‘%-HE ,6k-JlTORNEY GENERAL 

OF TEXAS 

March 13, 1959 

Hon. V. L. Ramsey 

Chairman, Revenue & 

Taxation Committee 

House of Representatives 

State of Texas 

Austin, Texas 

Dear Mr. Ramsey: 

.~ Opinion No. WW-571 

Re: Constitutionality of subsection (2) (b) of Section 

12.02 of House Bill Number 

33. 

We quote from your opinion request as follows: 

“The committee requests to be advised on the question as ' 

to vðer the Legislature may constitutionally delegate 

to the Scorctary of State the power to determine whether 

a corporatlon'(r accounting system is acceptable for 

allooatlon purposes an 1s~ provided in Subsection (2)(b) 

of Section 12.02 of the Bill p. B. 331." 

You arc advised that the delegation of power In question 

is constitutional. 

Article 1, Section 28, of the Texas Constitutionprohibits 

the exercise of the power of suspension of any law except by 

the Legislature; Article 2, Section 1, requires a separation of 

powers between the three departments of government. 

In construing these two provisions, the courts have formulated the following q.S.86 for tcrting the constitutionality of 

a delegation of power by the Legisls&ure: 

1. The Dower delearated must be eubleot to exeroisc by the 

exeoutive or bdmlnlstra~lve agency only i&thin limits pre-- 

eorlbed by the Legislature. Moody v. City of University Park, 

278 S.W. 26 912 (Tex.Civ.App. 1953 R 2' ExP rt 

.~Salolldo, 153 Tex. C.R. 160, 218 S.i. :d%$r[;&i4,; EX'P arts ' 

'wason, 112 Tex. CrioR.v1T2,, 15 S.W. 26 650 (1929); see 

,a160 Panama Refining Ryan, eb al Amazon Petroleum 

t.al,v. she: 55 S. ct. 2h~u.s. -9 L. 

2. Ilegislation wh& delegates power to an administrative 

or executive offloer to be exerol&ed.zzthat officer, in his 

tieoretlon, may arbitrarily ohooee, without setting forth a 

."gulde or "suffiolent standard" to govern the exercise of such 

, 
~\~.a . ~8, .’ .I.> 

Ron. v. L. Ramsey, page 2 (Ww-571) 

power, Is unconstitutional and void. Moody v. Clty,of Univcrsupra; Railroad, Commisslon~ v, Shell 011 C 

%%-%%l S W 2d 1022 

00, Y 

42) See also Margolin v,, State, 

151’Tcx: C.R. i$, 205 S.W?d 7j5, (1947). 

3. The standard prescribed by the Legislature to guide 

the exercise of the delegated power may be general and still 

be valid if it is susceptible of,rcasonablc application. 

Moody v. City,of Unlversity,Park, supra; see also Gillaspic 

v..Departmentof Publiosafety 152 T;;. 459, 259 S W 26 17 

b j) ; and Reagan County Purchasing ,, Inc. .v, ~&ate, llp7 

S.W. 2d~l194 (Tex.Clv.App. 1937, error ref.). 

The portions-of Seotion 12.02 of House Bill .33 relevant 

to this opinion .arc aa follow?: 

"( 2) Any corporation engaged in finance, investment, 

cohstruction or pub&lo utllltics aotlvltlcs may, in 

lieu of the allocation formula In Seotlon (1) of this 

Article, allooate.to 'Texas that portion of its entire 

stated capital, surplus and undivided profltr, plus 

the amount' of outstanding bondr,~ notes and debentures 

as defined In this Article which reparate accounting 

Indicates is properly attributable to business done 

in Texas. 

"Providcd,:.howcver, that to be eligible for allocation 

under the premises of this section, each corporation 

must: 

“(a). . , 

'I(b) Secure from the Secretary of State advance written 

‘approval certifying that the coz?poratlonl s acoo;;tlang 

system Is acceptable for allooation purposes. 

pre-requisite for granting such approval the Secretary 

of State may require the oorporatlon to submit to him 

any and all relevant Information regarding Its aocounting rymtem In such form as the Seoretary of State may 

direct ,I’ 

Purruant to the ‘foregoing provisions the Seoretary of 

State Is oharged with the ministerial duty of oert~hI.~~e~l~s 

written approvil o,f separate acoounting systems. 

oernarily calls for an administrative determination of faot. 

Delegation of the power ‘to make a detennlnation, of foot Is 

not unoonstitut 

100 S.W. 26 754 

58 fm. 45); 

Safety .,rnd, Reag 
I 

Hon. V. L. Ramsey, Page 3 (WW-571) 

supra . In the instant case the determination ‘must be made 

according to a well defined standard, 1.8, whether or not 

the accounting system ,ln question discloses the smount of 

entire stated capital, surplus, undivided profits, outstanding notes, bonds, and debentures attributable to business 

done in Texas. No discretion Is given to the Seoretary of 

State to refuse ocrtiflo.atlon of approval of any separate 

accounting system which conforms to this standardi nor Is 

he given any discretion to approve a separate aooountlng 

system that does note conform to the standard. It Is apparent, therefore, that the power of approval delegated to the 

Secretary of State by the Legislature meets the tests of 

constltutlonality’set forth above. 

Anol-llary to the power of approval, and to facilitate 

the making of the ‘fact. determination, the Seorctary of State 

is given the power to require any and all relevant lnformatlon concerning the separate accounting system in question. 

This power is one ‘thkt Is necessary in order for the Secretary 

to make a deolslon aa to whether a oorporatlon is entitled tb 

pay Its ,franchlse tax aooording to its sepw’ate aooountlmg 

syst.em . It. Is lapllolt 1~ the Bill that~ the Secretary of 

State can n’ot use the power &rbltrarily or In such manner as 

to cause dlsapprova;b of a separate aooouqrting syrtea whloh 

conforms to the staridard set forth i‘n the Bill. WC thercfore hold that th6 delegation of this power doe? not violate 

the tests of oonstittit~onbllty set forth~ above. 

SUMMARY 

The power of the Secretary of State to 

approve separate accounting systems is a mlnlsterlal Punctlon to be exercised aooording 

to a well defined standard; the power to 

require 8ubmlrrloPi of Information by a oorporation ooncernlng Its separate, accounting 

syetea ,I8 necessary to, the effective admInIstration of the Bill and can not be arbitrarily 

used by the Secretary of State. Therefore 

Section 12.02 Subsection (2)(b) of Hour8 Bill 

1 

The power of the X?.ecrctary of State to determine the form 

in which lnfomatlon from a corporation should be?iibiiiiiied 

; In order to calculate much oorporatlonts franahlse tax was 

apeclfioally upheld In Houston. Oil Company, of Texas. v. 

Lawson, 175 S.W. 26 716 (Tex.Civ.App., 1943). 
. 

Hon. V. L. Ramsey, Page 4 (WW-571) 

33 does not violate the constitutional prohibition against delegation of power by the 

Legislature. 

Yours very truly, 

WILL,,WILSON 

Attorney General 

J&k N, Price 

Assistant 

JNP:&t 

APPROVED 

OPINION COMMITTEE 

George P. Blackburn, Chairman 

Charles Cabiness 

Leonard Paasmore 

C. Dean Davis 

Morgan Nesbitt 

REVIEWED FOR THE ATTORNEY GENERAL 

By 

W. V. Geppert 

.