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 of Article 7084, V.C.S., under which 

motor bus and motor freight 

truck corporations should file 

their franchise tax returns. 

You request the opinion of this office upon the question 

presented in your letter which reads as follows: 

“We have a number ‘of motor bus and motor 

freight truck corporations, ordinarily designated 

as ‘common carriers.’ which are operating under 

certificates of public convenience and necessity 

issued by the Railroad Commission of Texas. These 

corporations are required to file a franchise tax return as provided in Article 7089, R.C.S., and pay a 

franchise tax in accordance with one of the provisions 

of Article 7084. R.C.S. ~The question arises as to 

which classification is proper, 7084 (1) or 7084 (3), 

in computing the franchise tax due by these corporations. 

“In accordance 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’ to file 

their franchise tax returns as a public utility under 

Article 7084 (3), R.C.S., thereby avoiding the payment 

of any tax upon their long term indebtedness as defined in that article. Other ‘common carriers’ which 

do not maintafn ‘fixed lines and schedules’ have been 

required to file their franchise tax return under the 

provisions of Article 7084 (1). R.C.S., thereby paying 

franchise taxes upon their long term indebtedness. 

UArticle 7084 (d) which at the time of the above 

opinion of your office ‘reads in part as follows: * . . . 

All public utility corporations, which shall include 

every such corporation engaged solely in the business 

of a 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 a franchise tax as provided in this Act, 

. . : was changed in 1949 to Article 7084 (3). It 

noiv reads as follows: ‘All public utility corporations; which shall include every such corporation 

engaged solely in the business of a public utility as 

defined by the laws of Texas whose rates or services 

are regulated, or subject to regulation in whole or in 

part, by law. shall pay a franchise tax as provided in 

this Article. . . .I Opinion O-133 1 ulaced authoritv 

on the words “whose rates or service is resulated. or 

subject to regi Brt allowing common carriers to file their franchise - ;tax returns as a 

uublic utilitv. The 1949 Amendment changed these words 

Eo ‘a public : utility as defined by the laws of Texas whose 

rates or services are regulated. . . . 

‘This office respectfully requests that you give 

your opinion in view of the 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 of Judge Blair in Gulf States Utility Company vs. 

State, 46 S.W.2d 1018, cited i 0 ini o-133 1 d 

JiElJEg that the Legislature rX?YefiZe v%t corporz 

tions are public utilities, as to whether these ‘common 

carriers’ should file their franchise tax returns under 

Article 7084 (1) or as a public utility under Article 

7084 (3), regardless of maintaining a ‘fixed line and 

schedule’.‘ 

The basic franchise tax-levying provisions are contained 

in Article 7084, V.C.S. It is observed that this statute levies the 

tax generally against every domestic and foreign corporation with 

exceptions in this language: “( 1) Except as herein provided, every 

domestic and foreign corporation heretofore or hereafter chartered 

or authorized to do business in Texas, or doing business in Texas, 

shall, on or before May first of each year, pay in advance to the 

Secretary of State a franchise tax for the year following, based upon . . .* : Then follows the formula 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 to pay an intangible assets tax except 

cor~porations enjoying the use of the public highways by virtue of a 

certificate of public convenience and necessity granted by the Railroad Commission of Texas and Clause (3) provides a special meas.- 

urement for the computation of the tax upon public utility corporations which is in this language: “Rxcept as provided in preceding 
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Hon. Jack Ross, page 3 (V-1552) 

Clause (2), all public utility corporations, which shall incIude 

every such corporation engaged solely in the business of a public utility as defined by the laws of Texas whose rates or services are regulated,, orsup~etf to a regulation in whole or in part, 

by law, shall pay a franchise tax as provided in this Article, except the same shall be based on that proportion of the issued and 

outstanding capital stock, sur.plus. and undivided profits, which 

the gross receipts of the business of said corporation done in 

this State bear to its total gross receipts instead of the groJs 

assets; and in lieu of the rate hereinbefore prescribed s&d tax 

shall be computed on the basis of One Dollar and Twenty-five 

Cents ($1.25) per One Thousand Dollars ($1,000) or fractional 

part thereof.” 

You present the question of whether or not motor bus 

and motor freight truck corporations which are required by law 

to secure from the Railroad Commission a certificate of convenience and necessity and are designated as “co-on carriers” 

are required to pay a franchise tax as provided for the general 

levy in Clause (1) of Article 7084, V.C.S., or Clause (3) of said 

article applicable to public 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. It is significant to note that prior to 1949,,Clause (a) 

of Article 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 the busihess of a public utility whose rates or services are regulated, 

or subject to regulation in whole 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 to Article 7084, V.C.S., which now reads as follows: ” . . . all public utility corporationg, which shall include 

every such corporation engaged solely in the business of a public utility as defined,by the laws of Texas whose rates or seFIces are regulated, or subJect to a regulation in whole 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 and we must assume that.the Legislature had a very definite purpose in making this change. We 

think this purpose is obvious. The .Legislature sought to make 

certain that only those corporations which were by law defined.by 

the Legislature to be public utility corporations ne entitled 

to have 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 .by statutory 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, ,the question 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 

it was a matter for legislative determination and in the absence 

of a statute designating or classifying a corporation as a public 

utility, it could reap no benefit under the section of the statute 

applicable to public utilities. This is manifest by the following 

quotation from the case: 

‘Passing to a consideration of subdivision (d),! -,, 

supra, of the Franchise Tax Act of 1930, we find 

that it neither expressly nor impliedly includes or 

,classifies for taxfng purposes private corporations 

engaged in the manufacture and sale of ic,e to 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,ed solely in the business of a public utility whose rates or service is regulated, or 

.subjec.t to regulation, in whole or in part, 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 to be ‘by law’ a public 

utility corporatiorior business. The phrase ‘every 

such corporation’ is necessarily limited to ‘all public utility corporations’ declared to be 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, then we think that 

such const~ruction is manifestly the intention of the 

Legislature from its long-continued policy of enacting from time to time declaratory statutes, declaring businesses or enterprises to be public 

utilities, or to be 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 to businesses or enterprises which were deemed to have 

by growth and by public need and use 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 f mposm 

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 think the legislature intended to leave to these officers and departments of government the intricate legal matters of 

determining what businesses are public utility businesses, or what corporations are public utilfty corporations, or of determining the matter of what public 

utility corporations’ rates or service are subject to 

regulation. It is well settled that the forum for declaring a business to be affected with the,public interest, 

and for subjecting its rates or service to regulation, 

is in the first instance the Legislature, and, until the 

Legislature has acted; we do not think administrative 

officials or de artments of government can determine 

the questions. B 

‘This case was decided prior to 1949 and henc~e prior to 

, the 1949 amendment. We think the 1949 amendment by the .Legislature does nothing more than to definitely confirm the decision 

c, ~‘in the Gulf States Utilfties Company chase to the effect that the designation or classification as a public utility must be by statute, thus 

relieving the Secretary~of State Of the intricate legal matters of 

d~etermining what corporations are public utilities within the purview 

of this statute. 

There are certain statutory provisions which define public utilities generally. These are embodied in Articles 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. In the~absence of a statute designating these corporations as public utilities.or classifying them as such, we think 

they should be classified as corporations subject to and required 

to pay the tax imposed by Clause (1) of Article 7084. V..CS.. and 

not by Clause (3) of said article applicable to corporations that are 

public utilities. 

Attorney General’s Opinion O-133 1 (1939) was based 

primarily upon that portion of the statute which then read ‘ivhose 

rates or service is regulated or subject to regulation in whole or 

in part,” as justifyfng the classification as public utilities of motor busses and motor trucks whose operations were regulated by 

the Railroad Commission. We think the 1949 amendment which 

added the further condition that they be 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 the Legislature has chosen by statute’to designate or classify as public utilities. Since the Legislature has not by statute 
Hon. 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. ~To hold 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 that would result in the application 

of the measurement of tax as provided in Clause (3) of Article 

7084, V.C.S., must be designated or classified as such by 

statute or legislative action. You are, therefore, respectfully 

advised that it is our opinion that motor 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) of Article 7084. V.C.S., and not under Clause (3) applicable 

to public utility corporations. 

SUMMARY 

Motor bus and motor freight truck corporations 

ordinarily designated as common carriers under a 

certificate of public convenience and necessity issued 

by the Railroad Commission of Texas are required to 

pay a franchise tax as provided in Clause (1) of Article 

7084. V.C.S.. and are 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 ~of Clause (3) of Article 7084. V.C.S., and un~- 

less designated and classified by the Legislature as 

public utilities, corporations may not avail themselves 

of the lesser tax liability imposed upon public 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