Honorable Geo. H. Sheppard
Comptroller of Public Accounts
Austin, Texas

Dear Mr. Sheppard:            Opinion No. 054OC
                              Re: Construction of Senate Bill
                                   No. 2, Acts Regular Session
                                   48th Legislature.

        This will acknowledge receipt of your letter of
June lsth, requesting the opinion of this Department as to
whether Senate Bill No. 2, Acts of the 48th Legislature,
authorizes and requires all officers and employees of this
State and its agencies, instrumentalities, political sub-
divisicqs, and municipalities to comply with the withhold-
ing provisions of the "Current Tax Payment Act of’_1943.”

        Senate Bill No. 2 reads as follows:

        "An ACT requiring all officers and employees of the
            State, its agencies, instrumentalities, politi-
            cal subdivisions and municipalities, having con-.
            trol over the payment of any salaries or wages
            to public officers or employees, to comply with
            the provisions of the Federal Revenue *ct of
            1942 reouiring the withholding cf the five per
            cent (s$) F ed era1 Victory Income Tax from wages
            paid public officers and employees so lorgas
            the United States of America is at war with Ger-
            many, Japan or Italy; and declaring an emergency.

        "BE    IT ENACTED BY THE LEGISLATURE CF THE STATE CF TEXAS

               "Section 1. For the duration of the present war,
              all officers and employees of this State and its agen-
              cies, instrumentalities, political subdivisions and
              municipalities, having control over the payment cf
              any salariesor wages to public or'ficers or employeee,
              are hereby authorized and required to comply with the
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Honorable Geo.   H.   Sheppard - page i?O-5408



            provisions of the tiedera Internal Revenue Act
            of 1942, re uiring-the withholding of the five
            per cent (50)
                       7 Federal Victory Income Tax from
            wages paid public officers and employees.    Any
            expenses involved in complying with the ;;rovis-
            ions of this law may be paid from existing or
            future appropriations.   The provislcns ci‘ this
            Act shall be in force and effect only so long
            as the United States of America is at war with
            Germany, Japan or Italy.

                  "Sec. 2.  The fact that there is doubt as
            to the authority of the Federal Government tc
            impose duties on State officers and employees,
            as such, without the consent of the State, and
            the State of Texas being desirous of cooperating
            to the fullest degree' with the Federal Govern-
            ment in its effort to collect taxes to finance
            the war effort, creates an emergency and an im-
            perative public necessity that the Ccnstitution-
            al Rule requiring bills to be read on three sever-
            al days in each House he suspended, and said Rule
            is hereby suspended, and that this Act shall take
            effect,from and after its passage, sold it is so
            enacted."

                      We quote the following paragraph from your letter:

                  "The Congress has recently enacted what is
            commonly referred to as the 'Current T&u Payment
            Act of 1943,' which provides fcr the current col-
            lection of income taxes on individuals ,which are
            already imposed by the Internal :icvcnue Code. No
            new taxes are imposed by this Act nor are any
            old ones removed. This Act will effect the col-
            lection of tax as income as earned. The 'Cur-
            rent Tax Payment Act of 1943' changes the method
            in collecting Federal Victory Income Taxes and,
            in effect, substitutes therefor the currc~:i;j:ay-
            ment of income taxes."

             We think it clear that the reference in S. B. No.
2 to the provisions of the Federal Internal Revenue Act of
1942 was not intended to restrict the application of the
policy adopted by the Legislature of co-operation with the
Federal Government in the collection of taxes during C.'
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            Honorable Geo. H. Sheppard - page 3 0-5408



            istence of the present war, to the provisions of that particu-
            lar enactment, Rather, the reference to the Federal Internal
            Revenue Act of 1942 was merely for the purpose of identifica-
            tion of the policy enacted by the Federal Congress with re-
            spect to withholding taxes from wages paid public officers
            and employees, with which policy the Legislature of this State
            determined, by 9. B. No. 2, to co-operate.

                    This, we think, is made clear by observing that the
             State could have legitimate concern only with the question
            whether its public officers and employees, ns such, should be
            required to assume the obligation to the Federal Government
            of withholding from salaries or wages paid to public officials
            and employees taxes on income due to the Federal Government
            under the laws promulgated by the Congress of the United
            States,  Other provisions of the law could not legitimately
            ccncern the State as such, for the State's action or non-action
            could not reduce the liability of the officers and employees of
            the State to the Federal Government for inccme taxes due cn sal-
            aries or wages earned by them, nor could the State, 'by action
            or non-action, in anywise impede or restrict the operation of
            provisions of the Federal Taxing Act affecting public officers
            and employees in their Eapacity as private citizens,

                    These observations make it plain that the only object
            or purpose of the passage of 9. B. No. 2 was to give the con-
            sent of the State that the Federal Government might impose the
            duty on State officers and employees as such to withhold, at
            the source, from salaries and wages paid to public officers
            and employees, income taxes assessed by the Federal Government,
            That this is the true object and purpose of the enactment is
            emphasized by the recitations of the emergency clause,, incor-
            porated in Section 2 of the enactment.

                    To reach any other conclusion we must attribute to
            the Legislature the intent to do-operate with the Federal i,
            Government only in the collection of the "Victory" Income "ax
            in the amount of five per cent, iif!more a& no less,as such
            tax is provided fnn     the Internalxenue    Kt of 1942, and
                         act of the Congress, Such construction would F
            in no other ---
            Fire the holding that, if the Congress, inthe Internal Reve-
            nue Act of 1943$ should reduce the Victory Income Tax to one
            per cent or raise it to seven per cent, the legislative cl-
            sent given in S. B. No, mshould not apply, To give the Act
            such a narrow and literalistic interpretation is to observe
            the form and ignore the substance,: Rather, ryethink', the i4ct
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Honorable Geo. H. Sheppard - page 4 O-5408



evinces a legislative intent to give its consent that the Con-
gress, during the war, may require officers and employees of
this State and its instrumentalities having control as such
ever the payment of salaries and wages to withhold from such
wages and salaries Federal income taxes assessed therecn
against the persons to whom the wages or salaries are due.

        Since the chief effect of the Current T,ax Payment
Act of 1943 'to apply the withholdin; provisions of the
Federal Internal Revenue Act of 1942 not only to the Federal
Victory Income Tax, but also to taxes on incoce ,zenerally,
you are advised that, in the opinion of this del,artnent, S. B.
No. 2. required all officers and employees of this State, its
agencies, instrumentalities, political subdivisions, and
municipalities, to comply with the withholding prcvisio?s of
the Current Tax Payment Act of 1943*

                                  Very truly yours

                             ATTORNEY GENERAL OF TEXAS

                             BY        R. W. Fairchild

RWF-MR/X/pam
APPROVED July 1, 1943
GERALD C. MANN
ATTORNEY GENERAL OF TEXAS
r




                                 o-5408
    IT:P:T:2                     Treasury Department
    RFD-5
                                 EY$:":9$;

    Collector
    Post Office Box 1150
    Austin, Texas

            Reference is made to your letter dated February 18,
    1947, transmitting a letter dated February 11, 1947 from Charles B.
    Mbcre, State Representative of,.the 87th Legislative District of 'fexas,
    concerning the withholding of Federal Income Tax on &Cl.00
    per day received by Members of the State Senate and 'louse of "epresenta,
    tivesi,jwhileattending sessions of the State Legislature at Austin, Tex-
    as.   r. Moore inquires W-War    or not the per diem of $10.00
    per day is subject to withholding tax.

             The per diem in question is authorized by Article III, Sec-
    ti.on 24 of the Constitution of Texas, entitled *Uleage   and Per
    DJ-em." This article authorizes, in addition to mileage, the ayment
    to Aembers of the Legislature of a per diem of not exceeding i 10.00
    per day for the ,first 120 days of each session and after that no ex-
    ceeding $5.00 per da:: for the rema??!gr of the session.

            While the article referred to does not specifically state
    the $10.00 per diem to be in lieu of subsistence, it ap:ears that it
    was intended to compensate legislators for expenses incurred while at-
    tneding sessions of the Legislature in Austin, Texas.

            Accordingly, this cffice holdsthat the per diem allowance
    paid under the provisions of Article III, Section 24 of the Gon-
    stitution of Texas, entitled "Mileage and Per Diem" does not ccnstitute
    "wages" within the meaning of section 1621 of the Internal Revenue
    Code and is not subject to withholding of Federal income tax at
    source under section 1622 of the Code.

            The per idem allowance should, however, be included in gross
    income for Federal income tax purposeg.  In computing net income,
    such part of the allowance as is expenued in connection with the
    performance of official duties may be taken as a deduction under
    Section 23(a)(l)(A) of the Internal Revenue Code.


                                       (Signed) E. L. McLarney
                                        Deputy Commiss$oner
                                                              .

                       O-5408


FBP:sc///PAM                 March 7, 1947


Honorable Charles 3. Moore
House of Representatives
State Capitol
Austin, Texas

Dear Mr. Moore:

Reference is made to your letter of the 11th ultimo,
addressed to me concerning the taxability of the
$10.00 per day.received by Members of the Legislature
as per diem while attending the State Legislature,
with special reference as to whether this $10.00 is
subject to withholding tax,

You are advised that I submitted this question to the
"egal Department of the Bureau of Internal Revenue at
Washington, D. C. for an opigion. I am enclosing you
a copy of the decision dated March 4, 1947. You will
note that this opinion holds yhat the $10.00 per diem
is not subject to withholding tax. You will also
note in the last paragraph of this opinion that the
ruling holds that the $lO.OO:*sh~iUd be included in
gross income for b'ederal Income Tax purposes and that
deductions may be taken in connection with performance
of official duties as provided in section 23 (a) (l)(A)
of the Internal Revenue Code,

A copy of this letter and a copy of the ruling is be-
ing furnished to Honorable Price paniels, Attorney
General of Texas, and "onoPable George H, Sheppard,
Comptroller of Public Accounts, that these officials
may be guided accordingly.

                             Very truly yours,            c


                                  (Signed)

                             Frank Scofield,
                             Collector

Encl. 1
cc/Honorable Price Daniels
   Honorable George H. Sheppard
