law forofficial action by the body, that taxes that remain delinquent onJuly 1of the year inwhich they become delinquent incur an additional Denaltv to defrav costs of collection if the unit or district or another unit that collects taxes for the unit has contracted with an attorney pursuant to Section 6.30 of this code. The amount of the Denaltv mav not exceed 15 percent of the amount of taxes, Denaltv, and interest due.

. . . . (c) Ifapenalty is imposed pursuant to this section, ataxing unit may not recover attorneyIs fees in a suit to collect delinquent taxes subject to the penalty. (Emphasis added.)

Tax Code 533.07.

Mr. Stubblefield informs us that some attorneys who have applied to collect delinquent taxes for Williamson County have proposed that the county impose the full 15 percent penalty under section 33.07 of the Tax Code, but compensate them only at the rate of 12.5percent, with the county retaining 2.5percent todefray itsown costs of

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collecting thedelinquent taxes. Youboth askwhether the penalty imposed and collected under section 33.07 may be used to defray the taxing unit's costs of collecting delinquent taxes, orwhether the penalty may only be used to compensate the attorney who contracts to collect delinquent taxes pursuant to section 6.30 of the Tax Code. The answer toyour question depends onwhether "costs of collection" insection 33.07 refers only to the cost of contracting with anattorney pursuant to section 33.07, or whether it includes costs incurred by the county.

Before addressing your specific question, we point out that the 15percent figure represents the maximum penalty thatmay be imposed by ataxing unit. Ataxing unitmay impose a section 33.07penalty of a lesser percentage. Inaddition, the taxing unitmay change the amount ofpenalty fromyear toyear, if itdoes so "in the
manner required by law for official action by the body.
. . ." Tax Code 533.07(a). Thus, by referring in this draft to the "15 percent penalty," we do not intend tonegate the taxing unit's power to set an amount less than 15percent and to change the amount of penalty from year toyear. Turning to your question, we will first examine former statutory provisions, to establish some of the circumstances under which section 33.07 of the Tax Code
was enacted. See Gov't Code 5311.023 (construction of statutes inacode). Theprovisions you inquire about are found inthe Property Tax Code,which was adopted in 1979 and codified asTitle Iof the Tax Code. Tax Code 31.01; B Acts 1979, 66th Leg., ch. 841. Section 33.07 was added to the Property Tax Code in 1981, ina bill which adopted a series of amendments to the Property Tax Code.
u H.B. No. 30,Acts 1981, 67th Leg., 1stC.S., ch. 13, at 168.

Before the Property Tax Codewas adopted, former article 7335,V.T.C.S., authorized the commissioners court to contract with aprivate attorney

to enforce orassist inthe enforcement or the collection of any delinquent State and county taxes for a percent on the taxes, penalty and interest actually collected.
. . .

Acts 1923, 38th Leg., 2d C.S., ch. 13,at 37; Acts 1923, 38th Leg., 3dC.S., ch. 21,at 182. Former article 7335a, V.T.C.S., provided that the compensation under acontract

p. 4147Honorable Gary Garrison Ro;zr;blT$-F5;frRay Stubblefield

to collect delinquent taxes could notbemore than 15percent of the amount collected. Acts 1930, 41st Leg., 4th C.S., ch. 8, at 9. These provisions also school districts. applied to Bellv. Mansfield Indenendent School District, 129 S.W.2d 629 (Tex.1939). Articles 7335 and 7335a, V.T.C.S., were revised and recodified as subsections 6.30(c) through 6.30(e) of the Tax Code, and the total compensation payable to the attorney under the contract was increased, sothat itnow "may not exceed 20 percent of the amount of delinquent tax, penalty, and interest collected." Under former law, there was no requirement that the compensation bepaid fromdelinquent tax COlleCtiOnS. Morrison v. Lane, 157 S.W.2d 466 (Tex. Civ. APP. - Beaumont 1941, no writ); see aenerallv Attorney General Opinion WW-217 (1980). provide in its The county had to budget for the contract compensation. Morrison v. Lane, sunra. attorney's

Fifteen percent of the amount collected constituted
anabsolute limit on the amount that could bepaid to an attorney under contract pursuant to former articles 7335 and 7335a, V.T.C.S. Attorney General Opinion O-4004 (1941)concluded that the attorney contracting with a school district could notmake claims inexcess of the 15 percent limit topay for stationery, stamps, and other similar itemsused incollecting delinquent taxes. The opinion stated as follows:

It is manifest that unless the school district pays forthe stationery, stamps, etc., the tax attorney must provide such items. It is alsomanifest that if the tax attorney receives 15% of the amount collected plus a payment for the above mentioned items hewill receive more than 15%of the amount collected, the maximum amount allowed by law.

Attorney General Opinion O-4004 (1941).
Thus, at the time section 33.07 of the Tax Codewas adopted, noparticular source of fundswas designated to pay the private attorney's compensation under section 6.30 of the Tax Code. The legislature was, moreover, presumably aware that compensation for the attorney might include payment for his expenditures for supplies and other itemswhich could not strictly speaking bedescribed
asattorney fees. See Attorney General Opinion O-4004 (1941).

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P Honorable Gary Garrison

Honorable Billy Ray Stubblefield Page 5 (JM-857)

Section 33.07 ofthe Tax Codeprovides for

an additional nenaltv todefrav costs of collection if the unit or district or another unit that collects taxes for the unit has contracted with attorney pursuant to Section 6.30 ofanthis code. (Emphasisadded.)

Tax Code 933.07(a). Thispenalty provides funds to pay some or all of the attorney's compensation under a section 6.30 contract. The additional penalty may be imposed upon adelinquent taxpayer only ifthe taxes aregoing tobe collected by aprivate attorney pursuant to section 6.30 of the code. This condition for imposing the additional penalty suggests that funds realized from collecting it must be applied topayment of the attorney's compensation.

This reading of section 33.07(a) issupported by subsection (c)of that statute, which provides as follows:

Ifapenalty is imposed pursuant to this section, a taxing unit may not recover attorneyIs fees in a suit to collect delinquent taxes subject to the penalty.

Tax Code, 533.07(c). The section 33.07 penalty may be
seen as a substitute forcourt-ordered attorney fees,with the advantage that the taxing unit determines the amount ofpenalty up to the 15 percent maximum, and that the penalty canbe collected even ifthe casedoes not go to court. See. a Tax Code 533.48(a)(4) attorney's feeseappkoved by the court). (reasonable

Section 33.48 of the Tax Codeprovides for the costs and expenses that ataxing unitmay recover ina suit to collect adelinquent tax:

(a) Inaddition toother costs authorized by law, ataxing unit isentitled to recover the following costs and expenses ina suit to collect adelinquent tax:

(1) allusual court costs, including the cost of serving process:
(2) expenses of foreclosure sale:

(3) reasonable expenses, subject to approval by the court, that are incurred by .-

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the taxing unit in determining the name, identity, and location ofnecessary parties and ' procuring necessary descrittions of the property on legal which a delinquent tax isdue; and

(4) reasonable attOrnSV*S fSSS aDDrOVed bv the court and not exceedina 15 nercent of the total amount of taxes. nenalties, and interest adiudaed due the unit.

. . . . 

### (cl Fees collected forattorneys and other officials are fees ofoffice, extent that fees for contract attornevs reoresentina a taxinq unit that is joined or intervenes shall be aonlied toward the comoensation due the attornev under the contract. (Emphasis added.)

Tax Code 533.48. The attorney's fees authorized by subsection (a)(4)of section 33.48may notbe recovered if the taxing unit imposes a penalty pursuant to section 33.07 of the code. Subsection (c) of section 33.48 provides that fees for contract attorneys shall be applied toward the contractual compensation rather than supplementing it. Seeaenerally Attorney General Opinion ME-67 (1979) (contract entered intounder former article 7335 and 7335a, V.T.C.S., does notpermit contract attorney to receive attorney fees inconnection with motion to compel
answers to interrogatories). The provisions of section 33.48 support the view that there is an equivalence of purpose between the section 33.07penalty, court-ordered attorney fees, and compensation payable to the private attorney under a section 6.30 contract.

There is support in the legislative history of section 33.07 that the penalty it authorizes isto be allocated only to the compensation payable to an attorney under a section 6.30 contract. The fiscal note to House BillNo. 30of the 67th Legislature, First Called Session, stated as follows:

Some increase in revenue to taxing units would result fromthe increase in penalty and interest rates ondelinquent taxes and fromallowing the taxing unit to impose additional penalty ondelinquent taxes ofup to 15% forattorney's fees, ifdelinquent on



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July 1and iftheunit has contracted with a delinquent tax attorney.

Fiscal Note on file inLegislative Reference Library for H.B. No. 30, 67th Leg., 1st C.S. (July17, 1981). This document refers to the section imposed "forattorney's 33.07 penalty as being fees," thus that the penalty is supporting the view
contracting attorney. applied solely to compensate the

ATexas court, bring aclass inconsidering whether taxpayers could

action to recover section 33.07 which they had paid, repeatedly referred to thepenalties section 33.07penalties as "attorney fees," and "attorney fee charges." See Salvaaaio v. Houston Indenendent School District, 709 S.W.2d 306 (Tex.App. -Houston [14thDist.] 1986,writ dism'd). For example, the court inSalvaaaio characterized thepenalty as *'§33.07attorney imposed to cover the collection of fee charges thedelinquent taxes." 709 S.W.2d at 308. The court thus assumed that the penalty was allocated to the contract attorney's costs of collection. Even though the courtwas not addressing the issuebefore us, its assumption as to the use of the section 33.07penalties demonstrates the reasonableness of construing "costs of collection" torefer to the cost of having aprivate attorney collect delinquent taxes.

We conclude that thepenalty imposed and collected under section 33.07 of the Tax Code may notbe spent to defray costs of collection incurred by a taxing unit itself. Thepenalty payments must go attorney with whom the taxing unit to compensating the has contracted to collect itsdelinquent taxes. The taxing unit need not impose the full 15 percent penalty authorized. That figure isa maximum, and the statute does not compel a taxing unit topay anattorney more than his services are worth. Indrafting the contract, the taxing unit has the opportunity to include specific terms on the "costs of collection" which the attorney will absorb.

Ifataxing unit does not contract with anattorney under section 6.30 of the Tax Code, the delinquent taxes
are collected by the attorney who ordinarily represents it,and the taxing unit has topay forall costs of tax collection. unit to Section 33.07of the code permits the taxing

shift to the delinquent taxpayer the cost of compensating the outside attorney with whom itcontracts. Wehave found no evidence that the legislature also intended the delinquent taxpayer to absorb the taxing unit's collection costs over and above the attorneyrs

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compensation under a section 6.30 contract. Statutes imposing penalties are tobe strictly construed. Hatch v. Davis, 621 S.W.2d 443 (Tex.App. -Corpus Christi 1981, writ ref'd n.r.e.); w Attorney General Opinion JM-285 (1984) (discussing applicabilty of section 33.07 penalty). Accordingly, we advise you that the penalty imposed and collected under section 33.07 of the Tax Codemay not be used to defray the taxing units' costs of delinquent taxes. collecting

SUMMARY

Pursuant to section 33.07 of the Tax Code, ataxing unit that has contracted with
an attorney to collect delinquent taxes under section 6.30 of the Tax Code is authorized to impose apenalty not to exceed 15percent against delinquent taxpayers to cover the attorney's compensation. The taxing unitmay not apply any part of the penalties collected under section 33.07 to any additional costs ofcollection which it incurs but must use all of the assessed penalties solely to compensate the attorney with whom itcontracted.

JIM MATTOX - Attorney General of Texas

MARY KELLER FirstAssistant Attorney General

LOUMCCREARY Executive Assistant Attorney General

JUDGE ZOLLIE STEAKLEY Special Assistant Attorney General

RICK GILPIN Chairman, Opinion Committee
Prepared by Susan L.Garrison Assistant Attorney General ?

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