Untitled Texas Attorney General Opinion

              THE     ATTORNEY            GENERAL
                         OF     TEXAS



                         August 9, 1990




Honorable Mark W. Stiles                Opinion   NO.   JM-1205
Chairman
Committee on County Affairs             Re:   Whether a taxing unit
Texas House of Representatives          is required to 1?ay interest
P. 0. BOX 2910                          on refunds made on or after
Austin, Texas   78768-2910              June 15, 1989   (RQ-1894)

Dear Representative   Stiles:

     Chapter 42 of the Tax Code grants aggrieved taxpayers a
right of judicial review by a district court of certain
orders issued by ei.ther appraisal review boards or the State
Property Tax Board. Subchapter C of chapter 42 sets forth
post-appeal administrative procedures to be taken by taxing
units in instances in which a court orders a change in the
taxable value of a taxpayer's property.     Section 42.43 of
the Tax Code governs the granting of refunds to a taxpayer
in instances in which a court has ordered a reduction in the
taxable value of that taxpayer's property.

     Section 42.43 of the code was amended by the 70th and
71st Legislatures to require that interest at a specified
rate be included in addition to the refunded taxes. You ask
about the latter amendment.  Section 42.43 of the Tax Code
provides the following:

           (a) If the final ~determination of an
        appeal that decreases a property owner's tax
        liability occurs after the property owner has
        paid his taxes, the taxing unit shall refund
        to the property owner the difference  between
        the amount of taxes paid and amount of taxes
        for which the property owner is liable.

           (b) For a refund made under this section
        because an exemption under Section 11.20 that
        was denied    by the    chief appraiser    or
        appraisal review board is granted, the taxing
        unit shall include with the refund interest
        on the amount refunded calculated      at an




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  Honorable Mark W. Stiles - Page 2      (JM-1205)




          annual rate of 10 percent from the date the
          amount refunded was paid by the propert
          owner until the date the refund *is made. II
          For     0
          the taxina unit shall incue   with the refund
          interest on the amount refunded at an annual
          Kate of eiaht vercent.   calculated from the
          delinouencv date for the taxes until the date
          the refund is made.2  (Emphasis and footnotes        ;I
          added.)

. Acts 1909, 71st Leg., ch. 496, 5 46, at 3605-6     (hereinafter
  House Bill 432).

       you inform us of the following:

             It has come to my attention     that some
          local taxing units are questioning their duty
          to pay interest on refunds that result   from
          taxpayer lawsuits that were pending on the
          amendment's effective date. Also, issues are
          being raised as to interest calculations when



        1. Section 11.20 of the Tax Code permits an exemption
  from ad valorem taxation   for religious organizations. i YOU
  have not asked, and therefore we have not addressed, whether
  according different taxpayers different rates of interest on
  tax refunds is constitutional.

        2. When the Tax Code was originally enacted,   section
  42.43 of the Tax Code required a taxing unit to refund ad
  valorem taxes in an instance in which a court orders a
  reduction  in the appraised value of the that owner Is
  property; no mention was made regarding the inclusion of any
  interest. Acts 1979, 66th Leg., ch. 841, 5 1, at 2313. The
  70th Legislature amended section 42.43 of the code by the
  inclusion of subsection   (b), requiring for the first time
  that a taxing unit include, with the refunded         taxes,
  interest at a specified     rate in instances  in which an
  exemption permitted  under section 11.20 of the code was
  improperly denied. Acts 1987, 70th Leg., ch. 640, 5 4, at
  2438. The 71st Legislature     amended the section again to
  require inclusion of interest at a specified    rate in all
  other instances   in which a refund is made under that
  section. Acts 1989, 71st Leg., ch. 796, § 46, at 3605-6.




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Honorable Mark W. Stiles - Page 3        (JM-1205)




        a taxpayer   lawsuit    involves     more     than    a
        single tax year.

Accordingly,  YOU ask two     questions       about     the        proper
construction of the 1989 amendments.

     Your first question~is:

        Does  Section 42.43(b), as amended above,
        require taxing units to pay interest on
        refunds that are paid on or after June 15,
        1989, regardless   of whether the   lawsuit
        giving rise to the refund was filed before,
        onI or after that date?
     The answer to your first question is set forth in                the
bill enacting the amendment.  Section 49 of House Bill                432
provides:

           (a) This Act takes effect         September        1,
        1989, except that:

           .   .   .   .

           (2) this section, Sections 3, 17, 30,' 31,
        32, 33, 42, 43, 44, 45, and 46 of this Act,
        take effect immediately.

           .   .   .   .

            (1) The change in law made by Sections 30
        and 46 of this~ Act aoolies onlv to a refund
        paid on or after the effective date of this
        a.    (Emphasis added.)

     By the very terms of the above underscored language, it
is clear that the legislature      intended that the 1989
amendment to section 42.43 reach all refunds @&   after the
effective date of the act, without regard to the date on
which any lawsuit was filed. Nothing in either the text of
the amendment,  the bill containing the amendment, or the
legislative history  of the bill supports the proposition
that the date on which a lawsuit is. filed triggers      the
application of the bill.




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     Honorable Mark W. Stiles - Page 4      (JM-1205)




          Your second question is:

             For' lawsuits that involve more than one tax
             year, does Section' 42.43(b),    as   amended
             above, require    interest to be calculated
             separately for each tax year involved in the
             litigation?

1,        In order to clarify the nature of your second question,
     we set forth an example of the proper application of the
     section.   Assume that a        taxpayer has challenged    the
     appraised value of his residential       property for the tax
     years 1986 and 1987. Assume further that on July 14, 1989,
     a court orders a reduction      in the appraised  value of the
     taxpayer's property that results in a refund of taxes of
     $100 for the 1986 tax year and $200 for the 1987 tax year.
     Assume further that the defendant taxing unit refunds the
     taxes on August      1, 1989. The formula for calculating  the
     interest for the 1986 refund is: $100 X .08 (interest rate)
     X 3.5 (years since delinquency date)3 = $28.00. The formula
     for calculating the interest for the 1987 refund is: $200    x
     .08 X 2.5  = $68.00.      The total amount of interest due is
     $96.00.

          It should be clear from the example above that the
     interest for each tax year must be calculated     separately.
     Because the amount of the interest is the product of the tax
     refunded multiplied  by a specified percentage,    calculated
     "from the delincuencv date for the taxes until the refund is
     made," the interest for each tax year must be calculated
     separately.  Tax Code 5 42.43(b)   (emphasis added).   There-
     fore, we answer your second question in the affirmative.

                            SUMMARY

                  Section 42.43 of the Tax Code requires a
             taxing unit to pay interest on refunds     of
             taxes that are paid on or after June 15,
             1989, regardless   of whether   the   lawsuit
             giving rise to the refund was filed before,
             on, or after that date. Because the formula
             for calculating  the interest requires    the



           3.  See chapter  31 of the    Tax Code       for   provisions
     concerning payment due dates.




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        amount of the tax refund to be multiplied by
        a specified percentage calculated   from the
        delinquency date for that tax until the date
        the refund is made, the interest must be
        calculated for each




                                   JIM     MATTOX
                                   Attorney General of Texas

MARYHHLLHR
First Assistant Attorney General

Lou MCcREARY
Executive Assistant Attorney General

JUDGE ZOLLIE STEAHLEY
Special Assistant Attorney General

RENEA HICKS
Special Assistant Attorney General

RICK GILPIN
Chairman, Opinion Committee

Prepared by Jim Moellinger
Assistant Attorney General




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