Court Opinion

ID: 4129990
Source: CourtListenerOpinion
Date Created: 2017-02-18 00:58:54.553675+00
Date Added: 2024-06-11T14:31:22.119344
License: Public Domain

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                                          &ate of QLexae
DAN MORALES
 .ATTORNEY
       CLNERAL                            December 22, 1992

     Honorable John Sharp                                Opinion No. DM 192
     Comptroller of Public Accounts
     State of Texas                                      Re: Betimd of franchise tax collec-
     L. B. J. State Office Buikihtg                      tions to banking corporations, and
     111Bast7thstreet                                    related questions (RQ-2127)
     Auatin, Texas 78774

     Dear Mr. sharp:

              You have asked several questions concerning retimds of franchise tax owed to
     banking corporations or their successors. The franchise tax was 6rst imposed on banking
     corporations in 1985, a&r the United States Supreme Court invalidated the method used
     by most Texas jurisdictions to value bank stock for purposes of ad valorem taxation. See
     American Bank & Tmti Co. v. Dallas Cow@, 463 U.S. 855 (1983). To replace the ad
     valorem tax revenues lost to local taxing units as a result of this decision, the legislature
     l&d the ad valorem tax from banking corporations and subjected them to the franchise
     tax imposed by chapter 171 of the Tax Code. Acts 1984,68th Leg., 2d C.S., ch. 31, art.
     3, pt. B, 8 1, at 212 (repealing Tw Code 8 171.078, which had exempted banking
     wrporations gem the franchise tax).         The same enactment established the local
     govemment corporate banking franchise tax fund, to which revenues 6om the franchise
     tax on banking corporations were to be deposited, for allocation to local taxing units. Id.
     Q 8, at 213-14 (formerly coditled at V.T.C.S. art. 4366e (1925); recodified as Gov’t Code
     8 403.105). The provision establishing the local’govemment corporate franchise tax fimd,
     which had been codiied as section 403.105 of the Government Code, was repealed in
      1991. Acts 1991. 72d Leg., 1st C.S., ch. 5. 0 8.24.’ Jn the same enactment. the
     legislature amended section 171.401 of the Tax Code to require the deposit of all franchise
     tax revenues in the general revenue fund. Id. 6 8.231.

             Afkr banks became subject to the franchise tax, a series of judicial decisions
     adverse to the state on application of the franchise tax to other kinds of corporations
     required extensive tax refunds and credits. See, e.g., Srare v. Sun Ref. & Mktg., Inc., 740
     S.W.Zd 552 (Tex. App.-Austin 1987. writ denied); Bullock v. Sage Enew Co., 728

               ‘Although formu rcction403.105oftk Govanmcnt ccdcbasbearcqcalcd,forbmitywcwill
     lCfCItOthiSptOViSlOlIbythC  Govemmtccdooitation,rathorthanbycitingthosasionlawthatadoptod
     it.

                                             p.   1011
Honorable John Sharp - Page 2            (DM-192)

S.W.Zd 465 (Tex. App.-Austin 1987, writ refd n.r.e.),s Because the adverse franchise
tax decisions apply to banking corporations in the same manner that they apply to the
other corporations, your 05ce has determined that banking corporations are entitled to
substantial tax re8mds or credits against ti~ture taxes. Most of your questions relate to the
tax retimds or credits; however, you tirst ask whether the provisions authorizing the
distribution of 8anchise tax revenues to local taxing units are consistent with article III,
sections 50 and 5 1 of the Texas Constitution.

       Article JJI, section 51 of the Texas Constitution, provides in part:
                TheLegislatureshallhavenopowertomakeanygrant...of
           public moneys to any individual, association of individuals, municipal
           or other corporations whatsoever. .
See ulso Tex. Const. art. JII, 5 50 (prohibits loan of the state’s credit “to any person,
association, or corporation, whether municipal or other. . .“).

         You ask whether these provisions are violated by the disbursement to local taxing
units of the state 8anchis.e tax imposed on banking corporations. As already pointed out,
section 403.105 of the Government Code, the provision that formerly authorized this
disposition of the 8anchise tax revenues, has been repealed. Acts 1991, 72d Leg., 1st
C.S., ch. 5, 0 8.24. Thus, your question is relevant only to d&ibutions of the tax that
weremadeinthepast.

        Sections 50 and 51 of article III prohibit the legislature from making gratuitous
donations to individuals, asso&tions, and all kinds of corporations, including municipal
and political corporations. Rand Dist. No. 4, Shelby Cow@ v. Allred, 68 S.W.Zd 164
(Tex. 1934). However, they do not deny the legislature. the power to use state funds for
govcmme& purposes. State v. Ci@o/Austin, 331 S.W.2d 737 (T’ex. 1960). The state
may allocate state funds to political subdivisions to use in carrying out duties that properly
rest on the state. Jefferson Count v. Board of Cow@ & Dist. Road Imkbtehess, 182
S.W.2d 908 (Tex. 1944); see ah San Antonio River Auth. v. Shepperd, 299 S.W.Zd 920
(Tex. 1957). Franchise tax revenues distributed to taxing units3 under section 403.105

        ~frPnchisctaxir~onthvPluedtbcprivilegeoT~budnasinT~,
Bulkk v. Nonon Bancshores Corp., 584 S.W.2d 268 (Tar. 1979).ti is based upoll tbc corporstion’r
taxable capital. Tax Code 00 171.002.171.101. Tk cues, takento@cr, bzld that the comptroUdr
meuKdforlktemh@whatwnstitotaitaxablecapitalwas-

        “%%ing   unit” nwaos a aalaty, iauaporatcd city, school diuric&county educatioodistrict a
rpedsldirtridorautbority(arhisrbospitaldisbid,rwatcrdirtrid,arfirrprrvcntiondirtrid),or~
otkrpoWcaluaitoftbcstatcthatimposesdvPlonm~mpropcrty.                   G0~?code~403.103(@0();
Tax Code 0 1.04(12).

                                          p.   1012
Honorable John Sharp - Page 3           (DM-192)

could be used “only by the taxing unit and only for public purposes.” Gov’t Code
5 403.105(i). The staMe set out specitic purposes for which municipalities, counties, and
school districts each could use the funds, purposes which were proper for the state as well
as the local taxing unit to carry out! For example, former section 403.105(j) provided
that franchise tax revenues distributed to a municipality could be used only for the
foUowing purposes:

               (1) payment of &ties    and beneths of municipal law
          enforcement 05ccrs having a duty to enforce or engaged in the
          enforcement of state law;
              (2) payment of salaries and be&Its to municipal fire-fighters
          having a duty to protect or engaged in the protection of state or
          wunty property, including public roadways and rights-of-way for
          public roadways;
               (3) purchase of law enforcement and fire-fighting equipment
          reasonably related to the services provided to the state under
          Subdivisions (1) and (2);
              (4) aquisition of rights-of-way for, and the construction and
          maintenance of. municipal streets that provide access to and
          departure from the state highway system;
              (5) provision of health protection services, including the
          removsJ and disposition of hazardous and solid wastes, and disease
          prevention services; and
               (6) protection of the public safety through the adoption and
          enforcement of building codes.

Id. Q403.105(j); see also id. 8 403.105(k) (school districts may use money to wmpensate
employees and to maintain schools and school district property), (I) (wunties may use
money to wmpensate law enforcement personnel involved in enforcing state law). In Our
opinioq the disbursement of franchise tax revenues to local taxing units pursuant to
section 403.105 of the Government Code did not violate article IIJ, section 51 of the
Texas Constitution.

                                         p.   1013
Honorable John Sharp - Page 4          (DM-192)

       We will next address your third, fourth, tX.h, and sixth questions,’ which wncern
the sources of statutory authority for retimding overpayments of t?anchise taxes to banks.
You ask how to reconcile the wmptroller’s general authority to give refunds under section
111.104 of the Tax Code with the authority under subsections (e) and (0) of section
403.105 of the Government Code to give credits and make regmds t+om the local
government corporate banking franchise tax tkd.         Section 111.104 of the Tax Code,
which provides for tax credits and refunds, states in part:

               (a) If the comptroller finds that an amount of tax, penalty, or
          interest has been unlawtkUy or erroneously wkcted, the wmptroUer
          shall credit the amount against any other amount when due and
          payable by the taxpayes from whom the amount was wllected. The
          remainder of the amount, if any, may be refunded to the taxpayer
          from money appropriated for tax refund purposes.
               . . .

              (e) This section applies to all taxes and license fees collected
          or administered by the comptroller. ~mphask added.]
        Former section 403.105 of the Government Code created the “local government
corporate banking ftanchise tax fund” in the state treaamy. Gdt Code 0 403.105(a).
Subsection (e) of section 403.105 required the wmptrolkr to send each taxing unit its
share of the banking corporation tbanchise tax. It fiuther provided in part as follows:

          The wmptrolla may retain in the local government wrporate
          banking franchise tax tknd a portion not to exceed five percent of
          each taxing unit’s share and mqy use this amount to make refunds of
          overpayments ma& to the fund and redeem dishonored checks and
          drafts deposited to the credit of the fund. [Emphasis added.16

This quoted language of former section 403.105(e) shows that a reknd fkom the local
government corporate banking fkanchiise tax fund was one legal remedy available to a
banking wrporation in the event of an overpayment of finnchise taxes.

                                       p.   1014
Honorable John Sharp - Page 5                         (DM-192)

       Subsection (0) of section 403.105 of the Government Code provided in part:
           Should it be determined that taxes assessed under Chapter 171, Tax
           Code, have been unlawfblly or erroneously wlkcted gem a banking
           wrporation (or its predecessor by merger, wnsolidation, or transfer
           of assets), then rhe knking         cotporation may...make       an
           irrevocable election to either 0) pursue legal remediIesother than
           taking credits against current or fiture taxes; or (ii) fire with the
           &mpWoIler a clpinr for a credit for all amounts unknvfil& or
           erroneous& collected against current or frrture taxes payable by the
           banking corporation under Chqter 171, .. Tm Co&                  The
           comptroller shall, on behalf of the state and the taxing unit& receive
           and administer all such claims for credit f&d by banking corporations
           for taxes assessed against banking corporations under Chapter 171,
           Tax Code, and shall verify credits claimed for such taxes that have
           been unlawfblly or erroneously wlkcted.           Any credit shall be
           deductedfrom the tax due by the banking corporation in the manner
           specSed in this subsection.. . If the amount of uniawtblly or
           erroneously wllected tax exceeds Sl.000, the portion of the credit
           deducted on the tax report will be (i) for the Srst tax report’ due
           following the veritication of such credit, 25 percent of the amount of
           tax unlawfully or erroneously collected, (ii) for the second tax
           report. .35 percent.         ; (iii) for the third tax report. .40
           percent . . ; and (iv) for tax reported due thereafter, any part of the
           remain@ amount. . which was not deducted as a credit on
           previous reports. [Emphasis added.]

        Despite the repeal of section 403.105, subsection (0) still has some etfect,
according to the following savings clause included in the repealing statute:
               (c) This article does not fleet the eligibility of a person to
           pursue legal remedies agatnst the state, or to app&for mtd receive
           a crea&, under Section 403.105(o), Govwnment Code, es that
           section existed immediately before the effective date of this article,
           for taxes assessed under Chapter 171. Tax Code, that have been
           unlawfitUy or erroneously wkcted before the e&ctive date of this
           article, and the former law is wntinued in effect for that purpose.
           Notwithstanding Section 403.105(o), Government Code, as that
           section existed immediately before the effective date of this article, a
           locd taxing unit is not liable for taxes assessed under Chapter 171,

       ‘.4ma1rep,3rtingoffranchisctaxliahilityisrrquircd.          TaxCade~ 171.202.

                                                     p.     1015
Honorable John Sharp - Page 6           (DM-192)

           Tax Code, that have been unlawtirlly or erroneously wllected before
           the e&ctive date of this article. This subsection does not @xt a
           claim fm a refundfired or other legal action commenced again a
           local taxing unit before the e&&e date of this article.

Acts 1991,72d Leg., 1st C.S., ch. 5, 5 8.27(c) (emphasis added).

        Subsection (0) of section 403.105 requires the banking corporation to choose
between filing a claim with the comptroller for tax credits or pursuing legal remedies
against the state other than taking credits against current or fitture taxes. Under the
savings clause, banking corporations remain eligible for these options, except that they
may not claim a retimd from or initiate a legal action against a local taxing unit after the
efkctive date of the statute.

        In our opinion, the election under section 403.105(o) of taking tax credits against
current or tuture taxes refers to the tax credits authorized by subsection (0). The
subsection (0) provision for tax credits is a provision specific to the S-anchise tax and
prevails over section 111.104 of the Tax Code, the earlier-enacted,* general provision for
tax credits, to the extent of inwnsisten9 between the two. Goti Code 5 3 11.026(b).

        If a banking corporation does not elect to take tax credits, it may pursue other
legal remedies including the retimd remedy available under section 111.104 of the Tax
Code. The bank’s right to seek rettmds is apparent fkom the savings clause. The savings
clause g&s local taxing units a prospective exemption t+om Uabiity for unlawtbUy or
erroneously wUected franchise taxes, but leaves in effect “claim[s] for a re%nd tiled or
other legal action wmmenced against a local taxing unit” before the effective date of the
statute. This language shows that the legislature considered a claim for a refbnd to be a
“legal action” and thus a “legal remedy” available to a bank under subsection (0).

         Thus, a banking corporation may elect to take the tax credits offered by subsection
(o), in accordance with the tax credit schedule set out in subsection (0). or it may elect to
pursue other legal remedies against the state, including the remedy of Sling a claim for a
retimd under section 111.104 of the Tax Code.9 Section 111.104, which applies to aJl

         ‘ThpleduraofIcdios,403.105oftk        cnwnmmtC4ldcw1p~inl984,~e~~a
9.1, while tbc pmiuaaor of section111.104of the Tax CJJ&was adoptedin 1959. Acts 1959.56th
Leg., 3d C.S., ch. 1. at 187,194.

        slider my inmpmtion of section 111.104of tbc Tax Code and saztion 403.105 of the
GovanmntC4dc,a~should,rccordingtoduepromsw~~be~~toreamrtbc
full ammmtoverpaidto the stateprovidedall statepm        are follow& McKesson Cop. Y. Division
o/AlcoholicBewrages & Tobocw, Dep’   tofBusi~~ssRegulation of Florkzia. 4% U.S. 18 (1990).

                                      p.   1016
Honorable John Sharp - Page 7          (DM-192)

taxes wllected and administered by the wmptroller, is a legal remedy within section
403.1 OS(o). Thus, as to the availabiity of a refund, the two provisions are not in wntlict.

        The second question wncems the sources for payment of franchise tax refunds to
banks. Until January 1, 1988, alI revenues of the &anchise tax on banking corporations
were distributed to local units of governments a&r deducting two percent for deposit in
the wmptroUer’s operating fund and mtaining five percent in the local government
corporate banking franchise tax t?md to refund tax overpayments and to redeem
dishonored checks and drags deposited to the tbnd. Acts 1984. 68th Leg., 2d C.S., ch.
31, art. 3, pt. B, 3 7, at 213; see Goti Code 5 403.105(e). The finnchise tax was
increased ILSof January 1, 1988, and the increase was credited to the general revenue
fund.tO Acts 1987, 70th Leg., 2d C.S.. ch. 5, art. 2, pt. 1, 8 1. at 22. You ask whether
retkds should be drawn from these funds according to the same percentage in which the
tax was ailocated to them. This question involves a wnstruction of article V, section 30
of the current general appropriations act, Acts 1991. 72d Leg., 1st C.S.. ch. 19. a
provision that appropriates money to pay tax rethnds.

       Article III, section 44 of the Texas Constitution prohibits the appropriation of
money from the treasury to pay a claim, unless it has been *provided for by pm-existing
law.” As we have found, section 111.104 of the Tax Code authorizes the wmptroller to
retknd uniawfbUy or erroneously wkcted taxes “from money appropriated for tax refund
purposes.” It is preexisting law which authorizes the legislature to appropriate money for
tax re8mds.

       Under article VIII, section 6 of the Texas Constitution, “[n]o money shall be
drawn from the Treasury but in pursuance of specitic appropriations made by
law. . .” The general appropriations act includes the following provision, which
appropriates money to pay tax retknds:

           1. Any money deposited into the State Treasury which is subject to
              re8md as provided by law” shali be refunded from the iknd into
              which such money was deposited, transferred, or otherwise

         ‘?heplwisionautborizingdishibutionoftllcfranchisctaxtolocal  -~rcptalcd
etfcuivc haamy 1. 1992. Acts 1991,72dLcg., 1stC.S.. ch 5, 0 8.231. Tk m      fnunthceanchisc
taxisnow&positaltotbccreditoftbegmrPlrwawfimd.           TaxCukp171.401.

        ‘IFor example, s&on 111.104oftbc Tax Code is a law pnwidiq authorityfor tbc zdund of
taxes unhklly er ermnmdy dkotcd. See atsaAustinNat7 Bank v. Sheppard,71 S.W.zd 242 (Tcx.
1934); Attomcy rhncral opinirm WW-749 (1959) at 4 (common46~ authorityfor lppropriation of
mwtrom1&trrpsury).

                                        p.   1017
Honorable John Sharp - Page 8                 (DM-192)

                crea?ted,and so much as is necessary for said refirnds is hereby
                appropriated.

                . . . .

           3. As a specific Umitation to the amount of refunds paid from fimds
              appropriated in this Act during the 1992-93 biennium, the
              Comptroller shall not approve claims or issue warrants for
              refmds in excess of the ~antount of revenue estimated to be
              available from the tax, fee, or other revenue source during the
              biennium according to the Biennial Revenue Estimate of the
              Comptroller of public Accounts used for certiiication of this
                Act. Aty &aim or portion of a claim which is in excess of this
                limitation shall be presented to the next legi&ure far a
                spec@c qprqvriation in or&r fov pigment to be made. This
                limitation shall not qply to any taxes or fees paid under
                protest.
Acts 1991, 72d Leg., 1st C.S., ch. 19, art. V, 0 30, at 1024 (emphasis added). Prior
appropriations acts have included provisions vhtually identical to subdivision 1 of section
30. See Acts 1989.71st Leg., ch. 1263, art. V, 9 30, at 5786.

         Since the franchise tax on hanking wrporations was deposited into various funds,
you inquire whether article V, section 30 of the appropriations act requires retbnds of the
tax to be drawn from each such gmd at the same ratio in which the tax was placed in it.
You inform us that it is the long-standing interpretation of the wmptroller’s office to
interpret the above-quoted provision of the appropriations act in this way. We believe that
this interpmmtion is wnsistent with the language of article V, section 30 of the general
appropriations act.12

           APPROFlUATIONOF TAX REFUNDS. Asmucbeftherospa4htaxes
           c&ctedud-bythccomptrouer6smrybcacwsmryirhereby
           rppmpriatcdUtdrtlridclOpayRfuadE~pmvidtdbyhW,#UbjtCtlOtbC
            followiq limitaticmsawl conditions:
            a. [tiIuelimitation6]
            b. [rdimdslimitedbyunountdrevuw          e3timadteksvailablefortheux.
            bc+,oraba revemc -I.
Aots 1991,72d Leg., lrt C.S., cb. 19, UL I, at 422-23. U&kc lbc qqaiatien    found in se&en 30 of
rrticlcV,therbove~ndoeollotpmvidcthatrefunb~kmadc~Uwfuadintowhicb
tbelnoncywasdepo6itcd,lTwsf~erolhuwiwueditat.               ThisrpproprLtionmoypmvidcawthcr
xUIWoffaodstepeyrefimdsoffmncbiwtaxer.

                                              p. 1018
Honorable John Sharp - Page 9          (DM-192)

        You suggested that franchise tax revenues placed in the wmptroller’s operating
fund may not be used to pay Eanchise tax re&nds, because no statute provides for refbnds
from that tImd. Express language authorizing the appropriation of retimds from the
wmptrollerk operating fbnd is unnecessary, as long as no statute or wnstitutional
provision restricts the purposes for which the legislature may appropriate that fund. See
genera& Attorney General Opinion JM-321 (1985) (restrictions on use of wnstitutional
highway lid).     We find no statute or wnstitutionai provision restricting the use of the
opera&g fknd. Article V, section 30 appropriates money for refunds from any timd to
which money subject to refund was deposited, including the comptroller’s operating
fknd.‘s

        Your remainhg questions arise from the failure of banks that paid franchise taxes
now subject to retimd. The Federai Deposit Insurance Corporation (hereit&er FDIC)
became the receiver of the failed banks, taking possession of their assets and Uabiities,
which were ultimately transferred to successor banks. You state that it is unclear whether
the FDIC or the successor banks are entitled to the retimds of franchise taxes paid by
failed banks, and that you have received many duplicate claims gem the FDIC and
successor banks for the same 6anchise tax refunds. You ask us to review the agreements
by which the IDIC transferred the assets and Uabiities of fhiled banks to successor banks
and to answer questions about the application of the merger credit authorized by section
171.1531 oftheTsxCode.

       Your questions sevw nine, and ten are as foUows:

          Under each set of documents, is the FDIC or ‘the successor bank
          entitled to any credit or refund owed the faiied bank?

          Reviewing the documents submitted in Question Seven, which, if
          any, of the successor banks are entitled to the merger credit?

          If you conclude gem the documents submitted that the successor
          bank was formed through any means other than a merger (i.e.,
          transfers of assets, purchase or wnsolidation), is the successor bank
          precluded from claiming a merger credit under Tax Code Section
          171.1531?

                                      p.   1019
Honorable John Sharp - Page 10         (DM-192)

        You ask us to construe the agreements because their intent as to the mhntds of
6anchise taxes is unclear. This office, in the exercise of its authority to issue legal
opinions, does not wnstrue contracts. I4 Where the meaning of wntract language is
tmcehn, a court will hear evidence of the parties’ intention in choosing the language. R
&P Enters. v. La Guarta, Gavreldt Kirk, Inc., 5% S.W.Zd 517 (Tex. 1980); 14 Tur.
JUR. 3d Conrracrs 4 184, at 303. This office cannot evaiuate evidence or make fact
lMittgs in the opinion process, and thus cannot determine the et&t of agreements
between the PDIC and successor banks as to the disposition of the credit or refund owed
to the tkiied bank, or whether the formation of the successor bank may be characterized as
a merger for purposes of the merger credit under section 171.1531 of the Tax Code.
Section 111.105 of the Tax Code provides for a hearing on the request of a person
claiming a retimd under section 111.104 of the Tax Code. This might be. an appropriate
procedure for resolving disputes as to whether the PDIC or the successor bank is entitled
to retimds of 6anchise tax wllected from failed banks.

       You also ask the following question:
                May the Comptroller offset claims of the State of Texas against
          a failed bank on any retbnds or credits that may be due?

       Section 403.055 of the Texas Government Code provides in part:

               (a) The wmptroiier may not issue a warrant to a person’s ifthe
          person is indebted or owes delinquent taxes to the state. . . until the
          debt or taxes are paid.
               ....
               Cg)Ifapersonowesdelinquenttaxesundaataxthatthe
          wmptroller administers or wUec& the wmptrokr may s&tract the
          delinquent amount from the total amount due the person from the
          state,. . . and issue a warrant for the difUbrence. The delinquent
          person is entitled to written notice of at least 20 days before the date

        ‘~~wdoaisnwopinionronibcauthority~aplMiccntitytoEmtrsctwitbrcspdto
p6rtiwlarsubjectmttcrerteagrwtoapartiwlarwntrwtterm      See,e.g.,AUorwyOwudOpinioas
JM-65, JM-57 (1983); H-966 (1977); see ah Attemcy Oewral OpinitmMW-290 (1981) (dclcrmining
~dit0fsdutic6witbre3pwttefmwcialmmmcdowuidngfrnmalwscbyacamining
~g~~~lar~pmvirions).         Suchqucsioascankanswadasanmtwoflaw,witinwtamsbinga
amirauerrc6o~dirprtesa6tethcintalticmsdthe~.

                                        p.    1020
Honorable John Sharp - Page 11         (DM-192)

          of the offset. The notice must conform to the notice requirements
          under Sections 111.018(b)(l) through (3). Tax Code.          The
          wmptrokr      may promulgate rules for the admbtistration of this
          aection. Footnote added.]
This provision authorizes the comptroller to subtract the amount of delinquent taxes that a
person owes the state from the amount of a state warrant payable to that person and issue
a warrant for the difference. Thus, if a bank is entitled to a rettmd of gawhise taxes, but
is delinquent in paying another tax administered or wUected by the comptroller, the
comptroller may offset the delinquent taxes against the reknd warrant. For section
403.055(g) to apply to an entity, it must be both entitled to the retimd warrant and liable
for the delinquent taxes.

        Section 403.055(g) of the Government Code does not authorize the comptroller to
offset claims the state may have against a bank, other than claims for delinquent taxes.
We have found no statute or judicial decision authorizing a setoff of other debts owed the
state by a bank against tax retimds due the bank, nor have you directed us to any. In the
absence of a statute authorizing such offsets, we camtot conclude that you have general
authority to do so. But see generally State v. Now, 422 S.W.2d 594 (Tex. Civ. App.-
Corpus Christi 1967. writ refd n.r.e.); State v. Martin, 347 S.W.Zd 809 (Tex. Civ. App.-
Austin 1961, writ refd n.r.e.) (once state vohmtarily files a lawsuit, defendant may tile
wunterclaims wnnected to the lawsuit). Soction 403.055(a), quoted above, does require
the comptroller to withhold warrants from a person indebted to the state until the debt is
paid.

                                  SUMMARY

               Former section 403.105 of the Government Code, which created
          the local government corporate banking franchise tax fund and
          provided for its disbursement to local taxing units, did not violate
          section 5 1 of article JII of the Texas Constitution.

               Section 403.105(o) of the Government Code, which provides
          remedies in the event franchise taxes have been unlawfully or
          erroneously wkcted from a banking wrporation, remains in effect
          for some purposes. A banking corporation that is entitled to tax
          credits or a retknd for overpayment of 6anchise taxes may elect to
          claim the tax credits authorized by former section 403.105 or pursue
          other legal remedies against the state, including the remedy of Sling a
          claimforarefbndundersection111.104oftheTaxCode.

              Article V, section 30 of the current general appropriations act
          provides that money in the State Treasury that is subject to refund

                                       p.   1021
Honorable John Sharp - Page 12        (DM-192)

          my be re-knded from the M into which the money was deposited,
          transferred, or otherwise credited. Article V, section 30 wnstitutes
          an appropriation for the purposes of paying tax refunds. The
          comptroller interprets article V, section 30 as mquirkg him to draw
          m~dsoftaxfromeachfUndinthetreaPuryintheMmemtioin
          which the tax was deposited in the knd.           This long-standing
          interpretation of ar&icle V. section 30 and its predecessors is
          consistent with the language of that provision.
               Section 403.055(g) pamits the wmptrokr            to deduct the
          amount of delinquent taxes a person owc8 under a tax administered
          or wkted     by the states from a state warrant owing that perso% and
          issue a warrant for the difference.

                                                    DAN      MORALES
                                                    Attorney General of Texas

WILL. PRYOR
Fii Assistant Attorney General

MARYKELLER
Deputy Assistant Attorney General

RENEAHIcKs
Special Assistant Attorney General

MADELEINE B. JOHNSON
Chair, Opiion Committee

Prepared by Susan L. Garrison
Assistant Attorney GeneraJ

                                      p.   1022