Untitled Texas Attorney General Opinion

Honorable Bob Bullock Opinion No. JM-566
Comtitrollerof Public Account:s
L.B.J. State Office Buildin!: Be: Whether interest earned on
Austin, Texas 70774 the bingo tax, the bank franchise
tax, and the mixed beverage tax
collected by the state should be
remitted to the local jurisdiction
for which the taxes were collected
Dear Mr. Bullock:
In Attorney General Clpinion .JM-539 (19861, we concluded that
local taxing units are entitled to be credited with interest earned by
the deposit of tax monies ,:ollectedby the state on behalf of those
local taxing units pursuant to the Local Sales and Use Tax Act,
article 1066~. V.T.C.S.. and articles 1118x and 1118~. V.T.C.S., which
authorize the creation of cwtropolitan rapid transit authorities and
regional transportation awhorities, respectively. We so concluded
because they constituted trust funds. You now wish to know whether
interest earned by the depo:;itof tax monies collected pursuant to the
bingo tax, the bank franchl,setax, and the mixed beverage tax should
be similarly treated. We answer your question in the negative. We
conclude that interest earned from the deposit of those taxes should
be deposited in the general revenue fund.
The Bingo Enabling Act was passed pursuant to article III,
section 47. of the Texas {Constitutionand is set forth in article
179d. V.T.C.S. Section 3 OE the act authorizes a commissioners court
of a county that has voted to legalize bingo or in which a justice
precinct has voted to leg;llJze bingo and the governing body of a
municipality that has voted to legalize bingo to impose a two percent
gross receipts tax on the conduct of bingo games. Section 24 provides
that "[tlhe comptroller of public accounts shall perform all functions
incident to the administrat:.on
, collection, enforcement, and operation
of any tax imposed under this Act." Section 25 declares that "[a]
license required to file a tax return shall deliver the monthly return
with a remittance of the nc!t amount of the tax due to the office of
the comptroller of public accounts." Section 26(a) provides the
following:
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Honorable Bob Bullock - Page 2 (JM-566)
Sec. 26. (a) Each jurisdiction's share of all
gross receipts tacos collected under this Act by
the comptroller of public accounts shall be trans-
mitted to the treasurer or the officer of the
jurisdiction performing the functions of that
office by the comptroller of public accounts pay-
able to the jurisdiction periodically as promptly
as feasible. Trar.smittalsrequired under this Act
shall be made at least twice in each state fiscal
year. The funds EO transmitted may be used by the
jurisdiction for r.ny purpose for which the general
funds of the jurit,dictionmay be used.
Section 171.001 of the Tax Code imposes a franchise tax "on each
corporation that does business in this state or that is chartered or
authorized to do business in this state." Section 171.078 of the Tax
Code, which specifically exempted banking corporations from the
franchise tax, was repealed tsyActs 1984, 68th Leg..,2nd C.S., ch. 31,
art. 3, part B, §I, at 212. Article 3, part B, section 1. of the 1984
repealing act provides in pmt:
It is the intention of the legislature that by
repealing this section, which provides an exemp-
tion for state and federal banking corporations,
all banking corporations in this stats become
subject to and p,sy the franchise tax imposed by
Chapter 171, TaK Code, as provided by this
article.
Section 171.1031 of the Tax Code defines "gross receipts" of a banking
corporation as "interest and dividends received . . . from its
business done in this stat220 S.W. 260, 272 (Tex. Civ. App. - Austin 1920, writ ref'd). Con-
sequently, interest earned on a constitutional fund must be credited
to that fund, unless the constitution itself otherwise directs.
Attorney General Opinions .R4-323, .JM-321 (1985); M-468 (1969). The
interest on state funds dedicated by statute, however, may be legally
severed and placed in the general fund. See Gulf Insurance Co. v.
James, 185 S.W.2d 966 (Tel,.1945) (articl~III, section 7, of the
Texas Constitution applies only to special funds created by the
constitution. not bv statute): Attorney General Ouinions .JM-323,
JM-321 (1985j; MW-338 (1981:);..see also Brazos River Conservation h
Reclamation District v. McC.caw, 91 S.W.2d 665 (Tex. 1936) (article
VIII. section 7 does not ;G'ply to general revenue funds). Article
2543d (since repealed and m-codified as section 3.042(a), V.T.C.S.,
article 4393-l) effects such a severance of interest on statutory
funds as a general rule.
Section 3.042(a) of a!rticle 4393-1, V.T.C.S., the article that
sets forth the powers and duties of the state treasurer, provides the
following:
Interest received from time deposits of tconey in
funds and account3 in the charge of the treasurer
shall be allocated as follows: to each constitu-
tional fund there shall be credited the pro rata
portion of the it&rest received due the fund; the
remainder of thtr interest received, with the
exception of that portion required by other
statutes to be ccsdited on a pro rata basis to
,- protested tax payments, shall be credited to the
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Ronorable Bob Bullock - Pagl?.
6 (JM-566)
General Revenue Fund. The interest received shall
be allocated on-7 monthly basis. (Emphasis
added).
The funds about which you inquire are not constitutionally dedicated
funds; rather, they are statutory funds. Consequently, pursuant to
section 3.042(a), the interest on such funds would normally be
credited to the General Rmrenue Fund. However, if they are trust
funds, interest would be cmdited to principal.
” This office previously has determined that the provisions of what
is now section 3.042(a), mticle 4393-1, V.T.C.S., do not apply to
interest earned on trust funds that are not the property of the state
and that the state treasurer holds as trustee out of the state
treasury. Opinions issued by this office consistently have maintained
that interest on such trust funds becomes part of the principal. See
Attorney General Opinions JM-306, JM-300 (1985); Mu-82 (1979); H-1040
(1977); M-468 (1969). Cf. ,Attorney General Opinions MW-338 (1981);
E-1187 (1978). The issu= then, is whether the funds about which you
inquire are trust funds, a~ opposed to statutory funds. We conclude
that they are not trust funds.
The opinions cited abrre indicate that in order to be charac-
terized as trust funds, the funds in question should reflect, among
other things, (1) that they are administered by a trustee or trustees,
(2) that the funds neither are granted to the state in its sovereign
capacity nor collected for the general operation of state government,
and (3) that they are to bfs spent and invested for specific, limited
purposes and for the benefit of a specific group of individuals.
Being in the nature of a trust. such funds are entitled to retain the
proceeds from their investment. Attorney General Opinions MW-481
(1982); M-468 (1969). It is clear from a reading of the statutes
quoted above, that the funds about which you inquire do not manifest
sufficient trust fund characteristics. In no case are the funds to be
administered by a trustee or trustees or by any public officer "in
trust;" rather the statute)3are silent or specifically provide that
the fund "is created in th- state treasury." In each instance, the
relevant statutes provide that the funds are granted to the state in
its sovereign capacity by providing that they be placed "in the
general revenue fund." Alt:h.ough the funds are earmarked for general
purposes, they are not to be spent or invested for specific, limited
purposes or for the benefit of a specific group of individuals.
We conclude that the funds created by the collection of the bingo
tax, the bank franchise tax, and the mixed beverage tax are statutory
funds. Accordingly, we con'clude that taxing units on whose behalf
these taxes are collected are not entitled to be credited with
interest earned by the depofr!it
of these funds; article 4393-1, section
3.042(a), V.T.C.S.. requires that such interest be credited to the
General Revenue Fund.
p. 2519
Honorable Bob Bullock - Page 7 (m-566)
5UMMARY
Funds createi.by the collection of the bingo
tax, the bank franchise tax. and the mixed beverage
tax are statutory' funds. __ Taxing
.
units on whose
._.
behalf these taxeliare collected are not entitled
to be credited with interest earned by the deposit
of these funds; article 4393-1, section 3.042(a).
V.T.C.S., requirerithat such interest be credited
to the General Revenue Fund.
JIM MATTOX
Attorney General of Texas
JACK HIGHTOWER
First Assistant Attorney Ger.eral
MARY KELLER
Executive Assistant Attorney General
RICK GILPIN
Chairman, Opinion Committee
Prepared by Jim Moellinger
Assistant Attorney General
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