Untitled Texas Attorney General Opinion ( 2005 )

ATTORNEY GENERAL OF TEXAS
GREG ABBOTT
November 4,2005
The Honorable Troy Fraser Opinion No. GA-0373
Chair, Committee on Business and Commerce
Texas State Senate Re: Whether a school district that contracts with
Post Office Box 12068 a tax appraisal district to collect school district
Austin, Texas 787 1 l-2068 taxes may offer taxpayers an early payment
discount (RQ-0344-GA)
Dear Senator Fraser:
On behalf of the Board of Trustees of the Killeen Independent School District (“KISD”) and
its Superintendent of Schools, you ask whether a school district may offer its taxpayers an early
payment discount if, by interlocal agreement, a tax appraisal district collects the school district’s
taxes.’ KISD informs us that it “has contracted with the Bell County Tax Appraisal District for the
collection of property taxes from its taxpayers” and further states that it “offers discounts for the
payment of said taxes in accordance with Section 3 1.05 of the Tax Code.“2
Section 3 1.05 was amended by the 79th Legislature during the regular session. See Act of
May 29,2005,79th Leg., R.S., H.B. 2491, ch. 1126,§ 9,2005 Tex. Sess. Law Serv. 3719,372l (to
be codified at TEX. TAX CODE ANN. 9 3 1.05(a)). However, as we will discuss below, the
amendment provides for a transition period during which the prior law will continue to apply in
certain circumstances. Accordingly, we will review an independent school district’s authority to
offer a discount in general and its specific authority under section 3 1.05 both as it read prior to the
recent amendment and as it presently provides.
Article VIII, section 20 of the Texas Constitution authorizes the Legislature to establish
discounts for prompt payment of state and governmental or political subdivision ad valorem taxes.3
‘See Letter from Honorable Troy Fraser, Chair, Senate Committee on Business and Commerce, to Honorable
Greg Abbott, Texas Attorney General (May 6, 2005) (on file with Opinion Committee, also available at
http://www.oag.state.tx.us) [hereinafter Request Letter].
2Letter from JimHawkins, Ph.D., Superintendent of Schools, Killeenmdependent School District, to Honorable
Troy Fraser (May 5, 2005) (submitted as part of Request Letter, on file with Opinion Committee, also available at
http://www.oag.state.tx.us) [hereinafter KISD Letter].
3Article VIII, section 20 states:
that in order to encourage the prompt payment of taxes, the Legislature shall have
the power to provide that the taxpayer shall be allowed by the State and all
(continued...)
The Honorable Troy Fraser - Page 2 (GA-0373)
The constitution does not give local taxing units independent authority to grant a tax discount. See
City ofTaylor v. Taylor BeddingMfg. Co., 215 S.W.2d 215,217 (Tex. Civ. App.-Austin 1948, writ
refd) (holding that a city has no authority to extinguish ad valorem tax liabilities except as
authorized by TEX. CONST.art. VIII, 9 20 and enabling legislation). Accordingly, a taxing unit may
offer statutory discounts only as established by the legislature under article VIII, section 20. Id.
Pursuant to its constitutional authority, the Legislature has provided for early payment
discounts in section 3 1.05 of the Tax Code. See TEX. TAX CODEANN. § 3 1.05 (Vernon 2001). Until
its amendment during the regular session of the 79th Legislature, section 3 1.05 provided in pertinent
part:
(a) The governing body of a taxing unit that collects its own taxes
may adopt the discounts provided by Subsection (b) or Subsection (c)
of this section, or both, in the manner required by law for official
action by the body. The discounts, if adopted, apply to taxes for a
taxing unit for which the adopting taxing unit collects taxes if the
governing body of the other unit, in the manner required by law for
official action by the body, adopts the discounts or approves of their
application to its taxes by the collecting unit . . . .
(b) [stating the generally applicable discount]
(c) [stating the discount available for bills mailed after September 301
TEX TAX CODE ANN. 5 3 1.05 (Vernon 2001) (emphasis added) (amended 2005).4
In two opinions this office has determined that a governmental entity may offer its taxpayers
a discount only if authorized either by the first sentence in section 3 1.05(a), pertaining to taxing units
that collect their own taxes, or by the second sentence, pertaining to taxing units the taxes of which
are collected by another taxing unit. See Tex. Att’y Gen. Op. Nos. GA-0225 (2004) at 2-3, DM-171
(1992) at 3. In the most recent opinion, GA-0225, we considered whether a school district could
continue to offer its taxpayers an early payment discount if its taxes were collected by a county that
‘(. ..continued)
governmental and political subdivisions and taxing districts of the State a three per
cent (3%) discount on ad valorem taxes due the State or due any governmental or
political subdivision or taxing district of the State if such taxes are paid ninety (90)
days before the date when they would otherwise become delinquent; and the
taxpayer shall be allowed a two per cent (2%) discount on said taxes if paid sixty
(60) days before said taxes would become delinquent; and the taxpayer shall be
allowed a one per cent (1%) discount if said taxes are paid thirty (30) days before
they would otherwise become delinquent. The Legislature shall pass necessary laws
for the proper administration of this Section.
TEX. CONST. art. VIII, $ 20.
4Amended by Act of May 29,2005,79th Leg., R.S., H.B. 2491, ch. 1126,s 9,2005 Tex. Sess. Law Serv. 3719,
3721 (to be codified at TEX. TAX CODE ANN. 5 3 1.05(a)).
The Honorable Troy Fraser - Page 3 (GA-0373)
no longer offered its own discount for county taxes. See Tex. Att’y Gen. Op. No. GA-0225 (2004)
at I. The school district there suggested that in section 3 1.OS(a)‘s first sentence, the phrase “a taxing
unit that collects its own taxes” could be construed to mean a taxing unit authorized to collect its
own taxes, even if another entity does the actual collecting. Id. at 2. We concluded that the section’s
plain language would not support such a construction. Instead, we determined that the phrase “a
taxing unit that collects its own taxes” means a taxing unit that literally collects its own taxes. Id.
Accordingly, the section’s first sentence did not authorize a taxing unit to offer a discount if its taxes
were collected by another taxing unit. We also determined that the section’s second sentence would
not allow a taxing unit to offer a discount if its taxes were collected by another taxing unit that did
not offer the discount. Id. at 2-3.
KISD has asserted that the principles discussed in GA-0225 should not prevent it from
offering a discount, because the appraisal district that collects KISD’s taxes is not a “taxing unit.”
KISD Letter, supra note 2. A political unit is not a “taxing unit” for property tax purposes unless
it is “authorized to impose and is imposing ad valorem taxes on property.” TEX. TAX CODE ANN.
fj 1.04(12) (V emon 2001)? Tax appraisal districts are not authorized to impose an ad valorem tax.
Seegenerally TEX. TAXCODEANN. 85 6.01-. 14 (Vernon 20018~ Supp. 2004-05) (Tax Code chapter
6, subchapter A, governing tax appraisal districts). Therefore, a tax appraisal district is not a taxing
unit, and as KISD points out, the second sentence of section 3 1.05(a) does not apply to taxing units
whose taxes are collected by a tax appraisal district. See KISD Letter, supra note 2. But under
section 3 1.05(a) as it read prior to amendment during the regular session of the 79th Legislature, a
taxing unit without authority under subsection (a)‘s second sentence could offer a discount only if
it was a “taxing unit that collects its own taxes” under the subsection’s first sentence. TEX. TAX
CODE ANN. 8 3 1.05(a) (Vernon 2001). Before its recent amendment, section 31.05(a) did not
authorize an independent school district that did not collect its own taxes to offer an early payment
discount. Id.; cJ: also Tex. Att’y Gen. Op. No. DM-470 (1990) at 4-5 (when county taxes are
collected by another entity, the county tax collector is not actively engaged in tax collection).
The recent amendment to section 3 1.05 of the Tax Code eliminated the phrase that restricted
the authority to grant an early payment discount to a “taxing unit that collects its own taxes.” Act
of May 29,2005,79th Leg., R.S., H.B. 2491, ch. 1126’5 9,2005 Tex. Sess. Law Serv. 3719’3721
‘As the Tax Code defines the term:
(12) “Taxing unit” means a county, an incorporated city or town (including a
home-rule city), a school district, a special district or authority (including a junior
college district, a hospital district, a district created by or pursuant to the Water
Code, a mosquito control district, a fne prevention district, or a noxious weed
control district), or any other political unit of this state, whether created by or
pursuant to the constitution or a local, special, or general law, that is authorized to
impose and is imposing ad valorem taxes on property even if the governing body
of another political unit determines the tax rate for the unit or otherwise governs its
affairs.
TEX. TAX CODEANN. 5 1.04( 12) (Vernon 2001).
The Honorable Troy Fraser - Page 4 (GA-0373)
(to be codified at TEX. TAX CODEANN. 5 3 1.05(a)).’ Giving effect to that deletion, section 3 1.05(a)
must be construed as authorizing a taxing unit to offer an early payment discount regardless of
whether the taxing unit collects its own taxes. See Gateley v. Humphrey, 254 S.W.2d 98’10 1(1952)
(holding that the fact that significant words are omitted from the re-enactment or amendment of a
statute “imports a conclusive presumption that the Legislature intended to exclude the object
theretofore accomplished by the abandoned words”). If a noncollecting taxing unit adopts a
discount, however, section 3 1.05 of the Tax Code now authorizes a taxing unit that collects the
noncollecting taxing unit’s taxes to prepare and mail separate tax bills and charge an additional fee
for doing so. See Act of May 29,2005,79th Leg., R.S., H.B 249 1, ch. 1126, $ 9’2005 Tex. Sess.
Law Serv. 3719’3721 (to be codified at TEX. TAX CODE ANN. 9 31.05(a)).
The amendment’s general effective date is September 1, 2005. Id. 5 30 at 3733. The
amendment generally applies to a taxing unit’s adoption of a discount beginning with the 2005 tax
year, which began on January 1’2005. Id. $29(c) at 3732. However, for taxing units that mailed
bills for the 2005 tax year prior to September 1,2005, the amendment does not apply until the 2006
tax year; “and the law in effect when the bills were mailed applies to the 2005 tax year with respect
to that taxing unit.” Id. § 29(d) at 3732. Consequently, a taxing unit that does not collect its own
taxes and whose tax bills for the 2005 tax year were mailed prior to September 1’2005 may not offer
a section 3 1.05 discount for the 2005 tax year but may do so beginning with the 2006 tax year. On
the other hand, a taxing unit whose tax bills are mailed on or after September 1’2005 may offer such
a discount for the 2005 tax year and subsequent years. To the extent that they state that a taxing unit
that does not collect its own taxes may not offer a discount inconsistent with the discount offered
by that of the collecting unit, Attorney General Opinions GA-0225 (2004) and DM- 17 1 (1992) are
superseded in part by statute.
‘Section 9 of the amendment provides:
(a) The governing body of a taxing unit C1-^L may adopt the
discounts provided by Subsection (b) or Subsection (c) e, or both, in
the manner required by law for official action by the body. The discounts, if
adopted, apply only to that taxing unit’s taxes A
4. If a taxing unit
adopts both discounts under Subsections (b) and (c) e, the discounts
adopted under Subsection (b) apply unless the u&ma&&s tax billsfor the unit are
mailed after September 30, in which case only the discounts under Subsection (c)
apply. A taxing unit that collects taxes for another taxing unit that adopts the
discounts may prepare and mail separate tax bills on behalfof the adopting taxing
unit and may charge an additional fee for preparing and mailing the separate tax
bills andfor collecting the taxes imposed by the adopting taxing unit. If under an
intergovernmental contract a counp assessor-collector collects taxes for a taxing
unit that adopts the discounts, the county assessor-collector may terminate the
contract tf the county has adopted a discount policy that is different from the
discount policy adopted by the adopting taxing unit.
Act of May 29,2005,79th Leg., R.S., H.B. 249 1, ch. 1126, $9,2005 Tex. Sess. Law Serv. 37 19,372l (to be codified
at TEX. TAX CODE ANN. $ 3 1.05(a)) (deletions shown as stricken, additions in italics).
The Honorable Troy Fraser - Page 5 (GA-0373)
SUMMARY
Prior to its amendment, Tax Code section 3 1.05(a) did not
authorize an independent school district to adopt an early payment
discount when the school district did not collect its own taxes but
instead had contracted for the county appraisal district to collect
school district taxes. Under section 3 1.05(a), as amended during the
regular session of the 79th Legislature, an independent school district
may offer such a discount regardless of the entity that collects its
taxes; whether the discount applies to the 2005 tax year or the 2006
tax year depends on whether the district’s tax bills were mailed on or
after September 1, 2005.
Attorney General Opinions GA-0225 (2004) and DM-17 1
(1992) are superseded in part by statute.
BARRY R, MCBEE
First Assistant Attorney General
NANCY S. FULLER
Chair, Opinion Committee
William A. Hill
Assistant Attorney General, Opinion Committee