                      ‘%-HE   ,6k-JlTORNEY         GENERAL

                                   OF   TEXAS




                                     March 13, 1959


     Hon. V. L. Ramsey                  .~Opinion No. WW-571
     Chairman, Revenue &
       Taxation Committee                  Re:   Constitutionality  of sub-
     House of Representatives                    section (2) (b) of Section
     State of Texas                              12.02 of House Bill Number
     Austin, Texas                               33.
     Dear Mr. Ramsey:
           We quote    from your opinion     request   as follows:
          “The committee requests to be advised on the question as             '
          to v&ether the Legislature    may constitutionally  delegate
          to the Scorctary of State the power to determine whether
          a corporatlon'(r   accounting system is acceptable  for
          allooatlon   purposes an 1s~ provided in Subsection (2)(b)
          of Section 12.02 of the Bill p.       B. 331."
          You arc advised      that the delegation      of power In question
     is constitutional.
          Article   1, Section 28, of the Texas Constitutionprohibits
     the exercise   of the power of suspension of any law except by
     the Legislature;   Article 2, Section 1, requires a separation of
     powers between the three departments of government.
           In construing these two provisions,    the courts have formu-
     lated the following   q.S.86 for tcrting  the constitutionality  of
     a delegation   of power by the Legisls&ure:
            1. The Dower delearated must be eubleot to exeroisc     by the
      exeoutive or bdmlnlstra~lve   agency only i&thin limits pre--
      eorlbed by the Legislature.     Moody v. City of University   Park,
      278 S.W. 26 912 (Tex.Civ.App.    1953 R 2'           ExP rt
    .~Salolldo, 153 Tex. C.R. 160, 218 S.i. :d%$r[;&i4,;      EX'P arts
                                                                    '
    'wason,      112 Tex. CrioR.v1T2,, 15 S.W. 26 650 (1929); see
     ,a160 Panama Refining          Ryan, eb al Amazon Petroleum
                     t.al,v.  she:  55 S. ct.  2h~u.s.        -9        L.

           2.     Ilegislation  wh& delegates power to an administrative
     or executive       offloer to be exerol&ed.zzthat  officer, in his
      tieoretlon,     may arbitrarily   ohooee, without setting forth a
    ."gulde or "suffiolent      standard" to govern the exercise   of such


,
~\~.a    .   ~8,   .’ .I.>



Ron. v. L. Ramsey, page 2 (Ww-571)


power,  Is unconstitutional   and void.    Moody v. Clty,of  Univcr-
            supra; Railroad, Commisslon~ v, Shell 011 C00,      Y
%%-%%l        S W 2d 1022       42)     See also Margolin v,, State,
151’Tcx: C.R. i$,     205 S.W?d   7j5, (1947).

        3. The standard prescribed      by the Legislature     to guide
the exercise    of the delegated power may be general and still
be valid if it is susceptible       of,rcasonablc    application.
Moody v. City,of    Unlversity,Park,      supra; see also Gillaspic
v..Departmentof     Publiosafety       152 T;;. 459, 259 S W 26 17
    b j) ; and Reagan County Purchasing         ,, Inc. .v, ~&ate, llp7
S.W. 2d~l194 (Tex.Clv.App.       1937, error ref.).
     The portions-of  Seotion 12.02        of House Bill   .33 relevant
to this opinion .arc aa follow?:
        "( 2) Any corporation       engaged in finance,   investment,
        cohstruction    or pub&lo utllltics    aotlvltlcs   may, in
        lieu of the allocation       formula In Seotlon (1) of this
        Article,   allooate.to    'Texas that portion of its entire
        stated capital,      surplus and undivided profltr,     plus
        the amount' of outstanding bondr,~ notes and debentures
        as defined In this Article       which reparate accounting
        Indicates    is properly attributable     to business done
        in Texas.
        "Providcd,:.howcver,    that to be eligible   for allocation
        under the premises     of this section,   each corporation
        must:
        “(a).      . ,
         'I(b) Secure from the Secretary of State advance written
        ‘approval certifying   that the coz?poratlonl s acoo;;tlang
         system Is acceptable   for allooation  purposes.
        pre-requisite    for granting such approval the Secretary
         of State may require the oorporatlon     to submit to him
         any and all relevant Information regarding Its aocount-
         ing rymtem In such form as the Seoretary of State may
         direct ,I’
      Purruant to the ‘foregoing provisions     the Seoretary of
State Is oharged with the ministerial      duty of oert~hI.~~e~l~s
written approvil o,f separate acoounting systems.
oernarily   calls for an administrative    determination   of faot.
Delegation    of the power ‘to make a detennlnation, of foot Is
not unoonstitut
100 S.W. 26 754
58 fm.     45);
Safety .,rnd, Reag
I




    Hon. V. L. Ramsey, Page 3 (WW-571)


    supra . In the instant case the determination ‘must be made
    according to a well defined standard, 1.8, whether or not
    the accounting system ,ln question discloses         the smount of
    entire stated capital,         surplus, undivided profits,   outstand-
    ing notes, bonds, and debentures attributable           to business
    done in Texas.        No discretion    Is given to the Seoretary of
    State to refuse ocrtiflo.atlon         of approval of any separate
    accounting system which conforms to this standardi nor Is
    he given any discretion         to approve a separate aooountlng
    system that does note conform to the standard.           It Is appar-
    ent, therefore,       that the power of approval delegated to the
    Secretary of State by the Legislature          meets the tests of
    constltutlonality’set        forth above.
          Anol-llary to the power of approval,   and to facilitate
    the making of the ‘fact. determination,   the Seorctary of State
    is given the power to require any and all relevant lnforma-
    tlon concerning the separate accounting system in question.
    This power is one ‘thkt Is necessary in order for the Secretary
    to make a deolslon aa to whether a oorporatlon      is entitled tb
    pay Its ,franchlse tax aooording to its sepw’ate aooountlmg
    syst.em . It. Is lapllolt  1~ the Bill that~ the Secretary of
    State can n’ot use the power &rbltrarily    or In such manner as
    to cause dlsapprova;b of a separate aooouqrting syrtea whloh
    conforms to the staridard set forth i‘n the Bill.     WC therc-
    fore hold that th6 delegation    of this power doe? not violate
    the tests of oonstittit~onbllty   set forth~ above.
                                  SUMMARY
                    The power of the Secretary of State to
             approve separate accounting systems is a mln-
             lsterlal   Punctlon to be exercised    aooording
             to a well defined standard; the power to
             require 8ubmlrrloPi of Information by a oorp-
             oration ooncernlng Its separate, accounting
             syetea ,I8 necessary to, the effective    admInIs-
             tration   of the Bill and can not be arbitrarily
             used by the Secretary of State.      Therefore
             Section 12.02 Subsection (2)(b)     of Hour8 Bill

    1
      The power of the X?.ecrctary of State to determine the form
      in which lnfomatlon from a corporation      should be?iibiiiiiied
    ; In order to calculate   much oorporatlonts   franahlse tax was
      apeclfioally upheld In Houston. Oil Company,of Texas. v.
      Lawson, 175 S.W. 26 716 (Tex.Civ.App.,     1943).
                                                           .




Hon. V. L. Ramsey, Page 4 (WW-571)


         33 does not violate    the constitutional  pro-
         hibition   against delegation   of power by the
         Legislature.

                                   Yours very truly,


                                   WILL,,WILSON
                                   Attorney General



                                      J&k N, Price
                                      Assistant
JNP:&t
APPROVED
OPINION COMMITTEE
George P. Blackburn,   Chairman
Charles Cabiness
Leonard Paasmore
C. Dean Davis
Morgan Nesbitt
REVIEWED FOR THE ATTORNEY
                        GENERAL
By
   W. V. Geppert




                             .
