Opinion ID: 1730468
Heading Depth: 1
Heading Rank: 2

Heading: Gross Income to be Considered

Text: We agree with Petitioner Gragg's contention that the primary occupation and source of income provision contemplates gross rather than net income. It is our duty in construing the Constitution to ascertain and give effect to the plain intent and language of the framers of a constitutional amendment and of the people who adopted it. Deason v. Orange County Water Control and Imp. Dist., No. 1, 151 Tex. 29, 244 S.W.2d 981, 984 (1952); Cramer v. Sheppard, 140 Tex. 271, 167 S.W.2d 147 (1942). When, as here, certain language is not plain, it is our duty to determine the intent from the other provisions, including the general purpose, of the entire enactment. In writing and submitting to the electorate Section 1-d of Article 8, the Legislature failed to insert the word net or gross ahead of the word income. We are not authorized to supply a missing word for the purpose of clarity, but it is our duty to determine by recognized rules or judicial interpretation whether the Legislature intended the comparison of sources of income to be based upon net or gross income. We have concluded that this determination must be based upon the manner and context within which the term is used. This is because the word income is susceptible of various meanings. It has been interpreted by courts to mean net or gross, depending upon the connection in which it is used. In Words and Phrases, there are 116 pages of definitions of income. See 20A Words and Phrases, 163-279. Different editions of the same legal dictionaries carry different definitions of income, depending upon the cases cited. For instance, the 1933 edition of Black's Law Dictionary defined the term as that which comes in or is received from any investment of capital, without reference to outgoing expenditures; while `profits' generally means the gain which is made upon any business or investment when both receipts and payments are taken into account. . ., citing People v. Niagra County, 4 Hill (N.Y.) 20, and Bates v. Porter, 74 Cal. 224, 15 P. 732. Black's Law Dictionary 944 (3rd ed. 1933). The 1968 edition gives a broader definition, including return in money and profits, as follows: The return in money from one's business, labor, or capital invested; gains, profits, or private revenue, citing In re Slocum, 169 N.Y. 153, 62 N.E. 130 (1901). Slocum involved a bequest of the income of my said estate, after deducting the necessary costs and expenses of investing the property and collecting the income . . .. See the lower court opinion in the same case, styled In re Austin's Will, 60 App.Div. 438, 69 N.Y.S. 1036 (1901). There have been numerous cases in which the use of the word income has been held to mean net income because of the circumstances, purposes, and manner of its use, but which recognize that under other circumstances the word should be interpreted to mean gross income. Such a case was Fullerton v. Central Lincoln People's Utility District, 185 Or. 28, 201 P.2d 524 (1948), wherein the court said: The word `income' is capable of a variety of meanings, depending upon the manner of its use. The ordinary meaning, without qualification, is as follows: `Income means that which comes into or is received from any business or investment of capital, without reference to the outgoing expenditures. The term, when applied to the affairs of individuals, expresses the same idea that revenue does when applied to the affairs of a nation.' 4 Words and Phrases, First Series, page 3504 [20 Words & Phrases, Perm.Ed., p. 492]. A leading case on the subject in Texas is Houston Belt & Terminal Ry. Co. v. Clark, 122 S.W.2d 356 (Tex.Civ.App.1938, affirmed, 135 Tex. 388, 143 S.W.2d 373, 1940), in which the question was whether the railroad company was exempted from payment of a franchise tax under a provision that this act shall not apply to corporations organized as terminal companies not organized for profit, and having no income from the business done by them. In holding that the company had income, the court said: The term `income' ordinarily means that `which comes into or is received by any business or investment of capital, without reference to the outgoing expenditures.' 4 Words and Phrases, First Series, p. 3504. Income is the `gain which proceeds from property, labor, or business.' 1 Bouv. Law Dict., Rawle's Third Rev., p. 1527. The statutes use the word `income' or the phrase, `income from the business done by them,' in the sense of any income, as distinguished from net income. In affirming, this Court said: The contention of the terminal company finds complete answer in the opinion of the Court of Civil Appeals, which we approve in its entirety. See also Humble Oil & Refining Co. v. Calvert, 478 S.W.2d 926 (Tex.1972); San Marcos Consolidated Independent School District v. Nance, 495 S.W.2d 335 (Tex.Civ. App.1973, writ ref. n.r.e.); Denver Live Stock Comm. Co. v. Comm. of Internal Revenue, 29 F.2d 543 (8th Cir. 1928); Crider Bros. Comm. Co. v. Comm. of Internal Revenue, 45 F.2d 974 (8th Cir. 1931); In re Knight, 9 F.Supp. 502 (Conn.D.C.1934); Opinion of Justices, 254 Ala. 188, 47 So.2d 729 (1950); State v. Morgan Gin Co., 186 Miss. 66, 189 So. 817 (1939); Fullerton v. Central People's Utility Dist., 185 Or. 28, 201 P.2d 524 (1948); State ex rel. McKay v. Keller, 140 Fla. 346, 191 So. 542 (1939); W. C. Sharp Drug Stores v. Hansard, 176 Tenn. 595, 144 S.W.2d 777 (1940). In San Marcos Consolidated Independent School District v. Nance, supra , the decision in favor of farmer-rancher taxpayers was based on their gross income. Instructions to the jury which were held to be correct by the Court of Civil Appeals included the following: You are instructed that the term `income,' as used in this charge, means that which comes in or is received from any occupation or business venture or investment of capital without reference to the outgoing expenditures. A similar term in the Federal Bankruptcy Act referring to farmer's income was held to mean gross income in the case of In re Knight, 9 F.Supp. 502 (Conn.D.C.1934). The statute, 11 U.S.C.A. § 203(r) or Bankruptcy Act, § 75(r), provided: The term `farmer' means any individual who is personally bona fide engaged primarily in farming operations or the principal part of whose income is derived from farming operations. In discussing the meaning of income, the court said: And `income' I construe to mean `gross income.' Otherwise, when, by drought or depressed market conditions, the agricultural producer operates at a loss, he would cease to be a farmer entitled to the benefits of the act, if he had any net income from nonfarming operations. Certainly Congress did not intend that such a producer should cease to be a `farmer' and lose the benefits of the act at the very time when he is most in need. The purpose of the self-enacting constitutional amendment and the manner in which the term was used in Section 1-d of Article 8 indicate that gross income was to be considered rather than net income. Use of the word source contributes to this conclusion. The word source as respects matters of taxation has been held to mean origin. Goldberg v. Gray, 70 N.D. 663, 297 N.W. 124 (1941). This and other terms of the amendment indicate an interest in the origin of the landowner's gross income to determine whether he is a bona fide farmer or rancher. Since the amendment is selfenacting, it is believed that if net income had been intended, there would have been provisions as to how net income would be determined; whether it would be figured before or after taxes; whether depreciation would be allowed and if so at what rate; as well as other provisions necessary in determining net as opposed to gross income. Furthermore, the interpretation contended for by the school district would defeat the purpose of the amendment. An almost insurmountable obstacle would be placed in the path of bona fide farmers and ranchers if their qualification under the amendment were to be tested by source of net income rather than gross income. There is a great difference, especially for those who depend upon the soil for their livelihoods. It is commonly known that farmers and ranchers require large expenditures in their operations and usually receive comparatively larger gross income than net income. Many of such bona fide farmers and ranchers depend upon additional sources of revenue in order to supplement their income from agricultural pursuits. [5]