Hegar v. 1st Global, Inc.

          FROM THE 126TH DISTRICT COURT OF TRAVIS COUNTY NO. D-1-GN-17-005832, THE HONORABLE DON R. BURGESS, JUDGE PRESIDING

          Before Chief Justice Rose, Justices Triana and Smith

          MEMORANDUM OPINION

          Jeff Rose, Chief Justice

         Appellants Glenn Hegar, Comptroller of Public Accounts of the State of Texas, and Ken Paxton, Attorney General of the State of Texas, appeal from the trial court's order denying their motion to dismiss for lack of jurisdiction filed in the underlying tax-protest suit brought by appellee 1st Global, Inc. As explained below, we will reverse the trial court's order and render judgment dismissing 1st Global's protest suit.

         BACKGROUND

         This case involves the interplay between Sections 112.051, 112.052, and 171.202 of the tax code. See Tex. Tax Code §§ 112.051, 112.052, 171.202. Under Section 171.202, a taxable entity that is required to pay franchise taxes must file with the Comptroller an annual report providing the information necessary to compute its franchise-tax obligation. Id. § 171.202(a). The report is due by May 16 of each year, but the Comptroller "shall grant an extension of time" if the entity requests it and remits a certain sum with its extension request.^[1]Id. § 171.202(c), (e). The length of the extension varies depending on whether the taxpayer is required to use electronic funds transfer (EFT) to pay its taxes: if the entity is "not required by rule to make its tax payments by" EFT, it can obtain an extension to November 15, id. § 171.202(c); but if it is "a taxable entity that is required by rule to make its tax payments by" EFT, it can obtain an extension to August 15, id. § 171.202(e).^[2]

         Section 112.051, titled "Protest Payment Required," provides that a taxpayer who contends that a tax "is unlawful or that the public official charged with the duty of collecting the tax . . . may not legally demand or collect the tax" and wishes to bring a protest suit must both "pay the amount claimed by the state" and "submit with the payment" a written protest that states "fully and in detail each reason for recovering the payment." Id. § 112.051. If the taxpayer complies with those requirements, Section 112.052, titled "Taxpayer Suit After Payment Under Protest," waives the State's sovereign immunity and allows the taxpayer to file suit against the state "before the 91st day after the date the protest payment was made, or the suit is barred." Id. § 112.052; see In re Nestle USA, Inc., 359 S.W.3d 207, 208, 212 (Tex. 2012) (Chapter 112's provision of taxpayer rights of action waives State's immunity from suit). In the franchise-tax context, Section 112.052(b) allows for the extension of the deadlines for filing the protest statement and protest lawsuit. Tex. Tax Code § 112.052(b). If the taxpayer is granted an extension of time for filing its franchise-tax report "under Section 171.202(c)" and files its franchise-tax report by the extended deadline, its protest statement, otherwise required by Section 112.051 to be submitted with the tax payment, may be filed with the report. Id. Further, if those requirements are met, the time for filing a protest suit is extended to ninety days from the date the report is filed. Id.

         STANDARD OF REVIEW

         In construing a statute, we seek to ascertain and effectuate the legislature's intent in enacting the statute. Southwest Royalties, Inc. v. Hegar, 500 S.W.3d 400, 404 (Tex. 2016); Rent-A-Center, Inc. v. Hegar, 579 S.W.3d 493, 495 (Tex. App.-Austin 2019, pet. filed). "We start with the text because it is the best indication of the Legislature's intent." Ojo v. Farmers Grp., Inc., 356 S.W.3d 421, 435 (Tex. 2011). We consider the statutory language in the context of the entire act and presume that the legislature chose each word for a purpose and purposefully omitted words not chosen. City of Dallas v. TCI W. End, Inc., 463 S.W.3d 53, 55 (Tex. 2015); Rent-A-Center, 579 S.W.3d at 495-96. "When statutory text is clear, it is determinative of legislative intent, unless enforcing the plain meaning of the statute's words would produce an absurd result." Combs v. Newpark Res., Inc., 422 S.W.3d 46, 49 (Tex. App.-Austin 2013, no pet.); see Hegar v. Sunstate Equip. Co., 578 S.W.3d 533, 535 (Tex. App.-Austin 2017, pet. granted). If the statute is unambiguous, we simply consider the statutory language rather than turning to extrinsic aids or canons of construction to construe it. City of Richardson v. Oncor Elec. Delivery Co., 539 S.W.3d 252, 261 (Tex. 2018); Combs v. Roark Amusement & Vending, L.P., 422 S.W.3d 632, 635 (Tex. 2013); Rent-A-Center, 579 S.W.3d at 496; see Combs v. Health Care Servs. Corp., 401 S.W.3d 623, 630 (Tex. 2013) ("It is true that courts grant deference to an agency's reasonable interpretation of a statute, but a precondition to agency deference is ambiguity; an agency's opinion cannot change plain language." (cleaned up)).

         If a statute is ambiguous, on the other hand, we give deference to the interpretation of the agency charged with enforcement of the statute as long as that interpretation is consistent with the statutory language and not plainly erroneous. Texas Dep't of Ins. v. American Nat'l Ins., 410 S.W.3d 843, 853 (Tex. 2012); TGS-NOPEC Geophysical Co. v. Combs, 340 S.W.3d 432, 438 (Tex. 2011); Rent-A-Center, 579 S.W.3d at 495-96. Our deference, however, is "tempered by several considerations," and we look to whether "(1) the agency's interpretation has been formally adopted; (2) the statutory language at issue is ambiguous; and (3) the agency's construction is reasonable." American Nat'l Ins., 410 S.W.3d at 853-54 (quoting Railroad Comm'n of Tex. v. Texas Citizens for a Safe Future & Clean Water, 336 S.W.3d 619, 625 (Tex. 2011)); Rent-A-Center, 579 S.W.3d at 496.

         We generally construe administrative rules in the same manner. Zimmer US, Inc. v. Combs, 368 S.W.3d 579, 583 (Tex. App.-Austin 2012, no pet.); see TGS-NOPEC ("If there is vagueness, ambiguity, or room for policy determinations in a statute or regulation, as there is here, we normally defer to the agency's interpretation unless it is plainly erroneous or inconsistent with the language of the statute, regulation, or rule."). "Unless a rule is ambiguous, we follow the rule's clear language; when there is vagueness, ambiguity, or room for policy determinations in a rule, we defer to the agency's interpretation unless it is plainly inconsistent with the language of the rule." Zimmer US, 368 S.W.3d at 583.

         DISCUSSION

         1st Global paid more than $45, 000 in franchise taxes for the 2016 tax year, meaning it was required to make "certain payments" by EFT under Rule 3.9(b)(2). See 34 Tex. Admin. Code § 3.9(b)(2) (2019) (Comptroller of Public Accounts, Electronic Filing of Returns and Reports; Electronic Transfer of Certain Payments by Certain Taxpayers). On May 12, 2017, 1st Global requested an extension of time to file its 2017 franchise tax report and also submitted a $182, 000 "extension payment" via EFT. 1st Global's deadline for filing its report was then extended to August 15, 2017, and on that date, it submitted its 2017 franchise tax report along with a protest letter, seeking a refund of $121, 777.41 from the $182, 000 paid in May. On October 17, 1st Global filed the underlying protest suit. The Comptroller filed a motion to dismiss for lack of jurisdiction, arguing that the suit was barred by sovereign immunity because 1st Global had paid its $182, 000 extension payment without an accompanying protest letter, meaning the payment should not be considered a protest payment under Section 112.051. See Tex. Tax Code §§ 112.051, .052. The trial court denied the motion to dismiss, and the Comptroller filed this appeal.

         As noted earlier, if a taxable entity is required to pay a tax but believes that the tax is unlawful or that the relevant official may not legally demand or collect it, the taxpayer still must "pay the amount claimed by the state." Id. § 112.051(a). If the taxpayer intends to file a protest lawsuit, it must file a written statement of protest at the same time the payment is made. Id. § 112.051. If such a statement is not submitted at the time, the payment generally is not considered to be a protest payment and may not be the subject of a protest suit. See Local Neon Co. v. Strayhorn, No. 03-04-00261-CV, 2005 WL 1412171, at *5 (Tex. App.-Austin June 16, 2005, no pet.) (mem. op.) (purpose of protest-statement requirement is to put State on notice of argument that tax demand is unlawful or unauthorized). Because the Tax Code specifies that only a taxpayer that receives an extension under Section 171.202(c) may postpone the filing of its protest statement to coincide with the filing of its report, the logical corollary is that a taxpayer that obtains an extension under any other subsection does not receive an extension of time to file its protest statement. See Tex. Tax Code § 112.052(b). Such a taxpayer ...