### TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

NO. 03
- 19
- 00740
- CV

1st Global, Inc. , Appellant

v. Glenn Hegar, Comptroller of Public Accounts of the State of Texas , and Ken Paxton,

Attorney General of the State of Texas , Appellee s

FROM THE 53RD D ISTRICT COURT OF TRAVIS COUNTY NO. D
- 1
- GN
- 18
- 003916 , THE HONORABLE DUSTIN M. HOWELL , JUDGE PRESIDING

M E M O R A N D U M O P I N I O N

This is a franchise

- tax suit. 1st Global, Inc. sued the state Comptroller and Attorney General ( collectively “ th e State ” ) to recover an amount of franchise taxes it paid for the year 2018 that it claims was excessive. The State filed a motion to dismiss the suit , asserting that 1st Global had not complied with one of the requirement s for the waiver of sovereign imm u n i ty. The trial court granted the motion and dismissed the suit for lack of jurisdiction. We will affirm.

Factual a nd Procedural Background 1st Global describes itself as the reporting entity of a combined group of investment advisors who assist indivi d u al s with their investments. A lthough 1st G lobal maintains a Dallas office to support transactions initiated by the advisors, a t least some of these advisors live and work outside of Texas. 1st Global generates its revenue in the form of commissions and f

ees from the services performed by the advisors.2 The underlying dispute between 1st Global and the Comptroller goes back several years and involves how 1st Global ’ s gross receipts should be apportioned for franchise

- tax purposes. Under the Texas Tax C o d e, apportionment of taxable margin is based on a taxable entity ’ s “ busin ess done in this state. ” T ex. Tax Code § 171. 103(a)(2). In a separate administr at ive proceeding involving 1st Global, t he Comptroller previously a nn ounced his position that receipt s generated throu gh the provision of services by 1st Global ’ s financial advisors, wherever they are located, s hould all be apportioned to Texas because of its Dal las off ice . 1st Global, on the other hand, asserts that it earns its revenues in the states w h e re its advisors perform services on its beha lf, which would result in its owing substantially less franchise taxes to the State of Texas.

Chapter 171 of the Tax C ode contains provisions pertaining to franchise taxes. Payment of franchise taxes by an on g o ing taxable entity is due May 15 for the pre ceding calendar year. Id . § 171.152(c). Pursuant to section 171 .202(a), a taxable entity mu st file an annual r eport containing the financial information necessary to compute the amount of franchise tax owed. T he entity ’ s regular annual report mus t be filed “ before May 16. ” Id. § 171.202(b).

Chapter 112 of the Tax Code co ntains provisions re lating to taxpa yer suits. Subsection (a) of section 112.052 provides that a person may bring a tax

- protest suit agai n st the
state to recover a tax on ly if the person has first paid the tax under protest “ as required b y Section 112.051. ” Id . § 112.052(a) ; see Tex l ey , Inc. v. H egar , 613 S.W.3d 322, 326 (Te x. App.

— Austin 2020, no pet.)

. Section 112.051(a), in turn, pr ov i des that a person who intends to bring a suit complaining about the imposition of a tax must first pay “ the amount claimed by the
st ate ” and must submit a protest along with the pay ment:
If a person who is required to p ay a tax or fee imposed by this ti tl e or collected by the comptroller under any law, including a local tax collected by the comptroller,3

contends that the tax or fee is unlawful or that the public official charged with the duty of colle cting the tax or fee may not legally demand or collect t h e t ax or fee, the person shall pay the amount claimed by the state , and if the person intends to bring suit under this subchapter, t he person must submit with the payment a protest.

Tax Code § 112.151(a) (emp hasis added).

1st Global filed this tax

- prot e s t su it in connection with its 2018 regular annual report. In its 2018 report, 1st Global self

- assessed its franchise taxes due for that tax year on the basis of the Comptr oller ’ s earlier

- stated position regarding apportionm ent, i.e., that receipts
gener a t ed t hrough the provision of services by 1st Global ’ s financial advisors must all be apportioned to Texas. Along with its annual report, 1st Global paid that amount of taxe s and, at the same time, filed a protest letter cont esting the correctness of the a m ount paid. At that time, however, the Comptroller had not determined, by any available process, that any specific amount was due from 1st Global for the 2018 tax year.

The Stat e moved to dismiss 1st Glo bal ’ s suit on the gr ound that 1st Global had not pa i d “ t he amount claimed by the state ” as required by section 112.151(a) because the state had not claimed any specific amount at that time and 1st Global therefore had not met section
112.151 ’ s require ments for a waiver o f sovereign immunity. It is un d ispu ted t hat at the time 1st Global filed its suit the Comptroller had not , as to 1st Global, conducted an audit, assessed a liability, issued a jeopardy determination, determined a deficiency, or issued a refund denial for tax year 2018. T here are no di s pute d fac t issues in th is case . The trial court granted the State ’ s motion and dismissed 1st Global ’ s suit for lack of jurisdiction. 1st Global perfected this appeal.

Discussion 1st Global asser ts three issues on appeal: (1) Whether Texas Tax Code sec t ion
11 2.05 2(b) recognize s tha t a taxpayer may file a protest letter with its regular annual report ;4

(2) Whether the phrase “ amount claimed by the state ” in se ction 112.051(a) of the Tax Code includes the tax calculated and self

- assessed by a taxpayer i n i ts r egu lar annual report ; and (3) Whether 1st Global ’ s live petition plead s sufficient facts to establish a w aiver of sovereign immunity

. Because we believe the second issue is the d ominant issue in this appeal , we will discuss it first. This Cour t ha s h eld tha t se ction 112.052 of the Tax Code can operate a s a waiver of the s tate ’ s immunity in franchise

- tax protest suits only if the taxpayer “ strictly complies with the statute ’ s administrative and procedural r equirements. ” OGCI Training, Inc. v. H egar , N o. 0 3

- 1 6

- 00 704

- CV, 2017 WL 4899015, at *5 (Tex. App.

— A us tin Oct. 27, 2017, no pet.) (mem. op.). Thus, since section 112.051(a) requires that the taxpayer “ pay the amount claimed by the state ” along with its pr otest, the dispositive issue here is wh ethe r 1 st G lob al p aid “ the
amount claimed by the state ” when it submitted its protest

.

In the context of the present legal issue, this Court is not free to give section 112.051(a) whatever interpretation we think i s the fairest or most efficient or even the mo st

r eas onable

. Rather, we are bound by the well

- established rule that “ a statute shall not be construed as a waiver of sovereign immunity unless the waiver is effected by clear a nd unambiguous language. ” Tex. Gov ’ t Code § 311.034; see also In re Nestle U SA , Inc

. , 359 S.W.3d 207, 212 (Tex. 2012) ; Te xas Facilities Comm ’ n v. Speer , 559 S.W.3d 245, 249 (Tex. App.

— Austin 2018, no pet.). Thus , even if ambiguity exists in th e phrase “ the amount claimed by the state , ” we are bound by the rule that “ w hen constru ing a st atute that purportedly waives sovereign immunity, we generally resolve ambiguities by retaining immunity. ” Texas Dep't of Transp. v. York , 284 S.W.3d 844, 846 (Tex. 2009) (quoting Wichita Falls State Hosp. v. Taylor , 106 S.W.3d 692, 697 (Tex. 2003) ). Thus , the issue for decision here is a narrow one: U nder the5

undisputed facts of the present ca se, did the stat utory requir em en t for payme nt of “ the amount claimed by the state ” cle arly and una mbi g uously include 1st Global ’ s self

- asse ssment of its
f ranchise t ax li a bility even though the Comptroller had not affirmatively asserted

— or even identified

— a specific am ount of franch ise tax es owed by 1st Global ?

1st Global ar gues that this Cou rt ’ s opinion in Hegar v. Mahindra USA, Inc. , No. 03

- 18

- 001 26

- CV, 2020 WL 962 415, at *5 (Tex. App.

— Austin, Feb. 28, 2020 , no pet. ) (mem . op.) , stands for the proposition that a pers on need only be r equi red to pay a tax imposed by the Tax Code to be permitte d to file a protest suit. 1st Global mis reads Mahindra

. Mahindra focused o n a dif

ferent requirement of section 112.051 (a)

— that a taxpay er is “ required ” to pay a
ta x or fee b efore section 112.051( a) c an operate as a waiver of sovereign immunity. Becau se the taxpayer there made no assertion that it was required to pay the self

- as sessed amount , t his Court held th at that provision of section 112.051 (a) had not been satisfied. Id. at * 5

- 6 ( “ Erroneous ly
p aid taxes not r equired by law or the Comptroller, as Mahin dra ’ s apportionment claim alleges, are recoverable as a tax refund claim, but no t as a refund request in a protest payment suit. ” ).
Because Mahindra did not address the portion of section 112.0 51(a ) at issue here , it cannot be read so b roadly as to repres ent a hold ing on that separate statutory requirement

.

1st G lobal next ar gues th at the term “ state ” in section 112.051(a) is not limited to the Comp troller , but also includes statu tes enacted by the legislature

. C onsequ ently, the argument goes, “ [ t ] he sta te, through the laws set out in Chapter 171 of the Tax Code, imposes an

a nnual l iability for th e franchise tax on all taxable entities doing business in Texas

. ” This
arg u ment may be c orre ct as far as it goes but does not take into ac count that section 112.0 51 (a) requires that there be p ayment of an “ amount claimed. ” Under o th er circ umstances, a statute might , by itself, represent an “ amount cl aimed by the state ” if, f or example, the l egislature6

ena cted a law fixing the annu al franchise tax for a named class of taxpa yers at a specific
amount

. 1 But t h ere is no such statute he re .

Fina lly, 1st Global argues that the Texas Supreme Court ’ s opinion in In re Nestle
USA , 3 87 S.W.3d at 612, “ impliedly ” held that a self

- assess ment and payment of taxes would satisfy section 112.051(a) ’ s requirement of “ amount claimed by the st ate ” even i n the a bsence of an affirmative demand or declaration by the Comptroller. In that case Nes tle p rotested its self

- assesse d f

r an chise

- tax pay ment on the g round that the entirety of Tex as ’ s f ranchise tax scheme vi olated the Texas Constitution ’ s mandate that “ taxati on shall be equal and uniform. ” Id.
at 612. It is true that the supr eme court accepted jurisdiction over (and re ject ed) the merits of Nestle ’ s claims , but the issue of whether Nestle had paid an “ amount claimed by the state ” was not raised by the parties or discussed by the court. Although courts do have a duty to r ai se jurisdictional issue s on their own motion, we dec line to hold that an accept ance of jurisdiction by an appellate court in an earlier case constitutes a n affirmativ e and authoritati ve dec i sion on a jurisdictional issue that w as nei ther raised by the parties nor discussed in th e court ’ s opinion

. See T own of Shady Shores v. Swanson , 5 90 S.W.3d 544, 555 n.12 (Tex. 2019) ( “ Carowest asser ts that it is ‘ significant ’ that we did not questi on juri sdiction in those cases in the first instance. Perhaps so, but we simply cannot ascribe to tacit acceptance the s ame significance we would give to an express consideration and analysis of the issue. ” (Citation omitted.))

.

We believe the phrase “ th e amoun t cla imed by the state ” can reasonably be read
to require some sort of affirmative claim by the state for a specific amo u nt of f ranchise taxes

. Accordingly, re gardles s of how appealing 1st Global ’ s argument may be that the words “ the

1 See, e.g. , In re Nestle USA, I nc. , 387 S.W.3d 610, 612 (Tex. 2012) ( “ Texas ’ first franchise tax, enacte d in 1893, was $10 annually for ‘ each and every private domestic corporation heret of

ore ch artered or that may be hereafter c hartered under the laws o f this State

. . . . ’ ” ).7

amo unt claimed by the state ” should be read to include a self

- assessment based on th e Comptroller ’ s previously announced general legal positio n re garding a pportionment, the language of section 112.051(a ) does not rise to the level of “ clear [ly] and unambiguous [ l y] ” waiv ing sov ereign immunity when the only “ amount claimed ” is a self

- assessment

. We overrule 1st Global ’ s second issue.

In it s firs t is sue, 1st Global argues t hat section 1 12.052(b) of the Tax Code recognizes that a ny taxpayer may file a protest letter with a regula r annual report. We disagree. That subsection of the Code created a n exception whereby the protest required by s ection
112.051 could be file d with the taxpayer ’ s annu al report “ if an extension is granted to the taxpaye r under Section 1 71.202(c) fo r filin g the report. ” Ta x Code § 1 12.05 2 (b ). 2 Section 171.202(c), however, provides for an extension only to a “ taxable entity that i s not requi red by rule to make its tax payments by e lectronic fun ds transfer. ” Id . § 171.202 (c). But 1st Global is
requ ired to make its tax payments by electronic funds transfer. See Hegar v. 1st Glob., Inc. , No. 03

- 18

- 00411

- CV, 2019 WL 6765754, at *5 ( Tex. App.

— A usti n, Dec. 12, 2019, no pet.) (mem. op.) ( “ We agree with the Comptroller that 1st G lobal sought and received an exte nsion under Subsection (e ), not Subsection (c). ” ). Section 112.052 (b) therefore does not apply to 1st Global. Nor do we think section 112 .052 (b) can reasonably be read to mean that all taxpayers can file a protest lette r with t heir regular annual report. We overrule 1st Global ’ s firs t issue.

1st Global ’ s third issue is whether its live petition pleaded sufficient fa cts to establish a wai ver of sovereign immunity. In its Appellan t ’ s Brief, 1st Global asserts that “ [t] he

2 By a statute effective September 1, 2021, the legislature amended section 112.052(b) to delete this exception in its entire ty. See Act of May 19, 2021, 87th Leg., R.S., ch. 331, § 5, sec. 112.052(b), 2021 Te x. Sess. Law S erv. 682 , 682 . The present case, however, is governed by the old law , id. § 12, which can be found at Act of May 19, 1989, 71st Leg., R.S., ch. 232, § 5, sec. 112.052, 1989 Tex. Gen. Laws 1070 , 1070

- 71

.8

only disputed issue in 1s t Global ’ s case is whether, un der the specific facts present herein, 1st Global paid the ‘ amount claimed by the state. ’ ” Bu t the bas ic fac ts unde rlyi ng the question of whether 1st G lobal p aid “ the amount claimed by the state ” a re undisputed

. Accordingly, 1st Glo bal ’ s assertion that a disp uted issue of fact exists as to whether it paid an “ amo u nt claimed by the state ” is me rely a conclusion of fact or l aw , and no amount of repleading could alter th e underly ing facts

. W e overrul e 1st Global ’ s third issue.

Conclusi on Having overr uled 1st Global ’ s issues on appeal, we affirm the trial court ’ s judgment dismiss ing 1st Global ’ s s uit for lack of jurisdic tion

.

__________________________________________ J. Wood fin Jones , Justice Before Justices Baker, T r iana , and Jones * Dissenting Opinion by Justice Triana Affirmed
Fil ed: October 29, 2021

* Be fore J. Woodfin Jones, Chief Justice ( Retired), Third Court of Appeal s, sit ting by assignment. See Te x. Gov ’ t Code § 74.00 3(b)

.