Untitled Texas Attorney General Opinion ( 1988 )

THE Arro NE\- GENERAL
OF TEXAS
June 2, 1988
Honorable Toby C. Wilkinson Opinion No. JM-913
Hunt County Attorney
P. 0. BOX 1097 Re: Constitutionality of
Greenville, Texas 75401 temporary occupation tax
on attorneys (RQ-1347)
Dear Mr. Wilkinson:
you ask whether a temporary occupation tax imposed on
attorneys is constitutional. We conclude that it is.
The 70th Legislature enacted a temporary occupation tax
on attorneys to be applied from January 1, 1988, until May
31, 1990. Acts 1987, 70th Leg., 2d C.S., ch. 5, art. IX,
5 12 at 35: Tax Code, 55 191.141 - 191.145. The tax is
applicable to persons licensed to practice law in Texas, Tax
Code, § 191.141, but it does not apply to:
(1) an attorney who is 70 years of age or
older: or
(2) an attorney who has assumed inactive
status under rules governing the licensing of
attorneys.
Tax Code, g 191.144. Additionally, the Tax Code provides
for the proration of the tax due in certain cases:
If a person is licensed to practice law
after the beginning of the tax year [June 1
of one year through May 31 of the following
year] or resumes active status to practice
law after the beginning of the tax year, the
person being .licensed or resuming active
status shall pay the tax imposed by this
subchapter in proportion to the number of
months for which he will be licensed during
that tax year. If a person is licensed after
the beginning of a calendar month, the month
in which he is licensed shall count as a
month for purposes of payment of taxes. . . .
P. 4557
Honorable Toby C. Wilkinson - 2 (JM-913)
Tax Code, 5 191.143(b).l
You ask whether these provisions violate the ?
requirement in article VIII, section 2, of the Texas
Constitution that occupation taxes be "equal and uniform
upon the same class of subjects within the limits of the
authority levying the tax. . . .I'
The courts have long concluded that the constitution
permits the legislature to levy occupation taxes based on
classification schemes established by that body, so long as
the legislation is not discriminatory between the same or
JJ& classes. In other words, if there is a rational basis
for the classification scheme selected by the legislature,
the constitutional command that occupation taxes be uniform
will be satisfied. The propriety of classification schemes
selected is
primarily within the discretion of the
Legislature; and . . % courts can interfere
only when it is made clearly to appear that
there is no reasonable basis for the attempt-
ed classification. If there is a reasonable
basis or, to express it differently, it ?
cannot be said that the Legislature acted
arbitrarily, the courts will not interfere.
Hurt v. Coover, 110 S.W.2d 896, 901 (Tex. 1937). See also
Bullock v. AB'C Interstate Theatres. Inc., 557 S.W.Zd 33M
(Tex. Civ. App. - Austin 1977, writ ref'd n.r.e.), cert.
denied 439 U.S. 894 (1984), and Bank of Texas v. Childs, 615
S.W.Zd 810, 815 (Tex. Civ. App. - Dallas 1981, writ ref'd
n.r.e.), reversed sub nom. American Bank and Trust Co. v.
Dallas County, 463 U.S. 855, reh*a denied, 463 U.S. 1250
(1983).2
1. The legislature may provide for the pro rata payment
of taxes. See aenerallv Attorney General Opinion JM-399
(1985).
2. A classification scheme employed by a state in a tax
law will not offend the equal protection clause of the
Fourteenth Amendment to, the United States Constitution if it
is founded on a reasonable distinction or difference in
state policy. Kahn v. Shevin, 416 U.S. 351, 355 (1974).
P. 4558
Honorable Toby C. Wilkinson - 3 (JM-913)
In Attorney General Opinion C-46 (1963), it was held
that:
The mere fact that discrimination is made in
classifications for occupation taxes proves
nothing against classification which is not
on its face an arbitrary, unreasonable or
unreal one.
The Texas Supreme Court has noted that this rule "has
been stated so often as to render unnecessary any further
discussion of it." Texas Co. v. Stenhens, 103 S.W. 481, 482
(Tex. 1907). See also 54 Tex. Jur. 2d, Taxation, at section
29. The Texas Supreme Court has written:
The very language of the Constitution of the
state implies power in the Legislature to
classify the subjects of occupation taxes and
only
.- requires that
. the tax shall
- be equal and
unirorm upon tne same class. persons who. in
the most aeneral sense. mav be reaarded as
pursuina the same occuoation . . . mav thus
be divided into classes. and the classes may
be taxed in different amounts and accordinq
to different standards. Merchants may be
divided into wholesalers and retailers, and,
if there be reasonable grounds, these may be
further divided according to the particular
classes of business in which they may engage.
The considerations upon which such class-
ifications shall be based are primarily
within the discretion of the Legislature.
The courts . . . can only interfere when it
is [clear] that an attempted classification
has no reasonable basis in the nature of the
businesses classified, and that the law
operates unequally upon subjects between
which there is no real difference to justify
the separate treatment of them undertaken by
the Legislature. . . . (Emphasis added.)
Texas Co. v. Stevhens, 103 S.W. 481, 485 (Tex. 1907). See
also Dancetown. U.S.A. Inc. v. St e, 439 S.W.2d 333 (Tex.
1969) and wont Dallas Restaurants, Inc., v. McBeath, 618
S.W.2d 931 (Tex. Civ. App. - Waco 1981, no writ).
In Dancetown, SLWZ, a taxpayer complained about a
classification scheme in an occupation tax levied on certain
.amusement enterprises. The rate of,tax differed based on
P the sort of amusement furnished. The taxpayer argued that
p* 4559
Honorable Toby C. Wilkinson - 4 (JM-913)
an "amusementV* is an *'amusement,**and that there was no
rational basis for varying the rate of tax by classifying,
for example, the amusement provided by operas differently
from that obtained from dance halls or animal contests. The
court, after citing the language in Texas Co. v. Stevhens,
noted that:
The members of each class into which the
amusement business is now divided obviously
differ from the members of every other class
in their methods and places of operation and
in the nature of the entertainment generally
offered. Each class seems to embrace every
enterprise that should reasonably be included
in the same category. Since appellants have
not demonstrated by proof or otherwise that
'there is no real difference to justify the
separate treatment undertaken by the Legisla-
ture,' we cannot say on the present record
that the classification is so arbitrary and
unreasonable as to render the statutes
unconstitutional.
439 S.W.2d 333, 337 (quoting Texas Co. v. SteDhens, 103
S.W.2d 481, 485).
You have not suggested any reason why the classifica-
tions chosen by the legislature in this statute might be
unreasonable, and we believe that rational explanations for
the choices made by the legislature can be presumed. We
conclude that a court would find that the legislature has
divided the broad categories of lawyers into reasonably
drawn classifications which distinguish between persons who
do not in fact pursue the occupation of an attorney and
those who do. See. e.a., State v. Pioneer Oil and Refining
Co., 292 S.W. 869 (Tex. Comm'n App. 1927, judgment adopt'd).
Thus, a rational basis can be perceived for the
classification schemes selected by the legislature here.
First, lawyers who are in an inactive status under the
statute governing the status of attorneys cannot engage in
any activities in Texas which will constitute the occuDation
of being an attorney at law. Gov*t Code, §§ 81.052-81.053.
Thus, they are not even within the occuvation group to which
the tax applies, absent any question about classifications
of that group. Second, it is not irrational to assume that
lawyers over the age of 70, more often than not, do not
actively engage in the practice of law, and it is reasonable
to assume that in the main, attorneys in that classification
are not in the same occupational circumstances as lawyers
p. 4560
Honorable Toby C. Wilkinson - 5 (JM-913)
whose careers are still in full blossom. Tex co
;;;Ihens, suura; see also Kahn v. Shevi& 416 U":. 352 :;
2. C mDare Massachusetts Board of Retirement
Wuraia, 427 'U.S. 307 (1976) (legislative classificati%
distinguishing the elderly from the non-elderly population
for the purpose of conferring benefits and burdens has a
rational basis and thus is permissible under the equal
protection clause of the Constitution). Finally, the
proration provision merely makes a rational temporal
distinction between taxpayers who practice the occuoation
subject to the tax for an entire tax year (lawyers on active
status under the statute governing the practice of law, see
Government Code §§ 81.052-81.053) and taxpayers who may not
lawfully practice the occupation at the beginning of the tax
year, but who become eligible to carry on the occupation
during the year.
Thus, the classifications cannot be said to be
arbitrary, or without relation to the actual division of
lawyers into those who carry on the occupation of attorney
in Texas, and those who do not. State v. Humble Pine Line
co., 247 S.W. 1082 (Tex. 1923). Accordingly, the statute
under consideration here is constitutional.
e
SUMMARY
A classification scheme specified by the
legislature, levying a temporary occupation
tax on attorneys according to section 191 of
the Tax Code, does not violate the "equal and
uniform" rule of article VIII, section 2 of
the Texas Constitution unless the classes
devised by the legislature clearly appear to
be arbitrary and
JIM MATTOX
Attorney General of Texas
MARY KELLER
First Assistant Attorney General
mu MCCREARY
,C. Executive Assistant Attorney General
JUDGE ZOLLIE STEAXLEY
Special Assistant Attorney General
p. 4561
Honorable Toby C. Wilkinson - 6 (JM-913)
RICK GILPIN
Chairman, Opinion Committee
Prepared by Don Bustion
Assistant Attorney General
p. 4562