                                                                                ACCEPTED
                                                                           03-14-00397-CV
                                                                                   4435411
                                                                 THIRD COURT OF APPEALS
                                                                            AUSTIN, TEXAS
                                                                     3/10/2015 11:14:24 AM
                                                                          JEFFREY D. KYLE
                                                                                    CLERK
                      No. 03-14-00397-CV
_______________________________________________
                                                          FILED IN
                                                   3rd COURT OF APPEALS
                 In the Court of Appeals                AUSTIN, TEXAS
              For the Third Judicial District      3/10/2015 11:14:24 AM
                      Austin, Texas                    JEFFREY D. KYLE
                                                            Clerk
_______________________________________________
                 AMERICAN MULTI-CINEMA, INC.

                    Appellant & Cross-Appellee,
                                v.
   GLENN HEGAR, COMPTROLLER OF PUBLIC ACCOUNTS
  OF THE STATE OF TEXAS, AND KEN PAXTON, ATTORNEY
           GENERAL OF THE STATE OF TEXAS

              Appellees & Cross-Appellants.
_______________________________________________
   ON APPEAL FROM THE 200TH DISTRICT COURT, TRAVIS COUNTY, TEXAS
               TRIAL COURT CAUSE NO. D-1-GN-12-003831
_______________________________________________

          APPELLANT & CROSS APPELLEE’S
            ORAL ARGUMENT HANDOUTS
_______________________________________________
Mark W. Eidman                    RYAN LAW FIRM, LLP
Texas Bar No. 06496500            100 Congress Avenue, Suite 950
Mark.Eidman@RyanLawLLP.com        Austin, Texas 78701
                                  512.459.6600 Telephone
Doug Sigel                        512.459.6601 Facsimile
Texas Bar No. 18347650
Doug.Sigel@RyanLawLLP.com         Counsel for Appellant &
                                  Cross-Appellee
Olga Goldberg
Texas Bar No. 24083081
Olga.Goldberg@RyanLawLLP.com

March 10, 2015
                                     No. 03-14-00397-CV
_______________________________________________

                 In the Court of Appeals
              For the Third Judicial District
                      Austin, Texas
_______________________________________________
                         AMERICAN MULTI-CINEMA, INC.

                                 Appellant & Cross-Appellee,
                                                    v.
     GLENN HEGAR, COMPTROLLER OF PUBLIC ACCOUNTS
    OF THE STATE OF TEXAS, AND KEN PAXTON, ATTORNEY
             GENERAL OF THE STATE OF TEXAS

              Appellees & Cross-Appellants.
_______________________________________________
   ON APPEAL FROM THE 200TH DISTRICT COURT, TRAVIS COUNTY, TEXAS
               TRIAL COURT CAUSE NO. D-1-GN-12-003831
_______________________________________________

          APPELLANT & CROSS APPELLEE’S
            ORAL ARGUMENT HANDOUTS
_______________________________________________


FINDINGS OF FACT FOR PHASE ONE &
ORDER ON PHASE ONE OF BENCH TRIAL ...................................................... TAB 1

FINDINGS OF FACT FOR PHASE TWO, AND MAY 16, 2014 LETTER
FROM JUDGE NARANJO .............................................................................. TAB 2

“INTANGIBLE PROPERTY” DEFINED.............................................................. TAB 3

KEY LANGUAGE OF TEX. TAX CODE § 171.1012 ............................................ TAB 4

CLARIFICATION IN (t) ..................................................................................TAB 5
                                    Respectfully submitted,


                                     /s/ Doug Sigel
                                    Doug Sigel
                                    Texas Bar No. 18347650
                                    Doug.Sigel@RyanLawLLP.com
                                    RYAN LAW FIRM, LLP
                                    100 Congress Avenue, Suite 950
                                    Austin, Texas 78701
                                    Telephone: (512) 459-6600
                                    Facsimile: (512) 459-6601

                                    Attorney for Appellant & Cross-Appellee


                            Certificate of Service

       I certify that a copy of the Appellant & Cross Appellee’s Oral Argument
Handouts was served on Appellees & Cross-Appellants, Glenn Hegar and Ken
Paxton, through counsel of record Charles Eldred, Office of the Attorney
General, Financial Litigation, Tax and Charitable Trusts Division, P.O. Box
12548, Austin, Texas, 78711, Charles.Eldred@texasattorneygeneral.gov, by
electronic mail on March 10, 2015.


                                     /s/ Doug Sigel
                                    Doug Sigel
Notice sent:   Final   Interlocutory   None         DC            BK14178 PG1280
                                                                                           t-iled in The Dist1iet Cotlrt
Olsp Parties:_ _ _ _ _ _ _....,.-../..:;                                                     of Travis County, Texas
                                 ;;;>"
                                                                                          ES JUN 23 2014
                                   ~::r        CAUSE NO. D-1-GN-12-003831                  At 9 ~L/-a .                M.
                                                                                            Amalia Rodrigu~~rk

       American Multi-Cinema, Inc.,                                       IN THE DISTRICT COURT OF
          Plaintiff,
       v.

       Susan Combs, Comptroller of Public                                 TRAVIS COUNTY, TEXAS
       Accounts of the State of Texas, and
       Greg Abbott, Attorney General of the
       State of Texas,
            Defendants.                                                   200th JUDICIAL DISTRICT

                                             n ij   i!d Findings of Fact for Phase One
                                                D'ef~f
       1.       Plaintiff American Multi-Cinema, Inc. ('"AMC") is a corporation engaged in the movie
                theater business.

      2.        AMC timely brought suit under Section 112 and 171 of the Texas Tax Code to recover
                franchise tax paid in protest for Report Years 2008 and 2009.

      3.        AMC exhibits movies and other content (such as live sporting events and theatre) to pay-
                ing customers at its movie theaters.

      4.        When AMC exhibits movies and other content to its paying customers, it produces per-
                sonal property that can be seen, weighed, measw·ed, felt,.. or touched or that is perceptible
                to the senses in any other manner for sale in its ordinary course of business.

                                       tll   fi/;"* Conclusions of Law for Phase One
       1.        The Court has jurisdiction over this case.

       2.        When AMC exhibits movies and other content to its paying customers, AMC produces
                 goods for sale in ordinary course of business under Section 171. I 012, and may therefore
                 include the costs of exhibiting movies and other content to its paying customers in its
                 cost-of-goods-sold deduction under Section 171.1012 of the Texas Tax Code.

       3.        Section 10(b) ofH.B. 500 does not apply to this case.

                                                         Signed on June 20,2014.



                                                                      Darlene Byrne            \ -===
                                                                      Judge, !26th District Court
                                                                      Travis County, Texas L.



                                                                                                                           30
                                    DC             BK13263 PG1548




                                 CAUSE NO. D-1-GN-12-003831

AMERICAN MULTI-CINEMA, INC.,                      §              IN THE DISTRICT COURTS
      Pb~tiff                                     §
                                                  §
vs.                                               §              OF TRAVIS COUNTY, TEXAS
                                                  §
SUSAN COMBS, COMPTROLLER OF                       §
                                                                     111
PUBLIC ACCOUNTS OF THE STATE                      §              200 JUDICIAL DISTRICT
OF TEXAS, and GREG ABBOTT,                        §
ATTORNEY GENERAL OF THE STATE                     §
OFTEXAS,                                          §
  Defendants                                      §




tax paid under protest was tried to the Court. The trial was bifurcated. Plaintiff, American
Multi-Cinema, Inc. (" AMC") appeared through counsel and announced ready for trial.
Defendants Susan Combs, Comptroller of Public Accounts of the State of Texas, and Greg
Abbott, Attorney General of the State of Texas ("Comptroller"), appeared through counsel and
announced ready for trial. The Court has jurisdiction over the parties and the claims presented to
the Court.      After hearing the evidence and considering the applicable law and arguments of
counsel, the Court finds that Section 10 (b) of H.B. 500 does not apply to this case in that it is not
effective until September I, 2013 , which is after the timeframe of the controversy in this case
and the Court further finds in favor of AMC and against the Comptroller.
         The Court orders that AMC is entitled to include the costs to exhibit films to its
customers in its Cost of Goods Sold subtraction under Section 171.1012 of the Tax Code.
         The parties are ordered to schedule a date with the Court for a phase two of this trial to
determine the refund an1ount, which can be set before any Judge.




                                               JUDGE DARLENE BYRNE
                                               126TH District Court
                                               Travis County, Texas




                                                                                                         197
Notice sent. Find! lnteiloet:Jtol")         ~~eRe
                                                        DC           BK14178 PG1281
Disp Parttes:_ _ _ _-:;;:;:;-.......:::::::;;..._--
                                                                                           Filed in The District Court
                                                                                            of Travis County, Texas
Dlsp code: cv
Red     gs:_ _ _ _ _ _ __                                                                 ES JUN 20 2014
Judge    Q Lk\             Clerk   f2-::J             CAUSE NO. D-1-GN-12-003831           At      3'~1'f M.
                                                                                            Amalia Rodriguez-Mendoza, Clerk

        American Multi-Cinema, Inc.,                                         IN THE DISTRICT COURT OF
           Plaintiff,
        v.

        Susan Combs, Comptroller of Public                                   TRAVIS COUNTY, TEXAS
        Accounts of the State of Texas, and
        Greg Abbott, Attorney General of the
        State of Texas,
             Defendants.                                                     200th JUDICIAL DISTRICT


                                                       Findings of Fact for Phase Two

        1.         Plaintiff American Multi-Cinema, Inc. ("AMC") is a corporation engaged in the movie
                   theater business.

        2.         AMC timely brought suit under Section 112 and 171 of the Texas Tax Code to recover
                   franchise tax paid in protest for Report Years 2008 and 2009.

        3.         AMC exhibits movies and other content (such as live sporting events and theatre) to pay-
                   ing customers.

        4.         The parties stipulated that Joint Exhibit l lists all of the costs that are includable either in
                   (1) AMC's non-exhibition cost-of-goods-sold or (2) AMC's exhibition costs.

        5.         The parties stipulated that I 00% of the costs shown in regular type in Joint Exhibit 1 are
                   includable either in AMC's non-exhibition cost-of-goods-sold or in AMC's exhibition
                   costs.

        6.         The parties stipulated that some, but not all, of the costs shown in bold type in Joint Ex-
                   hibit 1 are includable in AMC's exhibition costs ("Disputed Costs" ). All of the Disputed
                   Costs are costs associated with AMC's theatres.

        7.         13.42% of the Disputed Costs are exhibition costs. This includes 75% of the costs associ-
                   ated with the square footage used to sell concessions, which the parties stipulate is 2.19%
                   of the Disputed Costs. This also includes I 00% of the costs associated with the square
                   footage used to project to movies and alternative content into the auditorium, which the
                   parties stipulate is 9.67% of the Disputed Costs. Finally, this includes I 00% of the costs
                   associated with the square footage of AMC's auditoriums housing the speakers and
                   screens, which the parties stipulate is 1.56% of the Disputed Costs. This adds up to
                   13.42% of the Disputed Costs.




                                                                                                                          28
                                 DC                BK141 78 PG1282




8.    The costs associated with the square footage for the auditoriums, other than the square
      footage housing the speakers and screens, are not exhibition costs.

9.    Based on 13.42% of the AMC' s cost-of-goods-sold for Report Year 2008 is
      $1,091 ,269,621. AMC ' s refund for Report Year 2008 is $229,709, plus assessed interest,
      penalty, and statutory interest.

10.   AMC's cost-of-goods-sold for Report Year 2009 is $1,108,701,467. AMC's refund for
      Report Year 2009 is $269,959, plus assessed interest, penalty, and statutory interest.

                             Conclusions of Law for Phase Two

1.    The Court has jurisdiction over this case.

2.    Pursuant to Judge Byrne's order in Phase One of this trial, AMC may include the costs of
      exhibiting movies and other content to its paying customers in its cost-of-goods-sold de-
      duction under Section 171.1012 of the Texas Tax Code.

3.    Interpretations given to statutes by state agencies are entitled to deference when, as here,
      a tax arguably applied and the court is weighing competing interpretations of the amount
      owed. The Comptroller' s interpretation of the amount owed in the present case is rea-
      sonable under the plain language of Section 171.1012, Tax Code.

4.    Under Judge Byrne's ruli ng and Section 171.1012 of the Tax Code, 13.42% of the Dis-
      puted Costs are includable in AMC's cost-of-goods-sold deduction. AMC is entitled to a
      refund of$258,417 for Report Year 2008 and $289,815 fo r Report Year 2009, plus statu-
      tory interest.



      Date:




                                                    ~~~Judge, 419th District Cow-t
                                                       Travis County, Texas




                                                                                                     29
                                                         a
                                                                                                 T~£NT HlGHTOWER

ORLINDA NARANJO                                                                                       Staff Attorney
                                                                                                      (512) 854-4029
     Judge
      (512) 854-4023

                                                            ~~-=.---                              DORA CANZZALES
                                                                                                 Offidul Court RcportHr
 DIANA CAPUCHINO                             419TH DISTRICT COURT                                    (512) 854-9329
 C(!urt Operations Offit:cr
      (512) 854-402."1
                                  HEMAN MARTON SWEAD' THAVIS COUNTY COURTHOUSE
                                                   P. 0. 130X 1748                              STEPHANIE WJI.LIAMS
                                               AUSTIN, TEXAS 78767                                   Court Clerk
                                                                                                    (5'12) 854-5854
                                                 FAX: (512) 854-2224

                                                         May 16,2014


         Via Facsimile (5121477-2348                                   Via Facsimile (512) 459-6601
         Charles K. Eldred                                             Doug Sigel
         Office of the Attorney General                                Ray ley & Bowick, LLP
         P.O. Box 12548                                                The Ryan Law Firm
         Austin, Texas, 78711                                          100 Congress Ave., Suite 950
                                                                       Austin: Texas, 78701



            Re:     Cause No. D-1-GN-12-003831; American Multi-Cinema, Inc. v. Susan Combs,
            Comptroller of Public Accounts of the State of Texas, and Gt·eg Abbott, Attorney General
            of the State of Texas; In the 200th Judicial District, Travis County, Texas

      Dear Counsel:

      Enclosed is a file-stamped Final Judgment in the above-referenced matter granting the
      Comptroller's proposed refund amount. Though not required, the Court thought it would be helpful
      to the parties to explain the basis of its ruling. In reachjng its decision the Coutt relied on Tracfone
      Wireless. Inc.. et al v. Comm 'non State Emergency Communications, 397 S.W.3d 173, 183 (Tex.
      2012), which states that the interpretations given to statutes by state age.n cies are entitled to
      deference when, as here, "a tax unarguably applies and the court is weighing competing
      interpretations of the amount owed." The Comptroller's interpretation of the amount owed in the
      present case is reasonable under the plain language of Section 171.1012, Tax Code.

      If you have any questi<ms regarding this matter, please contact my Staff Attomey, Trent
      Highto\Yer, at (512) 854-4029.




      nnc!OS\lres (I)
      xc: Ms. Amnlia Rodriguez-Mendoza. District Clerk

                                                                                                                       33
          “Intangible property” defined

“property having no physical substance apparent to the
senses : incorporeal property (as choses in action) often
evidenced by documents (as stocks, bonds, notes,
judgments, franchises) having no intrinsic value or by
rights of action, easements, goodwill, trade secrets.”
                         Webster’s Third New International Dictionary 1173 (2002)




“Property that lacks a physical existence. Examples
include stock options and business goodwill.”
                  Black’s Law Dictionary 1411 (Bryan A. Garner ed., 10th ed. 2014)
§ 171.1012. Determination of Cost of Goods Sold

(a)(3)(A) “Tangible personal property” means:
              (i) personal property that can be seen, weighed,
              measured, felt, or touched or that is perceptible to
              the senses in any other manner;


(a)(2) “Production” includes construction, installation,
     manufacture, development, mining, extraction,
     improvement, creation, raising, or growth.


(t) If a taxable entity that is a movie theater elects to
subtract cost of goods sold, the cost of goods sold for the
taxable entity shall be the costs described by this section
in relation to the acquisition, production, exhibition, or
use of a film or motion picture, including1 expenses for the
right to use the film or motion picture. (2013 clarification)




                                                            
1
     Under the Code Construction Act, “[i]ncludes” and “including” are terms of enlargement
and not of limitation or exclusive enumeration, and of the terms does not create a
presumption that components not expressed are excluded.” Tex. Gov’t Code
§ 311.005(13).
                       Clarification in (t)
“In the absence of some showing, either by legislative history or
otherwise, that the intent by the legislature in adopting the
amendment was to clarify rather than change the statute in
question, the presumption is of change rather than clarification.”
                           Pub. Util. Comm’n of Tex. v. Harlingen, 311 S.W.3d 610, 620 n.7
                                                          (Tex. App.—Austin 2010, no pet.)

“if it can be gathered from a subsequent statute, in pari materia,
what meaning the Legislature attached to the words of a former
statute, this will amount to a legislative declaration of its
meaning and will govern the construction of the first statute.”
                                           Cannon’s Adm’r v. Vaughan, 12 Tex. 399 (1854)

“While we think the plain language of Section 5 before its
amendment made it mandatory that all petitioners attend the
adoption hearing in person, if there could have been any doubt
thereof it was removed by the amendment and its emergency
clause, wherein the legislature clearly interpreted said Section as
being mandatory.”
                                               Johnson v. Combs, 256 S.W.2d 207, 207-08
                                                      (Tex. App.—Eastland 1953, no writ)

“The legislature specifically noted [in the bill] that it intended
subsection (j)(1) to be considered as a clarification of the
existing law, not as a substantive change.”
        Sharp v. Caterpillar, Inc., 932 S.W.2d 230, 233-34 (Tex. App.—Austin 1996, no writ)


                             § 171.012(t)            Harlingen Caterpillar
Years at issue          RY 2008-2009 2007      RY 1988-1994
Clarification effective 9/1/2013     6/19/2009 9/1/1991


                       H.B. 500, Section 10(b)
 “Section 171.1012(t), Tax Code, as added by this section, is a
              clarification of existing law”
