Honorable.Robert S. Calvert Opinion No. M-139 

Comptroller of Public Accounts 

Capitol Building Re: Under H.B. 032, 

Austin, Texas Acts of the 60th 

Legislature, Regular 

Session, 1967, Chapter 227,.,page 523, 

which amended Article 

1.13, Title 122A, 

Taxation-General, 

V.C.S., whether the 

Comptroller is required to refund the 

forfeited discounts 

or deductions, provided in Article 

20.05(E) and the penalties and interest 

under Article 20.05(H) 

of said Title 122A, 

when the taxpayer is 

able to show that his 

return was mailed on 

time but postmarked 

late, and even though 

the, event occurred 

prior to the effective 

date of the 1967 

Dear Mr. Calvert: amendment. 

you have.requested our opinion on the following question: 

Under H.B. 832, Acts of the 60th Legislature, Regular 

Session, 1967, Chapter 227, page 523, which amended Article 

1.13, Title 122A, Taxation-General, V.C.S., whether the 

Comptroller is required to refund the forfeited discounts 

or deductions, provided in Article 20.05(E) and the penalties 

and interest under Article 20.05(H) of said Title 122A, when 

the taxpayer is able to show that his return was mailed on 

time but postmarked late, and even though the event occurred 

prior to the effective date of the 1967 amendment. 

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Honorable Robert S. Calvert, page 2 (M-$39) 

Article l-13, as amended by H. B. 832 reads as follows: 

"(a) Any report, require,d by any provision of this 

Title to be filed or made on or before a specific date 

shall be deemed timely filed if said report, shall be 

placed in the United States Post Office or in the hands 

of a common or contract carrier properly addressed to 

the Comptroller of Public Accounts on or before the date 

required for such payment, report, annual report, return 

declaration, statement, or document to be filed or made. 

"(b) The postmark or receipt mark Qif received by 

a common or contract carrier) will be prima facie evidence of the date that such report was deposited with 

the post office or the carrier. The person making the 

report or the Comptroller may show by competent evidence 

that the actual date of posting was to the contrary. 

"(cl The person making the report shall be deemed 

to have substantially complied with the filing requirements as to timeliness if he exercised reasonable diligence to comply and through no fault of his own the 

reports were not timely filed. 

"(d) ff the report is filed within ten (10) days 

after the due date and as originally filed shows the 

correct amount of taxes due, no assessment for penalties 

and interest will be made solely on the grounds of late 

filing after the lapse of ninety (90) days immediately 

following the date the report was required to be filed. 

"(e) If the due date falls on a Saturday, Sunday, 

or legal holiday the next business day thereafter will 

be considered to be the due date. 

"Bf) The term 'report' shall include any payment, 

report@ annual report, return, declaration, statement 

or other document required by any provision of this 

Title to be filed with the Comptroller. 

"$g) The Comptroller is hereby authorized to refund 

or issue credits for penalties and interest paid solely 

as a result of returns timely mailed but postmarked 

after the required filing date; provided, however, that 

no refund or credit shalb,be allowed for such pe,nalties 

incurred prior to September 1, 1961, the original effective date of this Article," 

We shall first consider the applicability of Article 1.13, 

as amended, on the provisions of Article 20.0568), which reads 

as follows: 
Honorable Robert S. Calvert, page 3 (M-139) 

"If any person shall fail to file a report as required 

herein or shall fail to pay to the Comptroller the tax 

as imposed herein when said report or payment is due, he 

shall forfeit five per cent (5%) of the amount due as a 

penalty, and after the first thirty (301 days he shall 

forfeit an additional five per cent (5%) ~ Provided, however, that the penalty shall never be less than One Dollar 

($11 e Delinquent taxes shall draw interest at the rate 

of six per cent (6%) per annum, 

from the date due." 

beginning sixty (60) days 

Prior to the effective date of Article 1.13, as amended, 

a tax return under Article 1.13, was deemed to have been timely 

filed if said return bore a postmark dated on or before the 

date required for such return to be filed. Since the statute 

was clear and unambiguous the Comptroller was under duty to 

collect penalties and interest on the tax due if the return 

was postmarked late irrespective of when it was mailed. The 

Comptroller had no authority to look behind the postmark at 

any mitigating circumstances. 

Article 1,13, as amended, declares in paragraph (c) that 

a report or return is deemed timely filed though postmarked 

late, if the person making the report exercised reasonable 

diligence to comply with the filing requirements and through 

no fault of his own the reports were not timely filed. Is 

this provision applicable if the event (return timely filed 

but postmarked late) occurred prior to the effective date of 

the 1967 amendment to Article 1.131 Stated otherwise, is Article 1.13(g), as amended, retrospective in scope as concerns 

penalties and interest imposed as a result of late filing as 

defined under old Article 1,131 

It is well settled that the legislature has the power to 

release penalties and interest on taxes. Jones v Williams, 

121 Tex. 94, 45 S.W.Zd 130 (1931). It is the general rule 

that a statute shall not be given retroactive effect unless 

such construction is required by explicit language or necessary 

implication. State v Humble Oii and Refining-Co;, 141 Tex. 40; 

169 s.W,Zd '707 119431, 53 Tex.Jur.2d 

apply this rule-to Article 1.13(g), 

53. Sec. 29. When we 

we find words contained 

therein which indicate a legislative intent to apply its 

provisions to past transactions. That is what it says in 

plain simple language. When a law is expressed in plain and 

unambiguous language and its meaning is clear and obvious, the 

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Honorable Robert S. CalVert, pages 4 (M-139) 

law will be applied and enforced as it reads there being 

no room for construction of its meaning. This rule of statutory construction is so well-settled that no authorities 

need be cited. Therefore, the Comptroller is required to 

refund the penalties and interest imposed by Article 20.05(H), 

when the taxpayer is able to show that his return was mailed 

on time but postmarked late and even though the event occurred 

prior to the effective date of Article 1,13 as amended. 

We come next to that portion of your opinion request 

regarding the refunding of the forfeited deduction allowed by 

Article 20.05(E) which reads as follows: 

3 "The taxpayer shall deduct and withhold from the 

taxes otherwise due from him on his quarterly tax return, 

one per cent (1%) thereof to reimburse himself for the 

cost of collecting the tax, Provided, however, an additional two per cent (2%) deduction shall be allowed a 

'taxpayer who makes prepayments of his tax liability based 

upon a reasonable estimate of his tax liability for the 

quarter in which the prepayment is made. In order for 

the taxpayer to be entitled to the additional two per cent 

(2%) discount, the prepayment must be made on or before 

the fifteenth day of the second month of the calendar 

quarter for which the payment is made. 

"A taxpayer making a prepayment of his tax as provided for in this paragraph is not relieved from the 

filing of quarterly returns as provided for elsewhere 

in this Chapter. At the time the taxpayer files his 

quarterly return showing his actual tax liability any 

prepayments made by the taxpayer shall be credited against 

his tax liability; in the event that there is tax liability owed by the taxpayer in excess of the prepayment, the 

taxpayer shall remit such excess at the time of filing 

his quarterly return and from such excess shall deduct 

and withhold one per cent (1%) of the amount of the 

excess D If the tax liability of the taxpayer is less 

than the prepayment of taxes, the excess of the payment 

shall be recorded as a credit against future tax liability or refunded to the taxpayer as provided for in Article 

20,lO. 

"In the event the payment of any taxes due under the 

applicable provisions of this Chapter are not paid within 

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. 

Honorable Robert S. Calvert, page 5 (M-139) 

the time required, or in the event that the taxpayer does 

not file reports when due as provided by the provisions 

of this chapter, the taxpayer forfeits his claim to any 

discount, including any discount that might have been 

taken by a taxpayer at the time of making a prepayment." 

Statutes providing for the remission of penalties for 

delinquencies in compliance with the tax laws are remedial, 

and relate to procedure in the collection of delinquent taxes 

and should be liberally construed in accordance with the general rules governing statutory construction. 85 C.J.S, p. 597 

Sec. 1031, 

The Legislature in the enactment of Article 20.05(E) 

expressly stated that the taxpayer "forfeits" his claim to any 

discounts earned for collecting the tax and for making prepayments of his tax liability. 

In order to determine the applicability of Article 1.13, 

as amended, to forfeited discounts or deductions, we must first 

ascertain if the forfeited discount is in the nature of a penalty. To fall within the purview of Article 1.13(g), the only 

paragraph providing for refund or credit of monies, the deductions must qualify as penalties. 

A tax is an exaction for revenue purposes; a penalty is 

an exaction for purposes of regulation and enforcement. Tax 

penalties are imposed as punitive measures against persons who 

have been guilty of some default or delinquency and therefore 

constitute no part of the tax. A statute authorizing collection 

of penalties and interest from delinquent taxpayers is a penalty 

statute and the penalties and interest authorized thereunder 

are no part of the tax, Reconstruction Finance Corporation 

v, State of Texas, 229 F.2d 9 (C.C.A. 5th 1956, cert.den, 351 

u,s, 907). Penalties are intended to compel and induce the 

taxpayer's prompt compliance with the tax laws. 85 C.J.S, 576 

Set o 1021, In Jones v. Williams, supra, it was held that penalties did not constitute a part of the tax, but were merely 

a method of enforcing payment of the tax. A careful reading 

of Article 20.05(E), shows that the discount is allowed as 

(1) compensation for services performed by the taxpayer and 

(2) for prepayment of the taxes, 

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Honorable Robert S. Calvert, page 6 (M-139) 

It is to be observed that Article, 1.13(g), as amended, 

does not confer any authority to refund taxes; the authority 

granted is confined to refund of penalties and interest. The 

discount earned by the taxpayer , although deducted from the 

taxes collected, does not make the discount a tax. The allowing of the discount is merely a convenient and inexpensive 

method of payment for service rendered by the taxpayer. Black's 

Law Dictionary, fourth edition, defines the word forfeit, "TO 

incur a penalty." It also states that forfeiture is "Something 

to which the right is lost by the commission of a crime or 

fault or the losing of something by way of penalty." The 

Court in State v, De Grass,72 Tex. 242, 11 S.W, 1029 (1898~), 

stated that "Forfeiture is where a person loses some property, 

right, privilese, or benefit in consequence of havins done or 

omitted-to do a certain act." In Jon& v. Williams,-supra, the 

Court stated: 

"In the first place, impositions for failure to make 

returns of and pay occupation taxes and other business and 

special taxes have been from the beginning to the present 

time penalties, sometimes named as such, sometimes referred 

to as forfeitures or fines, sometimes as 'double the amount 

of the tax,' or defined in some other manner, but all so 

plainly penalties that we deem an analysis and discussion 

of the laws unnecessary." 

Article 20.05(E) provides a 1% deduction from taxes owed 

as compensation for collection of the taxes by the taxpayer, 

It further provides an additional 2% deduction if the taxes are 

prepaid within a prescribed time. The discounts are for the 

purpose of encouraging collection and early payment of taxes. 

Both deductions are forfeited if the taxes are not timely paid, 

or the quarterly report is not filed when due. When disallowed 

by the Comptroller, these disallowed deductions take the form 

of punitive measures against persons who have been guilty of 

some default or delinquency and therefore become penalties, 

The type of, and not the name'given, an exaction is the proper 

criterion by which to judge whether or not it is a tax or a 

penalty. Disallowance of a deduction for failure to file tax 

returns and to file them timely is a penalty within legislative 

power of remission. The disallowance is in the nature of punishment, and the losing of the discount "by way of penalty." 

Having determined therefore that the forfeited deductions 

are penalties, the Comptroller is required to refund the same 

under the provisions of Article 1,13, as amended. 

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. . 

Honorable Robert S. Calvert, page 7 (M-139) 

SUMMARY 

Under the 1967 amendment to Article 1.13, TaxationGeneral, Vernon's Civil Statutes, the Comptroller is 

required to refund the forfeited discounts and deductions 

and':the penalties and interest when the taxpayer is able 

to shew: that his return was mailed on time but postmarked 

late and even though the event occurred prior to the effective date of the 1967 amendment. 

Y 

z@- 

s very truly, 

MGO:dls 

Prepared by Mario G. Obledo 

Assistant Attorney General 

APPROVED: 

OPINION COMMITTEE 

Kerns B. Taylor, Chairman 

W. V, Geppert, Co-Chairman 

Harold Kennedy 

Marvin Sentell 

Neil Williams 

STAFF LEGAL ASSISTANT 

A. J, Carubbi, Jr, 

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