Untitled Texas Attorney General Opinion ( 1988 )

THE ATTOR-VEY GENERAL
OF TEXAS
February16, 1988
Honorable Gary Garrison Opinion.No. (.I+857)
Ector County Attorney
Room 218, Courthouse Re: Whether a taxing
Odessa, Texas 79761 unit that contracts with
a private attorney pur-
Honorable Billy Ray Stubblefield suant to section 6.30 of
Williamson County Attorney the Tax Code may impose
P. 0. Drawer 1139 the additional penalty
Georgetown, Texas 78627 of 15 percent authorized
by section 33.07 of the
Tax Code in an instance
in which the section
6.30 contract provides
that the delinquent tax
attorney will be com-
pensated by a percentage
,- of less than 15 percent
(RQ-984)
Gentlemen:
You request an opinion on the authorized expenditure
of penalties imposed pursuant to section 33.07 of the
Tax Code, which permits taxing units to provide that
delinquent ad valorem taxes incur "an additional penalty
to defray costs of collection" if the taxing unit has
contracted with an attorney under section 6.30 of the Tax
Code. See aenerally Attorney General Opinion JM-285
(1984) (discussing circumstances under which section 33.07
penalty may be applied to delinquent taxes). Section 6.30
of the Tax Code provides in part:
(a) The county attorney or, if there is
no county attorney, the district attorney
shall represent the county to enforce the
collection of delinquent taxes if the
commissioners court does not contract with a
private attorney as provided by Subsection
(c) of this section.
. . . .
p. 4145
Honorable Gary Garrison
Honorable Billy Ray Stubblefield
Page 2 (JM-857
(c) The governing body of a taxing unit
may contract with any competent attorney to
represent the unit to enforce the collection
of delinquent taxes. The attornev's com-
pensation is set in the contract. but the
total amount of ComDensation Drovided may
not exceed 20 Dercent of the amount of
delinouent tax, Denaltv. and interest
collected. (Emphasis added.)
Tax Code 56.30; see also Attorney General Opinion JM-135
(1984) (neither county attorney nor city attorney may
enter into a contract pursuant to section 6.30(c) of the
Tax Code).
Section 33.01 of the Tax Code establishes the penalty
and interest imposed on delinquent taxes. Section 33.07
of the Tax Code authorizes the additional penalty as
follows:
(a) A taxing unit or appraisal district
may provide, in the manner required by law
for official action by the body, that taxes
that remain delinquent on July 1 of the year
in which they become delinquent incur an
I additional Denaltv to defrav costs of
collection if the unit or district or
another unit that collects taxes for the
unit has contracted with an attorney pur-
suant to Section 6.30 of this code. The
amount of the Denaltv mav not exceed 15
percent of the amount of taxes, Denaltv, and
interest due.
. . . .
(c) If a penalty is imposed pursuant to
this section, a taxing unit may not recover
attorneyIs fees in a suit to collect
delinquent taxes subject to the penalty.
(Emphasis added.)
Tax Code 533.07.
Mr. Stubblefield informs us that some attorneys who
have applied to collect delinquent taxes for Williamson
County have proposed that the county impose the full 15
percent penalty under section 33.07 of the Tax Code, but
compensate them only at the rate of 12.5 percent, with the
county retaining 2.5 percent to defray its own costs of
p. 4146
Honorable Gary Garrison
Honorable Billy Ray Stubblefield
Page 3 m-857)
collecting the delinquent taxes. You both ask whether the
penalty imposed and collected under section 33.07 may be
used to defray the taxing unit's costs of collecting
delinquent taxes, or whether the penalty may only be used
to compensate the attorney who contracts to collect
delinquent taxes pursuant to section 6.30 of the Tax Code.
The answer to your question depends on whether "costs of
collection" in section 33.07 refers only to the cost of
contracting with an attorney pursuant to section 33.07, or
whether it includes costs incurred by the county.
Before addressing your specific question, we point
out that the 15 percent figure represents the maximum
penalty that may be imposed by a taxing unit. A taxing
unit may impose a section 33.07 penalty of a lesser
percentage. In addition, the taxing unit may change the
amount of penalty from year to year, if it does so "in the
manner required by law for official action by the
body. . . ." Tax Code 533.07(a). Thus, by referring in
this draft to the "15 percent penalty," we do not intend
to negate the taxing unit's power to set an amount less
than 15 percent and to change the amount of penalty from
year to year.
Turning to your question, we will first examine
former statutory provisions, to establish some of the
circumstances under which section 33.07 of the Tax Code
was enacted. See Gov't Code 5311.023 (construction of
statutes in a code). The provisions you inquire about are
found in the Property Tax Code, which was adopted in 1979
and codified as Title I of the Tax Code. Tax Code 31.01;
B Acts 1979, 66th Leg., ch. 841. Section 33.07 was
added to the Property Tax Code in 1981, in a bill which
adopted a series of amendments to the Property Tax Code.
u H.B. No. 30, Acts 1981, 67th Leg., 1st C.S., ch. 13,
at 168.
Before the Property Tax Code was adopted, former
article 7335, V.T.C.S., authorized the commissioners court
to contract with a private attorney
to enforce or assist in the enforcement or
the collection of any delinquent State
and county taxes for a percent on the
taxes, penalty and interest actually
collected. . . .
Acts 1923, 38th Leg., 2d C.S., ch. 13, at 37; Acts 1923,
38th Leg., 3d C.S., ch. 21, at 182. Former article 7335a,
V.T.C.S., provided that the compensation under a contract
p. 4147
Honorable Gary Garrison
Ro;zr;blT$-F5;fr Ray Stubblefield
to collect delinquent taxes could not be more than 15 per-
cent of the amount collected. Acts 1930, 41st Leg., 4th
C.S., ch. 8, at 9. These provisions also applied to
school districts. Bell v. Mansfield Indenendent School
District, 129 S.W.2d 629 (Tex. 1939). Articles 7335 and
7335a, V.T.C.S., were revised and recodified as
subsections 6.30(c) through 6.30(e) of the Tax Code, and
the total compensation payable to the attorney under the
contract was increased, so that it now "may not exceed 20
percent of the amount of delinquent tax, penalty, and
interest collected." Under former law, there was no
requirement that the compensation be paid from delinquent
tax COlleCtiOnS. Morrison v. Lane, 157 S.W.2d 466 (Tex.
Civ. APP. - Beaumont 1941, no writ); see aenerallv
Attorney General Opinion WW-217 (1980). The county had to
provide in its budget for the contract attorney's
compensation. Morrison v. Lane, sunra.
Fifteen percent of the amount collected constituted
an absolute limit on the amount that could be paid to an
attorney under contract pursuant to former articles 7335
and 7335a, V.T.C.S. Attorney General Opinion O-4004
(1941) concluded that the attorney contracting with a
school district could not make claims in excess of the 15
percent limit to pay for stationery, stamps, and other
similar items used in collecting delinquent taxes. The
opinion stated as follows:
It is manifest that unless the school
district pays for the stationery, stamps,
etc., the tax attorney must provide such
items. It is also manifest that if the
tax attorney receives 15% of the amount
collected plus a payment for the above
mentioned items he will receive more than
15% of the amount collected, the maximum
amount allowed by law.
Attorney General Opinion O-4004 (1941).
Thus, at the time section 33.07 of the Tax Code was
adopted, no particular source of funds was designated to
pay the private attorney's compensation under section 6.30
of the Tax Code. The legislature was, moreover,
presumably aware that compensation for the attorney might
include payment for his expenditures for supplies and
other items which could not strictly speaking be described
as attorney fees. See Attorney General Opinion O-4004
(1941).
p. 4148
Honorable Gary Garrison
Honorable Billy Ray Stubblefield
Page 5 (JM-857)
Section 33.07 of the Tax Code provides for
- an additional nenaltv to defrav costs of
collection if the unit or district or
another unit that collects taxes for the
unit has contracted with attorney
pursuant to Section 6.30 ofanthis code.
(Emphasis added.)
Tax Code 933.07(a). This penalty provides funds to pay
some or all of the attorney's compensation under a section
6.30 contract. The additional penalty may be imposed upon
a delinquent taxpayer only if the taxes are going to be
collected by a private attorney pursuant to section 6.30
of the code. This condition for imposing the additional
penalty suggests that funds realized from collecting it
must be applied to payment of the attorney's compensation.
This reading of section 33.07(a) is supported by sub-
section (c) of that statute, which provides as follows:
If a penalty is imposed pursuant to this
section, a taxing unit may not recover
P attorneyIs fees in a suit to collect
delinquent taxes subject to the penalty.
Tax Code, 533.07(c). The section 33.07 penalty may be
seen as a substitute for court-ordered attorney fees, with
the advantage that the taxing unit determines the amount
of penalty up to the 15 percent maximum, and that the
penalty can be collected even if the case does not go to
court. See. a Tax Code 533.48(a)(4) (reasonable
attorney's feeseappkoved by the court).
Section 33.48 of the Tax Code provides for the costs
and expenses that a taxing unit may recover in a suit to
collect a delinquent tax:
(a) In addition to other costs authorized
by law, a taxing unit is entitled to recover
the following costs and expenses in a suit to
collect a delinquent tax:
(1) all usual court costs, including
the cost of serving process:
(2) expenses of foreclosure sale:
(3) reasonable expenses, subject to
.-
approval by the court, that are incurred by
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Honorable Gary Garrison
Honorable Billy Ray Stubblefield
Page 6 (m-857)
the taxing unit in determining the name,
identity, and location of necessary parties
and ' procuring necessary legal
descrittions of the property on which a
delinquent tax is due; and
(4) reasonable attOrnSV*S fSSS aDDrOVed
bv the court and not exceedina 15 nercent
of the total amount of taxes. nenalties,
and interest adiudaed due the unit.
. . . .
(cl Fees collected for attorneys and other
officials are fees of office, extent that fees
for contract attornevs reoresentina a taxinq
unit that is joined or intervenes shall be
aonlied toward the comoensation due the
attornev under the contract. (Emphasis
added.)
Tax Code 533.48. The attorney's fees authorized by sub-
section (a)(4) of section 33.48 may not be recovered if
the taxing unit imposes a penalty pursuant to section
33.07 of the code. Subsection (c) of section 33.48
provides that fees for contract attorneys shall be applied
toward the contractual compensation rather than supple-
menting it. See aenerally Attorney General Opinion ME-67
(1979) (contract entered into under former article 7335
and 7335a, V.T.C.S., does not permit contract attorney to
receive attorney fees in connection with motion to compel
answers to interrogatories). The provisions of section
33.48 support the view that there is an equivalence of
purpose between the section 33.07 penalty, court-ordered
attorney fees, and compensation payable to the private
attorney under a section 6.30 contract.
There is support in the legislative history of
section 33.07 that the penalty it authorizes is to be
allocated only to the compensation payable to an attorney
under a section 6.30 contract. The fiscal note to House
Bill No. 30 of the 67th Legislature, First Called Session,
stated as follows:
Some increase in revenue to taxing units
would result from the increase in penalty
and interest rates on delinquent taxes and
from allowing the taxing unit to impose
additional penalty on delinquent taxes of up
to 15% for attorney's fees, if delinquent on
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Honorable Gary Garrison
Honorable Billy Ray Stubblefield
Page 7 (m-857)
July 1 and if the unit has contracted with a
delinquent tax attorney.
Fiscal Note on file in Legislative Reference Library for
H.B. No. 30, 67th Leg., 1st C.S. (July 17, 1981). This
document refers to the section 33.07 penalty as being
imposed "for attorney's fees," thus supporting the view
that the penalty is applied solely to compensate the
contracting attorney.
A Texas court, in considering whether taxpayers could
bring a class action to recover section 33.07 penalties
which they had paid, repeatedly referred to the section
33.07 penalties as "attorney fees," and "attorney fee
charges." See Salvaaaio v. Houston Indenendent School
District, 709 S.W.2d 306 (Tex. App. - Houston [14th Dist.]
1986, writ dism'd). For example, the court in Salvaaaio
characterized the penalty as *'§33.07 attorney fee charges
imposed to cover the collection of the delinquent taxes."
709 S.W.2d at 308. The court thus assumed that the
penalty was allocated to the contract attorney's costs of
collection. Even though the court was not addressing the
issue before us, its assumption as to the use of the
section 33.07 penalties demonstrates the reasonableness of
construing "costs of collection" to refer to the cost of
having a private attorney collect delinquent taxes.
We conclude that the penalty imposed and collected
under section 33.07 of the Tax Code may not be spent to
defray costs of collection incurred by a taxing unit
itself. The penalty payments must go to compensating the
attorney with whom the taxing unit has contracted to
collect its delinquent taxes. The taxing unit need not
impose the full 15 percent penalty authorized. That
figure is a maximum, and the statute does not compel a
taxing unit to pay an attorney more than his services are
worth. In drafting the contract, the taxing unit has the
opportunity to include specific terms on the "costs of
collection" which the attorney will absorb.
If a taxing unit does not contract with an attorney
under section 6.30 of the Tax Code, the delinquent taxes
are collected by the attorney who ordinarily represents
it, and the taxing unit has to pay for all costs of tax
collection. Section 33.07 of the code permits the taxing
unit to shift to the delinquent taxpayer the cost of
compensating the outside attorney with whom it contracts.
We have found no evidence that the legislature also
intended the delinquent taxpayer to absorb the taxing
unit's collection costs over and above the attorneyrs
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Honorable Gary Garrison
Honorable Billy Ray Stubblefield
Page 8 (Jk-857)
compensation under a section 6.30 contract. Statutes
imposing penalties are to be strictly construed. Hatch v.
Davis, 621 S.W.2d 443 (Tex. App. - Corpus Christi 1981,
writ ref'd n.r.e.); w Attorney General Opinion JM-285
(1984) (discussing applicabilty of section 33.07 penalty).
Accordingly, we advise you that the penalty imposed and
collected under section 33.07 of the Tax Code may not be
used to defray the taxing units' costs of collecting
delinquent taxes.
SUMMARY
Pursuant to section 33.07 of the Tax
Code, a taxing unit that has contracted with
an attorney to collect delinquent taxes
under section 6.30 of the Tax Code is
authorized to impose a penalty not to exceed
15 percent against delinquent taxpayers to
cover the attorney's compensation. The
taxing unit may not apply any part of the
penalties collected under section 33.07 to
any additional costs of collection which it
incurs but must use all of the assessed
penalties solely to compensate the attorney ?
with whom it contracted.
JIM MATTOX -
Attorney General of Texas
MARY KELLER
First Assistant Attorney General
LOU MCCREARY
Executive Assistant Attorney General
JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General
RICK GILPIN
Chairman, Opinion Committee
Prepared by Susan L. Garrison
Assistant Attorney General
p. 4152