                     December      11, 1952


Hon. Jack Ross               Opinion No. V-1552
Secretary of State
State of Texas               Re:    The proper section of Arti-
Austin, Texas        ’              cle 7084, V.C.S., under which
                                    motor bus and motor freight
                                    truck corporations should file
Dear Mr. Ross:                      their franchise tax returns.

           You request the opinion of this office upon the question
presented in your letter which reads as follows:

            “We have a number ‘of motor bus and motor
     freight truck corporations, ordinarily designated
     as ‘common carriers.’ which are operating under
     certificates of public convenience and necessity
     issued by the Railroad Commission of Texas. These
     corporations are required to file a franchise tax re-
     turn as provided in Article 7089, R.C.S., and pay a
     franchise tax in accordance with one of the provisions
     of Article 7084. R.C.S. ~The question arises as to
     which classification is proper, 7084 (1) or 7084 (3),
     in computing the franchise tax due by these corpora-
     tions.

           “In accordance with Article 7084 (1) and (3).
     R.C..S., as interpreted by your office in Opinion No.
     O-1331, we have allowed ‘common carriers’ which
     are maintaining ‘fixed lines and schedules’ to file
     their franchise tax returns as a public utility under
     Article 7084 (3), R.C.S., thereby avoiding the payment
     of any tax upon their long term indebtedness as de-
     fined in that article. Other ‘common carriers’ which
     do not maintafn ‘fixed lines and schedules’ have been
     required to file their franchise tax return under the
     provisions of Article 7084 (1). R.C.S., thereby paying
     franchise taxes upon their long term indebtedness.

          UArticle 7084 (d) which at the time of the above
     opinion of your office ‘reads in part as follows: * . . .
     All public utility corporations, which shall include
     every such corporation engaged solely in the business
     of a public utility whose rates or service is regulated,
     or subject to regulation m whole or in part, by law
.   .

        Hon. Jack Ross, page 2 (V-1552)



              shall pay a franchise tax as provided in this Act,
              . . : was changed in 1949 to Article 7084 (3). It
              noiv reads as follows:      ‘All public utility corpora-
              tions; which shall include every such corporation
              engaged solely in the business of a public utility as
              defined by the laws of Texas whose rates or services
              are regulated, or subject to regulation in whole or in
              part, by law. shall pay a franchise tax as provided in
              this Article. . . .I Opinion O-133 1 ulaced authoritv
              on the words “whose rates or service is resulated. or
              subject to regiBrt                              allowing com-
              mon carriers      to file their franchise
                                                    -   ;tax returns as a
              uublic utilitv. The 1949 Amendment changed these words
              Eo ‘a public: utility as defined by the laws of Texas whose
              rates or services are regulated. . . .

                    ‘This office respectfully requests that you give
              your opinion in view of the above and in the light of
             -Chapter 10, V..C.S., titled ‘Public Utilities’, Articles
              1416 to 1446, inclusive, defining public utilities and the
              opinion of Judge Blair in Gulf States Utility Company vs.
              State, 46 S.W.2d 1018, cited i         0 ini    o-133 1  d
             JiElJEg that the Legislature rX?YefiZe       v%t corporz
              tions are public utilities, as to whether these ‘common
              carriers’ should file their franchise tax returns under
              Article 7084 (1) or as a public utility under Article
              7084 (3), regardless of maintaining a ‘fixed line and
              schedule’.‘

                     The basic franchise tax-levying provisions are contained
        in Article 7084, V.C.S. It is observed that this statute levies the
        tax generally against every domestic and foreign corporation with
        exceptions in this language: “( 1) Except as herein provided, every
        domestic and foreign corporation heretofore or hereafter chartered
        or authorized to do business in Texas, or doing business in Texas,
        shall, on or before May first of each year, pay in advance to the
        Secretary of State a franchise tax for the year following, based up-
        on . . .* : Then follows the formula for the measurement of the tax.

                    Following this general statement of the measurement of
        the tax there are provided certain exceptions and modifications of
        the tax rate for certain types of corporations.   For example, Clause
        (2) provides for a tax equal to one-fifth of the general levy on cor-
        porations required by law to pay an intangible assets tax except
        cor~porations enjoying the use of the public highways by virtue of a
        certificate of public convenience and necessity granted by the Rail-
        road Commission of Texas and Clause (3) provides a special meas.-
        urement for the computation of the tax upon public utility corpora-
        tions which is in this language: “Rxcept as provided in preceding
I:,
 I
      Hon. Jack Ross, page 3 (V-1552)



      Clause (2), all public utility corporations, which shall incIude
I     every such corporation engaged solely in the business of a pub-
      lic utility as defined by the laws of Texas whose rates or serv-
!     ices are regulated,, orsup~etf    to a regulation in whole or in part,
/
/     by law, shall pay a franchise tax as provided in this Article, ex-
I     cept the same shall be based on that proportion of the issued and
!     outstanding capital stock, sur.plus. and undivided profits, which
      the gross receipts of the business of said corporation done in
!     this State bear to its total gross receipts instead of the groJs
I     assets; and in lieu of the rate hereinbefore prescribed s&d tax
      shall be computed on the basis of One Dollar and Twenty-five
      Cents ($1.25) per One Thousand Dollars ($1,000) or fractional
/     part thereof.”

j                You present the question of whether or not motor bus
      and motor freight truck corporations which are required by law
      to secure from the Railroad Commission a certificate of con-
      venience and necessity and are designated as “co-on       carriers”
      are required to pay a franchise tax as provided for the general
,     levy in Clause (1) of Article 7084, V.C.S., or Clause (3) of said
      article applicable to public utility corporations.
I
!                  To answer this question we must first determine
      whether ‘motor carriers commonly designated as common car-
!
      riers are public utility corporations as provided in the .t+xing
      statute. It is significant to note that prior to 1949,,Clause (a)
!     of Article 7084, V.C;S., which is now Clause (3) of said article,
      provided as follows:    y . . . all public utility corporations, which
      shall include every such corporation engaged solely in the busi-
      hess of a public utility whose rates or services are regulated,
      or subject to regulation in whole or in part, by law, shall pay a
/
      franchise tax as provided in this Article . . .” The comparable
      provision in the present act is Clause (3). changed in 1949 by
j     an amendment to Article 7084, V.C.S., which now reads as fol-
i
      lows: ” . . . all public utility corporationg, which shall include
1     every such corporation engaged solely in the business of a pub-
,     lic utility as defined,by the laws of Texas whose rates or seF-
t     Ices are regulated, or subJect to a regulation in whole or in
      part, by law. shall pay a franchise tax as provided in this Arti-
      cle . . .*

                  There is a marked distinction between the language of
      the act prior to the 1949 amendment and that inserted by the Leg-
      islature in the 1949 amendment and we must assume that.the Leg-
      islature had a very definite purpose in making this change. We
      think this purpose is obvious. The .Legislature sought to make
      certain that only those corporations which were by law defined.by
      the Legislature to be public utility corporations ne      entitled
      to have their franchise tax measured under the terms of Clause

                                                                               .
Hon. Jack Ross, page 4 (V-1552)



(3) of the act instead of Clause (1). The term “by the laws of
Texas” means .by statutory definition or classification.     .This
is the holding of the court in the case of Gulf States Utilities   -
Companyv. State, 46 S.W.2d 1018 (Tex.div.App.         1Y32, error
ref.). In this case, ,the question was whether or not the manu-
facture of ice’ constituted a public utility entitled to pay fran-
chise taxes as such. The court, after discussing the general
aspects of a public utility under general law. held in effect that
it was a matter for legislative determination and in the absence
of a statute designating or classifying a corporation as a public
utility, it could reap no benefit under the section of the statute
applicable to public utilities. This is manifest by the following
quotation from the case:

              ‘Passing to a consideration of subdivision (d),! -,,
      supra, of the Franchise Tax Act of 1930, we find
      that it neither expressly nor impliedly includes or
      ,classifies for taxfng purposes private corporations
       engaged in the manufacture and sale of ic,e to the
      public in Texas a&public utility corporations.’
       Under the language of subdivision (d) only ‘public
      .utility corporations, which sbaI1. include ‘every such
      corporation engag,ed solely in the business of a pub-
      lic utility whose rates or service is regulated, or
      .subjec.t to regulation, in whole or in part, by law,’
      are included. It is manifest from this language that
      the Legislature did not intend to include within the.
       statute any corporation which it had not theretofore,
      or might thereafter, declare to be ‘by law’ a public
      utility corporatiorior business.     The phrase ‘every
      such corporation’ is necessarily limited to ‘all pub-
      lic utility corporations’ declared to be such ‘by law,’
      which means, as applied here! by a legislative en-
      actment. If the language may be regarded as of
      doubtful meaning in this regard, then we think that
       such const~ruction is manifestly the intention of the
      Legislature from its long-continued policy of en-
       acting from time to time declaratory statutes, de-
       claring businesses or enterprises to be public
       utilities, or to be affected with the public interest,
      and in subjecting them to some sort of public regu-
       lation or control. And especially has this been the
       practice of the Legislature with respect to busi-
      nesses or enterprises which were deemed to have
      by growth and by public need and use become pub:
       lit necessities or utilfties. This intention is further
       manifest from the practical standpoint of collecting
       the tax. The statute is a tax statute enacted for the
       purpose 0f mposm
       ministrative officers or departments of the govern-
.            .




         7        Hon. Jack Ross,   page 5 (V-1552)



                         ment from what character of corporations they
                         should demand the tax., We hardly think the legis-
                         lature intended to leave to these officers and depart-
                         ments of government the intricate legal matters of
                         determining what businesses are public utility busi-
                         nesses, or what corporations are public utilfty corpo-
                         rations, or of determining the matter of what public
                         utility corporations’ rates or service are subject to
                         regulation. It is well settled that the forum for declar-
                         ing a business to be affected with the,public interest,
                         and for subjecting its rates or service to regulation,
                         is in the first instance the Legislature, and, until the
                         Legislature has acted; we do not think administrative
                         officials or de artments of government can determine
                         the questions. B

                                ‘This case was decided prior to 1949 and henc~e prior to
                 , the 1949 amendment. We think the 1949 amendment by the .Legis-
                   lature does nothing more than to definitely confirm the decision
    c,            ~‘in the Gulf States Utilfties Company chase to the effect that the desig-
                   nation or classification as a public utility must be by statute, thus
                   relieving the Secretary~of State Of the intricate legal matters of
                   d~etermining what corporations are public utilities within the purview
                   of this statute.

                                There are certain statutory provisions which define pub-
                   lic utilities generally.  These are embodied in Articles 1416 to 1446,
                   inc,lusive, V.C.S. Also, Article 6050, V;C.S., classifies gas pipeline
                   corporations as public. utilities. A careful search, however, of all
                   the pertinent statutory provisions,. pertaining to motor bus and truck-
                   ing corporations, although snbj,ected to~regulation by the Railroad
                  .Commission. nowhere defines or classifies these corporations as
                   public utilities. In the~absence of a statute designating these corpo-
                   rations as public utilities.or classifying them as such, we think
                   they should be classified as corporations subject to and required
                   to pay the tax imposed by Clause (1) of Article 7084. V..CS.. and
                  not by Clause (3) of said article applicable to corporations that are
                   public utilities.

                             Attorney General’s Opinion O-133 1 (1939) was based
                  primarily upon that portion of the statute which then read ‘ivhose
                  rates or service is regulated or subject to regulation in whole or
                  in part,” as justifyfng the classification as public utilities of mo-
                  tor busses and motor trucks whose operations were regulated by
                  the Railroad Commission.      We think the 1949 amendment which
                  added the further condition that they be classified or defined as
                  such by the laws of Texas llmits the application of the special
                  consideration accorded public utility corporations to only those
                  which the Legislature has chosen by statute’to designate or clas-
                  sify as public utilities. Since the Legislature has not by statute
Hon. Jack Ross, page 6 (V-1552)



classified motor busses and motor carriers as public utilities,
we have no authority to do so by implication. Mere regulation
by the Railroad Commission as,authorized by law is not suf-
ficient. ~To hold that regulation alone was sufficient would, in
our view, nulIify and render meaningless the 1949 amendment
which provided that such a public utility in order to reap the
benefits of the lower tax that would result in the application
of the measurement of tax as provided in Clause (3) of Article
7084, V.C.S., must be designated or classified as such by
statute or legislative action. You are, therefore, respectfully
advised that it is our opinion that motor bus and motor freight
truck corporations ordinarily designated as common carriers
are s.ubject to and required to pay a franchise tax under Clause
(1) of Article 7084. V.C.S., and not under Clause (3) applicable
to public utility corporations.

                           SUMMARY

            Motor bus and motor freight truck corporations
      ordinarily designated as common carriers under a
      certificate of public convenience and necessity issued
      by the Railroad Commission of Texas are required to
      pay a franchise tax as provided in Clause (1) of Article
      7084. V.C.S.. and are not entitled to pay this tax as a
      public utility as provided in Clause (3) of said article.
      It is within the province of the Legislature to declare
      what corporations constitute public utilities within the
      purview ~of Clause (3) of Article 7084. V.C.S., and un~-
      less designated and classified by the Legislature as
      public utilities, corporations may not avail themselves
      of the lesser tax liability imposed upon public utilities
      by this statute.

APPROVED:                          Yours very truly,

.W. V. Geppert                      PRICE DANIEL
Taxation Division                  Attorney General

C. K. Richards
Revlew,ing Assistant

Charles D. Mathews
First Assistant


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