Untitled Texas Attorney General Opinion ( 1988 )

June 7, 1988
Honorable Bob Bullock Opinion No. JM-916
Comptroller of Public Accounts
L.B.J. State Office Building Re: Authority of the comp-
Austin, Texas 78774 troller to contract with paid
informants for information
about revenue or property the
state may be legally entitled
to recover (RQ-1302)
Dear Mr. Bullock:
You have requested an opinion on questions arising
under article 4344g, V.T.C.S., which was adopted in 1987 by
House Bill No. 921 of the 70th Legislature. Acts 1987, 70th
Leg., ch. 874, at 2971. Article 4344g, V.T.C.S., authorizes
you to contract with any person to receive information about
claims for the recovery of revenue or property which the
state may be entitled to pursue, except for property subject
to escheat by the state. V.T.C.S. art. 4344g, 51(a). See
Prop. Code ch. 71-75. This enactment creates a financial
incentive to persons who may be able to aid the state in
recovering dormant accounts. Bill Analysis to H.B. No. 921,
70th Leg. (1987), on file in the Legislative Reference
Library.
You first ask whether this statute violates article
III, section 51, of the Texas Constitution, which provides
in part:
Sec. 51. The Legislature shall have no
power to make any grant or authorize the
making of any grant of public moneys to
any individual, association of indivi-
duals, municipal or other corporations
whatsoever. . . .
?
This provision prohibits giving away public funds: it does
not deny the legislature the use of state funds for state
purposes. State v. Citv of Dallas, 319 S.W.2d 767 (Tex.
Civ. App. - Austin 1958), aff'd 331 S.W.Zd 737 (Tex. 1960).
To comply with the requirements of article III, section 51,
any contract between a private individual and the state must
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Honorable Bob Bullock - Page 2 (JM-916)
?
serve a public purpose, adequate consideration must go to
the state, and there must be contractual provisions designed ?
to insure that the public purpose is carried out. See.
e.cr., Dodson v. Marshall, 118 S.W.2d 621 (Tex. Civ. App. -
Waco 1938, writ dism'd); Attorney General Opinion Nos.
H-1309, H-1260 (1978): H-912 (1976).
Article 4344g, V.T.C.S., provides as follows:
(a) The comptroller of public accounts
may contract with any person for the receipt
of information about any possible claim that
the state may be entitled to pursue for the
recovery of revenue or other property, except
that this Act shall in no way relate to or
affect property which is recoverable by the
state pursuant to Chapters 71-75, Property
Code.
(b) In any contract under Subsection (a)
of this section, the total consideration to
be paid by the state:
(1) shall be contingent on a recovery by
the state;
(2) may not exceed five percent of the
amount of the revenue or the value of the
other property that the state recovers as a
result of the pursuit of the claim about
which the contracting person provided in-
formation; and
(3) may be limited by agreement to not
exceed a specified, absolute dollar amount.
(c) Consideration may not be paid by the
state pursuant to a contract executed under
Subsection (a) of this section if at the time
the contract is executed or within three
months after the date of execution, and by
means other than disclosure under the con-
tract, a state employee has knowledge of the
claim disclosed under the contract or has
knowledge of a cause of action different
from that disclosed under the contract but
entitling the state to recover the same
revenue or other property. An affidavit by a
state employee claiming that knowledge under I
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Honorable Bob Bullock - Page 3 (JM-916)
those circumstances is prima facie evidence
of the knowledge and circumstances.
It is a public purpose of the state to locate and recover
revenue and other property to which it is entitled. See.
e.s., Tex. Const. art. III, §49a (comptroller's duty to
estimate anticipated revenue for state from all sources);
Gov't Code 5403.011(2) (comptroller's duty to adopt regula-
tions for collection of state revenues), 5403.055 (warrant
may not be issued to person indebted to the state): 5403.091
(transfer to general revenue fund of balance in dormant
fund): Property Code ch. 71-75 (provisions for escheat of
funds to state).
Article 4344g, V.T.C.S., authorizes the comptroller to
contract with a person to purchase information about claims
to revenue or other property which the state may have.
Properly authorized officers of the state may enter into
a contract for services to be performed for the state.
Fazekas v. Universitv of Houston, 565 S.W.2d 299 (Tex. Civ.
APP. - Houston [lst Dist.] 1978, writ ref'd n.r.e.), cert.
dismissed, 440 U.S. 952 (1979). This statute makes payment
of consideration contingent upon a recovery by the state and
limits it to 5% of the amount of revenue or value of
property that the state recovers. Thus, the state will
receive adequate consideration for any payment made.
Moreover, the state may not pay consideration pursuant
to an article 4344g contract where a state employee has
knowledge of the claim disclosed under the contract or other
knowledge entitling the state to recover. See V.T.C.S. art.
4344g(c). This provision prevents the state from com-
pensating a private individual for information which dupli-
cates information in the possession of the state at the time
the contract is signed or within three months thereafter.
Section 4344g(c), V.T.C.S., also effectively prevents
a state employee from entering into a contract with the
comptroller under subsection (a) of that statute. If a
state employee knows of a claim for revenue or property
which the state is entitled to pursue, the state may not pay
consideration under contract for information about that
claim. Some state employees have an express duty to
investigate and pursue claims on behalf of the state. See.
e.q., General Appropriations Act, Acts 1987, 70th Leg., 2d
C.S., ch. 78, art. I, rider 16, at 303 (collection of
delinquent judgments by attorney general); Educ. Code 552.39
(collection of money due on student loans). Subsection (c)
of article 4344g, V.T.C.S., thus insures that the state will
not pay extra compensation to a state employee for
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Honorable Bob Bullock - Page 4 (JM-916)
information he has received on behalf of the state in his
capacity as a state employee. & Tex. Const. art. III, 544
(legislature may not grant extra compensation to public
servant after public service shall have been performed);
V.T.C.S. art. 6252-9b, 58 (standards of conduct for state
officers and employees); Penal Code 539.03(a) (misuse of
official information).
We finally note that article 4344g, V.T.C.S., does not
establish a traditional reward program, under which the
government offers a reward to the general public, payable
upon performing a specific service, and an individual
accepts the offer by -performing. See. e.q., Broadnax v.
Ledbetter, 99 S.W. 1111 (Tex. 1907) (sheriff offered reward
for recapture of an escaped prisoner). Under such reward
programs, the contract is formed only when an individual
accepts the state's offer by performing the requested
service, and the courts have struggled with questions of
contract formation as well as the validity of rewards under
article III, section 51. See Blain v. Pacific Exvress Co.,
6 S.W. 679 (Tex. 1887) (individual who captured one of two
criminals not entitled to half of reward offered for capture
of both criminals); Weaver v. Scurry Countv 28 S.W. 836
(Tex. Civ. App. 1894, no writ) (statute authokizing payment
of bounties for destruction of wild animals analyzed
for compliance with article III, section 51, of the Texas
Constitution). Since article 4344g, V.T.C.S., contemplates
that you will receive information pursuant to a contract, we
need not address the questions raised by a reward program.
You next ask whether there is an appropriation from
which to pay for information received under an article 4344g
contract. Article VIII, section 6, of the Texas Constitu-
tion provides in part:
No money shall be drawn from the Treasury but
in pursuance of specific appropriations made
by law. . . .
No particular form of words is required to make a "specific
appropriation;" it is sufficient if the legislature
authorizes an expenditure and specifies the purpose for
which an appropriation is made. National Biscuit Co. v.
State, 135 S.W.Zd 687 (Tex. 1940). The appropriation for
the comptroller's office, like appropriations to other state
agencies, is itemized according to programs or functions of
the office. It does not identify each salaried position
or each contemplated expenditure; nor is such minute
detail necessary to comply with article VIII, section 6, of
the Texas Constitution. See S. & G. Construction Co. v.
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Honorable Bob Bullock - Page 5 (JM-916)
Bullock, 545 S.W.2d 953 (Tex. 1977) (appropriation from
Available University Fund for permanent improvements and new
construction may be used to pay judgment against University
of Texas for additional work under a construction contract);
Attorney General Opinion Nos. MW-251 (1980); H-1275 (1978);
H-944 (1977): H-289 (1974); WW-865 (1960) (construing terms
of appropriations).
Your current appropriation provides in part:
COMPTROLLER OF PUBLIC ACCOUNTS
STATE COMPTROLLER'S OFFICE
For the Years Ending
August 31, August 31,
1988 1989
1. Central Administration
a. Executive Administration
b. Budget and Internal Accounting
C. Revenue Estimating and Research
d. Legal Services
Total, Central Administration
2. Tax Administration:
a. Tax Policy and Taxpayer
Services
b. Tax information
C. Field Operations: Headquarters
d. Field Overations: Enforcement
e. Field Operations: In-State Audit
f. Field Operations: Out-of-State Audit
. . . .
Total, Tax Administration
3. Funds Management:
a. Fund Accounting
b. Claims
Total, Funds Management
4. Aircraft Operations
5. Cost of Cigarette Tax Stamps,
estimated
6. State Government Accounting Division
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Honorable Bob Bullock - Page 6 (JM-916)
7. Imvlementation of Bills Passed bv
the 70th Leaislature. Resular Session
GRAND TOTAL, COMPTROLLER OF
PUBLIC ACCOUNTS, STATE
COMPTROLLER'S OFFICE
(Emphasis added.)
Acts 1987, 70th Leg., 2d C.S., ch. 78, at 319 (amounts of
appropriation items omitted). Specific amounts are appro-
priated for each item and the purpose of each expenditure
is stated. We find no provision which bars the use of
appropriated funds to make payments for article 4344g,
V.T.C.S., contracts. See senerally, In the matter of D-
H 556 S.W.2d 628 (Tex. Civ. App. - Waco 1977, writ ref'd
n=L.) (rider barring use of appropriated funds to pay
judgment unless such payment was specifically authorized in
an item of appropriation). The fiscal note to House Bill
No. 921 states that the bill "would have negligible fiscal
implications to the State. . . .I1 Fiscal Note to H.B. No.
921, 70th Leg. (1987), on file at the Legislative Reference
Library. Thus, the legislature would be unlikely to devote
a separate line item to appropriations authorized by article
4344g, V.T.C.S. See oenerallv Mutchler v. Texas Devartment
of Public Safety 681 S.W.2d 282 (Tex. App. - Austin 1984,
no writ) (approp;iated funds could not be used for overtime
pay where program would cost over $4,000,000 per year and
legislature had consistently refused to fund it). Our
concern is whether there are line items in your appropria-
tion that could be used to fund article 4344g contracts
consistent with the legislature's intent in adopting items
of appropriation.
Item 7 is subject to a rider which states that it shall
be used to administer several specifically identified bills
adopted by the 70th session of the legislature. Acts 1987,
70th Leg., 2d C.S., ch. 78, rider 16, at 323. House Bill
No. 921 is not included in this list: therefore, we conclude
that the legislature did not intend item 7 to be a source of
payments for information received pursuant to article 4434g,
V.T.C.S. However, the acquisition of information leading to
the state's recovery of revenue or other property would
fall within the purpose of other items. The items of the
appropriations to your office reflect the functions and
programs of your office. If you reasonably determine that
the article 4344g, V.T.C.S., contracts should be handled
under a particular program activity of your office, then
the funds appropriated for that purpose may be spent to
implement article 4344g, V.T.C.S. You are in the best
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Honorable Bob Bullock - Page 7 (JM-916)
position to determine where this new statutory authority
fits into the overall structure of your agency, but we can
- suggest some items which could reasonably be used to pay for
information leading to the recovery of revenue or property
by the state. For example, funds appropriated as item d.
under "Tax Administrationl' to enforce tax collection laws
could be spent to acquire information about taxes owing the
state. See aenerallv Comptroller of Public Accounts, Budget
Estimates for Fiscal Years 1988 and 1989 (July 1986), at
135 (description of Tax Administration: Field Operations:
Enforcement). Items 2e. and 2f., for in-state and out-of-
state audit, might also be used to acquire information about
revenues and other property which the state may be entitled
to claim.
We do not overlook the possibility that your office has
already budgeted its appropriation so that no funds for
article 43449, V.T.C.S., contracts are available from any of
the appropriation items which might be used for that purpose
consistent with the legislature's intent in making the
appropriation. Article 4344g, V.T.C.S., authorizes you to
enter into contracts but does not require you to do so, and
you have discretion to allocate appropriated funds to other
authorized activities of your office rather than to this
one.
You finally ask whether your office would be authorized
to show the informant information otherwise deemed confiden-
tial under sections 111.006, 151.027 or 171.206 of the Tax
Code to demonstrate that he is not entitled to compensation
or is receiving the correct compensation for the information
he furnished.1
Title II of the Tax Code contains the laws on state
taxation, including chapters 111, 151, and 171. Chapter 111
of the Tax Code sets out the comptroller's powers and duties
in collecting taxes imposed by title II. Tax Code §111.001.
He has authority to adopt rules not in conflict with the
laws or constitution for the enforcement of the provisions
of title II and the collection of taxes and other re-
venues thereunder. Tax Code 5111.002(a). To carry out the
provisions of title II he may examine a taxpayer's books and
P
1. Sections 154.308 and 155.185 of the Tax Code, which
formerly provided for the confidentiality of information
relevant to tax or cigarettes, cigars, and tobacco products,
have been repealed. Acts 1985, 69th Leg., ch. 58, 544.
P
p. 4588
Honorable Bob Bullock - Page 8 (JM-916)
records. Tax Code 5§111.004: 111.0041; 111.0043. Section
111.006 of the Tax Code provides for the confidentiality of
information obtained by examining a taxpayer's records:
(a) The followins matter is confidential
and mav not be used vubliclv. opened to
public insvection. or disclosed excevt as
permitted under Subsection fb1 of this
section:
(1) a federal tax return or federal
tax return information required to have
been submitted to the comptroller with a
state tax return or report: and
(2) all information secured, derived,
or obtained by the comptroller or the
attorney general during the course of an
examination of the taxpayer's books,
records, papers, officers, or employees,
including an examination of the business
affairs, operations, source of income,
profits, losses, or expenditures of the
taxpayer.
(b) All information made confidential in
this title may not be subject to subpoena
directed to the comptroller or the attorney
general except in a judicial or adminis-
trative proceeding in which this state,
another state, or the federal government is a
party.
(c) The comptroller or the attorney
general may use information or records made
confidential by provisions of this title to
enforce any provisions of this title or may
authorize their use in a judicial or an
administrative proceeding in which this
state, another state, or the federal govern-
ment is a party. (Emphasis added.)
Tax Code 5111.006. See aenerallv Attorney General Opinion
H-661 (1975); H-223 (1974); Open Records Decision No. 300
(1981) (members of the public are not entitled to inspect
unde'r Open Records Act taxpayer records in comptroller's
custody which are protected by confidentiality provisions).
Section 111.006 of the Tax Code is a strict confiden-
tia lity prov ision. Subsection (c) of that section allows
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Honorable Bob Bullock - Page 9 (JM-916)
the comptroller or attorney general to use such information
to enforce the tax laws in title II or to authorize their
use in specified judicial or administrative proceedings. It
contains no language that would authorize the comptroller to
reveal confidential information to an informant with whom he
has contracted under article 4344g, V.T.C.S. Chapter 151 of
the Tax Code, which deals with the administration of sales,
excise, and use tax, and chapter 171, which pertains to
franchise tax liability, are subject to the confiden-
tiality provision of section 111.006 of the code and include
specific confidentiality provisions as well. Tax Code
§§151.027, 171.206. The comptroller may not disclose to an
informant under a section 4344g contract information deemed
confidential under sections 111.006, 151.027 or 171.206 of
the Tax Code.
SUMMARY
Article 43449, V.T.C.S., which authorizes
the comptroller to contract with informants to
pay them for information about revenue or
property the state may be entitled to recover,
does not violate article III, section 51, of
- the Texas Constitution. State employees are
not authorized to contract with the comp-
troller to provide such information in
exchange for consideration under an article
4344g, V.T.C.S., contract. Funds appropriated
to the comptroller's office may be used to
fund article 4344g, V.T.C.S., contracts,
even though the appropriation act does not
expressly state that such contracts may be
funded. Whether a particular line item may be
used to fund such contracts depends upon the
legislature's intent in adopting that line
item. The comptroller's office would not be
authorized to show an informant information
that is confidential under sections 111.006,
151.027, or 171.206 of the Tax Code.
JIM MATTOX
- ‘,
Attorney General of Texas
MARY KELLER
First Assistant Attorney General
P
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Honorable Bob Bullock - Page 10 (JM-916)
MU 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. 4591