.

May 14, 1987

Elonorable

Mark W. Stiles chairman CountyAffairsConduittee TexasHouse of Repres&tatives P. 0. Box 2910 Austin,Texas 78769

Dear RepresentativeStiles: OpinionNo. n-696

Re: Definition of "principalplace ofbusiness" forpurposesof article 60113, V.T.C.S.. the out-of-state bidding act

Tou ask about the proper construction of article 6Olg, V.T.C.S. Thereinafter the act], which governs bids submitted by nonresidents topolitical subdivisions in Texas for constructlou, supplies, and services. Specifically, you ask about'the proper construction of thephrase "principal place of business' that is set forth in the statutory definitions of "nonresident bidder" and "Texas resident bidder" found in section l(a)of theact.
Section l(b)of theactprovides the following:

T'hestate or a govermnsntal agency of the state may not awarda contract for generalconstruction, improvements, services, or public works projects or purchases of supplies,materials, or equipment to a nonresident bidder unless the nonresident's bid is lower than the lowest bid submitted by a responsible Texas resident bidder by the same amount that a Texas resident bidder would be required to underbid a nonresident bidder to obtain a comparablecontract in the state inwhich the nonresident'sprincipal place of business is located. (Emphasisadded).
Section l(a)(2). of article 6Olg. provides that "'[nlonresident bidder' means a bidder whose principal place of business is not in this state,but excludesa contractorwhos.& ultimateparent companyor majority owner has its principal place of business in this state." (Emphasis added.) Section l(a)(3) provides that "'Texas resident bfdder' means a bidder whose principal place 

### ofbusiness is in this state, and includes a contractor whose ultimate parent company or majority owner has its principal place of business in this state.' (Emphasis added.) The act itself does not define the phrase

p. 3224Honorable Mark W. Stiles - Page 2 (m-696)

"principal place of business." You express concern that political s&divisions in this state are construing "principal place of business" in such a way as to permit companies having, for example, only one permanent office in the state with as few as one employee engaged in activities other than submitting bids to governmenral agencies to compete on an equal footingwith Texas resident bidders. You assert that this does not comport with the legislature's intent when it enacted the statute.

In construing a statute, we must look to the intent of the legislatiareand construe the statute so as to give effect to chat intent. Knight v. International Harvester Credit Corp., 627 S.W.2d **382** (Tex. 1982). In determining legislative intent.we must consider the end to be attained. themischief to be remedied, and the purposes to be accomplished. Flowersv. Den se -Ta eler h Co., **472** S.W.2d 112 (Tex. 1971);Calvertv. Kadane, 427 S.W.2d 605 (Tex. 1968). When the words of a statute are subject to two reasonable Interpretations and
are therefore ambiguous. one may consider the legislative history of the statute to determine which meaninn of the words the legislature intended. San Antonio General Drive&, Helpers Local No, 657 v. Thornton, 299 S.W.2d 911 (Tex. 1957);Miller v. Calverc, 418 S.W.2d 869 (Tex. Civ. **App.** - **Austin** 1967, no writ). Specifically, in attempt&g to-dis&rn legislative intent from an examination of the legislative history of a statute, one looks to the purpose the original enactment served, the discussion of statutory meaning in committee reports, the effect of amendments. whetha? accepted or rejected, and the remarks in debatc preceding passage. Johnson v. Department of Treasury, I.B.S., **700** F.2d 971 (5th Cir. 1983); Rogers
v. Frito-Lay, Inc., **611** F.2d 1074 (5th Cit. 1980). cert. denied, 449 U.S. 889 (1980),

On the basis of our examination of both the Bouse Committee on Business and Commerceand Iiouseof Representativesdiscussions of the bill, we conclude that the act is intended to impose on any out-ofstate company seeking co bid on construction. supplies, or services contractswith apolitical subdivision in Texas the sameburdens that are imposed, if any. upon Texas resident biddersby the state inwhich the nonresident's principal place of business is located. In the public hearing before the House Committee on Buslnass and Commerce, theHouse author of thebillmade the followingremarks explaining the purpose of theproposedbill:

In neighboring states.like Louisiana, Arkansas, and New Mexico, there is a rule that says any public work awarded In that state, if an out-of**state contractor**  **like a**  **contractor** fromTexas bids aproject in that state, than theTexasbidder, in order 

### to receive the contract, has to be five percent lower than the lowest bidder in that

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state. This isArkansas, for instance

. . . . If
a state like Arkansas,New Mexico, Louisiana, New York, wherever, requires that an out-of-state contractorbe lower by a certain amount in order to receive that bid, we will require those state contractorsto do the same thing inTexas.

. . .' Teshony of Rep. Mark Stiles on Tex. B.B. No. 602 before House Cosmlttee on Business and Commerce, 69th Leg., public hearing (Feb. 18, 1985) (transcriptavailable from House Staff Services). In the House discussionprior to thebill'spassage to engrossment,theliouse author of the bill explained that it was designed to create a "reciprocity requirement in the award of state contracts so chat bidders from other.states would face the same under-bid requirements in Texas contractsthatTexasbidderswould experiencefrombidding on comparablecontractsin those states."

InAttorneyGeneralOpinionJM-616 (1987).we declared:
[T]he term 'principalplace of business' as used in article 601g does not necessarily refer to the place of incorporation or organization of a fompany

. or to the residence of Its majority
owner. It means the place where the person' whether natural or artificial, maintains offices and transacts business. I.e., where the person's business affairs are conducted. See National Truckers Service, Inc. v. Aero SystG Inc., 480 S.W.2d 455 (Tax.Civ.App. - FortWorth 1972.writ ref'd n.r.e.). The 'principalplace of business'
can sometimes be different from the place of the person's general offices, see Dryden v. Ranger Refining 6 Pipe Line Co., 280 F. 257 (5th Cir. 1922).butwhen abusiness ouerates in a number of states and no one state is clearly the state in which its activities are principally conducted, the state from which centralized general supervision is exercised may be considered the location of the 'principal place of business,' particularly if a substantial part of its operations are also conducted there. See Jackson
v. Tennessee Valley Authority. 462 F.upp. 45 (D.C. Term. 1978). Cf. In re'Commonwealth 011 Refining Co., Inc., 596F.2d 1239 (5thClr. 1979).

It Is clear that the bill is intended to treat as a "Texas resident bidder" a bidder thathas more In Texas than merely an office In the state with an employee who submits bids to various political subdivisions. "Principal" has been defined to mean "chief, leading,

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ttostimportant or considerable, primary, original' highest in rank' authority, character, importance, or degree." Stilwell Co. v. Commissioner of Taxation, 100N.W.2d 504, 507 (Minn. 1959); **Kelp v.**  **s 583,**  **584 (Kan.**  **1911). Burgess.**  **115** P.
The issue of whether an office or establishment is a "principal place of business" requires, of course, a determination of fact, Kibler v. Transcontinental & Western Air, 63 F. Supp. 724. 726 (E.D. N.Y. 1945)' the resolution of which would be inappropriate in the opinion process. We do conclude, however, chat, for purposes of article 6Olg, V.T.C.S., a bidder's "principal place of business" refers to the place-where the bidder maintains offices and a substantialpart of itsoperations are also conducted there.

For purposes of article 601g, V.T.C.S., which governsbids submittedby nonresidents topolitical subdivisions in Texas for construction, supplies, and services, a bidder's "principal place of business" refers to the state in which the bidder maintains an office and a substantialpart of its operationsare also conducted there.

AttorneyGeneral ofTexas

JACKHIGHTOWER FirstAssistantAttorney General

**MARY KELLER**  ExecutiveAssistant **Attorney** General

JDDGE ZOLLIE STZAKLKT SpecialAssistantAttorney General

RICK GILPIN Chairman,Opinion Committee Prepared by JimMoellinger AssistantAttorney General

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