Untitled Texas Attorney General Opinion

March 14, 1952
Hon. Robert S. Calvert Opinion No. V-1421
Comptroller of Public Accounts
Austin, Texas Re: Occupation tax rate on liq-
uid hydrocarbons recovered
,i
from gas by means of a sep-
-_ arator. or other non-mechan-
ical methods incidental to
Dear Mr. Calvert: the production of the gas.
Your request for an opinion of this office reads in part
as foUows:
“Please advise me whether liquid hydrocarbons
recovered from-gas by means of a separator or other
non-mechanical methods incidental to the production
of said gas are to be taxed at 4.125$ per barrel when-
ever the value is less than $1.00 per barrel and at
4-l/8% of the value whenever the value is more than
$1.00 per barrel, or if the rate should be 4.6$ per
barrel whenever the value is less than $1.00 per bar-
rel and 4.6% of the value whenever the value is more
than $1.00 per barrel.
‘It has been my interpretation that the tax rate,
effective September 1, 1951, on liquid hydrocarbons
recovered from gas by means of a separator or other
non-mechanical methods incidental to the production
of said gas is 4.6$ per barrel whenever the value is
less than $1.00 per barrel and 4.6% of the value when-
ever the value is more than $1.00 per barrel. How-
ever, due to the large number of taxpayers who have
taken exception to this interpretation, I will appreciate
your opinion as to the correct tax rate. . . .”
Section III of House Bill 285, Acts 52nd Leg., R.S. 1951,
ch. 402. p. 695, amends Section l(1) of Article 7047b, V.C.S., by
increasing the tax on production of gas from 5.2 per cent to 5.72
per cent of the market value, and reads in part as follows:
‘There is hereby levied an occupation tax on the
business or occupation of producing gas within this
State, computed as follows:
22% Hon. Robert S. Calvert, Page 2 (V-1421)
“A tax shall be paid by each producer on-the*-
‘mount of gasproduced and saved within~this State
equivalent to:5.72% of the market value thereof~ssand
when produced; provided that the amount of such tax
on sweet and sour natural gas shall never be less than
121/1500 of One Cent (10 per one thousand (1,000) cubic
:fggt*”
Seiti&i(3) of Article-7047b,.V.‘C.‘S.,:~piovid&:
I@
-, “All liquid hydrocarbons that are recovered
from-gas .by means of a separator or by other.~non-
,~mechanical methods, incidental to the production~df
said.gas;~shall Abe.taxed at the same rate as oil--as
Llevied by:Acts-of 1941. Forty-seventh’,LegislaaWr.e,
Chapter 184,-Article I, ‘Section-ll”
Article-7047b. V;CiS.. levies an occunation tax on-the
‘business of produc~ing gas in this State. -The tax isbased upoarthe
.:.market~valrie:,.bf the.gas as produced. ~W. -R.-Davis v..State,.i42
-T.ex.’ 637; 180.S.W-.2d 429 (1944); Car&an River, ~Gas ~Co. v.Bivins,
.-137-T&, 347,~153‘S.W.2d 432 (1941).
?Sectlonll(3) of Article-7047b~spec’ifically.:provides!’the
“manner’ and- raie-of taxing certain liquid hydrocarbons-recovered
’from-,the:gas by me&s of a separator cr.other~‘non-mechanitil
,^-means. .This‘ provision, which has’ the. effect-of taxing.~ those.liquid
:hydrpcarbonsl produced with the. gas-at the lower: rate pr,ovided
for: oil’&thii than:,ht the. same’iate aslg6s;had. its- origin:i&kr-
ticle--~,ofHotis~Bill.8, Acts 47th-Leg.,-.R-.S.- 1941,:ch.. 184,?p.1269.
The pertinent part of paragraph (1)’of Section 1~of Article:IIzof
that~ Act read.as follows:
. . ;--Allliquid hydrocarbons- thattare’recov-
3’erkd friim’g+by means of a separator: or: byy~dther
nonmechanical~inethods shall~ be taxed at the: same
‘r&e.as oil-as levied by Article I of this-Act.”
Article I of House Bill 8 referred tomabove levied-anoc-
’ cupitibn tax.Lpon the production of oil at the rate of 4.12~:perrcent
!~.of the ‘market value thereof whenever such values was .in~excesszof
$1.00’ per barrel.
Article 7047b was amended in 1945 bye changes In~.the
wording of and in the addition of certain sections. Acts 49th Leg..
R.S. 1945, ch. 269; p. 423. There was no change in the amount of
the tax levied upon the production of gas. That portion of--Section
1 of Article II of House Bill 8 relating to ‘the taxation of ‘the .liqtid
hydrocarbons-in question was amended to tread:
Hon. Robert S. Calvert, Page 3 (V-1421)
“All liquid hydrocarbons that are recovered from
gas by means of a separator or by other non-mechanical
methods, incidental to the production of said gas, shall
be taxed at the same rate as oil as levied by Acts of 1941,
Forty-seventh Legislature, Chapter 184, Article I, Section 1.”
The 52nd Legislature increased the occupation taxes
on the production of oil and gas, making the tax equivalent to 4.6
per cent of the market value of oil and 5.72 per cent of the market
value of gas produced. Sections I and III, Acts 52nd Leg., R.S.1951,
ch. 402, p. 695. Section l(3) of Article 7047b was not amended by
this Act. -~
The only question presented here is that of determin-
ing whether the liquid hydrocarbons should be taxed at the rate of
4.125 per cent or at 4.6 per cent of their market value. Taxation
of the liquid hydrocarbons at the lower rate, 4.125 ‘per cent, may
be supported by the theory that this was the tax levied upon oil by
House Bill 8 of the 47th Legislature and this rate was specifically
adopted by reference to that act. Taxation of the liquid hydrocar-
bons on the basis of the present rate-at which oil is taxed (4.6 per
cent) may be maintained on the assumption that the Legislature in-
tended that oil and these liquid hydrocarbons were to be taxed at
the same rate.
It is a ge~neral rule that a statute which adopts another
statute or a part thereof by specific reference incorporates or
takes the adopted statute as it existed at that time notwithstanding
subsequent repeal, amendment or modification of the adopted stat-
ute. 50 Am. Jur. 58. Statutes, Sec. 39; 39 Tex. Jur. 129, Statutes,
Sec. 66; Annotation, 168 A.L.R. 627; 59 C.J. 610, 937, 1058, Statutes,
Sets. 167. 548, 624; 2 Sutherland, Statutory Construction (3rd Ed.
1943) 548. As in the case of most general rules, however, this rule
has its exceptions. The two exceptions applicable here are: (1)
where the Legislature evidences such an intent, either express or
implied, the subsequent amendments of the adopted statute are in-
corporated within the adopting statute; and (2) subsequent amend-
ments of the adopted provisions will be incorporated where both
adopted and adopting sections are part of the same act or statute.
Annotation, 168 A.L.R. 627; 50 Am. Jur., supra; 59 C.J. 1058, Stat-
utes, Sec. 624; 1 Sutherland, Statutory Construction (3rd Ed. 1943)
432.
The occupation taxes on oil and gas were both enacted
by the 47th Legislature in substantially their present form in House
Bill 8,, supra, commonly referred to as the Omnibus Tax Bill.
The two taxes are closely related and have a similar background
in many respects, and they are taxes in the nature of severance
taxes levied upon companion industries or occupations.
//
&:,. .
.4
2w Hon. Robert S. Calvert, Page 4 (V-1421)
We are of the opinion that the Legislature -intended that
‘the liquid hydrocarbons recovered from gas by ‘separators or other
5non-mechanical means were to.,be taxed at-the same rate as oil.
These liquid hydrocarbons were, for the purpose of this tax, to’be
treated as oil. If the Legislature had intended otherwise, a specific
‘-rate would have been set out in Article 7047b. This intent of the
~Legislature .is clearly evidencedhy the fact that when.the 5lst Leg-
islature, at its Special Session, passed House Bill 3 temporarily
increasing tiy ten per cent the various sales, occupation, hand li-
tense taxes, etc., fin order.to provide additional revenues, the ,Act
specifically provided that the liquid hydrocarbons recovered by
separators or noon-mechanical means were.t-o Abetaxed at the same
irate as oil under the-Act, i.e., 10% of 4.125. Acts 51st ‘Leg., kt
%.S. .1950’, rh. t, 9. :I&
.l-Iouse ‘Bill ‘Zg5, Acts 52nd ‘Leg., R.S. 1951, ch. 492, p.
695, ~generally car-r&d over and;~in effect. made permanent the
temporary increas’e~ of ten per c~ent imposed by House BiLl -3. The
caption to House .-Bill .2&E clearly evidences the intent of the Leg-
‘. .islature ‘,to increase the occupation taxes levied on the prodtiinn
of oil and gas; In this connection-we ‘quote from,Attorney Genek’fk
~0pihion V--1246 (.i9St) as ~filtows:
‘!After %h’e ctose of ~the ‘Re~gular Sessinn df r&e
;3tst’L;~~iStaWre:in’~49, it,became apparent*at’the
.~, . ‘revenues to’& -collected under’the rntes:prm+lediin
‘the taxing -&dtrites then in effect.would be insafficimrt
:PO-meet :the :neces~sary current expenditures r&the
,Stateforthe~biennium ending August.,31, 1951,andim
order ‘to-avert’the deficit forecas~t by-the Comptrxiller
and to pr-ovide :suificient funds ~for the operation of klre
State’Hospitals and Special Schools, the Legislature
was called ,into-Special Session for the purpose of~%n-
:acting ‘tax le.gielation to raise revenues in anamount
.stifficient to-averts the deficit and provide-forthe ~ne&s
of the State.Hospitals and Special Schools. House Bill
3, adopted by Zhe Legislature at the Special Session
(Acts 5Is.t Leg., 1st C.S. 1950, ch. 2. p. 10) pr~ovided
~for fan additional tax of 10% of the basic levies of ~a11
the taxing statutes, with certain exceptions not’herre
pertinent, such additional tax-to’be in effect’for .the
years 1950’and that part of 1951 ending on August 31gt.
‘The revenues derived therefrom were allocate,d to the
State~Hospital %und with the exception of the portion
required .by Section 3, Article VII of the Constitution
~of Texas to .be:set apart for the benefit of the public
:fru-e s&6oEs.
Hon. Robert S. Calvert, Page 5 (V-1421)
“At the Regular Session of the 52nd Legislature
in 1951, House Bill 285, as introduced in its original
form, provided for a continuation of the taxing statutes
therein contained at the rates then in effect and con-
tained the customary form of emergency clause. While
in committee, the .original bill was amended as a whole
by increasing the basic rate of all of the taxing statutes
by lo%,, using practically the identical language contained
in House Bill 3 ‘with certain ezceptions for the purpose
of clarifying the application of the increased rate. . . .
“In construi~ng a statute, the cardinal rule is to
ascertain the-intention of the Legislature in enacting
the law.-This intention, once ascertained, must be en-
forced although it may not be consistent with the strict
letter of the statute. In ascertaining the true intention
of the Legislature, the existing condition of the law at
the time of its enactment and the general rules then
established and applicable to its subject matter should
be considered.. State v. Dyer, 145 Tex. 586, 200 S.W.
2d 813 (1947). If the language used in the act leaves
,its intent obscure, the courts may resort to certain
.aids in construction such as the nurnose sounht to be
,accamplished, the history of the -legislation, and the
public policy of the State. Harris v. City of Fort Worth,
142 Tex: 600. 180 S.W.td 131U(l944]. The object in con-
struing any statute is to as&?&a& from the langua,ge
used in the statute the intention of the Legislature, and
where the statute is a taxing statute, the act should be
construed in connection with other laws relating to the
assessment and collection of taxes. White v. McGill,
131 Tex. 231, 114 S.W.td 860 (1938). The Legislature
is free to fii in each act the time it, as a whole or in
part; shall take effect, and may therefore provide that
it shall takewect in whole or in part from its passage,
approval, or %% fled date. Chambers v. Baldwin, 274
S.W. 1011 (Tex. Civ. App. 1925). The intention of the
Legislature being clearly manifested by its history and
by the emergency clause that it should become effective
as a revenue producing measure upon its effective date,
that intention should control. Texas Co. v. Stephens,
100 Tex. 628, 103 S,W. 481 (1900). In determining the
legislative intent, the entire act should be looked to and
this includes the caption, the body of the act, and the
emergency clause. -Popham v. PHtterson, 121 Tex. 615,
51 S.W.2d 680 (1932).
-. .
Hon. Robert S. Caivert, Page 6 (V-1421)
-Applying these rules of statutory construction
to House Bill 285, and bearing in mind that House Bill
3 imposed an additional tax of 10% in practically all
of the taxing statutes amended by House Bill 285, with
certain exceptions above noted, the continuance of the
10% increase in effect after>he expiration date of
House Bill 3 on August 31, 1951, makes it a reason-
able conclusion that the Legislature intended to carry
the 10% increase into effect for the entire calendar
vear 1951 except in cases where such increase was
specifically repealed. Construing all of the provisions
-,~of House Bill 285 together, the intendment was to keep
the 10% additional levy except where the basic levy
of the taxing statute was raised, in which case the ini
crease was to become effective upon September 1, 1951.
wtthout regard to whether the tax was payable in ad-
Vance upon an annual, quarterly, or monthly basis.”
(Emphasis Added).
The liquid hydrocarbons in question are actually pro-
duced as a part or component of the gas and would be taxed as such
except for the express provision that they were to be taxed at the
ijame rate as oil. We believe that it is obvious that the Legislature
intended to increase these occupation taxes by approximately the
same amount and that since the occupation tax on the production of
oil was raised from 4.125 to 4.6 per cent, it follows that the tax nn
these liquid hydtocarbons was aIso to be increased to 4.6 per cent
Of their rixaiket WAS.
,
in &n&usion, it is our opinion that the 52nd Legisla-
ture intended in House Bill 285 to carry over and to continue in
effect the gene*&1 ten per cent increase in various taxes imposed
by House Bill 3, and that the liquid hydrocarbons recovered from
gas by separators or other non-mechanical means under the pro-
visions of ~paragraph (3) of Section 1 of Articl~e 704i’b, V.C.S.,
should be taxed ‘at the same rate Bs oil or at~4.6 per cent of their
market v%lui? ~whenever such value is in excess of $1.00 per barrel.
Liquid hydrocarbons recovered from gas by
separators or other non-mechanical means are tax-
-* .
Hon. Robert S. Calvert, Page 7 (V-1421)
24-a
able at the same rate as the occupation tax levied
upon the production of oil, which is 4.6 per cent of
the market value. Arts. 7047b and 7057a, V.C.S.; .
H. B. 285, Acts 52nd Leg., R.S. 1951, ch. 402, p.
695; Att’y Gen. Op. V-1246 (1951).
Yours very truly,
APPROVED: PRICE DANIEL
,- Attorney General
W; V. Geppert _,
Taxation Division
E.Jacobson
Reviewing Assistant Assistant
Charles D. Mathews
First Assistant
.,
FL:meh ’