THE Arro NE\- GENERAL OF TEXAS

June 2, 1988

Honorable Toby C.Wilkinson Hunt County Attorney P. 0. BOX 1097 Greenville, Texas 75401 Opinion No. JM-913

Re: Constitutionality of temporary occupation tax on attorneys (RQ-1347)

DearMr. Wilkinson:

you askwhether a temporary occupation tax imposed on attorneys isconstitutional. We conclude that it is.

The 70th Legislature enacted atemporary occupation tax onattorneys tobe applied fromJanuary 1, 1988, until May 31, 1990. Acts 1987, 70th Leg., 2dC.S., ch. 5,art. IX, 5 12at 35:Tax Code, 55 191.141 - 191.145. The tax is applicable topersons licensed topractice law inTexas, Tax Code, § 191.141, but itdoes not apply to:

(1)an attorney who is 70years of age or older: or
(2)an attorney who has assumed inactive status under rules governing the licensing of attorneys.

Tax Code, g 191.144. Additionally, the Tax Code provides forthe proration of the taxdue incertain cases:

Ifaperson is licensed topractice law after thebeginning of the taxyear [June 1 of oneyear through May 31of the following year] or resumes active status to practice lawafter thebeginning of the tax year, the person being .licensed or resuming active status shall pay the tax imposed by this subchapter in proportion to the number of months forwhich he will be licensed during that tax year. Ifaperson islicensed after the beginning ofacalendar month, the month inwhich he is licensed shall count as a month forpurposes ofpayment of taxes. . . .

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Tax Code, 5 191.143(b).l

You ask whether these provisions violate the requirement in article VIII, section 2, of the Texas Constitution that occupation taxes be "equal and uniform upon the same class of subjects within the limits of the authority levying the tax. . . .I' ?

The courts have long concluded that the constitution permits the legislature to levy occupation taxes based on classification schemes established by that body, so long as the legislation is notdiscriminatory between

Inotherwords, the same or **JJ& classes.**  if there isa rational basis for the classification scheme selected by the legislature, the constitutional command that occupation taxes be uniform will be satisfied. The propriety of classification schemes selected is

primarily within the discretion of the Legislature; and . . %courts can interfere onlywhen it is made clearly to appear that there isno reasonable basis for the attempted classification. If there isa reasonable basis or, to express it differently, it cannot be said that the Legislature acted arbitrarily, the courts will not interfere.

Hurt v. Coover, 110 S.W.2d 896, 901 (Tex. 1937). See also

C Interstate Theatres. Inc., 557 S.W.Zd 33 Bullock v. AB' M (Tex.Civ.App. -Austin 1977,writ ref'd n.r.e.), cert. denied 439U.S. 894 (1984),and Bank of Texas v. Childs, 615 S.W.Zd 810, 815 (Tex. Civ.App. - Dallas 1981,writ ref'd n.r.e.), reversed sub nom.American Bank and Trust Co. v. Dallas County, 463U.S. 855, reh*a denied, 463U.S. 1250 (1983).2

1. The legislature **may**provide for the pro rata payment of taxes. See aenerallv Attorney General Opinion JM-399 (1985).

2. A classification scheme employed by a state in **a** tax lawwill not offend the equal protection clause of the Fourteenth Amendment to,theUnited States Constitution if it is founded on a reasonable distinction or difference in state policy. Kahn v. Shevin, 416U.S. 351, 355 (1974). ?

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In that: Attorney General Opinion C-46 (1963), itwas held

The mere fact that discrimination ismade in classifications for occupation taxes proves nothing against classification which is not on its face an arbitrary, unreasonable or unreal one.
The Texas Supreme Court has noted that this rule "has been stated so often as to render unnecessary any further discussion of it." Texas Co.v. Stenhens, 103 S.W. 481, 482 (Tex.1907). See also 54Tex. Jur. 2d, Taxation, at section 29. The Texas Supreme Court haswritten:

Thevery language of the Constitution of state implies power inthe Legislature classify the subjects of occupation taxes only requires that the tax shall be equal

.- . - the to and and unirorm upon tne same class. persons who. in themost aeneral sense.mav be reaarded as pursuina the same occuoation
. . .mav thus be divided into classes. and the classes may be taxed indifferent amounts and accordinq to different standards. Merchants may be divided intowholesalers and retailers, and, if there be reasonable grounds, these may be further divided according to the particular classes ofbusiness inwhich theymay engage. The considerations upon which such classifications shall be based are primarily within the discretion of the Legislature. The courts . . .can only interfere when it is [clear] that an attempted classification has no reasonable basis inthe nature of the businesses classified, and that the law operates unequally upon subjects between which there isno realdifference to justify the separate treatment of them undertaken by the Legislature.
. . . (Emphasis added.)

Texas Co.v. Stevhens, 103 S.W. 481, 485 (Tex. 1907). See also Dancetown. U.S.A. Inc.v. St e, 439 S.W.2d 333 (Tex. 1969) andwont Dallas Restaurants, Inc., v.McBeath, 618 S.W.2d 931 (Tex.Civ.App. -Waco 1981, nowrit).

InDancetown, SLWZ, ataxpayer complained about a classification scheme inan occupation tax levied on certain .amusement enterprises. The rate of,tax differed based on P the sort of amusement furnished. The taxpayer argued that

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an "amusementV* isan *'amusement,** and that there was no rational basis forvarying the rate of tax by classifying, for example, the amusement provided by operas differently from that obtained fromdance halls or animal contests. The court, after citing the language inTexas Co.v. Stevhens, noted that:

Themembers of each class intowhich the

amusement business is nowdivided obviously differ fromthemembers of every other class intheir methods andplaces of operation and inthe nature of the entertainment generally offered. Each class seems to embrace every enterprise that should reasonably be included in the same category. Since appellants have not demonstrated by proof or otherwise that 'there isno real difference to justify the separate treatment undertaken by the Legislature,' we cannot say on the present record that the classification is soarbitrary and unreasonable as to render the statutes unconstitutional.

439 S.W.2d 333, 337 (quoting Texas Co.v. SteDhens, 103 S.W.2d 481, 485).

You have not suggested any reason why the classifications chosen by the legislature in this statute might be unreasonable, and webelieve that rational explanations for the choices made by the legislature can be presumed. We conclude that a court would find that the legislature has divided the broad categories of lawyers into reasonably drawn classifications which distinguish between persons who donot in fact pursue the occupation of an attorney and those who do. See. e.a., Statev. Pioneer Oil and Refining Co., 292 S.W. 869 (Tex.Comm'n App. 1927, judgment adopt'd).
Thus, a rational basis can be perceived for the classification schemes selected by the legislature here. First, lawyers who are in an inactive status under the statute governing the status ofattorneys cannot engage in any activities inTexas which will constitute the occuDation ofbeing an attorney at law. Gov*t Code, §§ 81.052-81.053. Thus, they are not evenwithin the occuvation group towhich the tax applies, absent any question about classifications of that group. Second, it isnot irrational to assume that lawyers over the age of 70,more often than not, do not actively engage in thepractice of law, and it isreasonable to assume that in themain, attorneys in that classification
are not in the same occupational circumstances as lawyers

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whose careers are still in full blossom. Tex co ;;;Ihens, suura; see also Kahn v. Shevi& 416U":. 352 :; 2. C **mDare** Massachusetts 427 'U.S. Board of Retirement Wuraia, 307 (1976) (legislative classificati% distinguishing the elderly from the non-elderly population for thepurpose of conferring benefits and burdens has a rational basis and thus ispermissible under the equal protection clause of the Constitution). Finally, the proration provision merely makes a rational temporal distinction between taxpayers who practice the occuoation subject to the tax for an entire taxyear (lawyers on active status under the statute governing thepractice of law, see Government Code §§ 81.052-81.053) and taxpayers who may not lawfully practice the occupation at the beginning of the tax year, but who become eligible to carry on the occupation during the year.
Thus, the classifications cannot be said to be arbitrary, or without relation to the actual division of lawyers into those who carry on the occupation of attorney inTexas, and those who do not. State v. Humble Pine Line co., 247 S.W. 1082 (Tex. 1923). Accordingly, the statute under consideration here isconstitutional.

e SUMMARY

A classification scheme specified by the legislature, levying atemporary occupation tax on attorneys according to section 191 of the Tax Code, does notviolate the "equal and uniform" rule ofarticle VIII, section 2 of the Texas Constitution unless the classes devised by the legislature clearly appear to be arbitrary and

JIM MATTOX Attorney General of Texas MARY KELLER First Assistant Attorney General

,C. mu MCCREARY

Executive Assistant Attorney General

JUDGE ZOLLIE STEAXLEY Special Assistant Attorney General

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RICK GILPIN Chairman, Opinion Committee
Prepared by Don Bustion Assistant Attorney General

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