In Re Allcat Claims Service, L.P. and John Weakly
356 S.W.3d 455
| Tex. | 2011Background
- Bullock Amendment 1993 added Tex. Const. art. VIII, §24(a) requiring referendum approval for taxes on net incomes of natural persons, including partnership shares.
- Texas Tax Code amendments in 2006 added Chapter 171 and extended franchise tax to limited partnerships and certain unincorporated entities.
- Allcat Claims Service, L.P. paid franchise taxes for 2008–2009 under protest and seeks refunds for amounts allocable to natural-person partners.
- Allcat’s claims: (i) facial challenge to §24(a) as applied to partnership income; (ii) as-applied challenge to equal and uniform taxation; (iii) injunctive/declaratory relief and DJA-based attorney’s fees.
- Texas Supreme Court granted original, exclusive jurisdiction to hear constitutional challenges to the Act, but retained questions about jurisdiction over facial vs. as-applied challenges.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Act’s facial challenge falls within the Court’s jurisdiction. | Allcat seeks exclusive jurisdiction under §24(a). | Comptroller argues §24(a) is a valid limited grant; jurisdiction limited. | Jurisdiction admitted; facial challenge addressed. |
| Whether the franchise tax violates Bullock Amendment by taxing net partnership income. | Tax is on partners' net income; requires referendum. | Tax is on entity rather than partners; not facially violative. | Franchise tax is an entity tax, not a tax on partners’ net income. |
| Whether the tax violates equal and uniform taxation as applied to Allcat. | As-applied challenge to Comptroller’s application. | Tax uniformity defense; no class-based discrimination. | Court dismisses as-applied challenge for lack of jurisdiction. |
| Whether the Court has jurisdiction over Allcat’s as-applied challenge under §24(a) or Government Code §22.002(c). | Section 24(a) grants original jurisdiction; §22.002(c) supports mandamus. | Tax Code §112 limits mandamus; §24(a) does not confer as-applied mandamus authority. | Court lacks original jurisdiction over as-applied challenge. |
| Whether Allcat is entitled to attorney’s fees under DJA. | DJA contemplated attorney’s fees. | §112.108 bars mandamus and DJA-fees relief in tax suits. | No jurisdiction to award attorney’s fees. |
Key Cases Cited
- Love v. Wilcox, 28 S.W.2d 515 (Tex. 1930) (limits on original mandamus jurisdiction; legislature cannot confer beyond constitutional grant)
- Lane v. Ross, 249 S.W.2d 591 (Tex. 1952) (declaratory relief correlative to mandamus; limits on broad grants)
- In re Smith, 333 S.W.3d 582 (Tex. 2011) (mandamus authority against executive officers; jurisdictional questions)
- Corsicana Cotton Mills v. Sheppard, 123 Tex. 352, 71 S.W.2d 247 (Tex. 1934) (executive duty to enforce or withhold enforcement; exception for unconstitutional laws)
- LeCroy v. Hanlon, 713 S.W.2d 335 (Tex. 1986) (mandamus in constitutional challenges; limits on use as vehicle for merits)