Honorable.RobertS. Calvert Opinion No. M-139

Comptroller of PublicAccounts Capitol Building Re: Under H.B. 032, Austin, Texas Acts of the 60th Legislature,Regular Session, 1967, Chapter 227,.,page

523, which amendedArticle 1.13, Title 122A, Taxation-General, V.C.S.,whether the Comptroller is required to refund the forfeiteddiscounts 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 returnwas 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.requestedour opinion on the followingquestion:
Under H.B. 832, Acts of the 60th Legislature,Regular Session, 1967, Chapter 227,page 523,which amendedArticle 1.13,Title 122A,Taxation-General,V.C.S.,whether the Comptroller is required to refund the forfeiteddiscounts or deductions,provided in Article 20.05(E) and the penalties and interestunder Article 20.05(H) of said Title 122A,when the taxpayer is able to show that his returnwas mailed on timebut postmarked late, and even though the event occurred prior to the effectivedate of the 1967 amendment.

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Article l-13, as amendedby 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 shallbe deemed timely filed if said report, shall be placed in the United States Post Office or in the hands of a common or contract carrierproperly 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 receiptmark Qifreceivedby a common or contract carrier)will be prima facie evidence of the date that such reportwas depositedwith the post office or the carrier. The person making the report or the Comptrollermay show by competent evidence that the actual date of postingwas to the contrary. "(clThe person making the report shall be deemed to have substantiallycompliedwith the filing requirements as to timeliness if he exercised reasonable diligence to comply and through no fault of his own the reportswere not timely filed. "(d) ff the report is filedwithin ten (10)days after the due date and as originally filed shows the correct amount of taxes due, no assessment for penalties and interestwill 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 legalholiday the next business day thereafterwill be considered to be the due date. "Bf)The term 'report'shall include any payment, report@ annual report, return, declaration, statement or other document requiredby any provision of this Title to be filedwith the Comptroller. "$g)The Comptroller is hereby authorized to refund or issue credits for penalties and interestpaid solely as a result of returns timelymailed but postmarked after the required filing date; provided, however, that no refund or credit shalb,be allowed for such pe,nalties incurredprior to September 1, 1961, the original effective date of thisArticle,"

We shall first consider the applicabilityof 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 imposedherein 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 (301days 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 underArticle 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 Comptrollerwas under duty to collectpenalties and interest on the tax due if the return was postmarked late irrespectiveof when itwas mailed. The Comptrollerhad no authority to look behind the postmark at anymitigating circumstances.
Article 1,13, as amended, declares in paragraph (c)that a report or return is deemed timely filed though postmarked late, if the personmaking the report exercised reasonable diligence to complywith the filing requirementsand through no fault of his own the reportswere not timely filed. Is this provision applicable if the event (returntimely filed but postmarked late) occurredprior to the effectivedate 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 legislaturehas the power to releasepenalties 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 requiredby explicit language or necessary implication. Statev Humble Oii and Refining-Co;, 141 Tex. 40; 169 s.W,Zd '707119431,53 Tex.Jur.2d apply this rule-toArticle 1.13(g), 53. Sec. 29. When we we findwords contained thereinwhich indicate a legislativeintent to apply its provisions to past transactions. That iswhat it says in plain simple language. When a law is expressed in plain and unambiguous languageand itsmeaning is clear and obvious, the

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lawwill be applied and enforced as it reads there being no room for constructionof itsmeaning. This rule of sta**tutory** construction is sowell-settled that no authorities need be cited. Therefore, the Comptroller is required to refund the penalties and interest imposedby Article 20.05(H), when the taxpayer is able to show that his returnwas 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 forfeiteddeduction allowedby 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 reimbursehimself for the cost of collecting the tax, Provided,however, an additional two per cent (2%)deduction shall be allowed a 'taxpayerwho makes prepayments of his tax liabilitybased upon a reasonable estimate of his tax liability for the quarter inwhich the prepayment is made. In order for the taxpayer to be entitled to the additional two per cent (2%)discount, the prepaymentmust be made on or before the fifteenthday of the secondmonth of the calendar quarter forwhich the payment is made.

"A taxpayermaking 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 fileshis quarterly return showinghis actual tax liabilityany prepaymentsmade 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 excessD If the tax liabilityof the taxpayer is less than the prepayment of taxes, the excess of the payment shallbe 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 applicableprovisions of this Chapter are not paid within

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HonorableRobert S. Calvert, page 5 (M-139)
the time required, or in the event that the taxpayerdoes not file reportswhen due as provided by the provisions of this chapter, the taxpayer forfeitshisclaim to any discount, includingany discount thatmight have been taken by a taxpayer at the time of making a prepayment."
Statutesproviding for the remission of penalties for delinquencies in compliancewith the tax laws are remedial, and relate to procedure in the collection of delinquent taxes and should be liberallyconstrued in accordancewith 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 formaking prepayments of his tax liability.

In order to determine the applicabilityof Article 1.13, as amended, to forfeiteddiscounts or deductions,we must first ascertain if the forfeiteddiscount is in the nature of a penalty. To fallwithin the purview of Article 1.13(g), the only paragraphproviding for refund or credit of monies, the deductionsmust qualify as penalties.

A tax is an exaction for revenuepurposes; a penalty is an exaction for purposes of regulation and enforcement. Tax penalties are imposed as punitivemeasures againstpersonswho have been guilty of some default or delinquency and therefore constituteno 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, ReconstructionFinance 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'sprompt compliancewith the tax laws. 85 C.J.S, 576 Seto 1021, In Jones v. Williams, supra, itwas held that penalties did not constitutea part of the tax, but were merely a method of enforcingpayment of the tax. A careful reading of Article 20.05(E), shows that the discount is allowed as (1) compensation for servicesperformedby the taxpayer and (2) for prepayment of the taxes,

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It is to be observed thatArticle,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 ismerely a convenient and inexpensive method of payment for service renderedby the taxpayer. Black's Law Dictionary, fourth edition,defines the word forfeit, "TO incur a penalty." It also states that forfeiture is "Something towhich the right is lostby the commission of a crime or fault or the losing of somethingby way of penalty." The Court in State v, De Grass,72 Tex. 242, 11 S.W, 1029 (1898~), stated that "Forfeitureiswhere 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 firstplace, 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, sometimesnamed as such, sometimes referred to as forfeituresor fines, sometimesas 'doublethe amount of the tax,' or defined in some othermanner, but all so plainly penalties thatwe deem an analysis and discussion of the laws unnecessary."
Article 20.05(E)provides a 1% deduction from taxes owed as compensation for collectionof the taxes by the taxpayer, It furtherprovides an additional 2% deduction if the taxes are prepaidwithin a prescribed time. The discounts are for the purpose of encouraging collectionand early payment of taxes. Both deductions are forfeited if the taxes are not timelypaid, or the quarterly report is not filedwhen due. When disallowed by the Comptroller, these disalloweddeductions take the form of punitive measures againstpersons who have been guilty of some default or delinquency and thereforebecome penalties, The type of, and not the name'given, an exaction is the proper criterionby which to judgewhether 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 penaltywithin legislative power of remission. The disallowance is in the nature of punishment, and the losing of the discount "byway 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 forfeiteddiscounts and deductions and':the

penalties and interestwhen the taxpayer is able to shew:

that his returnwas 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 Preparedby 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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