Untitled Texas Attorney General Opinion ( 1939 )

OFFICE OF THE ATTORNEY GENERAL OF TEXAS
AUSTIN
Eononblo Ooorm 8. Sheppard
CaPptrol.br0r PublioAooottnta
Autltl,Toxu
Dear slrt
YOU d@0 uk th0 fttrth~rtpthitt~ Or Uh0thBr OL? ttOt t&X9
Wu]A b0 ~7
&itfWW* h th0 po~8 prOdUOtiO#I hXO@ On
the royalty lnterutotthe mu- lath* oueowhu'otha
royaltyifip&lo inoil amduhonthe royaltyi8p
able la mommy obtdmed im the lmn4own.r'~ (loo w'o
@hUa Or the 0% In other wordm, im ttnn uty terffOr-
wee In the tax llabllit~by *lrt~e or tha roplt being
paymblo in 011 lo one inataaooan4 being poyabloIIImonq
obtalnd imm the 1audom.r'~ lharo of tha oil in the oth-
Xonorablo George Ii. Sheppard, May 18, 1939, Page 8
The part8 or Artlole 7087a material to thlm dim-
ottufon rud 08 r0iitttmt
'saotlon 1. (1). Ibr the purpomo
or this A0t *p~=0att00~*mii ~UL 8tty
poraon owalng, oontmlllng, auuglmg or
laaslng any 011 ~011 and/or my penon
who produou in my maxmu sny 011 by
taklttg it her the la-tb or rd.on la
this stat., and ahall l.tlolUd~au7 p*r-
aon olmlttguty royalty or other Inter-
lt Inulyo ilo r 1 tn ~r a lu*
whothu pro-
dttod by ~hlm, or by eam# other pormn a&
hla bohali, llthu by leuo, oontraot or
Oth~nriU.
"'(01. ‘lb y a lty ~o wnlohalluti
n’
ana lnoludoal1por8oM wnlng ai~mln-
oral rlght8 tan&or of prodttolng luu-
hold wlthln this gtata, other thantbo
wrklng ltttaruf, rhloh wrklng lntwwt
L8 that or tha por8onhmlagthe mumge-
mnt and aperationof the roll.,
=swtlott0. (1.).There le hereby
leied an 000upat10n tu on 011 pmduo*d
within thir Stat. oi two an6 thrae-qmr-
ten oonk (e-s/4+1pu bun1 or fbrtp
tw (42)rtulaard&ollon& aaid tu
shallbe oo8pWd %&oath* tota b8rrelm
0r 011 produoodor ldv4pl rrm the.
lutb or vmt.sr8of thi8 St&m wlthout
sty dduotlolu, ud #hall bo bum4 upon
tutk tablea rhalagona hunAnd par oont
0$~,“16~g~;:h -d ua0f PI-
.
“(61. The tu &rein lorlod shall
bo borne rrtabll by all lntererted paz-
tiu, inomcling ?Qyalt~ intueots mm&
pro&oar8 u&/or gurOhwox% of oli uo
hanby authorlxod 8nd nqulrod ta rlth-
h0ia iron MY patrat 6~0 int~8td
putlu. the pmportlonate tu &a*.* -L“
Aa far a8 wo hauro hour lblo to 40k1ain0, thuo
uo aa Tuu appellate oourt oaaw paming dlreotly on the
Honorable George ?I. ShoppaM, Ymy l&, 1939. Paga S
llablllty of the lmndormarm that you tmk about. Xowevu,
am 8t8td in your lettor, l.n the om8e or OIVUP NO. 1 011
Corporation vs. Shsppmnl, 89 S.W. (ed) 1ORl (writ or u-
ror rr!ht806), the quemtlonham beon ummlrd h rmgua to
Unlrermlty lands lea804 for 011 darolopeont by tha omor,
the Unlrormlty of Tox~, a l/et& roymlty balng rda5.tmd.
In that omae it wmm held thmt 8 grwmr produotlon oll tu
umm not due on the royalty lnbrsmt or the Unltarmlty. In
the Oroup No. 1 011 Corporation oamm, the oourt mmid:
"Ho ooamtnto the mot ti levy tha
tu a,@nmt the +rrlow latmn8t holQ-
lr8 la the oil pndttood, lnoludlngthe
prptlttou 8ttd roymlty owttum other .tha
the Unlrmrmltf, in pmportlon b th*lr
rmmpemtlve intarmmt8; . . .*
We think it im llportmntto notloe thmt tbim 18
wt a pmputy tax, but it is ma oooupmtion tu. Attor
moaml+rmblo 8tuQ vm hare oomm ta the oonolu~lonthmt
th0 r8Ot that the i8ftd rrOW UhiOh thlm Ofi 18 p~dttO& 18
oxapt fnu tumtloa does aot result in the prodttotiott0r
tha ollbmlBgoxuptirortho gm*mproduotlontu. In
the 8aau ot Tru8te.8 ot Cook'8 X8tmte ~8. Sheppard,89 S.
1. (&I) 1Ogg (writ of lr nx rmfUUH6by Tmxmm Suprum Court,
8tta8frbd by Ualtal stmtoa aupnaa court 1, the ooti,
rhlle dlattmming thla tax, mid;
Vhm tu 18 not 8galmt the oil
roplt~. It 18 lovlaa mm l 6XQm8 pro-
daotlon tu on,tho bwl.lu.8 or proauo-
iag oil."
In Uroup Ho. loll Corporation 18. Shopputl, mpn, the
oourt,lpwJking or thlm tu, lm1at
'The tu 18 lorisd on the buolnomm
or oooupmtlon0r ~roauolngthe oil . . .
ml. tu . . . I.8 a porn8 pmduotlon or
gromm reomlptm tu, tha amount or the
tu being rsamurd by the groom lotlvlty
of the budn.88, mad 18 under the author-
1tiem an mooupmtlont8x."
Wo think the&'. lm a 8ound rmamau whr thlm (``a8
produotlon 011 t8x lm not duo on the ror8lty lq*aremtor
l OltJ, tOW7t or tillag8; and that la that it lm is ooou-
patlon tax, and the Oonmtltutlon of Tuam prohibita the
Honorable Daorge H. Sheppard, May 19, 1939, Page 4
inpO8itiOtl Or OOOUplltiOtl tUO8 011 WtliOipd OO~OMtiOtI8
ln Artlole VIII. Saotlon 1, whloh ro8d8. 1x1part, 8m rol-
1OW8t
-The legI81mtura mmy lnpoaa 8 poll
tu. It ray ml80 IapOmo oooupmtlon taxm8,
both upon n8tur8l por8Onm attd upon oorpo-
rmtIon8, other thmn nunIol9ml, dolag bumi-
M88 in th18 StSte.-
The wr48 %~nloIpil oorporatloama olwrly lnoludo ml1
OitiO8, tOWtt8 Md Villq.8, 90 TOX. Jur. u. we 8M Or
the opinion that the My8lty intOm8t Of 8 Oity, tom or
rillyo 18 not 8UbjaOt to the gross PMduotiOtt Oir tU.
fndopondent 8ohool 4Imtrlot8 mnd om SOhOO1
diStriOt8 8M 1ikWli8a RllttiOip81 OOl-QOMtiOM Withh tbr
rmnlng or thmt pmrt or the CoMtltutlon. h -0 VS.
",;;;tof D8llmm. Ito Tox.,SSl, 40 S.W. (~4) 20, the oaurt
Wohool di8triotm 8re looml pub110
oorpor8tlOtt8 Or the 8m gumred ohmrmo-
ter 88 lunlolpml 00rpormtlons.~
In H8.rlinge~1Independent Sohqol D18triOt VS. C. Ii. P8go
mnd Brother, (CM. App.) 46 S.W. (al) 903, the oourt lmid:
“Inbs&mtdUtt 8OhOO1 diStciot8 muoh
u the on8 hen invo1t.d mro luthOrlmm4
8n4 provided for ttndu thm Coamtltutlon
and 18wm or this state. nuthumoro,
lwh di8ttiOt8 ar8 mUtiO``8litiaS With
the power8 Oonlerr.4 011 thmm by lmw.-
BI Tlrtlla or the80 8UthOl’itiOS, w think the lmw lxmmp
tiOtt ira OOOU~8tiOtlt8WS thmt lp911@8 t0 OitiW. tOWI8
md TillageS Will 83.80 apply t0 lohool di8triOtS. WS U’O,
thU@rOM, Or the OpillIOn th8tthe myiltl ifltW@8t Of *II
independent 8ohool di8triot or 8 o-on lohool dI8trIot
18 not 8ubjeOt to the grO88 produot.Loa 011 tU.
we will now t&u upthl8.,,~mtion lm ~gmrd to
00Unt1.;, whloh 18 aor0 dlrrl0uitt0 umru than the pro-
oedlng quntloa8. In the Oroup No. 1 011 Corpormtlon
omn, whloh hold that 8 -88 pmduotlon 011 t&h8 not
dU0 Ott the myalty itttUO8t Or th@ UnIYOr8Ity Of TmX88,
the court did not glre a reason for it8 holdIn& 8pp8r-
Honorable Ooorga R. Sheppard, May 1.8, 1939, Page 6
lntly 888uaing that Sreryono knew that 8uch ~(18 tho law,
aud that oruyonm knew tho roawn8 why; snd the 00~1% said:
"Ths mot mroly lotIo4 the tu
m6mlnmtroymlty and other lntaremtm
rotobly, and we 40 not rogud the tu
88 hmring bun lovlod S@tl8t tho 8t.b
or Unirormlty royalty iatoremt, boo8u8o
thS LogI818turo wIl1 be pro8Uwd to
know that the tu oould not bo 1Swf~lly
lorlod mgmlnmt the Stmto or IJnlrorslty.*
10 hmvo lurlno4 tho brldm rllo4 in tho lppollmto oouq% la
that 0880, on4 ml1 Or the brIoi8 toko tho pomltlon thmt tlm
Vpinnitr'8 royalty lntonmt 18 aot mubJoot to this tmx,
without glrIn6 8ay rommoa or luthorlty, uoopt tho brlor
for appollmnt whloh OitiS tho oplttlonof Att0rm.J Qottusl
Allrod te the CorptrOllor on Soptombor 86. 19SZL. in whloh
Opinion it WU 8.14:
*8vu thou& . . . the Stat.
should aotumlly oagmgo In the oooupm-
tion 0r pnaduol4J 011, wm 40 not bo-
llovo it oould Iapomo mu oooup*tlozt
tu 0~ itdr. while it 18 trUo thmt
in tho 8bSonOO Of mOti8titUtIOIialprO-
hlbltlon the Stoto w tu ltmolf. tho
promuaptlon 18 mlwaym m@nmt mn lnton-
tion to 60 80, and tho St8to Is irpll04-
ly Inman. uulemm tho lntontlon to in-
OlUdO the St8tO Im 010~1~ UUtirOStOd.
8 cooloy oa Tmxmtion, 0ootIon Ml; 61
S;J. 366.
“NO 8ttoh MttffOSt8tiOtA 18 to be
round in our CoamtItutioa or ltatutmm.
Rather, it lm to bo Imp1104 trOn the pro-
~i8i~ or s00ti0n i or ~rti010 0 th8t
tw impo8iti0tt or 8t8 000up8tiott tu ttp-
on tho 8t8tO Im prPhibltod."
court had mom roawtt la rind v&on it mmdo
The
it8 holdlq in the Group Ho. 1 011 Corpormtloa omsa Vhat-.
over that romwn was. we think it will 8991~ with equal
intSio;t 18 not 8ubjSot to the grOS0 prOdUOtIOi 0i.l tax.-
It I8y bo that the 0Oui.t iolt that tho Stat. should not
Honorable George li. Sheppard, May 18, 1939, Page 6
t8X it801f.
8 Cooloy on Tumtlon, 4th Ed., lSl2
b&lo Point Irrlgmtlott DlstrIot vs. Cordon, 157
ol-0. 181, 1 2’80. (84) 605
8t8to tn. Board or County c000d8810n0r8, 166
Okla. 78, 85 Pmo. (Rd) 1074
std.0 V8. LOOk., 89 1. X.X. 118, 819 P80. 790,
30 A.L.R. 4078t8tS T8. 9~11th (MO.) 90 S.W. (zd) 405
The SW l-.SWW that lX8mpt Oit.108 iX3BBIthi8 tu
might 8180 mpply to oouAtio8, mnd thmt 18 thot they mro,, In
on0 same. mu4lolpa.loorpor8tlonm.
Eoi(o1 TS. Ulohltm County, 64 Tox. SOB, 19
6.1. 568
Johnwn VII. Lhtto Cotttit',
15 Tox. Cir. App.
al, 59~S.U. 995
Brlte vs. Atuoom8 County, a47 S.W. 878.
In SO Tex. Jim. lb, it Im lmI4:
". . . th.' (OOtULti.8)82.WOhUi-
ii.4 88 MttiOipti OOrpoZ8tiOM by the
Con8tItutIon."
Th8t St8tWttt in Toxam JurI8prudo~oo ha8 ~sforono. to the
hot thmt tha ho8dIng Or h?tiOlO XI Or tho Toxmm cOn8titlt-
tlon is lntgtlod "liunlolpml Corpormtlon8" and it domlm with
OOWtiO8 U WOii 88 Oiti88, t&It& ittsOOtiOtt s Or thmt Ml-
018 it lmymt
"Ro county, olty. or other nrmiol-
pml oorpor8tlon mhmll honmftor booms
l mubsorlbar to the ompltml or any prl-
r*to oorpormtlon or a8wol8tIon, or m8ko
any mppmgirl8tlon or dondlon to tho mom,
or in 8ttywls~loan It8 omait; . . .*
ThO.0 Wrd8 Indlomto thmt the timnon Of the COn-
ltltution Intendod to inolude oountlom when they umad thm
words %unlolpml OOrpo~tlonmO.
Wo 8ro or the oplnlon that the roymlty Itttus8t
or a oounty Is not subjoot to the grO.8 pmauotkiirnOil tax.
Tho oonoluoIons wo hare roaohod In thi8 opinion
up to th18 point am In agroenbent with the oonolusion maohod
Honorable 0wrp.e H. iiheppard, May 18, 1939, Page 7
in mn opinion written by 8.n A88iOtwt mdor Attorney DenOr-
ml YoCrsw to the Conrptrollor on April Z0, 1937, holding
that tho city 0r RofUgIo w*s iK#t llsblo ror thi8 tu on
its roymlty Intenst rr0r its land thot was U88d ror a pub-
110 purposs, end mlw In mgroomont with our Oplnlon lo.
O-442, dmtod Ymmh Z8, 1939, holding that yalls County ums
not llmblo for this tsx on it8 r0yml.t' Interest iron its
pub110 lohool land, but dlrroront roa8on8 than the onom
given hue wuo relied on in those OpiUIOUS.
We will now tsko up thi8 quootion In rogmrd to
ohmrItmble and olmmeromynmry lastltutlonm. Wo 888~ that
y0u hmro rorsroaoo to prIr*toly owaod lnrtItutl0ns 8n4
not t0 8tata or oounty~owa~a ln8tltutloam. we ooasiaor
the wr48 *ohmrltsblS* ma4 *01oom8yamx7* +o hmr, the
lmmmsmaiag. In the OUO Of MiXOn T8. Brown, & r.1.
459, t14 980. 524, th. OOUrt 8ddt
“*klOOm08~n~’ ha8
boon the SUb-
jOOt Or UOh &diOiti
di8OUSSiOtt mu&!
itttUQmt8tiW, 8Ud it 18 AMOS'
oonoe4s4 that ~olmmaomynmry~ 18 myaoa-
JnroU8 With 'ohmrItmble' 88 the l8ttu
tUXB 18 Wed itt it8 t@OhttiOd 8OMO fn
18W. w cm. -8 80 COrpW JUtiS 399;
Emburgher I. Cornell UnlrormIty, 9
x180. Rmp. 564, 164 M.Y. SUpQ. 46-48;
PWPlS v. COgmwoll, 11s cml. reo, 45
Pmm. R70, 2igL.R.A. MO." .
The .onstitutlOtd and St8tttto~ 9rOV101OaS thmt
deal with the80 inmtltutioa8 arm Art1010 WI, sootion R,
Or the cOtt8titUtiOtI Of TOW, iUId htiOi0 TiM) Of th0 Ro-
TiSOd cm1 st8tUk8 Or TOxmS. Art1010 TIII, 8ootloa t,
Q?OVidO8. itt put, 88 rOuOUOt
"All OOOup8tiOa tU.8
8hsll bm
lqu8l sad wtiromupoa the muio 01888
or lubjootm within the llmlts of the
mthority levy- thm tui but the
legimlaturo ray, by gmnorml lmm, ox-
lmp trrpn taxation pub110 proporty
used ror pub110 &urpomom; 8otual pl8088
or (or) rollgIouo wrmhlp, 8lmo sn7
property owned by 8 ohUr8h or by 8 ..~
strlotly rollgiou8 loal*ty ror the ox:-
oluolro UP. 88 8 dml1l.q plaoe rOr the
mInI8try of 8UOh ohuroh or religious SO-
Honorable George H. Sheppard, Yap 18, 1959, Page 8
o1ety.i pmvlded that auoh l xanption
ahall not axtend to more property than
I8 raa8onably neoO88ary for a dwolllnq
plaoa 8nd In no lrent mol.0 than one
aora 0r land; ~laoeo 0r burial not hald
r0r prlrat8 or oorporata kmoflt: all
building8 uudlxolu8Iroly and owned by
~r8OllO OC tlMOOi8tiOn8 Of 9armII8 fOr
8Oh001 pUl-pO808 and the Ih@O888aq fUmi-
tUr6 Of 811 8OhOOl8 md 9rO9Orty U8Od
lXOlU8ivdJ and nauxubly ne88888q I8
00nau0ting MY 88800iation 0tigwea in
promtin& tha ~-mlI&ow, eduoational
Md 948IOti 6eTeiOpunt Or b0y8,,girlSs
young nea or young wmn oper8tIw under
8 8tmto or Hationd or(l8nIratIon Of llka
oharaoter; al80 the end-t fund8 of
8uOh i~8titUtiOlu Of h8ming Wld tii-
glen not wad with a rler to 9mflt; and
When the 8aPd aXW illTO8tOd in bond8 Or
mrtgwe8, or InlUid OrOther prOpOrt
whioh ha8 been and 8hti h8X'WLftOr ba
bought in by 8uoh in8tItutIon8 under
r0noi08tm tie8 made to lti8Q or
,pmteot mob bond8 or mortg8&88, th8t
8UOh exemption of 8uoh land and pr09orty
8hall oontlnua only ror t* year8 after
the 9UrOh8H Of th8 m at 8tiOh 8ilO by
8uOh lMtItution8 8nd no longer, and ln-
8titUtiOll8 Of 9Ul'Oly QUbliO oharity; Md
all law8 exempting property irPmtumtIon
other than the pnqmrty 8b0VO mntlomd
8hall be null md roId.*
"Ths roll- 9mpOrty 8htil bo OX-
empt fmm t8xat10n, to-wit:
Pub110 OharItIe8. - All build-
i438 ;IZiongi, t0 ilUtitUtiOIl8 of mrely
pub110 oharlty, together with the land8
belonging to and 0OOUpI8d by 8wh IMti-
tutIon not based or othor*Imo uaod with
l ti8W t0 pmfit, UIIh88 8UOh r&8 Md
QJFOfit8 and all EOli@y8 and oredit ale’
appropriated by suoh lmtltutlon8 8olely
t0 8U8tain 8Uoh in8titUtiOll8 aIld iOr the
Ronorable George R. Sheppard, May 18, 1959, Page 0
bonefit Or tha 8iOk and dI8abi.d -bar8
uld thalr f88iilie8'tUId th8 bUri81 Of the
or for the raIntumn00 or pu8on8
k~‘unablo to provide for thYIIelva8,
rhdher 8Uoh QUMM U. mw8b.m Of 8uoh
irr8titUtiW8 OC UOt. . .*
w0 uo not 0di0a upon hem t0 a00ia0 wh8th0r or
Wt thi8 OOMtitUtiOd. QSOYi8iOn Would PO&t the Led81+
tur. t0 la 8p a tohuitablo irutitution tror UI oOOUQ8tlO,,
tu lIk8 the on8 in qumtlon. lio@u'dl.o88 of the l&da-
tit@lUthOrity~ it 18 OitIU Irma a mading Or h~%iOh 73.60'
that the h(Li818tUH ha. 0nly-~2iwt~a prlv8te ohultablo
f.lUtitUtiOM r&W8 tU8tiOli 0 thalr 9r99Wty. h8 the @'08fI
proauotiw oil tu I8 ui oostlon ta x, ma not l tu on
QEOQ8tiye the8a iB8titUtlOM WOdd nOt be l--t iror it,
'W. -0 Of the 09inI0ll that the my8lty inf@X'08tL
or 8 prIT8toly mm.4
oharIt8bla or OlOOmO8ynary lmtitu-
tiOn 18 8ubjeOt to the -88 QWdUOtiOII Oil tu.
we Win - t&O UQ PUr h8t qUa8tiOll, ti th&
I8 whothor or not them 18 my airr0m~0 In the roymlty
Ownor* tu llabIlIty for ylo88 pzvdUotIon t8xos by dirturn
of the myalty beI= pmyablc %q.~a In one Ilutanoo 8nd bo-
ins paymblo ln m0noy obthma rr0m the 3.8naonnor*8 8huu. of
the oil In the other Irutanoo. Uo ,thInk thli qurtlan! Ii
8m88ma by the vary raowt 0884 or 23h8pp@Sd vs. 8t8nolIna
oil & ou co., us 8.1. (84) 645 (writ or umr l'8fU8Od),
in WhiOh it W88 Mid, OOUOUVi~ thi8 tU, l8 fO~oW8:
% 8t8tuto m8nIto8tly lays the tu
upon th8 ownor or any oharaotar or almot
Of ti+i8te htOm8t in the OU 80tUdly
JIXUdUOOd, OT in 'It8 tilo0,' WIthOUt ZW-
6~x4 to the tit10 to the 0Il elther be-
fore or after lorar8noo; and wIthOut I)-
6U-d t0 8nf UtIit~ Oh88i'fiOatiOollOr
nononolatur8. we 8~ dlmot or irwdiato
to di8tin@i8h 8uah intem8t tram that of
a mm limOr, *ho80 int8m8t 18 Ody OOl-
1akXW.l a8 808Urity iOr 8 pU8OMl obllga-
tlon of abwlute lI8bllIty.
". . . it I8 oleu that the tu wula
rall upon the myalty owner to the 8xtht
Or hi8 intaX'O8t, r@gUa.h88 Of *ether tb
myrrlty ~88 pay8bh In oil, out 0r 0I.l. or
Honorable George II. Sheppard, May 10. 1939, Page 10
in the ~r8lue of 011. Cook EIt8tO Oa80,
8UPM. And thi8 18 m baO8U88 tha rOy-
a.lty o,wnor*8 Intarast In pmauotion I8
8UOh 88 t0 m8ke hk W¶ iUhlr8tOd 9Uty
8na 8 *proauoar* wlthln th8 mo8~11450r
the 8tatUtO. ‘. . ”
day~im18 or the 8uthority juiltquotaa, w0 U* of
th0 opinion that thorn 18 no airremnoa In the royalty om-
.I’8 tu lIabIlIty ror 6ro88 produotion tUO8 by virtueor
thO royilty b8Ing payable In 011 In one In8tum and being
Qy8bie in IDBeg Obt8iIbBd rrOa th0 1-d Omer’8 8hUe Of tb
oil In the'othar Ilutrnoe.
COFUM
A9PROVRDr
s----F v
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