Court Opinion

ID: 4130810
Source: CourtListenerOpinion
Date Created: 2017-02-18 01:08:41.156239+00
Date Added: 2024-06-11T14:33:32.249500
License: Public Domain

March 27, 1987

Eonorable Bob Bullock                     Opinion No. .TM-659
Comptroller of Public Accounts
L.B.J. State Office Building              lb:   Whether a municipality    which
Austin, Texas    78774                    does not at present         impose a
                                          property tax may impose the L/2
                                          percent    additional     sales   tax
                                          authorized   by Acts      1985,  69th
                                          Leg..   3rd C.S.,     ch.  10 [House
                                          Bill No. 791

Dear Mr. Bullock:

      Section 12 of House Bill No. 79, enacted during the recent third
called session,    amends article 1066c, V.T.C.S., the Local Sales and
Use Tax Act, by adding section    2A. which permits cities  to adopt in
certain instances an additional   one-half percent local sales and use
tax.   Acts 1985, 69th Leg., 3rd C.S., ch. 10, 112, at 29-36.   You ask
the following   three questions:

              1. May a city which does not currently impose
          a local     property  tax impose the l/2     percent
          additional    tax authorized  by House Bill No. 79,
          Acts    69th Legislature,    Third  Called  Session,
          chapter 101

              2.   If the      answer to question    number 1 is
          'yes,'   may all     the sales tax revenue be used to
          reduce     lawful     city  debt   and for   other uses
          consistent    with   the city's  budget?

              3.  May a city  simultaneously  adopt a local
          property tax and impose the l/2 percent additional
          sales tax?

We conclude that a city that currently does not impose an ad valorem
tax may not impose the additional  one-half percent Local Sales and Use
Tax authorized   by House Bill No. 79.     Because we answer your first
question in the negative,   we need not address your second question.
Finally.  we conclude that a city simultaneously   may not impose an ad
valorem tax for the first  tima and the additional   local sales and use
tax.

                                    p. 3002
Bonorable    Bob Bullock    - Page 2         .(JM-659)

       You first   ask, “May a city which does not currently         impose a
local property tax impose the l/2 percent additions1        tax authorized by
House Bill No. 792” Section         12 of House Bill No. 79 permits the
impositiou    of the tax either by a vote of the governing body or by
petition    and election    by the requisite    number of qualified    voters.
Subsection    F of    section  12 specifies    the contents    of the ballot
proposition    and provides the following    in pertinent part:

                 P. The ballot      at         such election  shall    be
             printed to provide for           voting for or against   the
             following proposition:

                 ‘The adoption of an additional one-half of one
             percent (1/2X) local sales and use tax within the
             city to be used to reduce the property tax rata.'
             (Emphasis added).

V.T.C.S.    art.   1066c,   52A.   subdiv.     F.

      Section 16 of House Bill No. 79 amends article            1066c, V.T.C.S..
by adding subsection       (b) to section 9 , which sets forth the purposes
for which such additional         tax revenue may be expanded.         Section   16
contemplates that the revenue generated by the additional             tax will be
used for the maintenance and operation             of the city;    the amount of
additional     revenue    generated     that    is  in excess    of   the amount
calculated    under section     26.04(c)    of the Tax Code (i.e.      the amount
representing    the previous year’s ad valorem tax levy forpurposes             of
the affective     tax rate calculation       in the present tax year), will be
used for debt service.        Section 16 provides the following:

                SECTION 16. Section      9, Local Sales and Use
             Tax Act    (Article  1066c,   Vernon's  Texas Civil
             Statutes),   is amended [V.T.C.S. art. 1066~. $91 to
             read as follovs:

                 Sec. 9.  (a) Money collected   under this Act is
             for the use and benefit      of  the cities   of the
             state; but no city may pledge anticipated    revenue
             from this source to secure the payment of bonds or
             other indebtedness.

                 (b)   In each year in which a city imposes an
             additional   city sales and use tax under Section 2A
             of this Act, if the revenue from the collection         of
             the additional     tax exceeds the amount of taxes
             calculated    for the city under Section      26.04(c),
             Tax Coda, the excess      shall   be deposited    in an
             account to be called       the city   sales    tax debt
             service fund.     Revenue deposited in the city sales
             tax debt service     fund may be spent only for the
             reduction of lawful debts of the city. except that

                                             p. 3003
Honorable Bob Bullock     - Page 3    (34-659)

            deposits   that exceed the amount of revenue needed
            to pay the debt service needs of the city in the
            currant year may be used for any city       purpose
            consistent   with the city budget.

Acts   1985. 69th Lag.,   3rd C.S.,   ch.   10, $16, at 40.

       Section 17 of gouse Bill No. 79 amends chapter 26 of the Tax Code
by adding section 26.041, which governs the calculation           of the city’s
effective     tax rate in each tax year in which the city imposes the
additional     sales and use tax.     The affective   tax rate calculation     is
designed to provide taxpayers with an accurate means of determining
the amount of increase or decrease in property taxes levied from one
year to the next.      The “effective    tax rate” is the tax rata that will
produce both the revenue necessary to satisfy           the taxing unit’s   debt
payment obligations     for the year in which the rate is calculated         and
the same amount of operating revenue levied on properties           taxed in the
previous year and taxable in the current year.            See Attorney General
Opinion MU-495 (1982).       Section 17 requires     a city to determine, the
amount of additional     revenue that it anticipates      will be generated by
the imposition of the additional       local sales and use tax authorized by
House Bill No. 79 and to factor          that amount into its effective      tax
rata.     In the calculation.      the amount of additional       tax the city
anticipates     will be generated is subtracted        from the amount of ad
valorem tax revenue generated in the previous year; the effective            tax
rate is then accordingly       reduced.     Section 17 provides in pertinent
part:

               SECTION 17. Chapter 26. Tax Code,          is amended
            by adding [Tax Coda 526.0411 Section           26.041 to
            read as follovs:

                Sec. 26.041.    TAX RATB OF CITY IMPOSINGADDI-
            TIONAL SALES AND USE TAX. (a)        In each tax year
            In which a city imposes an additional          sales and
            use tax under Section       2A. Local Sales and Use
            Tax Act    (Article   1066~.   Vernon’s    Texas    Civil
            Statutes),   the governing body may not adopt a tax
            rate that exceeds the tax rate calculated           under
            Section 26.04 of this code and adjusted under this
            section by more than three percent.       The governing
            body shall reduce a tax rata set by law or by vote
            of the electorate    to a rate that does not exceed
            the rata permitted      by this    subsection.       In a
            year in which this subsection       applies,     Sections
            26.05(c),   26.06,  and 26.07 of this code do not
            apply to the city.

                (b) The officer   or employee designated to make
            the calculations   provfded by Section 26.04 of this
            code   for   a city    shall  adjust   the tax rata

                                 p. 3004
Honorable Bob Bullock      - Page 4       (JM-659)

             calculated  under that section as provided by Sub-
             section (c) or (a) of this section,  as applicable.

                 (c)  In each tax year in which a city imposes
             an additional  sales and use tax under Section 2A,
             Local   Sales  and Use Tax Act (Article      1066~~
             Vernon's Texas Civil Statutes):

                     (1)  if the amount of additional      tax to be
                 imposed in the currant year as determined under
                 Subsection   (d) of this      section  exceeds  the
                 amount of additional     tax,    if any. used for
                 purposes of this section in the preceding year
                 as determined under Subsection        (d) in that
                 year, the officer   or employee shall subtract
                 from the rate calculated       for the city under
                 Section 26.04 of this code the rate that, if
                 applied to the total taxable value submitted to
                 the governing body, would impose taxes equal to
                 the amount by which the amount of additional
                 tax to be imposed in the current year exceeds
                 the amount of additional     tax used in the pra-
                 ceding year; or

                    (2)    if the amount of additional     tax to be
                imposed in the currant year as determined under
                Subsection (d) of this section is less than the
                amount of additional       tax,  if any, used for
                purposes of this section in the preceding year
                as determined under Subsection          (d) in that
                year, the officer     or employee shall add to the
                rate calculated      for  the city   under Section
                26.04 of this coda the rate that, if applied to
                the    total   taxable   value   submitted    to the
                governing body, would impose taxes equal to the
                amount by vhich the amount of additional         tax
                used in the preceding year exceeds the amount
                of additional    tax to be imposed in the current
                year.

Acts   1985, 69th Leg.,    3rd C.S.,    ch.   10, 117, at 41.

     Statutes should be given a reasonable and sensible   construction,
State Highway Department v. Gorham, 162 S.W.2d 934 (Tex. 1942); Brown
& Root v. Durland,     84 S.W.2d 1073 (Tex.   1935). vith     a view to
accomplishing the legislative  intent.  Magnolia Petroleum Company v.
Walker, 83 S.W.2d 929 (Tax. 1935); McKinney v. City of Abilene.       250
S.W.2d 924 (Tax. Civ. App. - Eastland 1952, writ ref'd n.r.e.).

        It is clear   from a reading of House Bill      No. 79, as a whole, that
the    legislature    intended that the additional       one-half  percent sales

                                       p. 3005
Bonorable   Bob Bullock   - Page 5    (JM-659)

and use tax offset        revenue normally generated by ad valorem taxes: an
obvious corollary       to this proposition    is that, if a city imposes no ad
valoram tax, the city may not impose the additional          sales tax designed
to offset   it.     That the legislature     intended the additional  sales and
use tax be used to offset           property taxes is clear not only from a
reading of the statute;           it is clear     from an examination     of the
legislative     history.     The Bill Analysis to Bouse Bill No. 79 includes
the following      language setting forth the purpose of article        I of the
bill,   the article     in vhich sections   12. 16, and 17 are located:

            This article    allows certain  cities   to adopt an
            additional   one-half  percent local   sales and use
            tax for the purpose of reducing city ad valorem
            taxes.

In the "section    by section" analysis   of the Bill Analysis   to House
Bill No. 79. the purpose and effect     of sections  16 and 17 are stated
to be the following:

            Section 16: Adds a new Subsection (b) to Article
            1066c, Section 9, V.T.C.S.,     which provides that in
            cities   which impose the additional       sales and use
            tax, if the amount of additional       sales tax revenue
            exceeds the amount of property          taxes calculated
            under     Section    26.04(c)   (effective      tax  rate
            calculation),     the excess shall be used to service
            debt.

            Section    17:    Amends Chapter 26, Tax Coda, by
            adding a new Section 26.041 which provides that a
            city which imposes the additional      sales and use
            tax under Section 2A of this Act shall take the
            anticipated     additional revenue derived   from the
            additional    tax into account when calculating   its
            effective   tax rate and shall reduce the effective
            rata accordingly.

Bill Analysis   to H.B. No. 79, prepared for Senate Finance Committee,
filed in Bill   File to B.B. No. 79, Legislative Reference Library.

      The bill    and its legislative   history require us to conclude that
the legislature     intended the additional     tax be used to reduce local
property taxes.      It necessarily   follows   that any city that does not
impose an ad valorem tax cannot then impose the additional          sales and
use tax.       It makes no sense for the legislature           to permit the
imposition of one tax for the purpose of providing tax relief           from a
second tax in an instance in which the second tax is not imposed.
Accordingly,     we conclude    that a city    that does not impose an ad
valorem tax may not impose an additional            local sales and use tax
authorized     by House Bill      No. 79,    Because we answer your first
question in the negative,      we need not address your second question.

                                     p. 3006
Honorable Bob Bullock          - Page 6   (JM-639)

      With your third question,    you ask, "May a city simultaneously
adopt a local property tax and impose the l/2 percent additional      sales
tax7"   We answer your third question in the negative.       The reduction
in the effective   tax rata calculation   required by sections   16 and 17
of Eouse Bill No. 79 requires a reduction calculated      on the basis of
the ad valorem taxes imposed in the previous year; subsection       (c) of
section   26.04 of the Tax Coda specifically     details the subtractions
that must be made "from the total amount of property taxes imposed by
the unit in the preceding year."     (Emphasis added.)

      Section  26.04 of the Tax Code sets forth the               method of cal-
culating the  "effective tax rate" for the taxing unit.            Subsection (d)
of section 26.04 of the Tax Code provides in pertinent            part:

             The designated officer  or employee shall calculate
             the tax rate that if applied to the total taxable
             value submitted to the governing body lass the
             taxable   value of new property would impose the
             amount of property taxes determined as provided by
             Subsection (c) of this section.

Subsection    (c)   provides    the following:

                 (c)  An officer or employee designated by the
             governing   body shall  subtract  from the total
             amount of property taxes imposed by the unit ip
             the preceding year:

                    (1)  the amount of taxes           imposed in the
                preceding year to pay principal         of and interest
                on debt of the unit            and to pay lawfully
                incurred     contractual      obligations      providing
                security   for the payment of principal           of and
                interest    on    bonds   or    other     evidences    of
                indebtedness    issued on behalf        of the unit by
                another political     subdivision;

                    (2)   the amount of taxes imposed in the
                preceding    year on property in territory that
                has ceased to be a part of the unit;

                    (3)  the amount of taxes imposed in the
                preceding year on taxable value that is exempt
                in the currant year;

                    (4)   the smount of taxes    imposed in the
                preceding    year on taxable value that is not
                taxable    in the currant year because property
                appraised at market value in the preceding year
                is required by lav to be appraised at less than
                market value in the currant year;

                                          p. 3007
Honorable Bob Bullock   - Page 7      (JM-660)

                  (5)   the amount of taxes imposed in the
              preceding    year pursuant to Subsection  (d) of
              this section    to recoup taxes lost in the year
              before as a result of an error or errors;   and

                   (6) the amount of taxes imposed in the
              preceding year dedicated to the use of a junior
              college district  under Section 20.48(s), Educa-
              tion Code.    (Emphasis added).

Tsx Code 126.04(c).

      The calculation    procedure   and ad valorem tax rate reduction
requirements make sense only if the city has imposed an ad valorem tax
at least in the year preceding the year in which the additional         sales
and use tax is imposed.     Otherwise, there would be no way to calculate
the affective    tax rate; both sections     16 and 17 would be rendered
meaningless, at least in the situation     that you describe.   Accordingly,
we conclude that a city may not impose simultaneously         an ad valorem
tax for the first time and the additional     sales and use tax authorized
by Eouse Bill No. 79 of the 69th Legislature.

                                 SUMMARY

                 A city that does not impose an ad valorem tax
           may not impose an additional        one-half percent
           sales and use tax authorized by House Bill No. 79.
           A city that does not impose an ad valorem tax may
           not impose simultaneously   an ad valoram tax for
           the first   time and the additional    sales and use
           tax.

JACF.HIGRTOWER
First Assistant Attorney   General

MARYKELLER
Executive Assistant   Attorney   General

RICH GILPIN
Chairman, Opinion Committee

Prepared by Jim Moellinger
Assistant Attorney General

                                     p.    3008