Bullock v. Dallas Power & Light Co.

KEITH, Justice,

dissenting.

I respectfully dissent.

After receiving much technical evidence relating to accounting and taxation, the trial court filed extensive findings of fact and conclusions of law, all adverse to the contentions of appellant. Without even mentioning the underlying facts found by the trial court, the majority has substituted its own findings for those based on the evidence. This, I submit, is impermissible.

The usual and general rule ordinarily applicable is this: If there is some evidence of a substantial and probative character to support the trial court’s findings of fact, they are controlling upon the reviewing court and will not be disturbed, even though the appellate court may have reached a different conclusion. Commercial Union Assurance Company v. Foster, 379 S.W.2d 320, 322-323 (Tex.1964); United States Fidelity & Guar. Co. v. Borden Metal Products Co., 539 S.W.2d 170, 172 (Tex.Civ.App.—Beaumont 1976, writ ref’d n. r. e.).

The parties stipulated that the American Institute of Certified Accountants promulgated two opinions regulating the treatment of the investment credit. Opinion No. 2 dated December 1962, concluded in paragraph 13:

“We conclude that the allowable investment credit should be reflected in net income over the productive life of acquired property and not in the year in which it is placed in service.”

This is the method used by the utility plaintiffs in this case. It is not the “flow through” method required by the defendant Comptroller.

Opinion No. 4 was issued in March 1964, and in paragraph 10 this conclusion is expressed:

“[Wjhile the method of accounting for the investment credit recommended in paragraph 13 of Opinion No. 2 should be considered to be preferable, the alternative method of treating the credit as a reduction of Federal income taxes of the year in which the credit arises is also acceptable.”

Thus, “flow through” is, at best, a poor second choice.

All of the expert witnesses for the parties, including professors of accounting, independent certified public accountants, and employees of the Comptroller agreed that the deferral method was not only proper but the preferred method of treatment.* *489Indeed, the Comptroller approved a formal opinion in December 1967, the issue being stated to be:

“The issue presented by the hearing is to determine whether the deferred investment credit is to be treated as an increase in the surplus of the Company in the year in which it is earned or in the years in which it is amortized over the life of the depreciable property acquired.”

The Comptroller cited the controlling statute (which is unchanged except as to the rate of taxation) and concluded:

“Consequently, so long as the Taxpayer’s method of accounting is generally accepted, is reasonable, reflects the true operation and financial status of the taxpayer and is not prohibited then the Comptroller must give recognition to it. Taxpayer’s system of accounting for the investment credit is generally accepted, it is reasonable, it reflects the true financial status of the Company and it is not prohibited. Therefore, the Comptroller will not designate, for tax purposes, something to be surplus that is not generally accepted to be surplus nor will the Comptroller, for tax purposes, designate that to be income which is not generally accepted to be income, without additional legislative authority.” (emphasis supplied)

This report of the hearings examiner bears the signature of appellant’s predecessor and is dated December 8, 1967. The parties stipulate as to its genuineness and the fact that it controlled the subject until “Rule .015” was promulgated effective December 31, 1975.

Several sessions of the Legislature intervened between the date of the ruling quoted above and the promulgation of Rule .015. The Legislature took no action (except to raise the rate of taxation), nor did it change any of the definitions relating to the subject. The truth of the findings quoted above are not challenged by the Comptroller on this appeal.

I, for one, do not comprehend a system of taxation which equates a portion of the cost of an item of machinery as a profit during the year in which the machinery is purchased. Between 1967 and 1975 while there was a change in the personnel of the tax collector’s office, there was no change in the law which authorized a different treatment of the investment credit.

Being of the opinion that the trial court reached the correct results, I would affirm that judgment; consequently, I dissent from a reversal thereof.

This case involves five electric public utility companies. I find no evidence in the record to support the statement that a majority of corporate accounting practitioners, in the utility industry, “utilize a ‘flow through method’ ” of accounting.