L.L.C., Inc. and Fun Holdings, LLC v. Glenn Hegar, Comptroller of Public Accounts of the State of Texas and Ken Paxton, Attorney General of the State of Texas

NUMBER 13-21-00011-CV

COURT OF APPEALS

THIRTEENTH DISTRICT OF TEXAS

CORPUS CHRISTI – EDINBURG

L.L.C., INC. AND
FUN HOLDINGS, LLC, Appellants,

v.

GLENN HEGAR, COMPTROLLER OF
PUBLIC ACCOUNTS OF THE STATE
OF TEXAS AND KEN PAXTON, ATTORNEY
GENERAL OF THE STATE OF TEXAS, Appellees.

On appeal from the 53rd District Court
of Travis County, Texas.

CONCURRING MEMORANDUM OPINION

Before Chief Justice Contreras and Justices Hinojosa1 and Silva

1 The Honorable Leticia Hinojosa, former Justice of this Court, was a member of the panel at the
time this case was submitted for oral argument but did not participate in this decision because her term of
office expired on December 31, 2022.
 Concurring Memorandum Opinion by Chief Justice Contreras

I agree with the Court’s conclusion because it is compelled by the controlling

precedent of the transferor court. See TEX. R. APP. P. 41.3. I write separately to note that,

if this were not a transfer case, I would decide this case differently because I disagree

with the Austin court’s majority opinion in 1st Global. See id. (noting that, in a transfer

case, “[t]he court’s opinion may state whether the outcome would have been different had

the transferee court not been required to decide the case in accordance with the transferor

court’s precedent”).

The 1st Global majority found that, under Texas Tax Code § 112.051, an “amount

claimed by the state” does not include an amount which is “self-assess[ed] based on the

Comptroller’s previously announced general legal position regarding apportionment” of

franchise taxes. 1st Glob., Inc. v. Hegar, No. 03-19-00740-CV, 2021 WL 5022390, at *3

(Tex. App.—Austin Oct. 29, 2021, no pet.) (mem. op.). It reasoned that “the phrase ‘the

amount claimed by the state’ can reasonably be read to require some sort of affirmative

claim by the state for a specific amount of franchise taxes.” Id. But as recognized in the

dissenting opinion in 1st Global:

[T]he Texas Legislature chose not to limit the broad language—“the amount
claimed by the state”—to an amount that the Comptroller calculates that a
particular taxpayer has underpaid on the original “amount claimed by the
state.” If the Legislature had sought to limit protest suits to situations in
which the Comptroller assesses a liability, conducts an audit, issues a
jeopardy determination, determines a deficiency, or issues a refund
denial . . . the Legislature would have included language specifying that
protest suits are limited to those circumstances.

Id. at *4 (Triana, J., dissenting) (citing TGS-NOPEC Geophysical Co. v. Combs, 340

S.W.3d 432, 439 (Tex. 2011) (noting that courts presume the Legislature carefully

chooses a statute’s language, “purposefully omitting words not chosen”)).

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 In this case, the SOB Fee Statute imposes a tax of $5 per customer entry on every

“sexually oriented business” in Texas. See TEX. BUS. & COM. CODE ANN. §§ 102.051–.056.

It is undisputed that appellants owed SOB Fees for 2020. Based on their own data

regarding the number of customers served (which the Comptroller does not dispute),

appellants voluntarily paid their 2020 SOB Fees, and the Comptroller received and

accepted the funds. Under the rationale of the 1st Global majority, appellants did not pay

an “amount claimed by the state” because their fee was “self-assessed.” See 1st Glob.,

2021 WL 5022390, at *3. I would instead conclude that the Comptroller, acting on behalf

of the state, “claims” that SOBs owe the SOB Fee “to be paid each year in the amount

prescribed” by the SOB Fee Statute, “and thus a taxable entity may file a protest letter”

with its SOB Fee “challenging any portion of that amount owed that it contends is

unlawful.” See id. at *4 (Triana, J., dissenting). It is irrelevant that appellants—as opposed

to the Comptroller—were the ones who performed the rudimentary arithmetic necessary

to calculate the precise dollar figure of their total SOB Fee in 2020. The Legislature did

not intend to deprive appellants of the ability to file a protest suit in this situation. See id.

(observing that “the plain language of [§] 112.051(a)” allows a taxpayer to “pay[] the

amount of its self-assessed franchise-tax liability under protest with its timely filed regular

annual report,” and that the Texas Supreme Court “explicitly recognized the validity” of

this approach in In re Nestle USA, Inc., 387 S.W.3d 610 (Tex. 2012) (orig. proceeding)).

Accordingly, were this case not a transfer case, I would resolve the issue in favor of

appellants. See TEX. R. APP. P. 41.3.

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 I concur in the Court’s judgment.

DORI CONTRERAS
Chief Justice

Delivered and filed on the
8th day of June, 2023.

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