Untitled Texas Attorney General Opinion ( 1987 )

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.
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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
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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
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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
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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