IN THE SUPREME COURT OF TEXAS
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NO. 11-0589
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IN RE ALLCAT CLAIMS SERVICE, L.P. AND JOHN WEAKLY, RELATORS
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ON PETITION FOR WRIT OF MANDAMUS
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Argued October 24, 2011
JUSTICE JOHNSON delivered the opinion of the Court, in which CHIEF JUSTICE JEFFERSON,
JUSTICE HECHT, JUSTICE WAINWRIGHT, JUSTICE MEDINA, JUSTICE GREEN, and JUSTICE GUZMAN
joined.
JUSTICE WILLETT filed an opinion concurring in part and dissenting in part, in which JUSTICE
LEHRMANN joined.
In this original proceeding Allcat Claims Service, L.P., a limited partnership, and one of its
limited partners seek an order directing the Comptroller to refund franchise taxes Allcat paid that
were attributable to partnership income allocated, but not distributed, to its natural-person partners.
Allcat claims it is entitled to a refund for two reasons. First, the tax facially violates Article VIII,
Section 24 of the Texas Constitution because it is a tax on the net incomes of its natural-person
partners that was not approved in a statewide referendum. Second, as applied by the Comptroller
to Allcat and its partners, the franchise tax violates Article VIII, Section 1(a) of the Constitution,
which requires taxation to be equal and uniform. We hold that: (1) the tax is not a tax imposed on
the net incomes of the individual partners, thus it does not facially violate Article VIII, Section 24;
and (2) we do not have jurisdiction to consider the equal and uniform challenge.
I. Background
A. The Bullock Amendment and the Franchise Tax
In 1993 Texas voters adopted Article VIII, Section 24 of the Texas Constitution, frequently
referred to as the Bullock Amendment.1 See Tex. S.J. Res. 49, §§ 1–2, 73d Leg., R.S. (1993)
(adopted Nov. 2, 1993). Section 24 provides in relevant part that
[a] general law enacted by the legislature that imposes a tax on the net incomes of
natural persons, including a person’s share of partnership and unincorporated
association income, must provide that the portion of the law imposing the tax not
take effect until approved by a majority of the registered voters voting in a statewide
referendum held on the question of imposing the tax.
TEX. CONST. art. VIII, § 24(a).
A decade later a Travis County district court determined that the manner in which Texas
funded its public schools was unconstitutional. Neeley v. West Orange-Cove Consol. Indep. Sch.
Dist., 176 S.W.3d 746, 753–54 (Tex. 2005). The court enjoined further state funding of the schools,
but stayed the effect of its injunction until October 1, 2005, in order to give the Legislature time to
cure the constitutional deficiencies. Id. The state defendants2 appealed, and this Court was “[o]nce
again . . . called upon to determine whether the funding of Texas public schools violates the Texas
Constitution.” Id. at 751. We issued our opinion on November 22, 2005 and held that the State’s
1
So called after Lt. Gov. Bob Bullock who is widely credited with having taken the lead in authoring the
amendment.
2
Hon. Shirley Neeley, Texas Commissioner of Education; the Texas Education Agency; Hon. Carole Keeton
Strayhorn, Texas Comptroller of Public Accounts; and the Texas State Board of Education.
2
system for financing public schools violated the Texas Constitution. We also changed the effective
date of the district court’s injunction to June 1, 2006. Id. at 796–99.
After the Travis County district court rendered its judgment in November 2004, and while
the appeal was pending in this Court, the state actively worked on a different approach to funding
public education. The 79th Legislature considered alternative methods of funding in its regular
session and in two special sessions that lasted into August 2005. During this same period, the
Governor also established the Texas Tax Reform Commission to study how to “modernize [Texas’s]
tax system and provide long-term property tax relief as well as sound financing for public schools.”
Press Release, Office of the Governor, Gov. Perry Names 24-Member Texas Tax Reform
Commission (Nov. 4, 2005), available at http://governor.state.tx.us/news/appointment/5077/. The
Commission held its first meeting the day before we issued West Orange-Cove.
In the months following our West Orange-Cove decision the Commission conducted hearings
around the state. Based on its study, research, and those hearings the Commission identified four
main concerns with the State’s tax system: (1) property taxes were too high; (2) taxes should be as
broad and as low as possible; (3) schools should be the priority for state funding; and (4) the State’s
property taxes make it difficult to attract businesses without substantial incentives. See REPORT OF
THE TEXAS TAX REFORM COMMISSION, Tax Fairness: Property Tax Relief for Texans 16 (2006),
available at http://govinfo.library.unt.edu/ttrc/files/TTRC_report.pdf. The Commission’s proposals
included increasing the number of business forms subject to the franchise tax, which is the State’s
business tax. Id. at 18. The Commission noted that
3
[f]or nearly a century the [franchise] tax has been applied to corporations. The
original purpose of the franchise tax — and that which the Commission finds is still
valid — was to collect a modest levy in return for the tremendous value afforded to
businesses that chose to benefit from a state-provided liability shield. However, the
recent spread of new business forms such as limited-liability partnerships have
tapped the state’s protections previously available only to corporations while
avoiding the very levy designed to reflect the value of that protection. Tax-free
status has thus been secured by many firms, to the competitive detriment of those
remaining in corporate form.
Id.
As part of the effort to provide lasting property tax relief, establish a stable and long-term
source of funding for public schools, and meet the June 1, 2006 deadline set in West Orange-Cove,
the 79th Legislature, in its third called session, enacted several amendments to the Texas Tax Code.
See Act of May 2, 2006, 79th Leg., 3d C.S., ch. 1, §§ 1–27, 2006 Tex. Gen. Laws 1, 1–41 (the Act).
The amendments were codified in Chapter 171 of the Tax Code and reflect many of the
Commission’s proposals, including its proposal to increase the number of business forms subject
to the franchise tax. For the first time limited partnerships and certain other unincorporated
associations were required to pay the tax. See TEX. TAX CODE §§ 171.0002, 171.001. It is these
amendments and their application that are the subject of this proceeding against the Comptroller and
the Attorney General (collectively, the Comptroller).
B. Allcat’s Claims
Allcat Claims Service, L.P. is a Texas limited partnership that provides adjusting services
to property insurers. It inspects damaged property to determine the cause of the damage and the
costs of repair. Allcat’s limited partners include relator, John Weakly. For tax years 2008 and 2009
Allcat paid franchise taxes under protest, then filed two suits seeking a refund: this original
4
proceeding and a suit in the 201st District Court of Travis County. Here, Allcat seeks (1) an order
requiring the Comptroller to refund that portion of the 2008 and 2009 franchise taxes it paid that are
referable to its natural-person partners’ shares of Allcat’s income;3 (2) a declaration that the
franchise tax is unconstitutional to the extent it taxes partnership income allocable to its natural-
person partners; (3) an injunction directing the Comptroller not to assess, enforce, or collect the
franchise tax to the extent it applies to Allcat’s income allocated to its natural-person partners; and
(4) a declaration that the Comptroller’s interpretation of certain franchise tax provisions violates
Allcat’s right to equal and uniform taxation under the Texas Constitution. Allcat asserts the same
equal and uniform taxation claim in the Travis County suit “to preserve the claim in the event this
Court decline[s] to exercise jurisdiction over [it].”
The first basis on which Allcat and Weakly (collectively, Allcat) rely for relief, which we
reference as the facial challenge, is that the amendments to the franchise tax statutes violate Section
24 of the Constitution because their effect is to impose an income tax on the net incomes of natural
persons, despite the fact that the tax has not been approved in a statewide referendum. The second
basis, which we reference as the as-applied challenge, is not that the franchise tax statutes are
unconstitutional, but rather that the Comptroller’s interpretation and application of them violate the
equal and uniform taxation clause of the Texas Constitution. See TEX. CONST. art. VIII, § 1. Allcat
3
Allcat at first sought relief as to all of the taxes it paid. It later limited the relief it sought.
5
also seeks attorney’s fees pursuant to the Declaratory Judgments Act (DJA). See TEX. CIV. PRAC.
& REM. CODE §§ 37.001–.011.4
II. The Facial Challenge
A. Jurisdiction
The jurisdiction of all Texas courts, including this Court, derives from the Texas Constitution
and state statutes. Chenault v. Phillips, 914 S.W.2d 140, 141 (Tex. 1996) (per curiam). Absent an
express constitutional or statutory grant, we lack jurisdiction to decide any case. Id.
The Constitution is silent about taxpayer suits, but Texas statutes have long vested our courts
with the responsibility to adjudicate these disputes. Under applicable statutory provisions, which
are not challenged by Allcat, taxpayer suits contesting either (1) the validity of a state tax or (2) the
authority of the public official charged with the assessment, enforcement, or collection of the tax,
must be brought in a Travis County district court. See, e.g., TEX. TAX CODE §§ 112.001 (“The
district courts of Travis County have exclusive, original jurisdiction of a taxpayer suit brought under
this chapter.”); id. § 112.051 (requiring that a person must pay the tax in question before bringing
a suit “contend[ing] that the tax or fee is unlawful or that the public official charged with the duty
of collecting the tax or fee may not legally demand or collect the tax or fee”); id. § 112.101(a)
(providing that injunctive relief may be issued against the Comptroller prohibiting her assessment
or collection of a tax). In contrast to the general provisions of the Tax Code prescribing jurisdiction
4
Amicus briefs supporting Allcat’s position were submitted by Niki Laing, CPA; Keller Haslett Storage Ltd.;
Austin Analytical, LLC; Yacktman Asset Management Co.; NSBMA, LP; Cherry Creek Plaza Partnership Ltd.; Nestle
USA Inc.; the Corporate Housing Providers Association; Tyson Hoffer; Winning Investments, L.P.; and Winning
Management, L.L.C. Amicus briefs supporting the Comptroller were submitted by the Texas Taxpayers and Research
Association and the Texas Association of Realtors.
6
for taxpayer suits, the Act gives this Court original and exclusive jurisdiction over constitutional
challenges to the franchise tax amendments:
The supreme court has exclusive and original jurisdiction over a challenge to the
constitutionality of this Act or any part of this Act and may issue injunctive or
declaratory relief in connection with the challenge.
See Act § 24. We first address the Legislature’s conferral of original jurisdiction on this Court.
Allcat argues that section 24 is a valid exercise of legislative authority under Article V,
Section 3(a) of the Constitution and that the Court has statutory authority to issue certain
extraordinary writs under section 22.002(c) of the Government Code. The Comptroller does not
contest our jurisdiction but posits that to accept jurisdiction under Article V, Section 3(a), we must
first overrule our decisions in Love v. Wilcox, 28 S.W.2d 515 (Tex. 1930) and Lane v. Ross, 249
S.W.2d 591 (Tex. 1952). She disagrees with Allcat’s contention that section 22.002(c) is a valid
source of our jurisdiction. For the reasons expressed below, we hold that we have jurisdiction under
Article V, Section 3(a)5 and that neither Love nor Lane stand as impediments.
The Constitution of 1891 gave the Supreme Court three types of jurisdiction: appellate
jurisdiction, jurisdiction to issue writs, and original jurisdiction. The Court’s appellate jurisdiction
was described as follows:
The Supreme Court shall have appellate jurisdiction only except as herein specified,
which shall be coextensive with the limits of the State. Its appellate jurisdiction shall
extend to questions of law arising in cases of which the Courts of Civil Appeals have
appellate jurisdiction under such restrictions and regulations as the Legislature may
prescribe. Until otherwise provided by law the appellate jurisdiction of the Supreme
Court shall extend to questions of law arising in the cases in the Courts of Civil
5
The Comptroller also suggests that Article V, Section 8 may authorize the Legislature to confer original
jurisdiction on this Court. We need not address that position.
7
Appeals in which the Judges of any Court of Civil Appeals may disagree, or where
the several Court of Civil Appeals may hold differently on the same question of law
or where a statute of the State is held void.
TEX. CONST. art. V, § 3 (1891). The next sentence described the Court’s writ jurisdiction:
The Supreme Court and the Justices thereof shall have power to issue writs of habeas
corpus, as may be prescribed by law, and under such regulations as may be
prescribed by law, the said courts and the Justices thereof may issue the writs of
mandamus, procedendo, certiorari and such other writs, as may be necessary to
enforce its jurisdiction.
Id. Section 3 then described the Court’s original jurisdiction:
The Legislature may confer original jurisdiction on the Supreme Court to issue writs
of quo warranto and mandamus in such cases as may be specified, except as against
the Governor of the State.
Id.
In Love we held that the sentence last quoted limited the Legislature’s authority to confer
original jurisdiction on the Court. 28 S.W.2d at 522. The statute involved in that case attempted
to give the Court “the power, or authority, or jurisdiction, to issue the Writ of Mandamus, or any
other Mandatory or compulsory Writ or Process” against certain political party officials. Id. We
concluded that “the Constitution limits the original jurisdiction of the court to the issuance of writs
of quo warranto and mandamus,” and that “so much of the legislative act under examination as
attempts to confer upon the Supreme Court the power to issue ‘any other mandatory or compulsory
8
writ or process’ save the writ of mandamus, is violative of the Constitution, and is therefore void.”6
Id. The Court reaffirmed Love in Lane. 249 S.W.2d at 593.
In 1981, Article V was amended, principally to confer jurisdiction over criminal appeals on
the Courts of Civil Appeals, changing them to the Courts of Appeals. Act of May 25, 1979, 66th
Leg., R.S., S.J. Res. No. 36, § 3 (adopted at Nov. 4, 1980 election). Section 3 was also amended to
its current form. Id. The first sentence referring to appellate jurisdiction was replaced by these two,
describing the Court’s jurisdiction generally:
The Supreme Court shall exercise the judicial power of the state except as otherwise
provided in this Constitution. Its jurisdiction shall be coextensive with the limits of
the State and its determinations shall be final except in criminal law matters.
TEX. CONST. art. V, § 3(a). The other two lengthy sentences of the prior provision describing the
Court’s appellate jurisdiction became one short one:
Its appellate jurisdiction shall be final and shall extend to all cases except in criminal
law matters and as otherwise provided in this Constitution or by law.
6
We also noted that there were other limitations on the Legislature’s authority to confer original jurisdiction
on the Supreme Court:
This court has heretofore laid down certain limitations on the power of the Legislature to specify
classes of cases which may be brought within the court’s original jurisdiction. One is that the right
to the duty required to be performed by mandamus shall not be ‘dependent upon the determination of
any doubtful question of fact.’ Teat v. McGaughey, 85 Tex. 486, 487, 22 S.W.302, 303 [1893].
Another limitation is that the writ of quo warranto or mandamus be a proper or necessary process for
enforcement of the right asserted. Pickle v. McCall, 86 Tex. 218, 24 S.W. 265 [1893]. A third is there
must be some strong and special reason for the exercise of this extraordinary original jurisdiction by
a court designed primarily as the court for the correction by appellate review of errors of inferior
courts in determining questions of law. In this connection, the court found no objection to the
Legislature requiring it to exercise original jurisdiction by mandamus, where the proceeding ‘involves
questions which are of general public interest and call for a speedy determination.’ Betts v. Johnson,
96 Tex. 363, 73 S.W. 4, 5 [1903].
28 S.W.2d at 519.
9
Id. The provisions describing the Court’s writ jurisdiction and original jurisdiction were not
changed.
The provision at issue in this case provides that the Court “has exclusive and original
jurisdiction over a challenge to [its] constitutionality.” Act § 24. It also authorizes the Court to
“issue injunctive or declaratory relief in connection with the challenge.” Id. If the grant of
jurisdiction or the relief authorized in the statute exceeds the limits of Article V, Section 3(a), then
we simply exercise as much jurisdiction over the case as the Constitution allows, as we did in Love.
See 28 S.W.2d at 522. But, in Lane, we held that while “this court has no original jurisdiction to
issue a writ of injunction . . . . [i]n cases in which this court’s jurisdiction to issue a writ of
mandamus has attached the court necessarily has the correlative authority to issue a writ of
injunction to make the writ of mandamus effective.” 249 S.W.2d at 593. The same may be said of
declaratory relief.
The Act clearly expresses legislative intent that the Court consider the constitutionality of
its provisions. In this matter, mandamus is a “proper or necessary process for enforcement of the
right asserted” because Allcat seeks an order directing the Comptroller to refund part of the taxes
it paid. Love, 28 S.W.2d at 519. That being so, we necessarily have the correlative authority to
provide declaratory and injunctive relief as appropriate.
The Comptroller argues that this suit cannot be considered a mandamus proceeding over
which the Court has original jurisdiction under Article V, Section 3(a) because mandamus relief
would never be appropriate. She contends that an official does not abuse her discretion by enforcing
a statute that is later determined to be unconstitutional. But in LeCroy v. Hanlon, 713 S.W.2d 335
10
(Tex. 1986), we affirmed a judgment declaring a filing fee statute unconstitutional, granting
mandamus relief against the district clerk, and issuing injunctive relief precluding the clerk from
charging the unconstitutional filing fee. Id. at 337, 343; see also Cramer v. Sheppard, 167 S.W.2d
147, 156 (Tex. 1942) (mandamus issued directing the Comptroller to issue pay warrants after he
refused to issue them based on his improper interpretation of the Constitution). In this matter, if
Allcat is correct and the Act is unconstitutional, then the Act does not provide legal authority for the
Comptroller to retain the taxes and Allcat will be entitled to mandamus directing a refund.
The Comptroller argues that if mandamus relief is appropriate in cases such as this, then any
constitutional challenge can be brought initially in this Court. But as we explained in Love and
Lane, Article V, Section 3(a) imposes a limit: legislative authorization and mandamus being a proper
or necessary process for enforcement of the right asserted. For example, in a case the Comptroller
cites, Chenault, the relators brought an original mandamus proceeding seeking “a declaration that
the attorney occupation tax is unconstitutional, an injunction against the officials responsible for
collecting the tax, and writs prohibiting enforcement of the tax.” 914 S.W.2d at 141. The Court
refused to consider the constitutional arguments, stating that “this action is not within the original
jurisdiction granted to this Court by either the Texas Constitution or the Legislature.” Id.
We conclude that section 24 of the Act serves as a specific, limited exception to the
generalized provisions of the Tax Code that confer exclusive jurisdiction over suits such as Allcat’s
on the district courts of Travis County; it does not violate Article V, Section 3(a); and it gives this
Court original, exclusive jurisdiction to consider the facial challenge to the Act’s constitutionality
in order to determine whether mandamus should issue directing the Comptroller to refund taxes that
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Allcat paid under protest. We need not and do not address other arguments advanced by the parties
regarding our jurisdiction over the facial challenge.
B. Is the Tax Constitutional?
As an initial matter, we note Allcat contends that only Texas law applies to the issues
presented. We agree. The Bullock Amendment and Texas partnership law, not some other law such
as the federal Internal Revenue Code (IRC), control whether the Act violates the Texas Constitution.
Allcat insists that the franchise tax is, in effect, an income tax notwithstanding the
Legislature’s express statement to the contrary. See Act § 21 (“The franchise tax imposed by
Chapter 171, Tax Code, as amended by this Act, is not an income tax . . . .”). It reasons that because
the income of a partnership is allocated to each partner according to the partner’s partnership
interest, the Act taxes each partner’s allocated share of Allcat’s income. Allcat asserts that, in this
manner, the franchise tax is a tax on the net incomes of its partners and violates the Bullock
Amendment as to partners who are natural persons.
The Comptroller counters that the franchise tax is not an income tax because it can result in
taxes due even if the entity loses money. She further argues that whether the tax is an income tax
is irrelevant because Texas has adopted the entity theory for partnership law and a tax imposed on
a limited partnership entity does not constitute a tax on the net incomes of the partnership’s
individual partners. Because it is dispositive, we begin with the Comptroller’s second argument.
Under the aggregate theory of partnership law a partnership is not an entity separate and
distinct from its individual partners. Rather, the “partnership” name or label is a convenient way
of referring to the partners as a group. See 1 ALAN R. BROMBERG & LARRY E. RIBSTEIN, BROMBERG
12
AND RIBSTEIN ON PARTNERSHIP § 1.03(a)–(b) (Release No. 31, 2011–12 Supp.). In contrast, under
the entity theory of partnership law the partnership is an entity separate and distinct from its
partners.7 Id.
Although it has not always been so, Texas adheres to the entity theory. In 1961 the
Legislature adopted the Texas Uniform Partnership Act (TUPA), TEX. CIV. STAT. ANN. art. 6132(b)
which “lean[ed] heavily toward the entity idea.” Id., § 1, cmt. This Court recognized that the
aggregate theory had been abandoned for most purposes with the TUPA’s adoption:
[under the aggregate theory] a partnership was considered to be an aggregate of
individuals acting under contract . . . . However, after the adoption of [TUPA], a
partnership was recognized as an entity legally distinct from its partners for most
purposes. The entity theory of partnership is consistent with other laws permitting
suit in the partnership name and service on one partner.
Haney v. Fenley, Bate, Deaton & Porter, 618 S.W.2d 541, 542 (Tex. 1981) (per curiam). Yet
despite the TUPA, some courts continued to apply the aggregate theory in certain situations. See,
e.g., Lawler v. Dallas Statler-Hilton Joint Venture, 793 S.W.2d 27, 33–34 (Tex. App.—Dallas 1990,
writ denied) (recognizing that Texas is “predominantly an entity theory state” but determining that
under the TUPA there were sufficient aggregate features to a partnership for the court to apply the
aggregate theory to an employment relationship).
7
The practical application of these different approaches yields various consequences. For example, which
theory a state embraces for its partnership law—aggregate or entity—can be determinative of whether a partner may be
liable for embezzlement or improper use of partnership property. Compare In re Leal, 360 B.R. 231, 239–41 (Bankr.
S.D. Tex. 2007) (applying Texas partnership law to conclude that a partner was liable to the partnership for conversion
of partnership property because he did not have an individual interest in such property), with State v. Birch, 675 P.2d
246 (Wash. Ct. App. 1984) (upholding the trial court’s dismissal of charges for embezzling partnership funds and
providing that whether a state follows an aggregate or entity theory of partnership law is for the Legislature to decide).
See generally BROMBERG at § 1.03(c) (identifying the aggregate and entity aspects of partnership law in specific areas).
13
Courts’ application of the aggregate theory in certain contexts and the entity theory in others
led to some confusion. So, “to allay previous concerns that stemmed from confusion as to whether
a partnership was an entity or an aggregate of its members,” the 73rd Legislature passed the Texas
Revised Uniform Partnership Act (TRPA) in 1993 and thereby “unequivocally embrace[d] the entity
theory of partnership by specifically stating . . . that a partnership is an entity distinct from its
partners.” TEX. REV. CIV. STAT. ANN. art. 6132b-2.01, Comment of Bar Committee—1993. The
TRPA, codified in the Texas Business Organizations Code, plainly provides that “[a] partnership
is an entity distinct from its partners,” and “[a] partner is not a co-owner of partnership property.”
TEX. BUS. ORGS. CODE §§ 152.056, 154.001(c). Further, it is the partnership interest that is a
partner’s “personal property for all purposes.” Id. § 154.001(a); see also Reid Road Mun. Util. Dist.
No. 2 v. Speedy Stop Food Stores, Ltd., 337 S.W.3d 846, 855 (Tex. 2011) (noting that the general
partner of a limited partnership is not an owner of the limited partnership’s property). The same
Legislature that adopted the TRPA also adopted the language in the Bullock Amendment. See Tex.
S.J. Res. 49, §§ 1–2, 73d Leg., R.S. (1993) (adopted Nov. 2, 1993).8
In Kao Holdings, L.P. v. Young, 261 S.W.3d 60 (Tex. 2008), we distinguished early Texas
law that rejected the entity theory from modern practice. In doing so we quoted the following
language from Frank v. Tatum:
8
The TRPA originated in the 73rd Legislature as H.R. 273. The House passed H.R. 273 on April 19, 1993 and
adopted the conference committee report on May 30. The Senate passed H.R. 273 with amendments on May 18and
adopted the conference committee report on May 29. Meanwhile, the Senate adopted the language of the Bullock
Amendment pursuant to Senate Joint Resolution 49 on April 27, 1993 and adopted the related conference committee
report on May 27, 1993. The House adopted Senate Joint Resolution 49 with amendments on May 21and the conference
committee report on May 28.
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It is a general rule that suits in courts can only be maintained by and against persons
natural or artificial; that is, individuals or corporations. Unless otherwise provided
by statute, a copartnership is not considered a person, and must sue and be sued by
its members. . . . The rule that a copartnership must sue or be sued by its members
is so universally recognized that there is no need for discussion.
Id. at 62 n.9 (quoting 25 S.W. 409, 409–10 (Tex. 1894)). We then contrasted that view with more
current law under which a partnership is an entity separate from the partners:
In M Sys. Stores, Inc. v. Johnston, 124 Tex. 238, 76 S.W.2d 503, 504 (1934), we
reiterated that “a partnership is not a legal entity, like a corporation.” Much later, in
Haney v. Fenley, Bate, Deaton & Porter, 618 S.W.2d 541, 542 (Tex.1981), we
observed that “after the adoption of the Texas Uniform Partnership Act, TEX. REV.
CIV. STAT. ANN. art. 6132b, effective January 1, 1962, a partnership was recognized
as an entity legally distinct from its partners for most purposes.” See also TEX. R.
CIV. P. 28 (“Any partnership . . . may sue or be sued in its partnership, assumed or
common name for the purpose of enforcing for or against it a substantive right. . . .”).
Id.
Allcat urges that the separate entity concept applies only in contexts unrelated to net income,
such as property ownership and enforcement of liability. Citing Destec Energy, Inc. v. Houston
Lighting & Power Co., 966 S.W.2d 792 (Tex. App.—Austin 1998, no pet.), it argues that Texas has
not adopted the entity approach for partnership income, thus partnership income is divided into
shares essentially owned by the partners regardless of whether the income shares are actually
distributed to the partners. We disagree with Allcat’s position and its reading of Destec. In Destec
the court of appeals rejected the aggregate theory of partnership law in deference to the Legislature’s
adoption of the entity theory in the TRPA. Id. at 795–96. That same court recently reviewed the
nature of partnership income under the entity theory. See Smith v. Grayson, No. 03-10-00238-CV,
2011 WL 4924073, at *5–*6 (Tex. App.—Austin Oct. 12, 2011, no pet. h.). In determining whether
15
partnership earnings retained by the partnership are separate property of a limited partner or
community property of the partner and his wife, the court noted that “[p]artnership earnings are
owned by the partnership prior to distribution to the partners and cannot be characterized as either
separate or community property.” Id. at *6. Rather, the limited partner’s “right to receive his share
of the profits is the only partnership right subject to characterization.” Id. at *5.
Other courts of appeals have likewise rejected attempts to impose an aggregate theory of
partnership law, given the express language of the TRPA. See, e.g., Bexar Appraisal Dist. v. Am.
Opportunity for Housing-Perrin Oaks, L.L.C., No. 04-10-00278-CV, 2010 WL 4978099, at *3–*5
(Tex. App.—San Antonio Dec. 8, 2010, no pet.) (applying the entity theory to distinguish between
the partnership and its partners to determine who could protest the rejection of the tax exempt status
of certain property); Simmons, Jannace & Stagg, L.L.P. v. Buzbee Law Firm, 324 S.W.3d 833 (Tex.
App.—Houston [14th Dist.] 2010, no pet.) (holding that a partnership law firm could not appear pro
se); Alice Leasing Corp. v. Castillo, 53 S.W.3d 433, 443 (Tex. App.—San Antonio 2001, pet.
denied) (recognizing that “the Legislature unequivocally embraced the entity theory of partnership
law in 1993”).
Allcat also argues that section 152.202(a) of the Business Organizations Code (entitled
“Credits of and Charges to Partner”) should control over section 152.056 (entitled “Partnership as
Entity”), thereby making partnership income an exception to the separate entity concept. Section
152.202(a) provides in relevant part: “Each partner is credited with an amount equal to . . . the
partner’s share of the partnership’s profits.” TEX. BUS. ORGS. CODE § 152.202(a). This provision,
when read in context with section 153.206, providing how limited partnership profits and losses are
16
allocated, merely specifies that partnership profits are credited and allocated to the partner’s
partnership interest according to the partnership agreement or as otherwise provided under the
TRPA. TEX. BUS. ORGS. CODE § 152.202(a), 153.206; see also id. § 153.003 (providing that the
provisions of chapter 152 apply to limited partnerships if they are not inconsistent with chapter 153
of the TRPA).9 The TRPA provides that partners have creditors’ rights in regard to distributions of
partnership profits, but it does not provide that allocations of partnership profits are property of,
subject to the control of, or income to the separate partners. See TEX. BUS. ORGS. CODE
§ 153.207–.210; see also Smith, 2011 WL 4924073, at *5–*6; Cleaver v. Cleaver, 935 S.W.2d 491,
495 (Tex. App.—Tyler 1996, no writ). And the right to receive a distribution, even assuming it is
authorized by the partnership, is subject to the partnership’s ability to satisfy its liabilities. See TEX.
BUS. ORGS. CODE § 153.210 (providing that distributions may not be made if, immediately after
giving effect to the distribution, liabilities of the partnership will exceed the fair value of the
partnership assets); see also TEX. BUS. ORGS. CODE § 153.105 (providing that rights of limited
partners may be created only by (1) the certificate of formation; (2) the partnership agreement; (3)
other sections of chapter 153; or (4) the other limited partnership provisions). Thus, under Texas
law the allocation of partnership income or profits to a partner does not convert the amounts
allocated into property of or income to the partner, and section 152.202(a) does not indicate a
departure from the entity theory.
9
Allcat’s partnership agreement is not in the record. Neither party argues that its relevant terms differ from
the TRPA’s provisions. See TEX. BUS. ORGS. CODE § 152.002 (“To the extent that the partnership agreement does not
otherwise provide, this chapter and the other partnership provisions govern the relationship of the partners and between
the partners and the partnership.”).
17
In support of its position, Allcat also references matters extraneous to the legislative history
of the Bullock Amendment. Some of these pre-date and some post-date enactment of the
Amendment. The most relevant are exemplified by a 1991 letter sent to then-Governor Ann
Richards by twenty-two members of the senate. The letter stated that “[a] tax on partnership
income . . . is really a tax on personal income that only applies to some persons.” Letter from
Members of the Texas Senate to Governor Ann Richards, et al., (Jul. 23, 1991) (on file with Baylor
University’s Collections of Political Materials). This position, Allcat urges, provides the context
in which the Amendment was adopted.
We agree that the Bullock Amendment must be construed in light of conditions existing at
the time it was adopted. See City of Beaumont v. Bouillion, 896 S.W.2d 143, 148 (Tex. 1995); Jones
v. Ross, 173 S.W.2d 1022, 1024 (Tex. 1943). However, in construing the Texas Constitution, we
“‘ascertain and give effect to the plain intent and language of the framers of a constitutional
amendment and of the people who adopted it.’” Wilson v. Galveston Cnty. Cent. Appraisal Dist., 713
S.W.2d 98, 101 (Tex. 1986) (quoting Gragg v. Cayuga Indep. Sch. Dist., 539 S.W.2d 861, 866
(Tex. 1976)). We presume the language of the Constitution was carefully selected, interpret words
as they are generally understood, and rely heavily on the literal text. See Harris Cnty. Hosp. Dist.
v. Tomball Hosp. Auth., 283 S.W.3d 838, 842 (Tex. 2009) (citing Stringer v. Cendant Mort. Corp.,
23 S.W.3d 353, 355 (Tex. 2000) and Bouillion, 896 S.W.2d at 148).
As we have often held, however, the most relevant consideration in construing a
constitutional or statutory provision is its text. The permutations placed on that text by others, even
those who urge its adoption, must ordinarily yield when the text’s plain meaning says the opposite.
18
Political advocacy may influence votes on important legislative initiatives, but it cannot control a
court’s ultimate responsibility to decide the law that was finally enacted or adopted. Here, the letter
to Governor Richards represents senators’ opinions almost two years before the Legislature adopted
the TRPA and approved the Bullock Amendment’s language and submitted it to Texans for
adoption. It represents but a subset of the Legislature and states views that may have changed in the
two-year period of debate preceding the enactment of the TRPA and the submission of the
Amendment to the voters. Indeed every one of the signatories who were still senators in the 73rd
Legislature voted in favor of the TRPA. The passage of time, in conjunction with the plain language
of the TRPA’s text, forecloses any argument that the Legislature rejected any aspect of the entity
theory of partnership law.
The materials Allcat references reflect a disdain for a state income tax on natural persons,
absent voter approval, but none of the materials contradicts legislative intent to tax partnerships
under the entity theory. The caption of Senate Joint Resolution 49 stated that the resolution
“[p]ropos[ed] a constitutional amendment prohibiting a personal income tax without voter approval
and dedicating the proceeds of the tax, if enacted, to education and property tax relief,” and when
the proposed amendment was submitted to the voters, it was described as “Proposition 4: The
constitutional amendment prohibiting a personal income tax without voter approval and, if an
income tax is enacted, dedicating the revenue to education and limiting the rate of local school
taxes.” Tex. S.J. Res. 49, 73d Leg., caption, § 3 (1993). The language is not ambiguous and, as
such, opinions from senators, newspapers, or other sources cannot override the text approved by the
Legislature. See Tex. Dept. of Pub. Safety v. Cox Tex. Newspapers, L.P., 343 S.W.3d 112, 117–18
19
(Tex. 2011) (recognizing that the Legislature’s intent is best manifested by what it enacts); Molinet
v. Kimbrell, ___ S.W.3d ___, (Tex. 2011) (“Statements made during the legislative process by
individual legislators or even a unanimous legislative chamber are not evidence of the collective
intent of the majorities of both legislative chambers that enacted a statute . . . . The Legislature
expresses its intent by the words it enacts.”); AT&T Commc’ns of Tex., L.P. v. Sw. Bell Tel. Co., 186
S.W.3d 517, 528–529 (Tex. 2006) (“[T]he statement of a single legislator, even the author and
sponsor of the legislation, does not determine legislative intent.”). Nor do they reflect intent by the
voters to adopt something other than a constitutional amendment prohibiting a personal income tax
without voter approval, and providing that if a personal income tax were to be enacted, revenues
from it must be dedicated to education. Accordingly, we read the TRPA as stating without
equivocation that partnership income remains property of the partnership entity until it is distributed.
Allcat further argues that the Bullock Amendment extends to instances in which a natural
person’s partnership income is taxed “indirectly.” Allcat urges that the Bullock Amendment’s
partnership clause—“including a person’s share of partnership and unincorporated association
income”—becomes meaningless if it applies only when the franchise tax statute results in direct
taxation of a partner for some part of partnership income, as is the case in the federal taxation
scheme. See 26 U.S.C. § 701 (“A partnership as such shall not be subject to the income tax imposed
by this chapter. Persons carrying on business as partners shall be liable for income tax only in their
separate or individual capacities.”). The substance of Allcat’s argument is that regardless of whether
Texas classifies partnership income and profits as partnership property (the entity theory) or
property of the partners (the aggregate theory), the Bullock amendment constitutionally transforms
20
a natural-person partner’s allocated share of partnership income into part of the person’s “net
income” and forbids applying the tax at either the partnership or individual level absent approval
in a referendum. Again, we disagree.
When construing statutes we presume the Legislature intended them to comply with the
Texas Constitution. TEX. GOV’T CODE § 311.021; see also Proctor v. Andrews, 972 S.W.2d 729,
735 (Tex. 1998) (“‘Statutes are given a construction consistent with constitutional requirements,
when possible, because the legislature is presumed to have intended compliance with [the
Constitution].’” quoting Brady v. Fourteenth Court of Appeals, 795 S.W.2d 712, 715 (Tex. 1990)).
And as previously noted, in construing amendments to the Texas Constitution we ascertain and give
effect to the plain intent and language of the framers of the amendments and of the people who
adopted them, beginning with and giving primacy to the language that was adopted. See Wilson,
713 S.W.2d at 101; Gragg, 539 S.W.2d at 866.
To review, Section 24(a) of the Constitution provides that voters must approve “[a] general
law enacted by the legislature that imposes a tax on the net incomes of natural persons, including
a person’s share of partnership and unincorporated association income” before it becomes effective.
TEX. CONST. art. VIII, § 24(a). The reference to partnership and unincorporated association income
is an explanatory phrase modifying the phrase “the net incomes of natural persons.” Id.; see also
TEX. GOV’T CODE § 311.005(13) (defining the term “including” under the Code Construction Act
as a term of enlargement). Allcat’s argument proposes that the amount of partnership income
allocated to a partner becomes the partner’s “share” of partnership income once it is allocated,
regardless of Texas law and regardless of whether partnership operations, expenses or losses were
21
to later reduce the allocated amount. That argument would have weight if the partnership were not
a separate entity, but it is. Allcat does not argue that the TRPA violates either the Bullock
Amendment or some other constitutional provision by making the partnership and its income an
entity separate from its partners. Nor does Allcat argue that either the Bullock Amendment or some
other constitutional provision restricts Texas to particular taxation methodologies such as ones
conforming to the federal income tax system.
Simply put, under Texas law the entity theory applies to partnership income and profits.
Individual partners do not own any of either while they remain in the partnership’s hands and have
not been distributed to the partners. See, e.g., TEX. BUS. ORG. CODE § 152.056; see also Tex. Lottery
Comm’n v. First State Bank of DeQueen, 325 S.W.3d 628, 637 (Tex. 2010) (“[W]e must take
statutes as we find them and first and primarily seek the Legislature’s intent in its language.”). And
while a partner’s interest in the partnership represents the right to receive the partner’s share of
partnership profits when they are distributed, it does not follow that for purposes of the Texas
franchise tax such right constitutes a partner’s “share” of any partnership income or profits while
the partnership retains the income and profits without having distributed any of them to the partner.10
10
The Comptroller argues that use of the term “net income” shows that the Legislature is not prohibited from
passing a tax on the gross incomes of natural persons. She suggests that to the extent a person’s share of partnership
income is income at all, it merely amounts to a portion of the person’s “gross income” which is not the subject of the
Bullock Amendment. The parties and amici advance competing arguments about whether the franchise tax is an income
tax. They cite authorities concluding that it is and authorities concluding that it is not. For those concluding that it is
not see Ga. Dep’t of Rev., Individual FAQs, available at https://etax.dor.ga.gov/inctax/webfaq/faq-ind.aspx#texasmargin
(last visited Nov. 16, 2011); Instructions for Maine Corporate Income Tax 2010 Form 1120ME, Line 4a, at 4, available
at http://www.maine.gov/revenue/forms/corporate/ 2010/10_1120inst.pdf; Mass. Dep’t of Rev., Directive No. 08-7 (Dec.
18, 2008); Minn. Rev. Notice No. 08-08 (Jul. 21, 2008); Pa. Dep’t of Rev., Corp. Tax Bulletin 2008-05, (Dec. 1, 2008),
available at http://pa.gov/portal/server.pt/document/910228/ct_bulletin_2008-05_pdf; Va. Tax Comm’r Ruling, Pub.
Doc. No. 08-169 (Sept. 11, 2008). For those concluding that it is see Cal. Franchise Tax Bd., Technical Advice Mem.
2011-03 (Apr. 13, 2011), available at http://www.ftb.ca.gov/law/Technical_Advice_Memorandums/2011/20110003.pdf;
Kans. Dep’t of Rev., Opinion Letter No. O-2008-004 (Sept. 2, 2008), available at
22
The Bullock Amendment prohibits the State from implementing, without voter approval, an
income tax on the net incomes of natural persons, including a tax scheme yielding results similar
to those of the federal income tax construct as related to partnerships. Under the federal construct,
partnership income “flows through” to and is taxed to the partner. The IRC does not tax
partnerships as entities, see 26 U.S.C. § 701, but instead taxes only the partners and defines a
partner’s gross income as including “his distributive share of the gross income of the partnership.”
26 U.S.C. § 702(c). The federal law flow-through approach to partnership income “certainly
represents the aggregate view [of partnerships].” BROMBERG at 1.03(c)(9). Chapter 171 of the Tax
Code does not adopt the tax scheme of the IRC even though it draws from entries on certain federal
tax forms as its method for determining the amount of franchise taxes a business owes.11 Allcat’s
http://rvpolicy.kdor.state.ks.gov/Pilots/Ntrntpil/IPILv1x0.NSF/ae2ee39f7748055f8625655b004e9335/e861583bab1c
af27862574ba005eb8c3?OpenDocument (last visited Nov. 16, 2011); Mo. Dep’t of Rev. Letter Ruling LR 5309 (Dec.
12, 2008), available at http://dor.mo.gov/rulings/show.php?num=5309 (last visited Nov. 16, 2011); S.C. Dep’t of Rev.,
R e v . R u l . 0 9 - 1 0 ( J u l . 1 7 , 2 0 0 9 ) , a v a i l a b l e a t
http://www.sctax.org/NR/rdonlyres/B8314617-023F-4575-9C96-D9449EE53AAF/0/RR0910.pdf; Wisc. Tax Bulletin
156 at 7 (April 2008); Minutes of the August 2, 2006, Board Meeting on Potential FSP: Texas Franchise Tax, at 2–3,
available at http://www.fasb.org/jsp/FASB/Page/08-02-06_texas_franchise_tax.pdf. Because the arguments do not
affect our analysis, we do not address them.
11
See TEX. TAX CODE § 171.1011. With respect to partnerships this section provides:
(c) Except as provided by this section, and subject to Section 171.1014, for the purpose of computing
its taxable margin under Section 171.101, the total revenue of a taxable entity is: . . . .
(2) for a taxable entity treated for federal income tax purposes as a partnership, an amount
computed by:
(A) adding:
(i) the amount reportable as income on line 1c, Internal Revenue Service
Form 1065;
(ii) the amounts reportable as income on lines 4, 6, and 7, Internal
Revenue Service Form 1065;
(iii) the amounts reportable as income on lines 3a and 5 through 11,
Internal Revenue Service Form 1065, Schedule K;
(iv) the amounts reportable as income on line 17, Internal Revenue
Service Form 8825;
(v) the amounts reportable as income on line 11, plus line 2 or line 45,
23
position flies directly in the face of the TRPA’s specification that partnership profits and losses are
allocated to partners as a component of that partner’s partnership interest and the partner’s rights to
a distribution from that property interest are limited to those of a creditor. TEX. BUS. ORGS. CODE
§§ 152.202(a), 153.206–.207, 154.001(a). We reject it. The Bullock Amendment does not preclude
the taxation of business entities for the privilege of doing business in Texas and taking advantage
of the option to limit the liability of the owners of a business as Allcat does by means of the limited
partnership structure.
We conclude that the franchise tax constitutes a tax on Allcat as an entity; it does not
constitute a tax on the net income of Allcat’s natural-person limited partners within the meaning of
the Bullock Amendment. We hold that Allcat’s facial challenge is without merit.
III. The As-Applied Challenge
Internal Revenue Service Form 1040, Schedule F; and
(vi) any total revenue reported by a lower tier entity as includable in the
taxable entity's total revenue under Section 171.1015(b); and
(B) subtracting:
(i) bad debt expensed for federal income tax purposes that corresponds to
items of gross receipts included in Subsection (c)(2)(A) for the current
reporting period or a past reporting period;
(ii) to the extent included in Subsection (c)(2)(A), foreign royalties and
foreign dividends, including amounts determined under Section 78 or
Sections 951-964, Internal Revenue Code;
(iii) to the extent included in Subsection (c)(2)(A), net distributive income
from a taxable entity treated as a partnership or as an S corporation for
federal income tax purposes;
(iv) to the extent included in Subsection (c)(2)(A), items of income
attributable to an entity that is a disregarded entity for federal income tax
purposes; and
(v) to the extent included in Subsection (c)(2)(A), other amounts
authorized by this section . . . .
TEX. TAX CODE § 171.1011(c)(2).
24
Allcat does not directly attack the provisions of the Act by its as-applied challenge, but
instead claims that the Comptroller’s interpretation and enforcement of the franchise tax statutes
violates its rights under the equal and uniform taxation clause of Article VIII, Section 1 of the
Constitution. In other words, by its as-applied claim Allcat challenges the Comptroller’s
assessment, enforcement, and collection of the tax imposed by the Act. As we did with the facial
challenge, we first address our jurisdiction.
Allcat’s claim is subject to chapter 112 of the Tax Code which generally vests exclusive
jurisdiction over tax suits in the district courts of Travis County. See, e.g., TEX. TAX. CODE
§§ 112.001, 112.051–.053, 112.101–.1011. As it does in its facial challenge, Allcat asserts that
section 24 of the Act withdraws its claim from the Travis County courts’ jurisdiction and provides
this Court with exclusive, original jurisdiction. In the alternative, it asserts that this Court has
jurisdiction under the statutory jurisdiction afforded by section 22.002(c) of the Government Code.
We first address the argument regarding section 24 of the Act.
We held in section IIA that section 24 of the Act constitutes a specific, limited exception to
the general grant of jurisdiction in the district courts of Travis County, see TEX. GOV’T CODE
§ 311.026(b) (specifying that specific statutory provisions prevail over general ones in statutory
construction), and is a valid legislative conferral of jurisdiction under Article V, Section 3(a) of the
Constitution. Assuming, without deciding, that Section 3(a) authorizes the Legislature to confer
original jurisdiction on this Court for an as-applied challenge, section 24 of the Act only confers
original jurisdiction over challenges to the constitutionality of the Act. It does not authorize this
Court to exercise original jurisdiction over challenges to how the Comptroller assesses, enforces,
25
or collects the franchise tax. Thus, section 24 of the Act does not confer original jurisdiction on this
Court over Allcat’s as-applied challenge. See Chenault, 914 S.W.2d at 141.
Next, we address Allcat’s argument that section 22.002(c) of the Government Code gives
this Court original jurisdiction. Section 22.002(c) provides
Only the supreme court has the authority to issue a writ of mandamus or injunction,
or any other mandatory or compulsory writ or process, against any of the officers of
the executive departments of the government of this state to order or compel the
performance of a judicial, ministerial, or discretionary act or duty that, by state law,
the officer or officers are authorized to perform.
TEX. GOV’T CODE § 22.002(c). To support its assertion Allcat cites In re Smith, 333 S.W.3d 582
(Tex. 2011), and A&T Consultants, Inc. v. Sharp, 904 S.W.2d 668 (Tex. 1995). In those cases the
Court determined it had jurisdiction because controlling statutes that expressly authorized
mandamus relief did not state which court had jurisdiction to issue the writ against a state executive
officer. See In re Smith, 333 S.W.3d at 585 (citing TEX. CIV. PRAC. & REM. CODE § 103.051(e));
A&T, 904 S.W.2d at 672 (citing former TEX. GOV’T CODE § 552.321, amended by Act of May 23,
1999, 76th Leg., ch. 1319, § 27 (adding a provision specifying the court in which a suit for writ of
mandamus must be filed)). In this case, however, the Tax Code expressly provides not only which
courts have jurisdiction to provide relief in taxpayer challenges—the district courts of Travis
County—but also addresses whether those courts are authorized to provide mandamus or other
similar relief. See TEX. TAX CODE §§ 112.001, 112.108.12
12
Section 112.108 provides as follows:
Except for a restraining order or injunction issued as provided by this subchapter, a court may not
issue a restraining order, injunction, declaratory judgment, writ of mandamus or prohibition, order
requiring the payment of taxes or fees into the registry or custody of the court, or other similar legal
or equitable relief against the state or a state agency relating to the applicability, assessment,
26
Moreover, even if section 22.002(c) of the Government Code empowered this Court to
exercise original jurisdiction over Allcat’s as-applied challenge, the more detailed, specific construct
of the Tax Code would apply over section 22.002(c)’s general provisions and limitations. See TEX.
GOV’T CODE § 311.026 (providing that if statutes conflict, “the special or local provision prevails
as an exception to the general provision”); see also A&T, 904 S.W.2d at 672 (“Any exception to
[section 22.002(c) of the Government Code] would require express statutory authorization by the
legislature.”). And section 24 of the Act is not an exception to the Tax Code in regard to the as-
applied challenge.
We hold that we do not have original jurisdiction over Allcat’s as-applied challenge.
IV. Attorney’s Fees
Allcat seeks to recover attorney’s fees pursuant to the DJA. See TEX. CIV. PRAC. & REM.
CODE §§ 37.001–.011. It argues that we should presume the Legislature intended to incorporate the
DJA into section 24 of the Act because section 24 authorizes declaratory relief, thus providing
jurisdiction over Allcat’s claim for attorney’s fees. See id. § 37.009 (“In any proceeding under this
chapter, the court may award costs and reasonable and necessary attorney’s fees as are equitable and
just.”). The Comptroller points out that even if section 24 validly grants jurisdiction to this Court,
collection, or constitutionality of a tax or fee covered by this subchapter or the amount of the tax or
fee due, provided, however, that after filing an oath of inability to pay the tax, penalties, and interest
due, a party may be excused from the requirement of prepayment of tax as a prerequisite to appeal if
the court, after notice and hearing, finds that such prepayment would constitute an unreasonable
restraint on the party’s right of access to the courts. The court may grant such relief as may be
reasonably required by the circumstances. A grant of declaratory relief against the state or a state
agency shall not entitle the winning party to recover attorney fees.
TEX. TAX CODE § 112.108 (emphasis added).
27
its language plainly authorizes only declaratory and injunctive relief—not attorney’s fees. See Act
§ 24 (stating that the Court “may issue injunctive or declaratory relief in connection with the
[constitutional] challenge”). We agree with the Comptroller that section 24 does not reflect
legislative intent to incorporate the DJA.
When construing a statute we presume that every word in the statute was used for a purpose.
In re M.N., 262 S.W.3d 799, 802 (Tex. 2008). Just as importantly, we presume that every word
excluded from the statute was excluded for a purpose. Id.
Assuming, without deciding, that Article V, Section 3(a) authorizes the Legislature to confer
jurisdiction for us to award attorney’s fees in an original proceeding such as this, section 24 of the
Act does not reference the DJA. The presumption Allcat contends for is the opposite of the long-
standing judicial presumption that words excluded from a statute were excluded for a purpose. We
will not apply it. We conclude that we do not have jurisdiction over the claim for attorney’s fees.
The Comptroller advances several reasons why Allcat should not recover attorney’s fees if
we have jurisdiction over the claim. Because we do not have jurisdiction over the claim, we do not
address her contentions. See Valley Baptist Med. Ctr. v. Gonzalez, 33 S.W.3d 821, 822 (Tex. 2000)
(noting that an appellate court’s opinion is advisory if the court does not have jurisdiction over the
pending matter).
V. Response to the Dissent
The dissent says section 24 of the Act does not confer mandamus jurisdiction on the Court
because it does not use the word “mandamus.” The dissent reads section 24 too narrowly. The
Legislature clearly intended section 24 to confer jurisdiction on this Court for all taxpayer suits
28
challenging the constitutionality of the Act. The second part of section 24 references injunctive or
declaratory relief, but nowhere does the Act purport to limit the jurisdictional grant to those types
of relief. Certainly the first part of section 24 does not limit the jurisdiction it attempts to confer on
the Court. And although the conferral of jurisdiction in section 24 is broader than that authorized
by Article V, Section 3(a), this does not mean that mandamus jurisdiction is not included within
section 24’s jurisdictional grant. As we noted in section IIA, when the Legislature attempts to
confer jurisdiction in excess of that allowed by the Constitution, we exercise jurisdiction only to the
extent allowed by the Constitution. See Love, 28 S.W.2d at 522. In this regard, should declaratory
or injunctive relief have been appropriate in this case, we would not have looked to the jurisdiction
purportedly granted in section 24 for authority. We decided in Love and Lane that such a grant
would not be constitutional. Rather, we would have determined whether such relief was necessary
to make our mandamus jurisdiction effective, that is, whether it was correlative to our mandamus
jurisdiction. Lane, 249 S.W.2d at 593.
The dissent also says that Chapter 112 of the Tax Code explicitly prohibits mandamus relief
in this type of suit, and the Act is not an exception to that prohibition. We disagree. While section
112.108 of the Tax Code may generally limit the granting of mandamus relief under certain
circumstances, section 24 of the Act is a later-enacted, specific grant of original
jurisdiction—including mandamus jurisdiction—over the type of proceeding Allcat brings: a
challenge to the constitutionality of the Act. Assuming a conflict exists between section 112.108
and the Act, we agree with the dissent that when statutes are in conflict, the more specific, and later,
enactment controls. See TEX. GOV’T CODE § 311.026. In this instance, that is the Act. Compare
29
Act of May 24, 1989, 71st Leg., R.S., ch. 232, § 16, 1989 Tex. Gen. Laws 232, with Act of May 2,
2006, 79th Leg., 3d C.S., ch. 1, §§ 1–27, 2006 Tex. Gen. Laws 1.
The dissent next argues that mandamus is not appropriate here because there is no ministerial
duty for the Comptroller to “independently sit in judgment of the constitutionality of every statute
she is charged with enforcing.” ___ S.W.3d ___ (Willett, J., dissenting). But we do not address
whether she has such a duty, or whether it would have been within her discretion to refuse to enforce
the Act as to Allcat’s natural person partners because she believed applying it to them would violate
the Bullock Amendment. The Comptroller here enforced the statute and relies on it as authority to
refuse Allcat’s claim for a refund. We determine only that Allcat has not shown entitlement to a
refund on the basis that the Comptroller has no legal authority to retain the taxes she collected from
Allcat. That is, Allcat has not shown the Act is unconstitutional.
Finally, the dissent discusses at length the question of whether the Legislature violated the
separation of powers doctrine by mandating a time limit for us to decide challenges such as Allcat’s.
See TEX. CONST. art. II, § 1. The separation of powers issue is neither subtle nor unimportant.
However, the issue (1) is not raised or briefed by the parties, (2) is not alleged to have any harmful
effect on the outcome of the proceeding or our decision, and (3) does not affect the validity of our
decision. Given the state of the record, any opinion on the issue would be advisory. See, e.g., Valley
Baptist Med. Ctr., 33 S.W.3d at 822 (“Under article II, section 1 of the Texas Constitution, courts
have no jurisdiction to issue advisory opinions.”); Tex. Ass’n of Bus. v. Tex. Air Control Bd., 852
S.W.2d 440, 444 (Tex. 1993) (noting that the distinctive feature of an advisory opinion is that it
decides an abstract question of law without binding the parties, and a judgment based on the opinion
30
does not remedy an actual or imminent harm). Nevertheless, the dissent’s extensive discussion on
this issue warrants at least some response.
Article II, Section 1 of the Texas Constitution provides as follows:
The powers of the Government of the State of Texas shall be divided into three
distinct departments, each of which shall be confided to a separate body of
magistracy, to wit: Those which are Legislative to one; those which are Executive
to another, and those which are Judicial to another; and no person, or collection of
persons, being of one of these departments, shall exercise any power properly
attached to either of the others, except in the instances herein expressly permitted.
TEX. CONST. art. II, § 1. We discussed in section IIA how a statute conferring more jurisdiction on
this Court than Article V, Section 3(a) authorizes is invalid to the extent it exceeds the Legislature’s
constitutional power to confer jurisdiction. The principle involved in that determination applies to
the provisions of Article II, Section 1: the Legislature cannot validly exercise a power properly
attached to the judiciary except as expressly permitted by the Constitution, or exceed the limits
imposed on it by the Constitution.
However, this Court does not function in a vacuum. We recognize that our decision will
have ramifications. The Legislature apparently concluded that expediting a judicial decision in
matters such as this will be in the best interests of all involved. We see no valid reason that this
Court cannot cooperate with priorities expressed by other branches of government so long as we
fulfill our constitutional duties and neither impair our judicial prerogatives and functions, nor impair
the rights of the parties. We do not see how expediting disposition of this matter violates our
constitutional duties or impairs our judicial prerogatives or functions; and the parties have neither
31
alleged nor shown that they have been harmed or prevented from properly presenting their positions
by the manner of the proceedings.
VI. Conclusion
We deny Allcat’s requests for relief relating to its facial challenge because the Act does not
violate Article VIII, Section 24 of the Constitution. We dismiss the as-applied challenge and
attorney’s fees claim for lack of jurisdiction.
________________________________________
Phil Johnson
Justice
OPINION DELIVERED: November 28, 2011
32