Opinion ID: 5058
Heading Depth: 1
Heading Rank: 3

Heading: penalties under texas tax law

Text: The taxing authorities in Irving contest the district court's holding that interest and collection costs associated with unpaid taxes are penalties from which the FDIC is shielded by § 1825(b)(3).
To determine the meaning of penalties under the Texas Property Tax Code we first look to the rule of Jones v. Williams.18 In that case, after a lengthy historical analysis of the nature of interest and penalties charged for nonpayment of taxes in Texas, the Texas Supreme Court held that Article 7336, the precursor to Texas Tax Code §§ 33.01 and 33.07, provided for a penalty rather than a charge for interest. The court wrote that the impositions made for delinquency in rendering property for taxation, and for failure to pay taxes, whether these impositions are denominated penalties, interest, forfeitures, or 17 Nordell v. Heckler, 749 F.2d 47, 48 (D.C.Cir.1984). 18 121 Tex. 94, 45 S.W.2d 130 (Tex.1931). whether prescribed without definition or name, are all in reality penalties imposed for delinquency or failure of duty, and all enacted in aid of the state's revenue, rather than as charges made by the state for the use or detention of its money. In other words, the exactions are penalties rather than interest in the commercial or statutory sense.19 The taxing authorities contend that Jones was unique: it arose during the Great Depression and must be considered in the context of that time of travail. The effects of the Great Depression may have given rise to the controversy in Jones; it did not, however, provide the basis for the outcome. The Jones opinion was founded upon a carefully considered ... history of [Texas] tax legislation, from the first act of the Republic to the law [there] involved.20 This Court's opinion in Reconstruction Finance Corporation v. Texas,21 further weakens the argument that Jones is either invalid or inapplicable.22 In Reconstruction Finance this Court interpreted Article 7336. The court found that [o]bviously, Article 7336 is a penalty statute and the penalties and interest which are authorized thereunder are no part of the tax.23 The Court went on to cite Jones as definitive support for its interpretation. Jones sought to determine whether or not the interest exactions ... [were] to be regarded as interest eo nomine, imposed and demanded by the state as compensation for the detention of its money, or as penalties.24 The answer for the Jones court was that any such interest was in the nature of a penalty. Jones reached into Texas history to identify a solid tradition of punishment as the 19 Id. 45 S.W.2d at 133. 20 Id. 21 229 F.2d 9 (5th Cir.), cert. denied 351 U.S. 907, 76 S.Ct. 695, 100 L.Ed. 1442 (1956). 22 Nor do we find that a later Texas Supreme Court opinion, Kubena v. Hatch, 144 Tex. 627, 193 S.W.2d 175 (1946), overruled Jones. The taxing authorities ask us to adopt this implausible position. Even if we were to analogize the very different context of Kubena, which considered a narrow question of Texas homestead law, to the penalty provisions of Texas property tax law, we could not ignore the continued citation of Jones by the Texas Supreme Court long after it issued Kubena. 23 Reconstruction Finance, 229 F.2d at 12. 24 Jones, 45 S.W.2d at 133. explanation for the exaction of interest for the nonpayment of taxes. This tradition is crumbling. In Spindletop Oil and Gas Co. v. Parker County,25 a Texas appellate court found that the sum denoted as penalty' in article 7347 ... represent[ed] interest on the actual tax money owed so as to compensate the taxing unit for not having such tax money available to pay its obligations.26 The new direction adopted by Spindletop will surely represent the position that will ultimately prevail in the Texas Supreme Court. Nevertheless, for purposes of this case, Jones and Reconstruction Finance still control.27 The Texas legislature has recently confirmed that the longstanding interpretation of Texas interest charges as penalties may be nearing its end. Spindletop's conception of interest as compensation for the use or the lost use of money has been codified in an amendment to Texas Tax Code § 33.01(c). That amendment, effective on August 26, 1991, provides that interest payable under this section is to compensate the taxing unit for revenue lost because of the delinquency.28 The amendment shows the Texas legislature's desire to reverse Jones as it might affect § 33.01(c), and to treat interest imposed under that subsection as interest, and not as a penalty. As we note, however, the amendment did not become law until August 26, 1991, long after both these cases were decided. We must, therefore, decide whether to give the amendment a retroactive application in this case. The general rule is that there exists a presumption that an act is intended to operate prospectively and not retroactively. If there is any doubt, the intention will be resolved against 25 738 S.W.2d 715 (Tex.App.—Fort Worth 1987). 26 Id. at 722. 27 Even if an opinion of a Texas appellate court did control here, Spindletop would not mandate a reversal of Irving I: it interpreted a different portion of the Texas Property Tax Code and it failed to mention either Jones or Reconstruction Finance, the two cases we are told it overruled. 28 Tex.Tax Code Ann. § 33.01(c) (West Supp.1992). retrospective operation of a statute.29 An act will not be applied retrospectively unless it appears by fair implication from the language used that it was the intent of the Legislature to make it applicable to both past and future transactions. In ascertaining legislative intent, the entire act must be examined, not just isolated provisions in the act.30 We find that the sentence added to § 33.01(c) made a substantive change in Texas tax law by redesignating what was once a penalty as interest and, therefore, partially overruling Jones and State v. Kingham.31 Because we also find no indication that the Legislature intended the amendment to § 33.01(c) to be applied retroactively, we shall follow the presumption in favor of prospect ive application: the amendment is inapplicable to these consolidated cases.
The taxing authorities' contention that § 33.07 is not a penalty provision is wrong. § 33.07(a) reads: A taxing unit or appraisal district may provide, in the manner required by law for official action by the body, that taxes that remain delinquent on July 1 of t he year in which they become delinquent incur an additional penalty to defray costs of collection, if the unit or district or another unit that collects taxes for the unit has contracted with an attorney pursuant to Section 6.30 of this code. The amount of the penalty may not exceed 15 percent of the amount of taxes, penalty, and interest due.32 As support, the taxing authorities rely on an unpublished opinion written by a federal bankruptcy