June 7, 1988

Honorable Bob Bullock Opinion No. JM-916 Comptroller of Public Accounts L.B.J. State Office Building Re:Authority of the Austin, Texas comp78774 troller to contract with paid

informants for information about revenue orproperty the statemay be legally entitled to recover (RQ-1302)

DearMr. Bullock:

Youhave requested an opinion on questions under article 4344g, V.T.C.S., arising

House BillNo. which was adopted in 1987 by

921 of the 70th Legislature. Acts 1987, 70th Leg., ch. 874, at 2971. Article 4344g, V.T.C.S., authorizes you to contract with anyperson to receive information about claims forthe recovery of revenue or property which the statemay be entitled topursue, except forproperty subject to escheat by the state. V.T.C.S. art. 4344g, 51(a). See Prop. Code ch. 71-75. This enactment creates a financial incentive topersons whomaybe able toaid the state in recovering dormant accounts. BillAnalysis toH.B. No. 921, 70th Leg. (1987), on file in the Legislative Reference Library.

You first askwhether this statute violates article III, section 51, of inpart: the Texas Constitution, which provides

Sec. 51. The Legislature shall have no power to make anygrant or authorize the making of any grant of public moneys to any individual, association of individuals, municipal or other corporations whatsoever.

. . .

? This provision prohibits giving awaypublic funds: it does

notdeny the legislature theuse of state funds for state purposes. State v. Citv of Dallas, Civ.App. -Austin 1958), 319 S.W.2d 767 (Tex. aff'd 331 S.W.Zd 737 (Tex. 1960). To comply with the requirements of article III, section 51, any contract between aprivate individual and the statemust

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?

serve apublic purpose, adequate consideration must go to the state, and there must be contractual provisions designed to insure that the public purpose iscarried out. See. e.cr.,Dodson v.Marshall, 118 S.W.2d 621 (Tex.Civ.App. - Waco 1938, writ dism'd); Attorney General Opinion Nos. H-1309, H-1260 (1978):H-912 (1976).
Article 4344g, V.T.C.S., provides as follows:

(a) The comptroller of public accounts may contract with anyperson forthe receipt of information about anypossible claim that the statemaybe entitled topursue for the recovery of revenue or other property, except that this Act shall inno way relate to or affect property which isrecoverable by the state pursuant to Chapters 71-75, Property Code.
(b) Inany contract under Subsection (a) of this section, the total consideration to bepaid by the state:
(1) shall be contingent ona recovery by the state;
(2) may not exceed five percent of the amount of the revenue or the value of the other property that the state recovers as a result of the pursuit of the claim about which the contracting person provided information; and
(3) may be limited by agreement to not exceed a specified, absolute dollar amount.
(c) Consideration may notbepaid by the state pursuant to acontract executed under Subsection (a)of this section ifat the time the contract is executed or within three months after the date of execution, and by means other than disclosure under the contract, a state employee has knowledge of the claim disclosed under the contract or has knowledge of a cause of action different from that disclosed under the contract but entitling the state to recover the same revenue or other property. An affidavit by a state employee claiming that knowledge under ?

I

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those circumstances is prima facie evidence of the knowledge and circumstances.

It isapublic purpose of the state to locate and recover revenue and other property towhich it isentitled. See. e.s., Tex. Const. art. III, estimate anticipated revenue §49a (comptroller's duty to forstate from all sources); Gov't Code 5403.011(2) (comptroller's duty to adopt tions for collection of regulastate revenues), 5403.055 (warrant may not be issued toperson indebted to the state): 5403.091 (transfer to general revenue fund ofbalance in dormant fund): Property Code ch. 71-75 (provisions for escheat of funds to state).
Article 4344g, V.T.C.S., authorizes the comptroller to contract with aperson topurchase information about claims to revenue or other property which the state may have. Properly authorized officers of the state may enter into acontract for services to be performed for the state. Fazekas v.Universitv ofHouston, 565 S.W.2d 299 (Tex. Civ. APP. -Houston [lstDist.] 1978,writ ref'd n.r.e.), cert. dismissed, 440U.S. 952 (1979). This statute makes payment of consideration contingent upon arecovery by the state and limits it to 5%of the amount of revenue or value of property that the state recovers. Thus, the state will receive adequate consideration foranypayment made.
Moreover, the statemay notpay consideration pursuant to an article 4344g contract where a state employee has knowledge of the claim disclosed under the contract or other knowledge entitling the state to recover. See V.T.C.S. art. 4344g(c). This provision prevents the state from compensating aprivate individual for information which duplicates information inthepossession of the state at the time the contract issigned orwithin threemonths thereafter.
Section 4344g(c), V.T.C.S., also effectively prevents a state employee from entering into acontract with the comptroller under subsection (a) of that statute. If a state employee knows of aclaim for revenue or property which the state isentitled topursue, the statemay notpay consideration under contract for information about that claim. Some state employees have an express duty to investigate andpursue claims onbehalf of the state. e.q., General Appropriations Act, See. Acts 1987, 70th Leg., 2d C.S., ch. 78, art. I, rider 16,at 303 (collection of delinquent judgments by attorney general); Educ. Code 552.39 (collection ofmoney due on student loans). Subsection (c) ofarticle 4344g, V.T.C.S., thus insures that the state will not pay extra compensation to a state employee for

p. 4584Honorable Bob Bullock -Page 4 (JM-916) ,

information hehas received onbehalf of the state in his capacity asa state employee. & Tex. Const. art. III, 544 (legislature may not grant extra compensation to public servant after public service shall have been performed); V.T.C.S. art. 6252-9b, 58 (standards of conduct for state officers and employees); Penal Code 539.03(a) (misuse of official information).

We finally note that article 4344g, V.T.C.S., does not establish a traditional reward program, under which the government offers a reward to the general public, payable upon performing a and an individual accepts the specific service,

offer by -performing. See. e.q., Broadnax v. Ledbetter, 99 S.W. 1111 (Tex. 1907) (sheriff offered reward for recapture of an escaped prisoner). Under such reward programs, the contract is formed only when an individual accepts the state's offer by performing the requested service, and the courts have struggled with questions of contract formation aswell as thevalidity of rewards under article III, section 51. See Blainv. Pacific Exvress Co., 6S.W. 679 (Tex. 1887) (individualwho captured one of two criminals not entitled tohalf of reward offered for capture ofboth criminals); Weaver v. Scurry Countv 28 S.W. 836 (Tex.Civ.App. of bounties 1894, nowrit) (statuteauthokizing payment

for destruction of wild animals analyzed for compliance with article III, section 51, of the Texas Constitution). Since article 4344g,V.T.C.S., contemplates thatyou will receive information pursuant to a contract, we need not address the questions raised by a reward program.

You next askwhether there is anappropriation from which topay for information received under anarticle 4344g contract. Article VIII, section 6,of the Texas Constitutionprovides inpart:

Nomoney shall bedrawn from the Treasury but inpursuance of specific appropriations made by law.

. . .
Noparticular form ofwords isrequired tomake a appropriation;" it is "specific sufficient if the authorizes an legislature

expenditure and specifies the purpose for which an appropriation is made. National Biscuit Co. v. State, 135 S.W.Zd 687 (Tex. 1940). The appropriation for the comptroller's office, like appropriations to other state agencies, is itemized according toprograms or functions of the office. Itdoes not identify each salaried position or each contemplated expenditure; nor is such minute detail necessary to comply with article VIII, section 6, of the Texas Constitution. See S. &G. Construction Co. v.

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Bullock, 545 S.W.2d 953 (Tex. 1977) (appropriation from Available University Fund forpermanent improvements and new construction may beused topay judgment against University ofTexas foradditional work under a construction contract); Attorney General Opinion Nos.MW-251 (1980);H-1275 (1978); H-944 (1977):H-289 (1974);WW-865 (1960) (construing terms ofappropriations).

Your current appropriation provides inpart:

COMPTROLLER OF PUBLICACCOUNTS STATE COMPTROLLER'S OFFICE

For the Years Ending August 31, August 31, 1988 1989
1. Central Administration
a. Executive Administration b. Budget and Internal Accounting
C. Revenue Estimating andResearch d. Legal Services
Total, Central Administration
2. TaxAdministration: a. Tax Policy andTaxpayer Services b. Tax information
C. Field Operations: Headquarters d. Field Overations: Enforcement e. Field Operations: In-State Audit f. Field Operations: Out-of-State Audit

. . . . Total, TaxAdministration

3. Funds Management: a. FundAccounting b. Claims
Total, FundsManagement
4. Aircraft Operations
5. Cost of Cigarette Tax Stamps, estimated
6. State Government Accounting Division

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7. Imvlementation of Bills Passed bv the 70th Leaislature. Resular Session

GRAND TOTAL, COMPTROLLER OF PUBLIC ACCOUNTS, STATE COMPTROLLER'S OFFICE (Emphasis added.)

Acts 1987, 70th Leg., 2dC.S., ch. 78, at 319 (amounts of appropriation items omitted). Specific amounts are appropriated foreach item and the purpose of each expenditure is stated. We find noprovision which bars the use of appropriated funds to make payments for article 4344g, V.T.C.S., contracts. See senerally, Inthematter of DH 556 S.W.2d 628 (Tex.Civ.App. -Waco 1977,writ ref'd n=L.) (rider barring use of appropriated funds to pay judgment unless suchpayment was specifically authorized in an item of appropriation). The fiscal note to House Bill No. 921 states that the bill "would have negligible fiscal implications to the State.

. . .I1 Fiscal Note toH.B. No. 921, 70th Leg. (1987),on fileat the Legislative Reference Library. Thus, the legislature would beunlikely to devote a separate line item toappropriations authorized by article 4344g, V.T.C.S. See oenerallv Mutchler v. Texas Devartment of Public Safety 681 S.W.2d 282 (Tex.App. -Austin nowrit) (approp;iated funds could notbe used for 1984, overtime pay where program would cost over $4,000,000 per year and legislature had consistently refused to fund it). Our concern iswhether there are line items inyour appropriation that could be used to fundarticle 4344g contracts consistent with the legislature's items ofappropriation. intent inadopting

Item 7 issubject to a riderwhich states that it shall beused to administer several specifically identified bills adopted by the 70th session of the legislature. Acts 1987, 70th Leg., 2d C.S., ch. 78, rider 16, at 323. House Bill No. 921 isnot included inthis list: therefore, we conclude that the legislature did not intend item 7tobe a source of payments for information received pursuant to article 4434g, V.T.C.S. However, the acquisition of information leading to the state's recovery of revenue or other property would fallwithin thepurpose of other items. The items of the appropriations to your office reflect the functions and programs ofyour office. Ifyou reasonably determine that the article 4344g, V.T.C.S., contracts should be handled under a particular program activity of your office, then the funds appropriated implement article for that purpose may be spent to 4344g, V.T.C.S. You are in the best

P. 4587Honorable Bob Bullock -Page 7 (JM-916)

- position to determine where this new statutory authority

fits into the overall structure ofyour agency, butwe can suggest some itemswhich could reasonably beused topay for information leading to the recovery of revenue or property by the state. For example, funds appropriated as item d. under "TaxAdministrationl' to enforce tax collection laws could be spent toacquire information about taxes owing the state. See aenerallv Comptroller of Public Accounts, Budget Estimates for Fiscal Years 1988 and 1989 (July 1986), at 135 (description ofTax Administration: Field Operations: Enforcement). Items 2e.and 2f., for in-state and out-ofstate audit, might alsobeused toacquire information about revenues and other property which the statemay be entitled to claim.

We do not overlook thepossibility thatyour office has already budgeted itsappropriation so that no funds for article 43449,V.T.C.S., contracts areavailable from any of the appropriation itemswhich might beused forthat purpose consistent with the legislature's intent in making the appropriation. Article 4344g, V.T.C.S., authorizes you to enter into contracts butdoes not require you todo so, and youhave discretion toallocate appropriated funds to other authorized activities ofyour office rather than to this one.

You finally askwhether your office would be authorized to show the informant information otherwise deemed confidential under sections 111.006, 151.027 or 171.206 of the Tax Code todemonstrate thathe isnot entitled to compensation
or isreceiving the correct compensation for the information he furnished.1
Title IIof theTax Code contains the laws on state taxation, including chapters 111, 151,and 171. Chapter 111 of the Tax Code sets out the comptroller's powers andduties incollecting taxes imposed by title II. Tax Code §111.001. Hehas authority to adopt rules not in conflict with the laws or constitution for the enforcement of the provisions of title II and the collection of taxes and other revenues thereunder. Tax Code 5111.002(a). To carry out the provisions of title IIhemay examine a taxpayer's books and

P 1. Sections 154.308 and 155.185 of theTax Code, which

formerly provided for the confidentiality of information relevant to tax or cigarettes, cigars, and tobacco products, have been repealed. Acts 1985, 69th Leg., ch. 58, 544.
P

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records. Tax Code 5§111.004: 111.0041; 111.0043. Section 111.006 of the Tax Codeprovides forthe confidentiality of information obtained by examining ataxpayer's records:

(a) The followins matter is confidential andmav not be used vubliclv. opened to public insvection. or disclosed excevt as permitted under Subsection fb1 of this section:

(1) a federal tax return or federal tax return information required to have been submitted to the comptroller with a state tax return orreport: and
(2) all information secured, derived, or obtained by the comptroller or the attorney general during the course of an examination of the taxpayer's books, records, papers, officers, or employees, including an examination of the business affairs, operations, source of income, profits, losses, or expenditures of the taxpayer.
(b) All information made confidential in this title may not be subject to subpoena directed to the comptroller or the attorney general except in a judicial or administrative proceeding in which this state, another state, or the federal government isa party.
(c) The comptroller or the attorney general may use information or records made confidential byprovisions of this title to enforce anyprovisions of this title or may authorize their use in a judicial or an administrative proceeding in which this state, another state, or the federal government isaparty. (Emphasisadded.)

Tax Code 5111.006. See aenerallv Attorney General Opinion H-661 (1975);H-223 (1974);Open Records Decision No. 300 (1981) (members of thepublic are not entitled to inspect unde'rOpen Records Act taxpayer records in comptroller's custody which areprotected by confidentiality provisions).
Section lityprov tia 111.006 of the Tax Code isa strict confidenision. Subsection (c)of that section allows

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-

- ‘, the comptroller orattorney general touse such information

to enforce the tax laws intitle II or to authorize their
use in specified judicial oradministrative proceedings. It contains no language thatwould authorize the comptroller to reveal confidential information to an informant with whom he has contracted under article 4344g,V.T.C.S. Chapter 151 of the Tax Code, which deals with the administration of sales, excise, and use tax, and chapter 171,which pertains to franchise tax liability, are subject to the confidentiality provision of section 111.006 of the code and include specific confidentiality provisions as well. Tax Code §§151.027, 171.206. The comptroller may not disclose to an informant under a section 4344g contract information deemed confidential under sections 111.006, 151.027 or 171.206 of the Tax Code.

SUMMARY

Article 43449, V.T.C.S., which authorizes the comptroller to contract with informants to pay them for information about revenue or property the statemay be entitled to recover, does notviolate article III, section 51, of the Texas Constitution. State employees are not authorized to contract with the comptroller to provide such information in exchange for consideration under an article 4344g, V.T.C.S., contract. Funds appropriated to the comptroller's office may be used to fund article 4344g, V.T.C.S., contracts, even though the appropriation act does not expressly state that such contracts may be funded. Whether aparticular line itemmay be used to fund such contracts depends upon the legislature's intent in adopting that line item. The comptroller's office would not be authorized to show an informant information that isconfidential under sections 111.006, 151.027, or 171.206 of the Tax Code.

JIM MATTOX Attorney General ofTexas

P MARY KELLER

FirstAssistant Attorney General

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MU MCCREARY Executive Assistant Attorney General

JUDGE ZOLLIE STEAKLEY Special Assistant Attorney General

RICK GILPIN Chairman, Opinion Committee Prepared by Susan L.Garrison Assistant Attorney General

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