The Honorable Jane Nelson Chair, Committee on Finance Texas State Senate Post Office Box 12068 Austin, Texas 78711-2068

Dear SenatorNelson: 

### KEN PAXTON ATTORNEY GENERAL OF TEXAS

April 21, 2017

OpinionNo. KP-0143
Re: Whether the deposit of net sales tax revenue into the state highway fund as required under article VIII, subsection 7-c(a) of the Texas Constitutionmay bemade afterthe close ofthe fiscal year when deposit before the close ofthe fiscal year is notpossible (RQ-0157-KP)

Yourequestanopinion concerningthetiming ofa depositto

### tpe creditofthe statehighway fund under article VIII, subsection 7-c(a) ofthe Texas Constitution. 1 Your question involves two conflicting words inthe same constitutional provision: "net" and "fiscal." The provisionrequires a deposit ofnet revenue in the current fiscal year. The Comptroller explains the net calculation necessarily occurs after the close ofthe fiscal year; thus the deposit ofnet**revenu~** canonly occur early into the next fiscal year. The resulting legal question presented is: What happens when a constitutionalprovision**conflict~** with itselfand is impossibleto complywith? Texas courts have consistently held that in such an event, substantial compliance will suffice. Under the facts presented, substantial compliance is making the deposit early in the next fiscal year once the net calculation is complete. 

### I. Background The constitutionalprovision at issue provides: Subjectto Subsections (d) and (e) ofthis section, ineach state fiscal year, the comptroller ofpublic accounts shall depositto the creditof the state highway fund $2.5 billion ofthe 

### netrevenue derived from the imposition ofthe state sales and use tax onthe sale, storage,use, or other consumption in this state oftaxable items under Chapter

1Letter from Honorable Jane Nelson, Chair, Senate Fin. Comm. at 1 (Apr. 12, 2017), https://www.texasattorneygeneral.gov/opinion/requests-for-opinion-rqs ("Request Letter").The Honorable Jane Nelson

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· 151, Tax Code, orits successor, that exceeds the first $28 billion of

thatrevenue coming into the treasury in that state fiscal year. TEX. CONST. art. VIII, § 7-c(a) (emphasis added). 2 You specifically ask whether, for the 2018- 2019 biennium, a delay in making each fiscal year deposit to the state highway fund until Septemberofthe following fiscal yearwould violate this constitutionalprovision.3 RequestLetter at 1. You explainthatthe Comptroller ofPublic Accounts ("Comptroller") informed you "that it is not possible to calculate net revenue and remit the appropriate payment to the highway fund until after the close of the fiscal year." Id. Based on that information, you ask whether the Comptroller can comply with article VIII, subsection 7-c(a) bymaking the deposit required under that subsection inthe next fiscal year as soon as the netrevenue canbe calculated. Id. Article VIII, subsection 7-c(a) requires the Comptroller to deposit up to $2.5 billion into the statehighwayfund ifthenetrevenue derived from the sales and use tax imposedunder chapter 151 ofthe Tax Code exceeds $28 billion. TEX. CONST. art. VIII,§ 7-c(a). The specific amount of the deposit will depend onthe amount ofnetrevenue coming into the treasurypursuant to chapter 151. Id. Ifnetrevenue reaches $30.5 billion, the Comptrollermust depositthe entire $2.5 billion allocated to the state highway fund under that provision. However, ifnet revenue derived under chapter 151 falls between $28 billionand $30.5 billion,the specific amount depositedintothe state highway fund will depend·upon the final net revenue amount. Until the Comptroller calculates that amount, the Comptroller may not be able to determine whether and to what extent funds are available for the transfer to the state highway fund as required under article VIII, subsection 7- c(a). However, the plain language ofthe provisionprovidesthatthe deposit shall be made in each state fiscal yearbaseduponthe netrevenue coming into the treasury "in thatstate fiscalyear." Id. (emphasis added). Thus, the express language ofthe provision requires the Comptroller to make the deposit during the fiscal year in which the revenue comes into the treasury, and a delay until Septemberofthe nextfiscal year appears inconsistent withthe "inthat state fiscal year" portion of the provision. 

### II. Standard ofReview Attorney General opinions do not find facts or resolve issues offact. Tex. Att'y Gen. Op. No. GA-0513 (2007) at 3 n.4. As aresult, whenrespondingto opinionrequests, weprovide advice concerning the legal issues presented and assume the facts as presented to us are true. Tex. Att'y Gen. Op. No. JC-0240 (2000) at 1. When answering legal questions, our role is to assess how a court would likelyrule, giventhe facts producedby therequestor, the text atissue, andpriorcases. Tex. Att'y Gen. Op. No. GA-1003 (2013) at 1.

2Subsection (d) concerns reductions in the amount ofthe deposit by joint resolution, and subsection (e) establishes an expiration date for the Comptroller's duty under subsection (a). TEX. CONST. art. VIII, § 7-c(d), (e). Neither subsection relates to the specific question you ask. The Legislature passed article VIII, section 7-c in 2015, and it was adopted by the voters in November 2015. Subsection 7-c(a) takes effect on September 1, 2017. See Tex. S.J. Res. 5, 84th Leg., R.S., 2015 Tex. Gen. Laws 5414, 5415. To date, no court has construed its provisions.
3See TEX. Gov'TCODE § 316.071 (providing that "[t]he state fiscal year ends on August 31 ofeach year").

### The Honorable Jane Nelson

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### III. Analysis A. "Net" Means Net Youtellus thatthe Comptrollerinforms you "thatitis notpossibleto calculate netrevenue and remit the appropriate payment to the highway fund until after the close ofthe fiscal year." RequestLetterat 1(emphasis added). The constitution does not define "netrevenue" forpurposes ofarticle VIII, subsection 7-c(a). When a term is not defined, we apply the common, ordinary meaning ofthe term unless a contrary meaning is apparent from the language ofthe provision. Tex. State Bd of Exam 'rs of Marriage & 

### Family Therapists v. Tex. Med Ass 'n, 511 S.W.3d. 28 (Tex. 2017). To determine a term's common, ordinary meaning, we typically look first to the dictionary definitions and "then consider the term's usage in other statutes, court decisions, and similar authorities." Id. We construe constitutional provisions and amendments that relate to the same subject matter together and consider them in light ofeach other. Garofolo v. Ocwen Loan Servicing, L.L.C., 

### 497 S.W.3d 474, 477 (Tex. 2016) (explaining that courts interpret words in the constitution as they are generally understood). Other constitutional references to "net revenue" similarly include in that term only the amount remaining afterpayments ofall refunds allowed by law and expenses ofcollection. See, e.g., TEX. CONST. art. VIII,§§ 7-a, 24(f); id. art. III,§ 49-g(o) (defining "net"to mean "the amount of money that is equal to the difference between gross collections and refunds before the comptroller allocates the receipts as provided by law"). "Net" is defined as a "final or overall" amount. NEW OXFORD AMERICAN DICTIONARY 1178 (3d ed. 2010). The common, ordinary understanding of "net" revenue includes only the amount of revenue "remaining after all deductions have been made." AMERICAN COLLEGE DICTIONARY 934 (4th ed. 2002); see also MERRIAM-WEBSTER'S COLLEGIATE DICTIONARY 832 (11th ed. 2004) (defining "net" as the amount "remainingafterthe deduction ofall charges, outlay, orloss"). Thus,

## a: fiscal year's actual "netrevenue derived from the imposition ofthe state sales and use tax

...under Chapter 151, Tax Code" includes only the final amount remaining at the end ofa fiscal year after the Comptroller pays deductions, refunds, and any other expenses required bylaw. See TEX. CONST. art. VIII, § 7- c(a). 

### Answering your question requires consideration of the timing involved in the Comptroller's calculation ofnet revenue. Under chapter 151, the State imposes a sales and use tax, and certain political subdivisions may impose additional sales and use taxes under other chapters ofthe Tax Code. See TEX. TAX CODE§§ 151.051(a) ("A tax is imposed on each sale of a taxable item in this state."), (b) ("The sales tax rate is 6 1/4 percent ofthe sales price ofthe taxable item sold."), .101 (imposing a use tax at the same percentage rate); see also id. §§ 321.lOl(a) (authorizing a municipality to adopt a sales and use tax), 323.101 (authorizing certain counties to adopt a sales and use tax). A retailer collects boththe State and local sales and use taxes due from the purchaser. Id §§ 151.103(a), 321.201 (requiring retailer to add sales tax imposed by the municipality to that imposed by chapter 151). Upon receipt ofsales and use tax revenue from a retailer, however, the Comptrollermust calculate the portionthat constitutes local sales and use taxes and send that amount to the appropriate political subdivisions. ·See, e.g., id. §§ 321.501-.505 (requiring Comptroller to distribute municipal sales and use taxes to the taxing municipality). Because local sales and use taxes do not constitute revenue derived from the taxThe Honorable Jane Nelson

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imposed under chapter 151, the Comptroller is unable to calculate the net revenue as required under article VIII, subsection 7-c(a) until after determining the amount oflocal sales and use taxes to distribute to local governments pursuant to the Tax Code. In addition, chapter 151 authorizes the Comptroller to issue various refunds on sales and use taxes imposed under that chapter. 

### See, e.g., id §§ 151.429(a), (c) (authorizing a tax refund ofup to $250,000 for an enterprise project), .4291(a), (c) (authorizing atax refund ofup to $250,000 for a defense readjustmentproject). Due to these provisions, the possibility of alterations to the net revenue calculation may continue through the end ofthe fiscal year. Furthermore, the Comptroller explains that for the 2018 and 2019 fiscal years, "projections suggest that the sales tax revenue will not reach the $30.5 billion threshold until the last month ofthe fiscal year."4 Thus, the Comptroller is currently unable to compute the final "netrevenue fiscal year end calculations" and confirm the appropriate amount ofthe deposit to the state highway fund before the end ofthe fiscal year. When a strictly literal construction of a provision would make compliance with it impossible, courts will adopt a constructionrequiring substantial compliance, which will promote the purposes for which the legislation was passed. 

### Bizelle v. State, 116 S.W.2d 385, 386 (Tex. Crim. App. 1938). 

### See also Bryant v. State, 457 S.W.2d 72, 77 (Tex. App.-Eastland 1970, writ refd n.r.e.) (substantial compliance with article III, section 35 of the Texas Constitution is sufficient); 

### Whiteside v. Brown, 214 S.W.2d 844, 847 (Tex. Civ. App.-Austin 1948, writdism'd) (concluding that substantial compliance with article XVII, section 1 ofthe Texas Constitution, relatingto notices ofelections, satisfiedthe constitutionaldemand). Relatedly, the Texas Supreme Court has admonished "that a too literal construction of a statute, which would prevent the enforcement of it according to its true intent, should be avoided." 

### Barshop v. Medina Cty. Underground Water Conservation Dist., 925 S.W.2d 618, 629 (Tex. 1996). B. What Would Be Substantial Compliance? 

### Ifthe Comptroller cannot calculate and make the deposit in the same fiscal year, what act would amount to substantial compliance? "Substantial compliance means one has performed the essential requirements" ofa provision oflaw. 

### Mekhail v. Duncan-Jackson Mortuary, Inc., 369 S.W.3d482, 485 (Tex. App.-Houston [1st Dist.] 2012, no pet.). The two elements to the provision at issue are money (the calculated net revenue deposit) and time (deposited the same fiscal year). The Comptroller's letter, your request, and other briefing suggestthe amount ofmoney is more essential-suchthat the netrevenue deposit should occur as soon as possible in the next fiscal year.5 Other briefing suggests timing is more essential-suchthat the Comptroller should deposit an estimated payment at the end ofthe fiscal year based onhis January 9, 2017 biennial revenue estimate with a reconciliation to follow once

4 See Letter from Honorable Glenn Hegar, Comptroller ofPub. Accounts, to Honorable Jane Nelson, Chair, Senate Fin. Comm. (Apr. 12, 2017) ("Comptroller Letter") (attached to Request Letter).
5Request Letter at 1-2, Comptroller Letter at 1-2, Brieffrom Honorable Dan Patrick, Lieutenant Governor, to Honorable Ken Paxton, Tex. Att'y Gen. at 2--4 (Apr. 18, 2017) (on file with the Op. Comm.).The Honorable Jane Nelson

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the final calculation occurs.6 A review ofthe text ofthe constitutional provision at issue and relevant case lawreveals that money is more essential to that constitutional provisionthan time. The Texas Supreme Court imparted guidance regarding "[p]rovisions which are not ofthe essence of the thing to be done." Chisholm v. Bewley Mills, 287 S.W.2d 943, 945 (1956). Specifically, the Court advised that, inlanguage commanding an actto be done within a settime, "the absence of words restraining the doing thereof afterwards or stating the consequences of failure to act withinthe time specified" supports a constructionthatthetimeto complete the act is less essential than the act itself. Id. Nothing in the constitutional provision prevents the deposit from occurring as soon as possible in the next fiscal year or spells out consequences for such a delay in the deposit. TEX. CONST. art. VIII, § 7-c(a). By contrast, there is no language in this provision contemplating a deposit based on estimated revenue. Estimates are**bas~d** on projected revenue and may not reflect the actual net revenue derived from the imposition ofthe state sales and use tax under chapter 151. The Legislature knows how to word a provision to require the Comptrollerto make apaymentbasedonestimatedrevenuebecauseithas done so elsewhere. See, e.g., TEX. TAX CODE § 351.1015(h) (authorizing the Comptroller to estimate hotel-associated revenue andmakedeposits into municipal suspense accounts "basedontheestimate"). Incontrast, article VIII, section 7-c(a) includes no discussion ofestimates and insteadrequires thatthe deposit into the state highway fund be calculated based on net revenue. Moreover, to the extent that the Comptroller deposited more into the state highway fund than required by article VIII, section 7- c(a), the Comptroller could not independently reconcile that overpayment in the absence of an express grant ofauthority due to the constitutional requirement that no money "bedrawn from the Treasury but in pursuance ofspecific appropriations made by law." TEX. CONST. art. VIII, § 6.7 Thus, the Legislature knew how to require the Comptroller to calculate a deposit based on an estimate andallowareconciliationofthatestimate, butitdidnotinclude similarlanguageinarticle VIII, section 7-c(a).8 Accordingly, paying an estimate, with no mechanism to return an overpayment, would not be a viable method of substantially complying with the constitutional provision at issue. The other potential methqd of substantial compliance would be to make the actual net revenue payment in September to allow for the calculation ofthe amount. In proposing article VIII, section 7-c, the Legislature intendedto providethe Texas DepartmentofTransportationwith

6See Brief from Frank Battle, Special Counsel to Honorable Joe Straus, Speaker of the Tex. House of Representatives at 5 (Apr. 18, 2017) ("Speaker Brief') (on file with the Op. Comm.).
7 See Tex. Att'y Gen. Op. No. 0-0044 (1939) at 3 (explaining that pursuant to article VIII, section 6 ofthe Texas Constitution, the Comptroller may not withdraw money from the treasury to "rectify a previous bookkeeping error, or for any other reason, except upon specific direction by the Legislature"). This principle is true whether the fund to withdraw money from is constitutionally dedicated (as here) ormerely statutory. See Tex. Att'y Gen. Op. No. 0-2658 (1940) (concluding that the Comptroller lacks authority to make a refund on an overpayment ofinheritance taxes absent a legislative appropriation). 8 SeePPGIndus., Inc. v. JMB/Houston Ctrs. Partners, Ltd P'ship, 146 S.W.3d 79, 84 (Tex. 2004) (observing that the "Legislature clearly knew how to indicate that warranty claims were assignable, but did not do so in the DTPA").

### The Honorable Jane Nelson

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"a revenue stream that allows for future planning" to address the State's growing infrastructure needs. Senate Research Ctr., Bill Analysis, Tex. S.J. Res. 5, 84th Leg., R.S. (2015). A court would likely conclude that the Comptroller would satisfy these essential requirements (thereby substantially complying with the constitution) by making the required deposit in Septemberofthe following fiscal year, when the net revenue calculation could be confirmed.9 

### Thus, if the Comptrolleris unable to calculate the exact amount ofthe depositto the statehighway fund before the end ofthe fiscal year, doing so as soon as possible thereafter would result in substantial compliance with the constitutional provision. 10

9lt has been suggested that the Legislature may not authorize the Comptroller to exercise discretion in determining the timing ofthe deposit. Speaker Briefat 6. We agree that the constitutional duties imposed by article VIII, section 7-c(a) belong to the Comptroller and that the Legislature could not revise those duties absent a constitutional amendment. However, ifthe Comptroller is unable to comply with the conflicting literal requirements ofthe provision, the Comptroller's substantial compliance will promote the purposes for which the legislation was passed.
10Article Ill, section 49a(b) ofthe Texas Constitution requires the Comptroller to certify "that the amount appropriated is within the amount estimated to be available in the affected funds." TEX. CONST. art. III, § 49a(b). Briefing submitted to this office questions whether the Comptroller's inability to make the deposit in a fiscal year would increase the amount ofgeneral revenue available for certification under article III, section 49a(b). Speaker Briefat 6. Because the Eighty-Fifth Legislature has yet to pass a General Appropriations Act, and the language regarding appropriations remains tentative, we are unable to determine whetherthe amount appropriated is within the amountestimatedto be availablepursuantto article III, section49a(b). See Hearings on Tex. S.S. 1 Beforethe Senate Comm. on Finance, 85th Leg., R.S. (Mar. 22, 2017), available at www.senate.texas.gov/av-archive.php. However, we note that in previous sessions, the Legislature has passed legislation deferring payment ofdedicated funds from the end ofone fiscal yearto the beginning ofthe next fiscal year. See Act ofJune 28, 2011, 82d Leg., lst C.S., ch. 4, sec. 1.01, 2011 Tex. Gen. Laws 5254, 5254-55 (amending section 42.259 ofthe Education Code to defer 15% ofthe payments from the foundation school fund to certain school districts from August 25th tobetween September 5thand l0th); Act ofJune 1, 2003, 78th Leg., R.S., ch. 201, sec. 35, 2003 Tex. Gen. Laws 812, 822-23 (same).The Honorable Jane Nelson

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### SUMMARY Article VIII, subsection 7-c(a) of the Texas Constitution requires the Comptroller to deposit into the state highway fund up to $2.5 billion ofthe netrevenue derived from the imposition ofthe state sales and use tax under Chapter 151, Tax Code. If the Comptroller is unable to calculate the specific amount of the required deposit before the end of the fiscal year, a court would likely conclude that doing so as soon as possible thereafter would result in acceptable, substantial compliance with the constitutional prov1s1on.

JEFFREY C. MATEER First Assistant Attorney General BRANTLEYSTARR Deputy First AssistantAttorney General VIRGINIA K. HOELSCHER Chair, Opinion Committee Verytruly yours,

KEN PAXTON Attorney General ofTexas