Court Opinion

ID: 4130902
Source: CourtListenerOpinion
Date Created: 2017-02-18 01:09:43.188639+00
Date Added: 2024-06-11T12:45:07.142343
License: Public Domain

Honorable Bob Bullock               Opinion No.   JM-566
Comtitrollerof Public Account:s
L.B.J. State Office Buildin!:      Be: Whether interest earned on
Austin, Texas   70774              the bingo tax, the bank franchise
                                   tax, and the mixed beverage tax
                                   collected by the state should be
                                   remitted to the local jurisdiction
                                   for which the taxes were collected

Dear Mr. Bullock:

     In Attorney General Clpinion .JM-539 (19861, we concluded that
local taxing units are entitled to be credited with interest earned by
the deposit of tax monies ,:ollectedby the state on behalf of those
local taxing units pursuant to the Local Sales and Use Tax Act,
article 1066~. V.T.C.S.. and articles 1118x and 1118~. V.T.C.S., which
authorize the creation of cwtropolitan rapid transit authorities and
regional transportation awhorities, respectively. We so concluded
because they constituted trust funds. You now wish to know whether
interest earned by the depo:;itof tax monies collected pursuant to the
bingo tax, the bank franchl,setax, and the mixed beverage tax should
be similarly treated. We answer your question in the negative. We
conclude that interest earned from the deposit of those taxes should
be deposited in the general revenue fund.

     The Bingo Enabling Act was passed pursuant to article III,
section 47. of the Texas {Constitutionand is set forth in article
179d. V.T.C.S. Section 3 OE the act authorizes a commissioners court
of a county that has voted to legalize bingo or in which a justice
precinct has voted to leg;llJze bingo and the governing body of a
municipality that has voted to legalize bingo to impose a two percent
gross receipts tax on the conduct of bingo games. Section 24 provides
that "[tlhe comptroller of public accounts shall perform all functions
incident to the administrat:.on
                              , collection, enforcement, and operation
of any tax imposed under this Act." Section 25 declares that "[a]
license required to file a tax return shall deliver the monthly return
with a remittance of the nc!t amount of the tax due to the office of
the comptroller of public accounts." Section 26(a) provides the
following:

                              p. 2514
Honorable Bob Bullock - Page 2    (JM-566)

            Sec. 26. (a) Each jurisdiction's share of all
         gross receipts tacos collected under this Act by
         the comptroller of public accounts shall be trans-
         mitted to the treasurer or the officer of the
         jurisdiction performing the functions of that
         office by the comptroller of public accounts pay-
         able to the jurisdiction periodically as promptly
         as feasible. Trar.smittalsrequired under this Act
         shall be made at least twice in each state fiscal
         year. The funds EO transmitted may be used by the
         jurisdiction for r.ny purpose for which the general
         funds of the jurit,dictionmay be used.

     Section 171.001 of the Tax Code imposes a franchise tax "on each
corporation that does business in this state or that is chartered or
authorized to do business in this state." Section 171.078 of the Tax
Code, which specifically exempted banking corporations from the
franchise tax, was repealed tsyActs 1984, 68th Leg..,2nd C.S., ch. 31,
art. 3, part B, §I, at 212. Article 3, part B, section 1. of the 1984
repealing act provides in pmt:

         It is the intention of the legislature that by
         repealing this section, which provides an exemp-
         tion for state and federal banking corporations,
         all banking corporations in this stats become
         subject to and p,sy the franchise tax imposed by
         Chapter 171, TaK Code, as provided by this
         article.

Section 171.1031 of the Tax Code defines "gross receipts" of a banking
corporation as "interest and dividends received . . . from its
business done in this stat220 S.W. 260, 272 (Tex. Civ. App. - Austin 1920, writ ref'd). Con-
     sequently, interest earned on a constitutional fund must be credited
     to that fund, unless the constitution itself otherwise directs.
     Attorney General Opinions .R4-323, .JM-321 (1985); M-468 (1969). The
     interest on state funds dedicated by statute, however, may be legally
     severed and placed in the general fund. See Gulf Insurance Co. v.
     James, 185 S.W.2d 966 (Tel,.1945) (articl~III,      section 7, of the
     Texas Constitution applies only to special funds created by the
     constitution. not bv statute): Attorney General Ouinions .JM-323,
     JM-321 (1985j; MW-338 (1981:);..see also Brazos River Conservation h
     Reclamation District v. McC.caw, 91 S.W.2d 665 (Tex. 1936) (article
     VIII. section 7 does not ;G'ply to general revenue funds). Article
     2543d (since repealed and m-codified as section 3.042(a), V.T.C.S.,
     article 4393-l) effects such a severance of interest on statutory
     funds as a general rule.

          Section 3.042(a) of a!rticle 4393-1, V.T.C.S., the article that
     sets forth the powers and duties of the state treasurer, provides the
     following:

              Interest received from time deposits of tconey in
              funds and account3 in the charge of the treasurer
              shall be allocated as follows: to each constitu-
              tional fund there shall be credited the pro rata
              portion of the it&rest received due the fund; the
              remainder of thtr interest received, with the
              exception of that portion required by other
              statutes to be ccsdited on a pro rata basis to
,-            protested tax payments, shall be credited to the

                                      p. 2518
    Ronorable Bob Bullock - Pagl?.
                                 6    (JM-566)

             General Revenue Fund. The interest received shall
             be allocated on-7     monthly basis.    (Emphasis
             added).

    The funds about which you inquire are not constitutionally dedicated
    funds; rather, they are statutory funds. Consequently, pursuant to
    section 3.042(a), the interest on such funds would normally be
    credited to the General Rmrenue Fund. However, if they are trust
    funds, interest would be cmdited to principal.

”        This office previously has determined that the provisions of what
    is now section 3.042(a), mticle 4393-1, V.T.C.S., do not apply to
    interest earned on trust funds that are not the property of the state
    and that the state treasurer holds as trustee out of the state
    treasury. Opinions issued by this office consistently have maintained
    that interest on such trust funds becomes part of the principal. See
    Attorney General Opinions JM-306, JM-300 (1985); Mu-82 (1979); H-1040
    (1977); M-468 (1969). Cf. ,Attorney General Opinions MW-338 (1981);
    E-1187 (1978). The issu= then, is whether the funds about which you
    inquire are trust funds, a~ opposed to statutory funds. We conclude
    that they are not trust funds.

         The opinions cited abrre indicate that in order to be charac-
    terized as trust funds, the funds in question should reflect, among
    other things, (1) that they are administered by a trustee or trustees,
    (2) that the funds neither are granted to the state in its sovereign
    capacity nor collected for the general operation of state government,
    and (3) that they are to bfs spent and invested for specific, limited
    purposes and for the benefit of a specific group of individuals.
    Being in the nature of a trust. such funds are entitled to retain the
    proceeds from their investment. Attorney General Opinions MW-481
    (1982); M-468 (1969). It is clear from a reading of the statutes
    quoted above, that the funds about which you inquire do not manifest
    sufficient trust fund characteristics. In no case are the funds to be
    administered by a trustee or trustees or by any public officer "in
    trust;" rather the statute)3are silent or specifically provide that
    the fund "is created in th- state treasury." In each instance, the
    relevant statutes provide that the funds are granted to the state in
    its sovereign capacity by providing that they be placed "in the
    general revenue fund." Alt:h.ough the funds are earmarked for general
    purposes, they are not to be spent or invested for specific, limited
    purposes or for the benefit of a specific group of individuals.

         We conclude that the funds created by the collection of the bingo
    tax, the bank franchise tax, and the mixed beverage tax are statutory
    funds. Accordingly, we con'clude that taxing units on whose behalf
    these taxes are collected are not entitled to be credited with
    interest earned by the depofr!it
                                   of these funds; article 4393-1, section
    3.042(a), V.T.C.S.. requires that such interest be credited to the
    General Revenue Fund.

                                     p. 2519
Honorable Bob Bullock - Page 7   (m-566)

                              5UMMARY

               Funds createi.by the collection of the bingo
          tax, the bank franchise tax. and the mixed beverage
          tax are statutory' funds. __ Taxing
                                           .
                                              units on whose
                                                        ._.
          behalf these taxeliare collected are not entitled
          to be credited with interest earned by the deposit
          of these funds; article 4393-1, section 3.042(a).
          V.T.C.S., requirerithat such interest be credited
          to the General Revenue Fund.

                                           JIM     MATTOX
                                           Attorney General of Texas

JACK HIGHTOWER
First Assistant Attorney Ger.eral

MARY KELLER
Executive Assistant Attorney General

RICK GILPIN
Chairman, Opinion Committee

Prepared by Jim Moellinger
Assistant Attorney General

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