‘%-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.

Wequote from your opinion request as follows:

“The committee requests to be advised on the question as ' to vðer the Legislature mayconstitutionally 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. TheDower delearated mustbe eubleot to exeroisc by the exeoutive 

### or bdmlnlstra~lve agency only i&thin limits pre-- eorlbed by the Legislature. Moodyv. City of University Park, 278 S.W. 26 912 (Tex.Civ.App. 1953 R2' ExP rt .~Salolldo, 153Tex. 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 PanamaRefining Ryan, eb al AmazonPetroleum

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 andvoid. Moodyv. Clty,of Univcrsupra; Railroad, Commisslon~v, Shell 011 C %%-%%l SW 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 maybe general and still be valid if it is susceptible of,rcasonablc application. Moodyv. City,of Unlversity,Park, supra; see also Gillaspic v..Departmentof Publiosafety 152T;;. 459, 259S W 26 17 b j) ; and Reagan County Purchasing ,, Inc. .v, ~&ate, llp7 S.W. 2d~l194 (Tex.Clv.App. 1937, error ref.). Theportions-of Seotion 12.02 of House Bill .33relevant to this opinion .arc aa follow?: "(2) Anycorporation 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 andundivided 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 mayrequire the oorporatlon to submit to him any and all relevant Information regarding Its aocounting rymtemIn 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 makea detennlnation, of foot Is not unoonstitut 100 S.W. 26 754 58 fm. 45); Safety .,rnd,ReagI

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

supra. In the instant case the determination ‘must be made according to awell 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, anddebentures attributable to business done in Texas. Nodiscretion 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, andto 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 

### forthe 

### Secretary tomakeadeolslonaatowhetheraoorporatlon is entitled tb pay Its ,franchlse tax aooording to its sepw’ate aooountlmg syst.em

. It. Is lapllolt 1~ the Bill that~

### theSecretary of State can n’ot use 

### thepower &rbltrarily or In such manneras 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 Thepower of the Secretary of State to approve separate accounting systems is a mlnlsterlal Punctlon to be exercised aooording to awell 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 Hour8Bill
1The

### powerof the X?.ecrctary of State to determine the form 

### inwhichlnfomatlon from a corporation should be?iibiiiiiied ; In order to calculate muchoorporatlonts franahlse tax was apeclfioally upheld In Houston. Oil Company,of Texas.v. Lawson, 175 S.W. 26716 (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 OPINIONCOMMITTEE George P. Blackburn, Chairman Charles Cabiness Leonard Paasmore C. DeanDavis MorganNesbitt REVIEWED

FORTHEATTORNEY

GENERAL ByW.V. Geppert

.