March 14, 1952 

Hon. Robert S. Calvert Opinion No. V-1421 

Comptroller of Public Accounts 

Austin, Texas Re: Occupation tax rate on liquid hydrocarbons recovered ,i from gas by means of a sep- 

-_ arator. or other non-mechanical methods incidental to 

Dear Mr. Calvert: the production of the gas. 

Your request for an opinion of this office reads in part 

as foUows: 

“Please advise me whether liquid hydrocarbons 

recovered from-gas by means of a separator or other 

non-mechanical methods incidental to the production 

of said gas are to be taxed at 4.125$ per barrel whenever the value is less than $1.00 per barrel and at 

4-l/8% of the value whenever the value is more than 

$1.00 per barrel, or if the rate should be 4.6$ per 

barrel whenever the value is less than $1.00 per barrel and 4.6% of the value whenever the value is more 

than $1.00 per barrel. 

‘It has been my interpretation that the tax rate, 

effective September 1, 1951, on liquid hydrocarbons 

recovered from gas by means of a separator or other 

non-mechanical methods incidental to the production 

of said gas is 4.6$ per barrel whenever the value is 

less than $1.00 per barrel and 4.6% of the value whenever the value is more than $1.00 per barrel. However, due to the large number of taxpayers who have 

taken exception to this interpretation, I will appreciate 

your opinion as to the correct tax rate. . . .” 

Section III of House Bill 285, Acts 52nd Leg., R.S. 1951, 

ch. 402. p. 695, amends Section l(1) of Article 7047b, V.C.S., by 

increasing the tax on production of gas from 5.2 per cent to 5.72 

per cent of the market value, and reads in part as follows: 

‘There is hereby levied an occupation tax on the 

business or occupation of producing gas within this 

State, computed as follows: 
22% Hon. Robert S. Calvert, Page 2 (V-1421) 

“A tax shall be paid by each producer on-the*- 

‘mount of gasproduced and saved within~this State 

equivalent to:5.72% of the market value thereof~ssand 

when produced; provided that the amount of such tax 

on sweet and sour natural gas shall never be less than 

121/1500 of One Cent (10 per one thousand (1,000) cubic 

:fggt*” 

Seiti&i(3) of Article-7047b,.V.‘C.‘S.,:~piovid&: 

I@ 

-, “All liquid hydrocarbons that are recovered 

from-gas .by means of a separator or by other.~non- 

,~mechanical methods, incidental to the production~df 

said.gas;~shall Abe .taxed at the same rate as oil--as 

Llevied by:Acts-of 1941. Forty-seventh’,LegislaaWr.e, 

Chapter 184,-Article I, ‘Section-ll” 

Article-7047b. V;CiS.. levies an occunation tax on-the 

‘business of produc~ing gas in this State. -The tax isbased upoarthe 

.:.market~valrie:,.bf the.gas as produced. ~W. -R.-Davis v..State,.i42 

-T.ex.’ 637; 180.S.W-.2d 429 (1944); Car&an River, ~Gas ~Co. v.Bivins, 

.-137-T&, 347,~153‘S.W.2d 432 (1941). 

?Sectlonll(3) of Article-7047b~spec’ifically.:provides!’the 

“manner’ and- raie-of taxing certain liquid hydrocarbons-recovered 

’ from-,the:gas by me&s of a separator cr.other~‘non-mechanitil 

,^-means. .This‘ provision, which has’ the. effect-of taxing.~ those.liquid 

:hydrpcarbonsl produced with the. gas-at the lower: rate pr,ovided 

for: oil’&thii than:,ht the. same’iate aslg6s;had. its- origin:i&krticle--~,ofHotis~Bill.8, Acts 47th-Leg.,-.R-.S.- 1941,:ch.. 184,?p.1269. 

The pertinent part of paragraph (1)’ of Section 1~ of Article:IIzof 

that~ Act read.as follows: 

. . ;--Allliquid hydrocarbons- thattare’recov3’erkd friim’g+by means of a separator: or: byy~dther 

nonmechanical~inethods shall~ be taxed at the: same 

‘r&e.as oil-as levied by Article I of this-Act.” 

Article I of House Bill 8 referred tom above levied-anoc- 

’ cupitibn tax.Lpon the production of oil at the rate of 4.12~:perrcent 

!~.of the ‘market value thereof whenever such values was .in~ excesszof 

$1.00’ per barrel. 

Article 7047b was amended in 1945 bye changes In~.the 

wording of and in the addition of certain sections. Acts 49th Leg.. 

R.S. 1945, ch. 269; p. 423. There was no change in the amount of 

the tax levied upon the production of gas. That portion of--Section 

1 of Article II of House Bill 8 relating to ‘the taxation of ‘the .liqtid 

hydrocarbons-in question was amended to tread: 
Hon. Robert S. Calvert, Page 3 (V-1421) 

“All liquid hydrocarbons that are recovered from 

gas by means of a separator or by other non-mechanical 

methods, incidental to the production of said gas, shall 

be taxed at the same rate as oil as levied by Acts of 1941, 

Forty-seventh Legislature, Chapter 184, Article I, Section 1.” 

The 52nd Legislature increased the occupation taxes 

on the production of oil and gas, making the tax equivalent to 4.6 

per cent of the market value of oil and 5.72 per cent of the market 

value of gas produced. Sections I and III, Acts 52nd Leg., R.S.1951, 

ch. 402, p. 695. Section l(3) of Article 7047b was not amended by 

this Act. -~ 

The only question presented here is that of determining whether the liquid hydrocarbons should be taxed at the rate of 

4.125 per cent or at 4.6 per cent of their market value. Taxation 

of the liquid hydrocarbons at the lower rate, 4.125 ‘per cent, may 

be supported by the theory that this was the tax levied upon oil by 

House Bill 8 of the 47th Legislature and this rate was specifically 

adopted by reference to that act. Taxation of the liquid hydrocarbons on the basis of the present rate-at which oil is taxed (4.6 per 

cent) may be maintained on the assumption that the Legislature intended that oil and these liquid hydrocarbons were to be taxed at 

the same rate. 

It is a ge~neral rule that a statute which adopts another 

statute or a part thereof by specific reference incorporates or 

takes the adopted statute as it existed at that time notwithstanding 

subsequent repeal, amendment or modification of the adopted statute. 50 Am. Jur. 58. Statutes, Sec. 39; 39 Tex. Jur. 129, Statutes, 

Sec. 66; Annotation, 168 A.L.R. 627; 59 C.J. 610, 937, 1058, Statutes, 

Sets. 167. 548, 624; 2 Sutherland, Statutory Construction (3rd Ed. 

1943) 548. As in the case of most general rules, however, this rule 

has its exceptions. The two exceptions applicable here are: (1) 

where the Legislature evidences such an intent, either express or 

implied, the subsequent amendments of the adopted statute are incorporated within the adopting statute; and (2) subsequent amendments of the adopted provisions will be incorporated where both 

adopted and adopting sections are part of the same act or statute. 

Annotation, 168 A.L.R. 627; 50 Am. Jur., supra; 59 C.J. 1058, Statutes, Sec. 624; 1 Sutherland, Statutory Construction (3rd Ed. 1943) 

432. 

The occupation taxes on oil and gas were both enacted 

by the 47th Legislature in substantially their present form in House 

Bill 8,, supra, commonly referred to as the Omnibus Tax Bill. 

The two taxes are closely related and have a similar background 

in many respects, and they are taxes in the nature of severance 

taxes levied upon companion industries or occupations. 

// 
&:,. . 

.4 

2w Hon. Robert S. Calvert, Page 4 (V-1421) 

We are of the opinion that the Legislature -intended that 

‘the liquid hydrocarbons recovered from gas by ‘separators or other 

5 non-mechanical means were to.,be taxed at-the same rate as oil. 

These liquid hydrocarbons were, for the purpose of this tax, to’be 

treated as oil. If the Legislature had intended otherwise, a specific 

‘-rate would have been set out in Article 7047b. This intent of the 

~Legislature .is clearly evidencedhy the fact that when.the 5lst Legislature, at its Special Session, passed House Bill 3 temporarily 

increasing tiy ten per cent the various sales, occupation, hand litense taxes, etc., fin order.to provide additional revenues, the ,Act 

specifically provided that the liquid hydrocarbons recovered by 

separators or noon-mechanical means were.t-o Abe taxed at the same 

irate as oil under the-Act, i.e., 10% of 4.125. Acts 51st ‘Leg., kt 

%.S. .1950’, rh. t, 9. :I& 

.l-Iouse ‘Bill ‘Zg5, Acts 52nd ‘Leg., R.S. 1951, ch. 492, p. 

695, ~generally car-r&d over and;~in effect. made permanent the 

temporary increas’e~ of ten per c~ent imposed by House BiLl -3. The 

caption to House .-Bill .2&E clearly evidences the intent of the Leg- 

‘. .islature ‘,to increase the occupation taxes levied on the prodtiinn 

of oil and gas; In this connection-we ‘quote from,Attorney Genek’fk 

~0pihion V--1246 (.i9St) as ~filtows: 

‘!After %h’e ctose of ~the ‘Re~gular Sessinn df r&e 

;3tst’L;~~iStaWre:in’~49, it,became apparent*at’the 

.~, . ‘revenues to’& -collected under’the rntes:prm+lediin 

‘the taxing -&dtrites then in effect.would be insafficimrt 

:PO -meet :the :neces~sary current expenditures r&the 

,Stateforthe~biennium ending August.,31, 1951,andim 

order ‘to-avert’the deficit forecas~t by-the Comptrxiller 

and to pr-ovide :suificient funds ~for the operation of klre 

State’Hospitals and Special Schools, the Legislature 

was called ,into-Special Session for the purpose of~%n- 

:acting ‘tax le.gielation to raise revenues in anamount 

.stifficient to-averts the deficit and provide-forthe ~ne&s 

of the State.Hospitals and Special Schools. House Bill 

3, adopted by Zhe Legislature at the Special Session 

(Acts 5Is.t Leg., 1st C.S. 1950, ch. 2. p. 10) pr~ovided 

~for fan additional tax of 10% of the basic levies of ~a11 

the taxing statutes, with certain exceptions not’herre 

pertinent, such additional tax-to’be in effect’for .the 

years 1950’and that part of 1951 ending on August 31gt. 

‘The revenues derived therefrom were allocate,d to the 

State~Hospital %und with the exception of the portion 

required .by Section 3, Article VII of the Constitution 

~of Texas to .be:set apart for the benefit of the public 

:fru-e s&6oEs. 
Hon. Robert S. Calvert, Page 5 (V-1421) 

“At the Regular Session of the 52nd Legislature 

in 1951, House Bill 285, as introduced in its original 

form, provided for a continuation of the taxing statutes 

therein contained at the rates then in effect and contained the customary form of emergency clause. While 

in committee, the .original bill was amended as a whole 

by increasing the basic rate of all of the taxing statutes 

by lo%,, using practically the identical language contained 

in House Bill 3 ‘with certain ezceptions for the purpose 

of clarifying the application of the increased rate. . . . 

“In construi~ng a statute, the cardinal rule is to 

ascertain the-intention of the Legislature in enacting 

the law.-This intention, once ascertained, must be enforced although it may not be consistent with the strict 

letter of the statute. In ascertaining the true intention 

of the Legislature, the existing condition of the law at 

the time of its enactment and the general rules then 

established and applicable to its subject matter should 

be considered.. State v. Dyer, 145 Tex. 586, 200 S.W. 

2d 813 (1947). If the language used in the act leaves 

,its intent obscure, the courts may resort to certain 

.aids in construction such as the nurnose sounht to be 

,accamplished, the history of the -legislation, and the 

public policy of the State. Harris v. City of Fort Worth, 

142 Tex: 600. 180 S.W.td 131U(l944]. The object in construing any statute is to as&?&a& from the langua,ge 

used in the statute the intention of the Legislature, and 

where the statute is a taxing statute, the act should be 

construed in connection with other laws relating to the 

assessment and collection of taxes. White v. McGill, 

131 Tex. 231, 114 S.W.td 860 (1938). The Legislature 

is free to fii in each act the time it, as a whole or in 

part; shall take effect, and may therefore provide that 

it shall takewect in whole or in part from its passage, 

approval, or %% fled date. Chambers v. Baldwin, 274 

S.W. 1011 (Tex. Civ. App. 1925). The intention of the 

Legislature being clearly manifested by its history and 

by the emergency clause that it should become effective 

as a revenue producing measure upon its effective date, 

that intention should control. Texas Co. v. Stephens, 

100 Tex. 628, 103 S,W. 481 (1900). In determining the 

legislative intent, the entire act should be looked to and 

this includes the caption, the body of the act, and the 

emergency clause. -Popham v. PHtterson, 121 Tex. 615, 

51 S.W.2d 680 (1932). 
-. . 

Hon. Robert S. Caivert, Page 6 (V-1421) 

-Applying these rules of statutory construction 

to House Bill 285, and bearing in mind that House Bill 

3 imposed an additional tax of 10% in practically all 

of the taxing statutes amended by House Bill 285, with 

certain exceptions above noted, the continuance of the 

10% increase in effect after>he expiration date of 

House Bill 3 on August 31, 1951, makes it a reasonable conclusion that the Legislature intended to carry 

the 10% increase into effect for the entire calendar 

vear 1951 except in cases where such increase was 

specifically repealed. Construing all of the provisions 

-,~of House Bill 285 together, the intendment was to keep 

the 10% additional levy except where the basic levy 

of the taxing statute was raised, in which case the ini 

crease was to become effective upon September 1, 1951. 

wtthout regard to whether the tax was payable in adVance upon an annual, quarterly, or monthly basis.” 

(Emphasis Added). 

The liquid hydrocarbons in question are actually produced as a part or component of the gas and would be taxed as such 

except for the express provision that they were to be taxed at the 

ijame rate as oil. We believe that it is obvious that the Legislature 

intended to increase these occupation taxes by approximately the 

same amount and that since the occupation tax on the production of 

oil was raised from 4.125 to 4.6 per cent, it follows that the tax nn 

these liquid hydtocarbons was aIso to be increased to 4.6 per cent 

Of their rixaiket WAS. 

, 

in &n&usion, it is our opinion that the 52nd Legislature intended in House Bill 285 to carry over and to continue in 

effect the gene*&1 ten per cent increase in various taxes imposed 

by House Bill 3, and that the liquid hydrocarbons recovered from 

gas by separators or other non-mechanical means under the provisions of ~paragraph (3) of Section 1 of Articl~e 704i’b, V.C.S., 

should be taxed ‘at the same rate Bs oil or at~4.6 per cent of their 

market v%lui? ~whenever such value is in excess of $1.00 per barrel. 

Liquid hydrocarbons recovered from gas by 

separators or other non-mechanical means are tax- 
-* . 

Hon. Robert S. Calvert, Page 7 (V-1421) 

24-a 

able at the same rate as the occupation tax levied 

upon the production of oil, which is 4.6 per cent of 

the market value. Arts. 7047b and 7057a, V.C.S.; . 

H. B. 285, Acts 52nd Leg., R.S. 1951, ch. 402, p. 

695; Att’y Gen. Op. V-1246 (1951). 

Yours very truly, 

APPROVED: 

,- 

W; V. Geppert _, 

Taxation Division 

E.Jacobson 

Reviewing Assistant 

PRICE DANIEL 

Attorney General 

Assistant 

Charles D. Mathews 

First Assistant 

., 

FL:meh ’