Untitled Texas Attorney General Opinion ( 1967 )

Honorable.Robert S. Calvert Opinion No. M-139
Comptroller of Public Accounts
Capitol Building Re: Under H.B. 032,
Austin, Texas Acts of the 60th
Legislature, Regular
Session, 1967, Chap-
ter 227,.,page523,
which amended Article
1.13, Title 122A,
Taxation-General,
V.C.S., whether the
Comptroller is re-
quired to refund the
forfeited discounts
or deductions, pro-
vided in Article
20.05(E) and the pen-
alties and interest
under Article 20.05(H)
of said Title 122A,
when the taxpayer is
able to show that his
return was mailed on
time but postmarked
late, and even though
the,event occurred
prior to the effective
date of the 1967
Dear Mr. Calvert: amendment.
you have.requested our opinion on the following question:
Under H.B. 832, Acts of the 60th Legislature, Regular
Session, 1967, Chapter 227, page 523, which amended Article
1.13, Title 122A, Taxation-General, V.C.S., whether the
Comptroller is required to refund the forfeited discounts
or deductions, provided in Article 20.05(E) and the penalties
and interest under Article 20.05(H) of said Title 122A, when
the taxpayer is able to show that his return was mailed on
time but postmarked late, and even though the event occurred
prior to the effective date of the 1967 amendment.
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Honorable Robert S. Calvert, page 2 (M-$39)
Article l-13, as amended by H. B. 832 reads as follows:
"(a) Any report, require,dby any provision of this
Title to be filed or made on or before a specific date
shall be deemed timely filed if said report, shall be
placed in the United States Post Office or in the hands
of a common or contract carrier properly addressed to
the Comptroller of Public Accounts on or before the date
required for such payment, report, annual report, return
declaration, statement, or document to be filed or made.
"(b) The postmark or receipt mark Qif received by
a common or contract carrier) will be prima facie evi-
dence of the date that such report was deposited with
the post office or the carrier. The person making the
report or the Comptroller may show by competent evidence
that the actual date of posting was to the contrary.
"(cl The person making the report shall be deemed
to have substantially complied with the filing require-
ments as to timeliness if he exercised reasonable dili-
gence to comply and through no fault of his own the
reports were not timely filed.
"(d) ff the report is filed within ten (10) days
after the due date and as originally filed shows the
correct amount of taxes due, no assessment for penalties
and interest will be made solely on the grounds of late
filing after the lapse of ninety (90) days immediately
following the date the report was required to be filed.
"(e) If the due date falls on a Saturday, Sunday,
or legal holiday the next business day thereafter will
be considered to be the due date.
"Bf) The term 'report' shall include any payment,
report@ annual report, return, declaration, statement
or other document required by any provision of this
Title to be filed with the Comptroller.
"$g) The Comptroller is hereby authorized to refund
or issue credits for penalties and interest paid solely
as a result of returns timely mailed but postmarked
after the required filing date; provided, however, that
no refund or credit shalb,be allowed for such pe,nalties
incurred prior to September 1, 1961, the original effec-
tive date of this Article,"
We shall first consider the applicability of Article 1.13,
as amended, on the provisions of Article 20.0568), which reads
as follows:
Honorable Robert S. Calvert, page 3 (M-139)
"If any person shall fail to file a report as required
herein or shall fail to pay to the Comptroller the tax
as imposed herein when said report or payment is due, he
shall forfeit five per cent (5%) of the amount due as a
penalty, and after the first thirty (301 days he shall
forfeit an additional five per cent (5%)~ Provided, how-
ever, that the penalty shall never be less than One Dollar
($11e Delinquent taxes shall draw interest at the rate
of six per cent (6%) per annum, beginning sixty (60) days
from the date due."
Prior to the effective date of Article 1.13, as amended,
a tax return under Article 1.13, was deemed to have been timely
filed if said return bore a postmark dated on or before the
date required for such return to be filed. Since the statute
was clear and unambiguous the Comptroller was under duty to
collect penalties and interest on the tax due if the return
was postmarked late irrespective of when it was mailed. The
Comptroller had no authority to look behind the postmark at
any mitigating circumstances.
Article 1,13, as amended, declares in paragraph (c) that
a report or return is deemed timely filed though postmarked
late, if the person making the report exercised reasonable
diligence to comply with the filing requirements and through
no fault of his own the reports were not timely filed. Is
this provision applicable if the event (return timely filed
but postmarked late) occurred prior to the effective date of
the 1967 amendment to Article 1.131 Stated otherwise, is Art-
icle 1.13(g), as amended, retrospective in scope as concerns
penalties and interest imposed as a result of late filing as
defined under old Article 1,131
It is well settled that the legislature has the power to
release penalties and interest on taxes. Jones v Williams,
121 Tex. 94, 45 S.W.Zd 130 (1931). It is the general rule
that a statute shall not be given retroactive effect unless
such construction is required by explicit language or necessary
implication. State v Humble Oii and Refining-Co;, 141 Tex. 40;
169 s.W,Zd '707 119431, 53 Tex.Jur.2d 53. Sec. 29. When we
apply this rule-to Article 1.13(g), we find words contained
therein which indicate a legislative intent to apply its
provisions to past transactions. That is what it says in
plain simple language. When a law is expressed in plain and
unambiguous language and its meaning is clear and obvious, the
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Honorable Robert S. CalVert, pages4 (M-139)
law will be applied and enforced as it reads there being
no room for construction of its meaning. This rule of sta-
tutory construction is so well-settled that no authorities
need be cited. Therefore, the Comptroller is required to
refund the penalties and interest imposed by Article 20.05(H),
when the taxpayer is able to show that his return was mailed
on time but postmarked late and even though the event occurred
prior to the effective date of Article 1,13 as amended.
We come next to that portion of your opinion request
regarding the refunding of the forfeited deduction allowed by
Article 20.05(E) which reads as follows:
3 "The taxpayer shall deduct and withhold from the
taxes otherwise due from him on his quarterly tax return,
one per cent (1%) thereof to reimburse himself for the
cost of collecting the tax, Provided, however, an addi-
tional two per cent (2%) deduction shall be allowed a
'taxpayer who makes prepayments of his tax liability based
upon a reasonable estimate of his tax liability for the
quarter in which the prepayment is made. In order for
the taxpayer to be entitled to the additional two per cent
(2%) discount, the prepayment must be made on or before
the fifteenth day of the second month of the calendar
quarter for which the payment is made.
"A taxpayer making a prepayment of his tax as pro-
vided for in this paragraph is not relieved from the
filing of quarterly returns as provided for elsewhere
in this Chapter. At the time the taxpayer files his
quarterly return showing his actual tax liability any
prepayments made by the taxpayer shall be credited against
his tax liability; in the event that there is tax liabil-
ity owed by the taxpayer in excess of the prepayment, the
taxpayer shall remit such excess at the time of filing
his quarterly return and from such excess shall deduct
and withhold one per cent (1%) of the amount of the
excess D If the tax liability of the taxpayer is less
than the prepayment of taxes, the excess of the payment
shall be recorded as a credit against future tax liabil-
ity or refunded to the taxpayer as provided for in Article
20,lO.
"In the event the payment of any taxes due under the
applicable provisions of this Chapter are not paid within
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Honorable Robert S. Calvert, page 5 (M-139)
the time required, or in the event that the taxpayer does
not file reports when due as provided by the provisions
of this chapter, the taxpayer forfeits his claim to any
discount, including any discount that might have been
taken by a taxpayer at the time of making a prepayment."
Statutes providing for the remission of penalties for
delinquencies in compliance with the tax laws are remedial,
and relate to procedure in the collection of delinquent taxes
and should be liberally construed in accordance with the gen-
eral rules governing statutory construction. 85 C.J.S, p. 597
Sec. 1031,
The Legislature in the enactment of Article 20.05(E)
expressly stated that the taxpayer "forfeits" his claim to any
discounts earned for collecting the tax and for making prepay-
ments of his tax liability.
In order to determine the applicability of Article 1.13,
as amended, to forfeited discounts or deductions, we must first
ascertain if the forfeited discount is in the nature of a pen-
alty. To fall within the purview of Article 1.13(g), the only
paragraph providing for refund or credit of monies, the deduc-
tions must qualify as penalties.
A tax is an exaction for revenue purposes; a penalty is
an exaction for purposes of regulation and enforcement. Tax
penalties are imposed as punitive measures against persons who
have been guilty of some default or delinquency and therefore
constitute no part of the tax. A statute authorizing collection
of penalties and interest from delinquent taxpayers is a penalty
statute and the penalties and interest authorized thereunder
are no part of the tax, Reconstruction Finance Corporation
v, State of Texas, 229 F.2d 9 (C.C.A. 5th 1956, cert.den, 351
u,s, 907). Penalties are intended to compel and induce the
taxpayer's prompt compliance with the tax laws. 85 C.J.S, 576
Set o 1021, In Jones v. Williams, supra, it was held that pen-
alties did not constitute a part of the tax, but were merely
a method of enforcing payment of the tax. A careful reading
of Article 20.05(E), shows that the discount is allowed as
(1) compensation for services performed by the taxpayer and
(2) for prepayment of the taxes,
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Honorable Robert S. Calvert, page 6 (M-139)
It is to be observed that Article,1.13(g), as amended,
does not confer any authority to refund taxes; the authority
granted is confined to refund of penalties and interest. The
discount earned by the taxpayer, although deducted from the
taxes collected, does not make the discount a tax. The allow-
ing of the discount is merely a convenient and inexpensive
method of payment for service rendered by the taxpayer. Black's
Law Dictionary, fourth edition, defines the word forfeit, "TO
incur a penalty." It also states that forfeiture is "Something
to which the right is lost by the commission of a crime or
fault or the losing of something by way of penalty." The
Court in State v, De Grass,72 Tex. 242, 11 S.W, 1029 (1898~),
stated that "Forfeiture is where a person loses some property,
right, privilese, or benefit in consequence of havins done or
omitted-to do a certain act." In Jon& v. Williams,-supra, the
Court stated:
"In the first place, impositions for failure to make
returns of and pay occupation taxes and other business and
special taxes have been from the beginning to the present
time penalties, sometimes named as such, sometimes referred
to as forfeitures or fines, sometimes as 'double the amount
of the tax,' or defined in some other manner, but all so
plainly penalties that we deem an analysis and discussion
of the laws unnecessary."
Article 20.05(E) provides a 1% deduction from taxes owed
as compensation for collection of the taxes by the taxpayer,
It further provides an additional 2% deduction if the taxes are
prepaid within a prescribed time. The discounts are for the
purpose of encouraging collection and early payment of taxes.
Both deductions are forfeited if the taxes are not timely paid,
or the quarterly report is not filed when due. When disallowed
by the Comptroller, these disallowed deductions take the form
of punitive measures against persons who have been guilty of
some default or delinquency and therefore become penalties,
The type of, and not the name'given, an exaction is the proper
criterion by which to judge whether or not it is a tax or a
penalty. Disallowance of a deduction for failure to file tax
returns and to file them timely is a penalty within legislative
power of remission. The disallowance is in the nature of pun-
ishment, and the losing of the discount "by way of penalty."
Having determined therefore that the forfeited deductions
are penalties, the Comptroller is required to refund the same
under the provisions of Article 1,13, as amended.
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. .
Honorable Robert S. Calvert, page 7 (M-139)
SUMMARY
Under the 1967 amendment to Article 1.13, Taxation-
General, Vernon's Civil Statutes, the Comptroller is
required to refund the forfeited discounts and deductions
and':thepenalties and interest when the taxpayer is able
to shew:that his return was mailed on time but postmarked
late and even though the event occurred prior to the effec-
tive date of the 1967 amendment.
Y s very truly,
z@-
MGO:dls
Prepared by Mario G. Obledo
Assistant Attorney General
APPROVED:
OPINION COMMITTEE
Kerns B. Taylor, Chairman
W. V, Geppert, Co-Chairman
Harold Kennedy
Marvin Sentell
Neil Williams
STAFF LEGAL ASSISTANT
A. J, Carubbi, Jr,
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