                  THE        Li-lTORNEY                   GENERAL

                                     OF      TEXAS

                                    AUS-ITN~LTEXAR



                                 November     24, 1959

Honorable   William    A. Harrison                  Opinion   No. WW-746
Commissioner      of Insurance
State Board of Insurance                            Re:   ,Articie    21.28 Texas   Insurance
Austin, Texas                                             Code and the payment of con-
                                                           tributions    under the Texas Un-
                                                           employment      Compensation    Act
                                                           on employees      of the State
                                                           Liquidator.

Bear   Mr.     Harrison:

              Your request for an opinion         has been    received     and we quote
from   your     request as follows:
                      A4
                        . . .the Liquidator      named and appointed under
              the authority     of Article    21.28, Texas Insurance      Code,
             has been making contributions            to the Texas Employ-
             ment CommiasIoiras            prescribed   by the Texas   Unem-
              ployment     Compensation        Act on the attorneys,   clerks,
             and other assistants,         including  the accounting   and
             secretarial      personne1,     employed   by the Liquidator
             under the authority        of the State Board of Insurance.
             Ail of these employees           are named and appointed by
             the Commissioner          of Insurance    in accordance   with
             Section    12(b), Article     21.28, Texas    Insurance  Code.

                     “We respectfully       request your    opinion as to
             whether    the employees      in the office of the Liquidator,
             who are appointed       in accordance     with Section   12(b),
             Article   21.,28, Texas    Insurance   Code, are subject to
             the terms of the Texas Unemployment             Compensation
             Act?    In other words, must contributions          be paid on
             such employees?      ”

              Article   21.28,   Section    12(b) provides    In part    as follows:

                     “The Board shall have the power to appoint
             and fix the compensation    of the Liquidator     and of
             such special  deputy liquidators,  counsel,    clerks,   or
             assistants,  as it may deem necessary.       . .”

          Attorney General    Opinion No. S-141 held that the Liquidator
and his employees   appointed under Article   21.28, Texas Insurance     Code,
were State employees    within the terms of the State Employees    Retire-
ment Act and were eligible    for membership   in the Employees   Retirement
Hon.   WiIIiam   A. Harrison,     page 2      (ww-746)



System of Texas.      However,   the opinion declined     to pass on the
question  of their coverage    under the Texas Unemployment         Com-
pensation  Act because of a prior federal       ruling requiring   such
employees    to make contributions     under the Federal     Unemploy-
ment Tax Act.     Since the writing    of this opinion,  the Supreme    Court
of Texas has had before     it questions   concerning   the status of certain
employees    of the State Liquidator.

            In the State Board of Insurance           v. Betts, 315 S.W.2d 286
(1958) on an orininal      action of mandamus brst                by the State Board
of Insurance    an; the Insurance         Commissioner,~prayIng           that a dis-
trict judge be instructed       to expunge an order entered            by him pur-
porting   to increase    the monthly compensation            allowed    to attorneys
for the liquidator-receiver         in insurance      company     receivership      cases
pending in his district      court, the Supreme          Court held that, the pro-
visions   of the statute, giving the State Board of Insurance                power    to
appoint and fix compensation           of the Liquidator      and his counsel is man-
datory and the judge’s       order increasing        the compensation        in disregard
of the statute   was void.      This decision,      and two earlier      ones by the
Texas Supreme       Court (State Board of Insurance             v. Betts, 308 S.W.Zd
846 and State Board of &.urance             v. Betts, 315 S.W.2d 279) have con-
firmed   the constitutionaiity       of Article   21.28, Sec. 12(b), and affirmed
that the full-time    employees        of the liquidator-receiver        appointed     in
accordance     with this section of the Texas           Insurance    Code are subject
to the supervision     and control       of the Commissioner         of Insurance,
Attorney    General   Opinion No. WW-432 also sets out this same conclu-
sion.

           The Texas Unemployment       Compensation     Act by Section (5)(g)
of Article  5221(b)-17 exempts   state employees     from making contribu-
tions under this Act, such section    reading in part as follows:

                   “(g)  Service   performed    in the employ of
           this State or of any other state or of any political
           subdivision   thereof,   or any instrumentality       of any
           one or more of the foregoing       which is wholly-owned
           by this State or by one or more states or political
           subdivisions;    and any service    performed      in the
           employ of any instrumentality       of this State or of
           one or more states or political       subdivisions     to the
           extent that the instrumentality      is with respect      to
           such service,    exempt under the Constitution         of the
           United States from the tax imposed by Section 1600
           of the Federal    Internal   Revenue Code;. . .”

          In addition,    the federal  government    has reversed          its prior
ruling and by letter under date of September         1, 1959 from         the Director
of Tax Rulings,    Division   of the Secretary   of the Treasury          of the United
States, held that:
Hon.   William   A. Harrison,     page   3   (WW-746)




                   “We conclude        that the Liquidation   division
            is an integral    part of the Board of Insurance         Com-
           missioners,      an agency of the State of Texas.
           Individuals    who act in a representative        capacity     and
           who are appointed        or employed     pursuant to Section
            12(b) of Article    21.28 of the Texas      Insurance     Code
           by the Board of Insurance,          are employees     of the
           Board.    Their    services     in such capacity   are excepted
            ‘employment       under the Federal      Insurance     Contri-
           butions Act and the Federal          Unem loyment Tax Act
           by Sections    3 132(d)(?) and 3306(c) P7), respectively,
            of the Internal    Revenue      Code.”

           And further,   by a letter dated October    9, 1959, to C. H.
Langdeau.    State Liquidator,    the group supervisor   of the United States
Treasury    Department,    Internal   Revenue Service,   District Director’s
Offlce,  Austin, Texas,    stated that:

                    “It is our opinion that you are correct     in your
            Interpretation    that the 70 some-odd     people employed
           by the Liquidation      Division  on a continuing  basis are
           not employees      of the estates   of insurance  companies
           being liquidated.”

            Based on the reasoning      of Attorney    General    Opinion No.
WW-432,     the above cited Betts case and the new rulings from the
Internal   Revenue Service,xonciude             that the full-time    employees
of the State Liquidator’s     Office insofar as Article       5221(b)-17,   Sec.
(5)(g) is concerned   are performing       service   in the employ     of the
State and, therefore,     are not required     to make contributions      under    the
Texas    Unemployment      Compensation     Act.


                                  SUMMARY

                       The   full-time   employees      of the
                  ~~~~2~,~~~~~~;~~~~~;loyU~~~n”t-
                  continuing  basis are performing      ser-
                  vice in the employ of the State insofar
                  as Article  5221(b)-17 Sec. (5)(g) is con-
                  cerned and are exempt from the Texas
                  Unemployment     Compensation    Act.
                                                                                              -   -




          Hon.    Wiliiam    A. Harrison,   page 4    (WW-746)



                                                          Very    truly   yours,

                                                          WILL    WILSON
                                                          Attorney   General       Of Texas




                                                          BY     -dwe
                                                                 Richard A. Wells
                                                                 Assistant

RAW:lmc

APPROVED:

OPINION         COMMITTEE:

W. V. Geppert,       Chairman

Iola   Wilcox

Gordon     Cass

Fred    B. Werkenthin

=VIEWED      FOR THG ATTORNEY               GENERAL
BY:
     Leonard   Passmore
