American Multi-Cinema, Inc.// Glenn Hegar, Comptroller of Public Accounts of the State of Texas And Ken Paxton, Attorney General of the State of Texas v. Glenn Hegar, Comptroller of Public Accounts of the State of Texas And Ken Paxton, Attorney General of the State of Texas// Cross-Appellee, American Multi-Cinema, Inc.
03-14-00397-CV
| Tex. App. | Jan 15, 2015Background
- AMC seeks refund of Texas franchise taxes for 2008–2009 based on COGS subtraction under Tax Code §171.1012; phase two trial addressed where production occurs and what costs qualify.
- Phase two court held for Comptroller based on deference to agency interpretation of production; AMC appeals phase two ruling.
- Evidence at trial (Huerta) shows AMC’s production occurs in the entire movie theatre auditorium, including the enhancement/improvement process.
- Stipulated facts in phase two limit disputed issues to the square footage used for production, but do not foreclose AMC’s broader production-space definition under §171.1012(a)(2).
- AMC argues production includes improvements to the sight and sound and thus occurs throughout the auditorium; Comptroller argues production is limited to the projector/screen area.
- AMC’s appeal requests reversal of phase two judgment and recognition that the entire auditorium (plus relevant spaces) is production space for COGS.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the phase two court properly applied Tax Code §171.1012 to AMC’s production space. | AMC contends production includes the entire auditorium due to §171.1012(a)(2) (improvement). | Comptroller argues production is limited to specific production equipment; agency interpretation should be deferred. | No; court erred in deferring to agency interpretation; production includes auditorium improvements. |
| Whether AMC’s sight and sound production is not ‘common knowledge’ and requires evidence. | AMC asserts Huerta's trial testimony establishes a technical production process not deducible as common knowledge. | Comptroller relies on general consumer experience as common knowledge. | Common knowledge does not govern production; evidence supports AMC’s production-space ruling. |
| Whether Tax Code §171.1012(a)(2) includes improvements to the film’s sight and sound in production. | Improvements to auditorium/sound/reviewed as part of production under the statute. | Improvements are not tied to production space; argued otherwise. | Yes; §171.1012(a)(2) includes improvements as production. |
| Whether stipulated facts about costs control the outcome or the case requires broader production-space analysis. | Stipulation sets disputed costs percentages but does not resolve production-space extent. | Stipulation governs calculation scope; broader production-space interpretation unnecessary. | Stipulation does not foreclose AMC’s broader production-space position. |
Key Cases Cited
- American Tobacco Co. v. Grinnell, 951 S.W.2d 420 (Tex. 1997) (common knowledge limits; need for evidence for non‑lay matters)
- TracFone Wireless, Inc. v. Comm’n on State Emergency Commn’cs, 397 S.W.3d 173 (Tex. 2013) (agency interpretations defer where statute applies; substantial issue of tax)
- Combs v. Roark Amusement & Vending, L.P., 422 S.W.3d 632 (Tex. 2013) (production/exclusion boundaries under Tax Code; statutory text controls)
- First Am. Title Ins. Co. v. Combs, 258 S.W.3d 627 (Tex. 2008) (deference to Comptroller in tax-calculation context; not applicable to production interpretation)