December 11, 1952

Hon. Jack Ross Secretary of State State of Texas Austin, Texas ’

Dear Mr. Ross: Opinion No. V-1552

Re: The proper section ofArticle 7084, V.C.S., underwhich motor bus and motor freight truck corporations should file their franchise tax returns.
You request the opinion of this office uponthe question presented in **your** letter which reads as follows:

“We have a number ‘ofmotor bus andmotor freight truck corporations, ordinarily designated
as ‘common carriers.’ which are operating under certificates of public convenience andnecessity issued by the Railroad Commission of Texas. These corporations are required to file a franchise tax return as provided inArticle 7089, R.C.S., and pay a franchise tax in accordance with one of the provisions ofArticle 7084. R.C.S. ~Thequestion arises as to which classification is proper, 7084 (1) or 7084 (3), in computing the franchise tax due by these corporations.

“Inaccordance with Article 7084 (1) and (3). R.C..S., as interpreted by **your** office in Opinion No. O-1331, we have allowed ‘common carriers’ which
are maintaining ‘fixed lines and schedules’ tofile their franchise tax **returns** as a public utility under Article 7084 (3), R.C.S., thereby avoiding the payment ofany tax upontheir long term indebtedness as defined in thatarticle. Other ‘common carriers’ which do not maintafn ‘fixed lines and schedules’ have been required tofile their franchise tax return under the provisions ofArticle 7084 (1). R.C.S., thereby paying franchise taxes upontheir long term indebtedness.
UArticle 7084 (d)which at the time ofthe above opinion of **your** office ‘reads in part as follows: *

. . . All public utility corporations, which shall include every such corporation engaged solely in thebusiness ofa public utility whose rates or service is regulated,
or subject to regulation m whole or in part, by law. . Hon. Jack Ross, page 2 (V-1552)

shall pay afranchise tax as provided in this Act,

. . : was changed in 1949 toArticle 7084 (3). It noivreads as follows: ‘All public utility corporations; which shall include every such corporation engaged solely in thebusiness ofa public utility as defined by the laws ofTexas whose rates or services
are regulated, or subject toregulation inwhole or in part, by law. shall pay afranchise tax as provided in this Article.

. . .I Opinion O-133 1ulaced authoritv
onthewords “whose rates or service is resulated. or subject to regiBrt allowing common carriers to file their franchise - ;tax returns as a uublic utilitv. The 1949 Amendment changed these words

: utility as defined by the laws of Texas whose Eo‘a public rates or services are regulated.

. . .

‘This office respectfully requests thatyou give your opinion inview ofthe above and in the light of -Chapter 10, V..C.S., titled ‘Public Utilities’
, Articles 1416 to 1446, inclusive, defining public utilities and the opinion ofJudgeBlair in Gulf States Utility Company vs. State, 46 S.W.2d 1018, cited i 0 ini o-133 1 d JiElJEg thatthe Legislature rX?YefiZe v%t corporz tions are public utilities, as towhether these ‘common carriers’ should file their franchise tax returns under Article 7084 (1) or as a public utility under Article 7084 (3), regardless ofmaintaining a ‘fixed line and schedule’

.‘
The basic franchise tax-levying provisions are contained inArticle 7084, V.C.S. It is observed thatthis statute levies the tax generally against every domestic andforeign corporation with exceptions in this language: “(1)Except as herein provided, every domestic andforeign corporation heretofore or hereafter chartered
or authorized to dobusiness in Texas, or doingbusiness inTexas, shall, on or before May first of each year, pay in advance tothe Secretary of State a franchise tax for theyear following, based upon

. . .* :Then follows theformula for the measurement of the tax.

Following this general statement of the measurement of the tax there are provided certain exceptions and modifications of the tax rate for certain types of corporations. **For** example, Clause (2) provides for a tax equal to one-fifth of the general levy on corporations required by law topay an intangible assets tax except cor~porations enjoying the use of the public highways by virtue of a certificate ofpublic convenience andnecessity granted by the Railroad Commission of Texas and Clause (3) provides a special meas.- urement for the computation of the tax uponpublic utility corporations which is in this language: “Rxcept as provided in preceding

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, t Hon. Jack Ross, page 3 (V-1552)

Clause (2), all public utility corporations, which shall incIude every such corporation engaged solely in thebusiness of a public utility as defined by the laws of Texas whose rates or services are regulated,, **orsup~etf** to a regulation inwhole or in part, by law, shall pay afranchise tax as provided in this Article, except the same shall be based onthatproportion of the issued and outstanding capital stock, sur.plus. and undivided profits, which the gross receipts ofthe business of said corporation done in this State bear to its total gross receipts instead of the groJs assets; and in lieu ofthe rate hereinbefore prescribed s&d tax shall be computed onthe basis **of** One Dollar and Twenty-five Cents ($1.25) per One Thousand Dollars ($1,000) or fractional part thereof.”

You present the question ofwhether or not motor bus and motor freight truck corporations which are required by law to secure from the Railroad Commission a certificate of convenience andnecessity and are designated as “co-on carriers”
are required to pay afranchise tax as provided for the general levy in Clause (1) ofArticle 7084, V.C.S., or Clause (3) of said article applicable topublic utility corporations.

To answer this question we must first determine whether ‘motor carriers commonly designated as common carriers are public utility corporations as provided in the.t+xing statute. Itis significant to note thatprior to 1949,,Clause 

### (a) ofArticle 7084, V.C;S., which is now Clause (3) of said article, provided as follows: y

. . . all public utility corporations, which shall include every such corporation engaged solely in thebusihess of a public utility whose rates or services are regulated,
or subject to regulation inwhole or in part, by law, shall pay a franchise tax as provided in this Article

. . .” The comparable provision in the present act is Clause (3). changed in 1949 by
an amendment toArticle 7084, V.C.S., which now reads as follows: ”

. . . all public utility corporationg, which shall include every such corporation engaged solely in thebusiness of a public utility as defined,by the laws of Texas whose rates or seFIces are regulated, or subJect to a regulation inwhole or in part, by law. shall pay a franchise tax as provided in this Article

. . .*
There is a marked distinction between the language of the act prior to the 1949 amendment and that inserted by the Legislature in the 1949 amendment andwe must assume that.the Legislature had a very definite purpose in making this change. We thinkthis purpose is obvious. The .Legislature sought to make certain that only those corporations which were by law defined.by the Legislature tobe public utility corporations ne entitled tohave their franchise tax measured under the terms of Clause

.Hon. Jack Ross, page 4 (V-1552)

(3) of the act instead of Clause (1). The term “by the laws of Texas” means .bystatutory definition or classification. .This is the holding of the court in the case of Gulf States Utilities - Companyv. State, 46 S.W.2d 1018 (Tex.div.App. 1Y32, error ref.). In this case, ,thequestion was whether or not the manufacture of ice’ constituted a public utility entitled to pay franchise taxes as such. The court, after discussing the general aspects of a public utility under general law. held in effect that itwas a matter for legislative determination and in the absence ofa statute designating or classifying a corporation as a public utility, it could reap nobenefit under the section of the statute applicable topublic utilities. This is manifest by thefollowing quotation from the case:

‘Passing to a consideration of subdivision (d),! -,, supra, of theFranchise Tax Act of 1930, we find that itneither expressly nor impliedly includes or ,classifies for taxfng purposes private corporations engaged in the manufacture andsale of ic,eto the public in Texas a&public utility corporations.’ Under the language of subdivision (d) only ‘public .utility corporations, which sbaI1.include ‘every such corporation engag,edsolely in thebusiness of a public utility whose rates or service is regulated, or .subjec.tto regulation, inwhole or inpart, by law,’
are included. It is manifest from this language that the Legislature did not intend to include within the. statute any corporation which it had not theretofore,
or might thereafter, declare tobe ‘by law’ a public utility corporatiorior business. The phrase ‘every such corporation’ is necessarily limited to ‘all public utility corporations’ declared tobe such ‘by law,’ which means, as applied here! by a legislative enactment. If the language may be regarded as of doubtful meaning in this regard, thenwe think that such const~ructionis manifestly the intention of the Legislature from its long-continued policy of enacting from time to time declaratory statutes, declaring businesses or enterprises tobe public utilities, or tobe affected with the public interest, and in subjecting them to some sort of public regulation or control. And especially has this been the practice of the Legislature with respect tobusinesses or enterprises which were deemed to have by growth andby public need anduse become pub: lit necessities or utilfties. This intention is further manifest from the practical standpoint of collecting the tax. The statute is a tax statute enacted for the purpose 0 mposm

f ministrative officers or departments of the govern-. .

7 Hon. Jack Ross, page 5 (V-1552)

ment from what character of corporations they should demand the tax., We hardly thinkthe legislature intended to leave to these officers and departments of government the intricate legal matters of determining whatbusinesses are public utility businesses, or what corporations are public utilfty corporations, or of determining thematter ofwhat public utility corporations’ rates or service are subject to regulation. It is well settled that the forum for declaring abusiness tobe affected with the,public interest, andfor subjecting its rates or service to regulation, is inthe first instance the Legislature, and, until the Legislature has acted; we do notthinkadministrative officials or de artments of government can determine the questions. B

‘This case was decided prior to 1949 andhenc~eprior to

, the 1949 amendment. We think the 1949 amendment by the.Legislature does nothing more than todefinitely confirm thedecision c,

~‘inthe Gulf States Utilfties Company chaseto the effect that the designation or classification as a public utility must be by statute, thus relieving theSecretary~of State Of the intricate legal matters of d~eterminingwhat corporations are public utilities within the purview ofthis statute.

There are certain statutory provisions which define public utilities generally. These are embodied inArticles 1416 to 1446, inc,lusive, V.C.S. Also, Article 6050, V;C.S., classifies gas pipeline corporations as public.utilities. A careful search, however, of all the pertinent statutory provisions,.pertaining to motor bus and trucking corporations, although snbj,ected to~regulation by the Railroad .Commission. nowhere defines or classifies these corporations as public utilities. Inthe~absence ofa statute designating these corporations as public utilities.or classifying them as such, we think they should be classified as corporations subject to andrequired to pay the tax imposed by Clause (1) ofArticle 7084. V..CS.. and not by Clause (3) of said article applicable to corporations thatare public utilities.

Attorney General’s Opinion O-133 1 (1939) was based primarily uponthat portion ofthe statute which then read ‘ivhose rates or service is regulated or subject to regulation inwhole or in part,” asjustifyfng the classification as public utilities of motor busses andmotor trucks whose operations were regulated by the Railroad Commission. We think the 1949 amendment which added thefurther condition thattheybe classified or defined as such by the laws of Texas llmits the application of the special consideration accorded public utility corporations to only those which theLegislature has chosen by statute’to designate or classify as public utilities. Since the Legislature has notby statuteHon. Jack Ross, page **6** (V-1552)

classified motor busses and motor carriers as public utilities,
we have no authority to do so by implication. **Mere** regulation by the Railroad Commission as,authorized by law is not sufficient. ~Tohold that regulation alone was sufficient would, **in**
**our** view, nulIify and render meaningless the 1949 amendment which provided that such a public utility in order to reap the benefits of the lower tax thatwould result in the application of the measurement of tax as provided in Clause (3) ofArticle 7084, V.C.S., must be designated or classified as such by statute or legislative action. You are, therefore, respectfully advised thatit is our opinion thatmotor bus and motor freight truck corporations ordinarily designated as common carriers are s.ubject to and required to pay a franchise tax under Clause (1) ofArticle 7084. V.C.S., andnot under Clause (3) applicable to public utility corporations.
SUMMARY
Motor bus andmotor freight truck corporations ordinarily designated as common carriers under a certificate of public convenience andnecessity issued by the Railroad Commission of Texas are required to pay a franchise tax as provided in Clause (1) ofArticle 7084. V.C.S.. andare not entitled to pay this tax as a public utility as provided in Clause (3) of said article. It is within the province **of** the Legislature to declare what corporations constitute public utilities within the purview ~ofClause (3) ofArticle 7084. V.C.S., and un~- less designated and classified by the Legislature as public utilities, corporations may not avail themselves ofthe lesser tax liability imposed uponpublic utilities by this statute.
APPROVED: Yours very truly,

.W. V. Geppert Taxation Division
C. K. Richards Revlew,ing Assistant
Charles D. Mathews First Assistant

LPL:mw PRICE DANIEL Attorney General