Honorable.Robert S. Calvert               Opinion No.   M-139
Comptroller of Public Accounts
Capitol Building                          Re:   Under H.B. 032,
Austin, Texas                                   Acts of the 60th
                                                Legislature, Regular
                                                Session, 1967, Chap-
                                                ter 227,.,page523,
                                                which amended Article
                                                1.13, Title 122A,
                                                Taxation-General,
                                                V.C.S., whether the
                                                Comptroller is re-
                                                quired to refund the
                                                forfeited discounts
                                                or deductions, pro-
                                                vided in Article
                                                20.05(E) and the pen-
                                                alties and interest
                                                under Article 20.05(H)
                                                of said Title 122A,
                                                when the taxpayer is
                                                able to show that his
                                                return was mailed on
                                                time but postmarked
                                                late, and even though
                                                the,event occurred
                                                prior to the effective
                                                date of the 1967
Dear   Mr.   Calvert:                           amendment.
       you have.requested our opinion on the following question:
     Under H.B. 832, Acts of the 60th Legislature, Regular
Session, 1967, Chapter 227, page 523, which amended Article
1.13, Title 122A, Taxation-General, V.C.S., whether the
Comptroller is required to refund the forfeited discounts
or deductions, provided in Article 20.05(E) and the penalties
and interest under Article 20.05(H) of said Title 122A, when
the taxpayer is able to show that his return was mailed on
time but postmarked late, and even though the event occurred
prior to the effective date of the 1967 amendment.


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Honorable Robert S. Calvert, page 2 (M-$39)
    Article l-13, as amended by H. B. 832 reads as follows:
         "(a) Any report, require,dby any provision of this
    Title to be filed or made on or before a specific date
    shall be deemed timely filed if said report, shall be
    placed in the United States Post Office or in the hands
    of a common or contract carrier properly addressed to
    the Comptroller of Public Accounts on or before the date
    required for such payment, report, annual report, return
    declaration, statement, or document to be filed or made.
         "(b) The postmark or receipt mark Qif received by
    a common or contract carrier) will be prima facie evi-
    dence of the date that such report was deposited with
    the post office or the carrier. The person making the
    report or the Comptroller may show by competent evidence
    that the actual date of posting was to the contrary.
         "(cl The person making the report shall be deemed
    to have substantially complied with the filing require-
    ments as to timeliness if he exercised reasonable dili-
    gence to comply and through no fault of his own the
    reports were not timely filed.
         "(d) ff the report is filed within ten (10) days
    after the due date and as originally filed shows the
    correct amount of taxes due, no assessment for penalties
    and interest will be made solely on the grounds of late
    filing after the lapse of ninety (90) days immediately
    following the date the report was required to be filed.
         "(e) If the due date falls on a Saturday, Sunday,
    or legal holiday the next business day thereafter will
    be considered to be the due date.
         "Bf) The term 'report' shall include any payment,
    report@ annual report, return, declaration, statement
    or other document required by any provision of this
    Title to be filed with the Comptroller.
         "$g) The Comptroller is hereby authorized to refund
    or issue credits for penalties and interest paid solely
    as a result of returns timely mailed but postmarked
    after the required filing date; provided, however, that
    no refund or credit shalb,be allowed for such pe,nalties
    incurred prior to September 1, 1961, the original effec-
    tive date of this Article,"
     We shall first consider the applicability of Article 1.13,
as amended, on the provisions of Article 20.0568), which reads
as follows:
Honorable Robert S. Calvert, page 3     (M-139)

          "If any person shall fail to file a report as required
     herein or shall fail to pay to the Comptroller the tax
     as imposed herein when said report or payment is due, he
     shall forfeit five per cent (5%) of the amount due as a
     penalty, and after the first thirty (301 days he shall
     forfeit an additional five per cent (5%)~ Provided, how-
     ever, that the penalty shall never be less than One Dollar
     ($11e Delinquent taxes shall draw interest at the rate
     of six per cent (6%) per annum, beginning sixty (60) days
     from the date due."
     Prior to the effective date of Article 1.13, as amended,
a tax return under Article 1.13, was deemed to have been timely
filed if said return bore a postmark dated on or before the
date required for such return to be filed. Since the statute
was clear and unambiguous the Comptroller was under duty to
collect penalties and interest on the tax due if the return
was postmarked late irrespective of when it was mailed. The
Comptroller had no authority to look behind the postmark at
any mitigating circumstances.
     Article 1,13, as amended, declares in paragraph (c) that
a report or return is deemed timely filed though postmarked
late, if the person making the report exercised reasonable
diligence to comply with the filing requirements and through
no fault of his own the reports were not timely filed. Is
this provision applicable if the event (return timely filed
but postmarked late) occurred prior to the effective date of
the 1967 amendment to Article 1.131 Stated otherwise, is Art-
icle 1.13(g), as amended, retrospective in scope as concerns
penalties and interest imposed as a result of late filing as
defined under old Article 1,131
     It is well settled that the legislature has the power to
release penalties and interest on taxes. Jones v Williams,
121 Tex. 94, 45 S.W.Zd 130 (1931). It is the general rule
that a statute shall not be given retroactive effect unless
such construction is required by explicit language or necessary
implication. State v Humble Oii and Refining-Co;, 141 Tex. 40;
169 s.W,Zd '707 119431, 53 Tex.Jur.2d 53. Sec. 29. When we
apply this rule-to Article 1.13(g), we find words contained
therein which indicate a legislative intent to apply its
provisions to past transactions. That is what it says in
plain simple language. When a law is expressed in plain and
unambiguous language and its meaning is clear and obvious, the




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    Honorable Robert S.   CalVert,          pages4 (M-139)
    law will be applied and enforced as it reads there being
    no room for construction of its meaning. This rule of sta-
    tutory construction is so well-settled that no authorities
    need be cited. Therefore, the Comptroller is required to
    refund the penalties and interest imposed by Article 20.05(H),
    when the taxpayer is able to show that his return was mailed
    on time but postmarked late and even though the event occurred
    prior to the effective date of Article 1,13 as amended.
         We come next to that portion of your opinion request
    regarding the refunding of the forfeited deduction allowed by
    Article 20.05(E) which reads as follows:
3             "The taxpayer shall deduct and withhold from the
         taxes otherwise due from him on his quarterly tax return,
         one per cent (1%) thereof to reimburse himself for the
         cost of collecting the tax, Provided, however, an addi-
         tional two per cent (2%) deduction shall be allowed a
        'taxpayer who makes prepayments of his tax liability based
         upon a reasonable estimate of his tax liability for the
        quarter in which the prepayment is made. In order for
         the taxpayer to be entitled to the additional two per cent
         (2%) discount, the prepayment must be made on or before
         the fifteenth day of the second month of the calendar
        quarter for which the payment is made.
             "A taxpayer making a prepayment of his tax as pro-
        vided for in this paragraph is not relieved from the
        filing of quarterly returns as provided for elsewhere
        in this Chapter. At the time the taxpayer files his
        quarterly return showing his actual tax liability any
        prepayments made by the taxpayer shall be credited against
        his tax liability; in the event that there is tax liabil-
        ity owed by the taxpayer in excess of the prepayment, the
        taxpayer shall remit such excess at the time of filing
        his quarterly return and from such excess shall deduct
        and withhold one per cent (1%) of the amount of the
        excess D If the tax liability of the taxpayer is less
        than the prepayment of taxes, the excess of the payment
        shall be recorded as a credit against future tax liabil-
        ity or refunded to the taxpayer as provided for in Article
        20,lO.
              "In the event the payment of any taxes due under the
         applicable provisions of this Chapter are not paid within




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Honorable Robert S. Calvert, page 5 (M-139)
     the time required, or in the event that the taxpayer does
     not file reports when due as provided by the provisions
     of this chapter, the taxpayer forfeits his claim to any
     discount, including any discount that might have been
     taken by a taxpayer at the time of making a prepayment."
     Statutes providing for the remission of penalties for
delinquencies in compliance with the tax laws are remedial,
and relate to procedure in the collection of delinquent taxes
and should be liberally construed in accordance with the gen-
eral rules governing statutory construction. 85 C.J.S, p. 597
Sec. 1031,
     The Legislature in the enactment of Article 20.05(E)
expressly stated that the taxpayer "forfeits" his claim to any
discounts earned for collecting the tax and for making prepay-
ments of his tax liability.
     In order to determine the applicability of Article 1.13,
as amended, to forfeited discounts or deductions, we must first
ascertain if the forfeited discount is in the nature of a pen-
alty. To fall within the purview of Article 1.13(g), the only
paragraph providing for refund or credit of monies, the deduc-
tions must qualify as penalties.
      A tax is an exaction for revenue purposes; a penalty is
an exaction for purposes of regulation and enforcement. Tax
penalties are imposed as punitive measures against persons who
have been guilty of some default or delinquency and therefore
constitute no part of the tax. A statute authorizing collection
of penalties and interest from delinquent taxpayers is a penalty
statute and the penalties and interest authorized thereunder
are no part of the tax, Reconstruction Finance Corporation
v, State of Texas, 229 F.2d 9 (C.C.A. 5th 1956, cert.den, 351
u,s, 907). Penalties are intended to compel and induce the
taxpayer's prompt compliance with the tax laws. 85 C.J.S, 576
Set o 1021, In Jones v. Williams, supra, it was held that pen-
alties did not constitute a part of the tax, but were merely
a method of enforcing payment of the tax. A careful reading
of Article 20.05(E), shows that the discount is allowed as
(1) compensation for services performed by the taxpayer and
(2) for prepayment of the taxes,




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Honorable Robert S. Calvert, page 6 (M-139)
     It is to be observed that Article,1.13(g), as amended,
does not confer any authority to refund taxes; the authority
granted is confined to refund of penalties and interest. The
discount earned by the taxpayer, although deducted from the
taxes collected, does not make the discount a tax. The allow-
ing of the discount is merely a convenient and inexpensive
method of payment for service rendered by the taxpayer. Black's
Law Dictionary, fourth edition, defines the word forfeit, "TO
incur a penalty." It also states that forfeiture is "Something
to which the right is lost by the commission of a crime or
fault or the losing of something by way of penalty." The
Court in State v, De Grass,72 Tex. 242, 11 S.W, 1029 (1898~),
stated that "Forfeiture is where a person loses some property,
right, privilese, or benefit in consequence of havins done or
omitted-to do a certain act." In Jon& v. Williams,-supra, the
Court stated:
         "In the first place, impositions for failure to make
    returns of and pay occupation taxes and other business and
    special taxes have been from the beginning to the present
    time penalties, sometimes named as such, sometimes referred
    to as forfeitures or fines, sometimes as 'double the amount
    of the tax,' or defined in some other manner, but all so
    plainly penalties that we deem an analysis and discussion
    of the laws unnecessary."
     Article 20.05(E) provides a 1% deduction from taxes owed
as compensation for collection of the taxes by the taxpayer,
It further provides an additional 2% deduction if the taxes are
prepaid within a prescribed time. The discounts are for the
purpose of encouraging collection and early payment of taxes.
Both deductions are forfeited if the taxes are not timely paid,
or the quarterly report is not filed when due. When disallowed
by the Comptroller, these disallowed deductions take the form
of punitive measures against persons who have been guilty of
some default or delinquency and therefore become penalties,
The type of, and not the name'given, an exaction is the proper
criterion by which to judge whether or not it is a tax or a
penalty. Disallowance of a deduction for failure to file tax
returns and to file them timely is a penalty within legislative
power of remission. The disallowance is in the nature of pun-
ishment, and the losing of the discount "by way of penalty."
     Having determined therefore that the forfeited deductions
are penalties, the Comptroller is required to refund the same
under the provisions of Article 1,13, as amended.




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.   .




    Honorable Robert S. Calvert, page 7 (M-139)
                             SUMMARY
              Under the 1967 amendment to Article 1.13, Taxation-
         General, Vernon's Civil Statutes, the Comptroller is
         required to refund the forfeited discounts and deductions
         and':thepenalties and interest when the taxpayer is able
         to shew:that his return was mailed on time but postmarked
         late and even though the event occurred prior to the effec-
         tive date of the 1967 amendment.
                                  Y         s very truly,
                                  z@-




    MGO:dls
    Prepared by Mario G. Obledo
    Assistant Attorney General
    APPROVED:
    OPINION COMMITTEE
    Kerns B. Taylor, Chairman
    W. V, Geppert, Co-Chairman
    Harold Kennedy
    Marvin Sentell
    Neil Williams
    STAFF LEGAL ASSISTANT
    A. J, Carubbi, Jr,




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