Case Information
*1 .I [*] . . . . . . .
OFFICE OF THE ATTORNEY GENERAL OF TEXAS AUSTIN QROVERSELLERS ATTORNEY GENERAL
J
Hoaorcblo Geo. H. 3happnr.i
Con troller of Public kwounta Aus t in 11. Tmur
Deer Sir:
lie: The tbi8 orri0e
in part as roi- whio,h lerlao the Ctate reada in part et ValUO O? Oil, as that ercia, shall be the wtual Hereof, plw my bonus or ther things or value paid rhioh suoh 011 will romon- II produoed in eooordano* wd requlatlonr or.
*This 3epartmunt he8 reoently rewire3 a num- from bath purohoser mci the her or inquirtce produoer of oil au to vrbethar pro saed eubalby paymnts whiotl bdaofm er’feotive &u&am 1, will be t eubjaot to the tax levied by .?rtlole 7057~~.
mnorablc George W. Sheppard, 9qec 2
"This I8, therefore, to rcqucct your opinion a8 to whether or not the aubcldy payment whloh will bcoomc operative and effcotIvc on Auguet 1, I8 cubjcot to the State tax levied by Scotlon 2 0r mi0i0 7057b
r+ * *a Artlolc 7057e, Y. A. C. 9. we8 cneotod by the 431-d ‘Sm88Ion .oi the Tue8 LcgI8laturc In 1933 amended by the 431-d LcgI8laturc et It8 firat oellcd 8088ion in 1933 and again amended et the roguler 8c88Ion of 44th Lcglslaturc In 1935. Seotfon 2 of this Art1010 wa8 lert emended by Aot8 1941, 47th Lcglmleturo, page 269, Ch. 184, Art. 1, Sco. 1. Thla scotion of the erticlr Is oonoorncd chlcfly with the emount or the tax to bo oollcotcd and the method wh%oh suoh amount Is to bc nca8urmd. A art br SeOtIon 2, Artlolc 7057e, V. A. C. s. I8 88t out a8 r0 1~8: P *co. 2., (1) Thcrc I8 hcroby levied en oo-
oupetion tax on oil produood within thlr Btate d tour en4 one huadnd twenty-ilvc thousendths (4.l25) oont8 per barrel of rortp-two (42) rtenderd gellonc. 8e+d tar shell be oomputcd upon the total barrel8 or 011 produocd or cetvegcd from the earth or waters or this State rlthout any dcduotion8 urd shall be be8cd upon tenk table8 ohowing one hundred (100) par ocnt or ptioduotion end cxeot acarurcmcntc or oontont8. Provided, however, thet the oooupetion tex.hcrcIn lcvlrd on 011 shall be four end one hundred twenty-fIVc thoulrendths (4.125) per oat or the narkmt value or said 011 whenever market value thercoi 18 In cxocc8 or One Dollar ($1) pmr barrel or rortptro (42) 8tenderd gallonm. The naflcot value of oil, am that term I8 uccb heroIn, ahell be the eotuel merkct value thcrcoi, pins any bonus prcmlumm or other things oi valqc pald thcrcior or whloh ewh 011 will reasonably bring It produocd In eooordenoc with the laW8, rules, end rcgulation8 of the State oi Texas.
"(2) The tax hereby levied shall liebll- fty of the groduocr oroll end it 8hall bethc duty of such produocr to keep aoouretc xcoords of all 011 produocd, making monthly reports under oath a8 hcrcfnaftcr provided.
"(3) The purohescr or oil shall pay the tax on all 011 puroharrcd end dcduot tax so paid from pay- ment due groduocr other Iatcrcst holdcr, making
703 Honorable Ocorgc ii. Shcpperb, Pago 3
SUOh payments SO dcduotcd to the ~Oln9tro11.r Of Pub110 Aooounts by legal tcndcr or oachfcr~s ohcok payable to the State Trcasurcr. Provibcd, that if oil produocd i8 not 801% during the month in which produoed, then said produocr shall pay the tax at the cam rate an4 in Bhc am&nor a6 Ii said oil were Sold.
A8 the rirst step in enswmrlng your quc8tIon It Is ncoc88eryto esocrtaln the intention or the Logiclaturc. ThiS the Lc((I8leturc hem nude easy ror u8 brthc rlmpllolty en6 olerlty or~thc la $6 it hec used In dcflnlng the tam *market telu6 of o 1". Thfm 4cfinftiOn a8 qWtC4 in tO6U lct- "f"
tom
"The market V~UC of 011, em that t.?m i8 wad herein, rhell be the eotuel merkmt vehc pluc eaybonw or prcrtuas or other
the-or, thlngc or veluc~pcid thcrcfor or &oh swh will reasonably bring, Ii producc4 In eooor4enoc with the lews, ruler end regulation8 or the Stat0 or TC~~S.*
would soufo bc es olcer a8 logieletivc lurguego oould tie it& It stetcs In ruch a mennor es to have a0 rwm ror doubt that the aurket prloe of the 011, rtenderd b;l which the amount of the tax 18 to be celoulatcd,rhould Include eny bontm or prtimn or other thin8 of value which the pzv4uotIon of the oil brings Into the hand8 Or the pro4uocr thcrcor. We bclIcve that lt 8ey 'be raid with essuraooc that It we8 the fateuntlon Or LcgIsleturc that rush a bonus or promfum or 8ub8ldy as that now being pald to produocr8 of oil from stripper wclla in the Stetm ot Tcxes ~shotid bc Inoluded in market prloo ior purpos,c or oaloulatlng the exaount 0r the tax.
The publiolty rclcemc from the Offioc of .micC Admfa- Irtretlon rclce8cd by the Oftlo. of W&8 InfoFmetfon on Thursday, July 13, 1944, whloh you attached to your opinion rCqUCSt, in dC8OrfbiXIg plans by whloh thcac SU~SfdfcS were be paid end distributed XCfCrS to the 91en a6 *this promfur peymcnt glen*. In anothbr paragraph of the Seid rchasc, in 8pcekfng of the anount to be paid under the plan, they WC oellcd prcmim payxacnt8n. Nowhere In auoh rclcesc ir the word W8ub8fdyW wed, but It Is obvIou8 that the plan thcrc outllncd 18 e plan to 9ey e cubaldy, bOllUS, or bounty to enoourepJc the produotlon Or 011 from mInimum produotlon stripper rcl18. That pert or the rtlolc quoted In your letter and hcrcInebovc, defining *merkct *4 lioiorable George H. Shoppud, page 4 USM both tha words Lbonu*W and *prsmlumm a*
prloo or oil”, ltenb to be inoludad in the market prloe of 011. In thi8 oon- neotlon, however, it in proper to oon*lder the word "mubaidy", the logal definition of whloh 18:
“A @'ant Of funds or propUt+ rXY#m a gorUn- nent a* of the state or munlolpal oorporatlon to a private pemon or 0~ to a8818t in the en- deomd tebliehwnt 8uppoa-t 01 en ezttuQrl88
*drentyoow to the publloj l 8ubventIon". 60
Corpus Yurla 976,
*a rynony~auu with the words "born@ and “pnmlum”.
The 8mend.d l ot am mot out above l mglop two b-a* by whloh th* smoant oi the tu to be paid I8 bo aaloulated. The fir&t ba8Im mentioned In thr 8ot I8 "by the barrel", 8ad tha l ot prooldas that thr 8um a? 4.125 rot8 pr rt8nAarA barrel oi 011 produsnd *hall be p8IA to.tio Stat. of hxu by the proAumr, and tho8. hatlry en intuest in wih,~mduotIon for l eoh and tii oil pro0~0rd 80 lonig a8 urket priom of eterp barrel *hall be and remain 1088 than 41.00 &mr $taadard b-01. The 8ooond bauI8 pmfided by thr act u8r# thr market prloe of oil a* the 8tandard ror~mea*arument and repulses that ~125 per oat of the market prloe ot the 01). 8haU br paid to the @iate Tsu8 as an oooupatlop tu by the prodwu of 8uoh oil, 8nd thwe lntueatod in 8uoh JiMduotionI whm the mark& prioa got 011 *hall xoooA~~$l&O psr Lt8ndud bsrrml.
Where the~rlr8t of theno bamar sly be employed, It I8 obvlow t&t the payaeat oy non-pqmeat of a sub8Idy oan hare no citeot bn the amount of the tu to bo paid to thm &tat* of Texa* . So long a* the mark& rlos of thr 01 lnoludlag the subrIdIa8 doer not rlw *bore P 1.00 per Nandud b-01 the amount or the tu to bo paid rem&m oonrtaat with or~rithout the'payment of 8ubsIdg or premium. It 18 only *hem the nrket prloe of the 011 roeeda ona dollar per barrel, or whom b?oaurr of the payment of the aubrldy the market ptlom ir o*\u*d to risa above one dollar per barrel that it booome8 neoe***ry to oonslder nmrket prloo of the oil in order arrive at the amsuit of tax to be paid. When the market prloe ot thm 011 I8 pDre th @f one dollar, the leglrl*tfve rormula reqtirlng th* tu to bo Ci325 per ,o*at of the market prloa of the 011 is used, and sutih fotiu3.a ahould be applied to the whole marJmt prior Inoludlag the pramIum8 or 8ubsIdle8 if any.
It vrould be Inoorreot to oonelude, however, that tha tax baaed on eueh a rormula aotually a tax on the sub8ldy Itllslf, Honorable Qeo. 5. Sheppard, p. 5
proAwus oi 011 in Tua8 wbleb la l lied alike to all aa- gagd io the bu8I8orr ot puoInf oif in 8oooraenoe with a M emtie formnl8 whir B&W ho 8muaf; of th. tax VW in dlroot ratio wltb tha urket prlocr af tha oil n~rdlesm or whloh prodwers or what produou moeives l wh prloe, The la oonstaat and th8 SMS for eaoh pmduoor, peroent8go to-8 whZle Oha mullet prloo for oil WA Aifianat lemmntr go- i8g to Mks up that mukrt prioe w ohango ttcm dy to day, from math to msmth, 8aA, in lib this where 8 dltier-
The view here oxpresead find8 by 8a8low ruoh support djubloated deoIrloas both la state end tedornl j&iris- dlot on, a rbw at wbloh are sltul heralmiter. Tbur we are -7 brofi@& to ee88Ider rhstbcr or not the State Of Texas In o~lleat- iog~thlr tax uy be mm14 up00 uar ouaA* tok‘IarrInglug upon st8tutory or oonatltut f on8l,problbItloa or llmlba- m~,nfedor@l . But first let us dIgres8 for a mommnt to exemla0 ' briefly natrue this tom& of taxation. The kgI8lrture in ezlaotlpcl it oalled it 8n oooupation tax. A ?* fluagbny, 159 s.'R. (2aF”!6::%.%ir Civil Appeals in State vs. T e Supraw Court Taxas in it an oooupatlon tax.
2tatc va. Bumble Oil Ilt HerImIag company, 169 S.W. (26) 707, whlla not stating 8poolfIoall~ what kind of tax that oourt Asomod It to be, reforrbd to as a "@o@@ prodwtiion tax", repeatedly it and, lndsed, tha beglrlatura lteslf la Article 6Gj2, V. A. C. 9. rsoelpts produotion tax mentioned the (rot 88 th* * r88eint yeas on crud. petrolma". It a ould ha noted, howMm)I, that Artlole E 6032 wos enaottd tht Leglrlaturw rlor tha amen4manb of P ;,rtlole 7357r whfoh gave to the aot ts present form. *bile the Suprem Comt of the Ynltad :jtatos 1~ Beklse, et al TO* ' .';bsPmrd, 299 U.S. 33, in holding this aOt to be @Q=titutg‘=al,
II- ~‘~.I!onorsble 2:". ?i. Shappard, p. 6
referred in different part8 of its opinion to the tax as "an oo- oupatlon tax", a *gross prodwtlon taxw, and an *exslse tax”.
By whatever nams the tax msy bssalled, it Is aotually, in terms of aomm~n ualerstmdng, ati by ths weight Of suthorlty, a tax on oooupation of produoing 011, a tu plaotd upon the business or the privilege of severing iroin the ground s nstural resourss of the Stat. of Texss.
hn sxhsustlve searoh tor prcsedant-8 bsaring upon ths au- thority of a state to oollsot tax. psrt of the measurement of whioh la a federal mtibsldy slmllar to the one under disousslon, unoorered no oaoes directly In point. The season fer this seas be that the question is so nsvel that It has not besa pn- asntsd to wy oourt in the iom found here. %‘hs neared psrallrl to rush a subsidy la round in an aot pasaed ,by the UaJtsd States Congrsss on Octobsr 1, 18$fO, whioh prorid. that thbM'~Lhould bs pa14 to the greduoer or sugar, or a oertain grade ?rsm osrtaln probeta within the United States a bounty o? 2# per psriaff. rbs question whathar thaes bounty provisions were oonstltut$om~~~as in Buprene Court in Field vs. Clark, 111.,12,8. CL 495, raised lL,3 U.S. 649, 36 L. Ed. 294. The Suprsu Court refuss$.to mle upoa the oonstltutlonallty or the88 bsuntles, and the kc?t wa& re- pealed by Congress two yearn later. Soms state sourts, hOwevar, have held sI*JL+r sugar bouatlss to be uneonstitutimal under state oonstltuti~ &s takiw pub110 money tor a private use. This is not ths proper plase to rsise s question as to the osnstltutionslit~ of subsidy payments here belog oonsidered. It, hwever, they should held be u.noonstltutlO~sl, they vsuld then be taxable by ths state upon the authority or the Suprsme Court of Uississippf rhloh he14 In Chapman vs. State, 179 Yiss. 507, 176 80.~391 8hst payments wee te a isrmer under the afterwards-held-usoast~tutlo~al Agrlo*ultural Adjustment hat were propsr obdeots for taxation bye a b!ls~lssippl laooms tu law.
tiy olslni statutory axemptlon rrom taxation of th, premium payments would be foundad on the authority of the Act o?
January 22, 1932, Ch. 8, Sec. 10, 47 Stat. 9 as amendsd Aot or June 10, 1941. Ch. 190, 55 Stat. 2k8, dealing with exemption 0r property 0r iieooastruotion Plnsnoe Ootporstion tram taxation.
The lpost psrtlnent provlaions or the Ast are quoted!
*The oorporation. . . shall be exempt from all taxation now or hsreartsr lmposs4 by the Uaited States . I . or by any state, county, muaioipality, or loaal, texlng authority. . . .
I
I?onomble Ceo. H. Sheppasd. p. 7
+hi ars&lons provided for in the prsosdln(l stnteaoe with respect to tustfoll shall b8 sonstrurd to be ayp2losble. . . . with reamat to. . . the 3efense Supplies Corporstloa. . . .*
In oases wh en l lallsr hate been mdo, both the
sldlss COW of lut r08o&t ha+. M rate4 ug~8~8r m analogous prsmiums or rulsl4les a the hsa4s of the *rpyer es-
180. vs. Qorr. 0r xaa. IhsalIs 124 msfl oantnrt fn rillrtn df l WI& vs. Ooum. of ht. Bnamm, 135 F. ?ed*nl ~**mstim~ Oaaor Boll Conser- ration aad Zkwmotlo A~letasmt Aot)t Taxas and. %eiti@ Ry. 00. Ts. United Btateo 2sS U.S. 265 (amstint paid rallrsad Yedeml Goremment m4er Sestloa 209 of the Traasportatioa Aot ot 1920). These oases l r, 8ald Lo no0 ia o&Liot wlDh,but frem ooatrrrf oasluqloa dlstlagulrhsbls ia .Muav& vs. CPbs Rallrwd Gompany 268 U.S. 626. mo lbs oi ~~tiMtloa is tin.- ly dnm and ir bassd upon the dofinlt~ion 0f'~tioe11*. 80 fOd4rti sub&Alu gZz,~~tWg8~~~~ sage Si8ilSx
Oorenuuat of not tar, ukdsr prwiriena federal uaotmnt xorld War. 8r 8pHSfiO these. ~~:lzI' the stated by Coognus to ba urspt Wan tus%lti. SUQMM Court of Xorth Ouollna in Hwtln ts. Wllt'or4 Cow&, et al, 158 S.E. 667, uad Ln Lsabsrt ts. Gtillord Uountf, 156 8.L 849, held that suoh ubmptioa did not sstead to psMesds ot sat& moneys in ths hasds of retsxaas .wbd that whan Ohs Rose ha6 been paid ana the iatiti bad acquired full an4 wimstri0 F d tit10 snd lnrestsd in ansth*r pnwsrbr, that Prop- and oontrol them? erty was terable by'the county 03 state. Theso oasu bid not resoh a federal sourt.
In like manner prosee4s CM war rlsk lnsurB~~e~~yR~4eral sxempted Woe taxntlcm enaotaeat at0 8paridy r;ohaafru 130 nlao. b36, N.P. Sum. 305, 55 A-I..& 613 it WWJ
heI4 that prorisioas said aot rolatlng to sxswtion from i
-. ii. Sheppard, 2. 8
Honorable Sea. taxation af' Insurenor, payable thereunder, do not exempt the amount paid to the aatata of the insured from the State Trsnafer Tax, but the axenptlon applies only while euoh moneys are In the handa of the Nted Ctetea, and does not extend to oover suoh moneys atter they have actually been paid to the baneflolary. It ua8 further held that cren If the exsmptlon applied to the prooecds of lnsur- anoe In the hand8 of the beneflolary, it would hot exsmpt suoh pprooueda from the transfer tax. The prorIrIon exettiptlng progarty from taxation ?id not exempts tranarer thereof, upon the death of theoumg, drool the suooearlon or traaafer tax, the exemption applying to taxation of the property it8elf. end not th e l xolss or prIrIls&e taxes lapo8ed upon the transrer thsreoi.
If the first purchasers or the oil u.Bder pnliur ptIyLfi6nt plan, in ps~ying theme aubsldlos t0 the prod~@sr for whloh they am ln turn oompensated for the prem.lum psyasntr by Detsn8s Gupplie8 Corporation, 811 agenoy of the Feberal @otornment, wsre oonelbsrad thereby to b8oome oontraotors with the Frdsr81 Oovun- merit, they would BOt, oooord~ to the ro8t reoont ruling by ths Supmae Court of United. Stete8, broaurr Of suoh relstionshlp, rreed 130~ the ertsot of thls r0m of taxation. The tax 18 not laid on ths purshsser. It la on ths produoer. Ir ho b\y8, puFOha8er 18 raqu!red to pay tho:purohass prioe SVSB ~thougb suoh payment 8kIght result In sn Inore88e in the ooat 0r earrylllg out hi8 tsderal oontraot.
The United State8 Supreae Court ONJOS upouodl~ thlm prlnofple hare an lntere8tlu history. In 1928 in P8ahaDdlo 011 Qompanp vs. Y188188lpp1, 277 U.S. 218, th8 Qourt in s M Orlty oplnlon written Mr. Ju8tioe Butler h8lb that ths Yi88 saippi 3.
Oooupatlon Tax on the sale or gasoline measumd by the number oi gallons 8old oould not be oolleoted iron a aontraotor *ho rw- the UnIted States GOa8t DUard md to a #oteraB8* nished gasoline Hospital because such tax tight plaoe a burden upon a redersl lnatruamtality by inoreasing the oost Of the Qontnot. In thI8 e+se tlie Court found itself 8harply ditlded $ to b. Hr. Justloe Holmes wrote one of his great di8mnting OpInIons In m&oh he ra8 joined by Er. Jwtloe BraIidei8 and Mr. Sustioe Stemi Mr. Justioe XoRsynolda tiled a 8eparata dI88sntIng opinion. Beoause the rIew8 expreaaad by Lr. Justice Holmes later beoame thoee of the Court, we quote hers a pert of al8 dl88entIng oplnlonr
*It 8eerzs to me that Lhe state oourt wei8 right. I should aay plainly right, but for efteot oar- taln dlota or Chief JuFtloe Zarrhall which oulmfaated In cr ratLc~:r were, rounded upon hi8 oft-quoted prop- oeltlun th,:~t tha ;)ower to tsx 18 the power to deS- troy. . . “he i.‘Crr;Gr t::: t<.X fS AOt tbF power tG df3S- troy wLlls ttle ootrt 8It.s. . . dhOA the gorerfm#nt OCUhGs into a state to purohase, i do not yeroelre why it should entltlcd to etanddlfforentlp fm8 any othr r pumbasrr. It eVai it8eit of the arPohlnery rUrBiBhed by &ate, md I 60 not 8be why it should not OOBtribUttr in the mm8.0 OQortlOA that 6Y* other
AMha88r oontrlbuter for t e prltllege8 that1 u6e8. r z t ha8 no better or other right um thu P than any one l l8s. The ooaa 0r KQaiBtaiAiB# the sate that make8 the bU8iA.88 possibh f8 $l8t 8s nsor88uy aB el.ement in the 008t 0r produotlon a8 labor or 0081. 1 am BOt SW N that the hW8id8nt, She aeabera of the Ju4 la iary or, to OOY nearer ,$o the
~O&SSS, OaI* la hand, the Cosst Guard or OttiOhl8 6r th. VeteranI* Xoospltal, beOAU8A they r* Inatrtrrr8ntalItls8 0r goremann aml oarnot funotion nahd ana unfed, hitherto have beon beld eAtitle6 to hare b&l18 for icw6 anO O~othlA& out a0m 80 .t8r as their butohers aad tafior8 hare beon t8x.d on their 8ale8; sad 1 hare Aot 8~ poeed that the butoh8rs and tailors oould omit tram the 1 r tax returns all rcmelpta from the large ola88 eu8towra to *blob I have roterred. . . .*
OA Roteaber 10, 19bl la Al8bum ~8. Kiaq sad Booaar, )U U.S. 1, 61 3. Ct. 63 hited Btate8 Suprou Court la a UB8A~iSQUS OpiBiOA 8pSSitiOslly OVOWllhd ~SBhUdlO V8. fiS81881pp1, 8Up-, and amtber 0a8. ba8.d UPOA it8 authority ad h&l, (1) "The oon#titutioaat ivuplty of the Utitecl
State8 ima etete tuu6lon 18 not inrrlaaea br tha xaotlcn a S81e8 tax, with rhI8h tb4 seller I8 ohargeable but whloh h8 18 luQulred to OOlhOt irOr [8] buyu, la re8peot to iuiterhl8 pUrohrre6 by a OOB- traotor with thr kited Stat&a 011 Oost-plU8 ball8 for ume in oekryliq out hi8 oontraot, AOtWlthlrtand- the eoonomlo burden of the tax 18 borne br
ted States and AotwithstaAdlAg thht under the oOIi- traot,, title buoh aatsrlals paseed to that United States on ahlpment the railer . . . aAd “I%8 COA8titUtiOA Of unit@6 Stat88 Uo- (2)
aided Py oongres8fonal lel&1816tiOnv dOa8 ~3% prohibit n0ndIrorlmlaetory rtate texatioa 0r oontr*otor8 with tba United States merely baoaus8 bht burden I8 PuoS@I on eoononrloally , by the tc;n;ur or ths oontraot or *10 Ecnorable 000. Ii. Sheppard, p. 20
~thbwiae, aa part of ths oonatruatlon oost to the fgorernment .”
~,uoting from the opmon or court: partloipants In the prcreent tranaaotton en- the COII- tax immudtp as 18 affordwl 507 t&*a~oh 8titution itsar. . 50 far as suoh a aon4laorlmlnator~ state tax u 0 the oontraotor antera into ooat or the mater18 p” a the ~overment, that la but a normal laoldent of the organisatlon within the saao tcrrltory of two independent taring l ovarelgrrtiea the aasort- b U&other ad right OS the ona to bo irae of tautlon do.6 not SpSll impliurity rrOR pyin& the add A ths taxation of those rho first a$ ttributabla ply to the gowrnment and *ho hete bean grant&d no So far as e differsat rlw has pra- t6s iRRun1ty. railed see Panhandle 011 Conpaw va. Ylsalaaippl aad ;;:~.a vs. Toxaa Cola ny we think l,t no lo va Nltahell z69?% Saa Uatoalt an&d&y ‘E; Trlkty Ymfa Conatruotlon a0rr.w VS. ur~ajatG i91 U.S. 466$ James *a. wave Con raotla6 Comp8ay U.S. P 13L; Eialrerlng vs. Gerhedt 3Ok U.S. 605; Wares vs.
N. Y. 306 U.S. 466.”
Closely alogous to this tw upon tha bualnasa of pro- duolng.oil ln Tsxea are franohlae taxes qacted by almost orsly in Union from domeatio and forSi@ aor oratlona ror state prlrllaga o? doing businaaa uithln thalr reapaot ta jurladlatlona. P :‘.uoh l’ranohlea taxes arb PII a rule baaed upon a just as the tex hare un&r dlaouaalon mule la mule. &any of the formulas employed include
of maoauroment upon whloh the tax 18 baaed, lnooma from federal oontraota, funds vhlch lro raoaived fro@ tadcrral agenoi~a or fed- era1 lnatrumentalltlea eeralnga fros foderol oop@gbtr 0;~gapi8, end intersat on l’aderai tax-orea t bonds or obllgat:ona. long line of Suprame Court de0 alona upholding there various P
forraa of taxation and holding that suoh nondiaorlminstory taxation plana whlah may include any or all. al the above-enumerated ,faderal sour008 of lnoome rlthln their taxebls base Jo not pleor any pro- h:bited purdan upon the lredernl Governumnt and do not rlolste any actual cr Implied prorlalon of Federal ConaLltution.
z~uoational lllms Corporation msrarloa vs. ‘#ard, 282 U.S. 379 was a oaae involving a franohlar tax, one of tha types hatilnabove referred to, and In UoioJ32ng It the Court 1814 down
73.1 n:,nortibla Gso. H. :ihs;::pard, P. 11
the f~llcwlng rubs:
1. ..rr.-,umln thct tedersl prop* rty rights and lnccms tiJererrbm are lnmunc f roa ttatc thxstlon (LS Ii~otrum,cntt~litit-s ot the Xc&era1 5overnment the tex here, insofar ee mesrurad by
t royeltles la not void a8 6 tiix on :~~~~~~r~~t~~c.~~~Gt~a.
2. The etato power to ter oorporlrte rranehlaea and the Immunity or federal Inatrumentalitlss rrom tnxetfon, should &lren such S praotioal cunatruction au will not unduly restrict tho tex, or the axerolse of the ower of th6 orernment oaln the unctions of f P he governmen B '9, whlo may be alfeottd by It.
3. There la a logloal end preotioal dlStlnotlon between tht; tax luid dlreotly upon all of a olaea oi govbrnment lnstrumsn- tallties whioh the Constitution lmpliedly torblds knd S tax Suoh 68 the prmont, whloh oen In no ouoe ,hSve any lnofdenoo unless the taxpayer enjoys S pririlego whioh is a yruyor objoot or tnxetion . . . .
In arriving at the oonoluaion sot out next &ova Court wrote as follows:
wise rar es lt aonoorne the power of e atata to impose e tar on oo gr;~;efFaaohiaan the problsnr Xblle thin Court Slnoe ha long oeesed 'g to li.cCullooh vs. &a land, r( &ret 316 has conalatent- ly held that the 7: nStr~ntSlltfS8 0P either got- ernment or tho Income derived from thara ms not bo maJe the dlreot obJeot of tarntlon by the o her, f . . . it hes held with liice oonalaknoy thet t,ha prlvilaga 0r oxaroialng tbs oorporate rranohlsa is no leaa en approprla,te objeot of teratlon by one government merely beoailse the oorporate property m net 1noomS whiah 1s madr measure of the t&x, mey ohsnoe to include the obllgetioaa ot other or the inooaa- ~larived from thain. Tha oonatltutlonel ower of ona government to rsaoh thia potieaible eat. ot tnx- &Ion ney not be ourtelled beoause of t e 1nJlreot effect whioh ,thtj tax may hmo upon the other.
"Tire precise question nov presented wae doff- tmawercd in FlIAt YS. Stons-Treoy Coapa4, 220 nitely x.3. 107, hiOh Uc,helb #A fddrr8l ti%X, bVi6Pd Wn a oorpcrate frSnohlaa granted by a ntuto, but mo~aured ths entire oorporate lnoona :noludlnti. In that o&se lncorae from tax-exe&,pt munlolpal bcn4&. Ia restohia6 *12 Iionorzble Geo. Ii. Lihep;mrd, p. 12
th;e oonclusion, the Court reafflrvad the dlstlnotlw, roptietedly aede In earlier dsolaloAs, between 6 tsx*, invalid beoa4ee laid Ilretatlz on governmental lnetru- ~mcntelltics orJhaoare Ierlved from it, and an axalas wblah 1s ralld beoause 1mpo.e.d oa corporate fs%nahls.s, even though the corporato pm&w%y or lnooa~t whiab LB tire F M~SUTS of th e. te x l abrraaas tax-erampt ssaurltise or th*:lr lnoome. Sea Soolety for Savln~a v.. Colt., 3.11. 596; J3-ovldsat Xnetltutlon v&i. Ymse., 6 311. 611; Hamlltoa Co. vs. Mdn6, 6 %a11 632. "Upun a Ilk. rlnoiple otbcr forma of srolee
tax hev. been uph. d, nltbwgb the statutory me&sure E of thr? tex lncludee seourltlea aonatItutlonal1.y lmaune from any form of 3lreat tazution. & 6t.W inbacltsnae or a legaoy tax la valll, altheugh ineosured b the value ol' Unltsd Stetes bode whleh ere traa llmir tted. rlumor vs. Colts, 178 U.6. 11 By parity of rba- rronlag 8n lnh.rit.aao tax say . levied . state 8. on P bequ et to Unitbd Steter U.S. ~8. Pmrlcins 163 U.S. 825 and by the United St&es on . bequest to e munlalpallty. Snyder v.. Bettam, 190 U.S. 249. ~lmll.rly, state laws taring to etoakboldar. at full value stock in net~onal baab, am upheld although the banka own tar-except United St&tar: bonds. Van Ellen vs. 4.s~ee8om, 3 :sall 573; 1’60. vs. commlsslonera, l4 xau. 244. the line *h&oh della. mThle Court, in drawl limits the powers an iaauniti%s of Or state and national ia not intent upoa P me- the ml. th.t gov.Wnt
are immune IIWB teratloa, regard- 1s~ tiie oonecquenoes to the oparrrtlon or the government. T&e neeesaltp for merklog those bound- rowa out of our ooaatltutlone~ eyetea, under urles which tl 0th Pedersl &id ?tat. Gov8rnment .x~lWlE. their euthority over on. psapl. aLthin tbeterrl- tori.1 llmlts OS tba 11s~ stete. The purpose la the ~rrrt~~W.tTOAt@ c~aeh ~OV.rnsl.Cit, WlthlA ltL3 own Freedom 00rry OA those aTfairs oom- sptrere al’;ted to it by the Constltutlon without undue in- terference by she other. k%cCulloch 98. &caryland, sWr.; The Collector VIM. 2fgg, 11 3~nll. 113, 125; Haflroad Crmp0ny v5. :enintc;n, 18 ‘.:all. 5, 31; Zouth Carolina Vs. *13 Honorable Geo. H. Sheppard, p. 13
United States, lyy U.S. 437; 461; Flint vs. stone- Traoy Company, supra."
There is no denying that in some instances the decisions are oon- rli0ting. This is mom true of earlier dealalone than of the later ones. No area of absolute oertalnty is to be found on the border- line of oonfllot between the state and federal jurladlot:ona In matters of taxation.
However, the weight of authority, reinforced by the dla- tlnotly discernible reoent trend or the Supreme Court to liberalize its viewpoint toward similar taxation plans, upholds the validity of laws levying and measuring taxea by the method used by the.Legls- lature in its enaotment of Article 7057a, V. A. C. S.
You are therefore advised that in our opinion: 1. The Legislature intended to lnoludo within the measure- ment standard upon whioh the tax is based suoh premium payments or subsidies as those desoribed in your letter.
2. The state has the power to exaot psyment of taxes whloh lnolude within their measurement formula these premium payment8 or subsidies.
3. In providing ror suoh taxation the state has not ln- fringed upon federal statutory or constitutional prohibitlone or llmltatlons.
YOUB Very tidy . ATTOBBEY GENERAL OF TEXAS HFC:BBH