Can a Texas tax assessor-collector spend escrow interest without commissioners court approval?

Plain-English summary

Texas car dealers can prepay their property taxes on vehicle inventory through an escrow account that the county tax assessor-collector holds in the county depository (Tax Code section 23.122). That escrow earns interest. Brazos County Attorney James Kuboviak asked the Attorney General two questions about who controls that interest: whether the assessor-collector can put it in a separate account and spend it without the commissioners court's approval, and what it can be spent on.

On the first question, the office said the collector may keep the interest in a special account and spend it without commissioners court approval. The 1996 version of section 23.122(c) tells the collector to "retain" the interest "to defray the cost of administration of the prepayment procedure," calls it "the sole property of the collector," says it "may be used by no entity other than the collector," and bars using it to reduce the collector's regular appropriation. The office compared this to the prosecutor's "hot-check fund," which a series of opinions (most recently DM-357) had treated as "wholly outside of the county budgeting process." Reading section 23.122(c) alongside section 23.122(p), which sends dealer "fines" to the general fund but makes "penalties" the collector's sole property, the office found the legislature meant this interest to be a specially dedicated fund, not general county revenue.

The office was careful about what "sole property" means. It said it cannot mean the collector gets to keep the money personally, both because the statute earmarks it for administering the prepayment program and because handing public funds to a private person would violate article III, section 51 of the Texas Constitution. Quoting the Black's Law Dictionary definition of property (the exclusive right to possess, enjoy, and dispose of a thing), the office said the collector has no exclusive right of enjoyment here, only an exclusive (but conditional) right to dispose of the fund.

On the second question, the office said the interest can be used only for the cost of administering the prepayment program. It found nothing requiring those costs to be ones the county budget had not already covered, but it stressed that nothing lets the county "recapture" general expenditures from the fund, and that the last two sentences of subsection (c) forbid using the interest to reduce or affect the collector's regular appropriation. The office noted that section 23.122(c)'s "cost of administration of the prepayment procedure" language is narrower than the hot-check fund's "salaries and expenses of the prosecutor's office," so it is more like a records-management fee: the interest may not pay for general office expenses of the assessor-collector that are unrelated to the prepayment program. And, like hot-check money, the fund stays subject to audit by the county auditor and must be administered within the laws that govern the use of county funds.

Currency note

This opinion was issued in 1996. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

This opinion construed section 23.122 of the Tax Code (the dealer's motor vehicle inventory prepayment escrow), as amended effective January 1, 1996, along with the hot-check fund statute (article 102.007 of the Code of Criminal Procedure) and article III, section 51 of the Texas Constitution. These statutes have been amended since, so the subsections and details may differ today. Read this page for the office's 1996 reasoning, and verify the current Tax Code before relying on any specific provision.

What the opinion meant at the time

For county tax assessor-collectors: The opinion meant they could hold the interest earned on the dealer motor vehicle inventory tax escrow account in a separate account and spend it, at their discretion, to defray the cost of administering the prepayment program, without the commissioners court's approval. They could not use it for general office expenses unrelated to the program, nor for personal benefit.

For commissioners courts: The opinion meant this particular interest fund sat outside their budgeting control, like the prosecutor's hot-check fund.

For county auditors: The opinion meant the fund, though outside commissioners court control, remained subject to audit and to the general laws governing the use of county funds.

For lawyers: The office read the statute's "sole property of the collector," "retain," and "used by no entity other than the collector" language, by analogy to the hot-check fund (article 102.007 of the Code of Criminal Procedure and Opinion DM-357) and in pari materia with subsection (p), to keep the fund out of general county revenue, while limiting "sole property" so it could not be a personal grant barred by article III, section 51.

Common questions

Can a county tax assessor-collector spend the escrow interest without the commissioners court's approval?
Under this opinion, yes. The office concluded the interest is the collector's "sole property" under Tax Code section 23.122(c), like the prosecutor's hot-check fund, so it falls outside the commissioners court's budgeting control; the collector may keep it in a special account and disburse it without court approval.

Does "sole property of the collector" mean the collector can keep the money personally?
No. The office said it cannot mean personal use, both because the statute directs the collector to retain the interest to defray the cost of administering the prepayment program, and because handing public funds to a private individual would violate article III, section 51 of the constitution. The collector has an exclusive but conditional right to dispose of the fund, not to enjoy it personally.

What can the interest be spent on?
Only the cost of administering the prepayment program. The office said this language is more restrictive than the hot-check fund (which covers a prosecutor's office salaries and expenses), and the money may not go to general office expenses of the assessor-collector that are unrelated to the program.

Can the interest cover costs the county budget already pays for?
The office found nothing requiring the costs to be otherwise unfunded, but said that if a cost has already been defrayed the money will not be used for it, and that nothing lets the county "recapture" general expenditures from the fund. The last two sentences of subsection (c) forbid using the interest to reduce or affect the collector's regular appropriation.

Is this fund still audited?
Yes. The office said the same rules that apply to hot-check funds as public money apply here: the fund is subject to audit by the county auditor and must be administered within the laws governing the use of county funds.

Background and statutory framework

Section 23.122 of the Tax Code, amended by the Seventy-fourth Legislature effective January 1, 1996, requires a county tax assessor-collector to maintain a dealer's motor vehicle inventory escrow account in the county depository for the prepayment of certain property taxes. Subsection (c) directs the collector to retain the interest the account generates "to defray the cost of administration of the prepayment procedure," declares that interest "the sole property of the collector," limits its use to the collector alone, and bars using it to reduce or affect the collector's annual appropriation.

To decide who controls that interest, the office reached for the closest analogue: the prosecutor's "hot-check fund" under article 102.007 of the Code of Criminal Procedure, which a line of opinions (most recently DM-357) had placed "wholly outside of the county budgeting process," administered at the prosecutor's sole discretion rather than the commissioners court's. The "sole property of the collector" language, the office reasoned, signaled the same treatment for the escrow interest. A comparison within section 23.122 reinforced that: subsection (p) sends dealer "fines" to the county general fund but makes "penalties" the collector's "sole property," using the same protective language as subsection (c). Reading the subsections in pari materia, the office concluded the interest is a specially dedicated fund, not general county revenue.

The office then bounded the result. "Sole property" could not authorize personal enrichment, because the interest is earmarked for program administration and because article III, section 51 forbids granting public funds to a private individual; the collector holds only a conditional right to dispose of the fund. And the permitted uses are narrow. Unlike the hot-check fund's broad "salaries and expenses of the prosecutor's office," section 23.122(c) ties the interest to "the cost of administration of the prepayment procedure," which the office likened to a records-management fee (Local Government Code section 118.011(b)) and held could not cover general office expenses unrelated to the program. The fund remains public money: subject to audit by the county auditor and to the laws governing the use of county funds (citing Opinions DM-357, JM-313, and JM-967).

Citations

Constitutional and statutory provisions discussed:

• Tax Code § 23.122, including subsection (c) (escrow interest as the collector's "sole property," retained to defray the cost of administering the prepayment procedure) and subsection (p) ("fines" to the general fund; "penalties" the collector's sole property)
• Code of Criminal Procedure art. 102.007, including subsections (c) and (f) (the "hot-check fund")
• Tex. Const. art. III, § 51 (no grant of public funds to a private individual)
• Local Government Code § 118.011(b) (records management fee)
• County Road and Bridge Act § 4.202(a), V.T.C.S. art. 6702-1 (motor vehicle registration fee; discussed in Opinion DM-199)

Attorney General opinions cited:

• DM-357 (1995), DM-199 (1993), JM-313 (1985), JM-967 (1988), Letter Opinion 92-7 (1992)

Authority quoted:

• Black's Law Dictionary 1095 (5th ed. 1979) (definition of "property")

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/dan-morales/dm-0398
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1996/dm0398.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain — the linked PDF is authoritative.

Office of the Attorney General
State of Texas

DAN MORALES
ATTORNEY GENERAL

June 13, 1996

The Honorable James M. Kuboviak
Brazos County Attorney
Brazos County Courthouse
Bryan, Texas 77803

Opinion No. DM-398

Re: Whether a tax assessor-collector may, without approval of the commissioners court of his county, expend funds accrued as interest under section 23.122, Tax Code (RQ-813)

Dear Mr. Kuboviak:

You ask certain questions concerning interest on the dealer's motor vehicle inventory escrow account maintained by the tax assessor-collector pursuant to section 23.122 of the Tax Code, as amended by the Seventy-fourth Legislature. Act of May 18, 1995, 74th Leg., R.S., ch. 945, 1995 Tex. Sess. Law Serv. 4727, 4730-33. This statute requires the assessor-collector to maintain such an account in the county depository for the prepayment of certain property taxes on motor vehicle inventory. Subsection (c), as amended effective as of January 1, 1996, now reads as follows:

The collector shall maintain the escrow account for each owner in the county depository. The collector is not required to maintain a separate account in the depository for each escrow account created as provided by this section but shall maintain separate records for each owner. The collector shall retain any interest generated by the escrow account to defray the cost of administration of the prepayment procedure established by this section. Interest generated by an escrow account created as provided by this section is the sole property of the collector, and that interest may be used by no entity other than the collector. Interest generated by an escrow account may not be used to reduce or otherwise affect the annual appropriation to the collector that would otherwise be made.

Tax Code § 23.122(c) (emphasis added).

You ask two questions about the interest created by this escrow account and how it is to be administered. First, you ask whether the assessor-collector is "allowed to set up a special account for these funds and spend them without the approval of the commissioners court." In our view, these funds are analogous to the "hot-check fund" administered by the district attorney pursuant to article 102.007 of the Code of Criminal Procedure. The administration of that fund, as we have reiterated in a series of Opinions of which the most recent is Attorney General Opinion DM-357 (1995), is "wholly outside of the county budgeting process." Accordingly, we answer your first question in the affirmative.

Ordinarily, as we pointed out in Attorney General Opinion DM-357, expenditure of county funds is under the control of the commissioners court. Attorney General Opinion DM-357 (1995) at 3. However, the hot-check fund has been removed from the control of the commissioners court by article 102.007(f) of the Code of Criminal Procedure, which provides as follows:

Fees collected under Subsection (c) of this article shall be deposited in the county treasury in a special fund to be administered by the county attorney. . . . Expenditures from this fund shall be at the sole discretion of the attorney and may be used only to defray the salaries and expenses of the prosecutor's office, but in no event may the county attorney . . . supplement his or her own salary from this fund.

We believe it was the intent of the legislature, in denominating interest generated by the inventory escrow account as the "sole property" of the collector, to indicate that such funds, like the hot-check fund, were not subject to the control of the commissioners court. Further, the collector has the authority to separate these funds in a special account. Indeed, given the insistence of the statute that the collector "retain" the funds, and that they "may be used by no entity other than the collector," such separation is necessary for the statutory scheme to be effective. See Letter Opinion 92-7 (1992) at 2 (separate account required to avoid commingling of funds so that statute will be complied with).

The statute speaks of the fund derived from the interest on the inventory escrow account as "the sole property of the collector." We must ask what this means. It plainly cannot mean that the collector may retain the funds for his personal use and benefit, both because the collector is directed to retain the interest "to defray the cost of administration" of this prepayment procedure and because any such purported grant of these public funds to a private individual would be impermissible under article III, section 51 of the Texas Constitution. Black's Law Dictionary defines property, inter alia, as "[t]he exclusive right of possessing, enjoying, and disposing of a thing." BLACK'S LAW DICTIONARY 1095 (5th ed. 1979). In this case, the collector has no such exclusive right of enjoyment. However, the collector does have an exclusive, but not unconditional right to the disposal of the fund.

It has been suggested that the fund in question here is less like the hot-check fund and more akin to the records management fee established by section 118.011(b) of the Local Government Code, which is discussed in Letter Opinion No. 92-7, or the fee relating to motor vehicle registration mandated by section 4.202(a) of the County Road and Bridge Act, article 6702-1, V.T.C.S., which is discussed in Attorney General Opinion DM-199 (1993) at 1. However, in neither of those statutes, both of which unlike section 23.122 describe the fees involved as fees of office, is the fund described as a "sole property" of the officer; nor in either of those statutes is the officer directed to "retain" the fees involved.

We are further persuaded that it was not the intent of the legislature that this interest should be placed within the general county fund when we compare subsection 23.122(c) with subsection 23.122(p), enacted by the Seventy-fourth Legislature. Act of May 18, 1995, 74th Leg., R.S., 1995, ch. 945, 1995 Tex. Sess. Law Serv. 4727, 4731-33, 4733. Subsection 23.122(p), which contemplates that fines and penalties for failure to file a required inventory tax statement will be assessed against motor vehicle dealers, reads as follows:

Fines collected pursuant to the authority of this section shall be deposited in the county depository to the credit of the general fund. Penalties collected pursuant to the authority of this section are the sole property of the collector, may be used by no entity other than the collector, and may not be used to reduce or otherwise affect the annual appropriation to the collector that would otherwise be made. [Emphasis added.]

The "penalties" are treated precisely as the interest is in subsection (c), and they are distinguished from "fines" which are explicitly made part of the general fund of the county. Reading the two subsections in pari materia makes clear the legislative intent that these funds are not to be treated as general county revenue, but are rather a specially dedicated fund, the "sole property" of the collector, and like the hot-check fund are "wholly outside of the county budgeting process." Attorney General Opinion DM-357 (1995) at 6. As further evidence of this, we note the insistence in both sections that these funds "may not be used to reduce or otherwise affect" general appropriations to the assessor. Tax Code § 23.122(p).

We conclude, therefore, in response to your first question that the assessor-collector may set up a special account for the funds generated by the interest on the motor vehicle inventory escrow account, and that he may dispose of such funds without the approval of the commissioners court.

Your second question is whether the costs of administration for which the interest is dedicated may include costs and expenses already provided for in the county budget and paid for out of the general fund. We find nothing in the statute that requires that these costs be not otherwise provided for, although obviously if particular costs have already been defrayed the money will not be used to that end. More importantly, nothing in the statute supports a construction which would permit the county to recapture general expenditures from this fund. Indeed, the last two sentences of subsection (c), which note that the interest "may be used by no other entity" and "may not be used to reduce or otherwise affect the annual appropriation to the collector" expressly forbid such recapture.

What constitutes a legitimate cost of administration of the prepayment program is a matter of fact upon which this office cannot opine. We do note, however, that the requirement that the interest be used "to defray the cost of administration of the prepayment procedure" is more restrictive than the corresponding language in the hot-check fund statute, article 102.007(f) of the Code of Criminal Procedure, which permits that fund to be used "to defray the salaries and expenses of the prosecutor's office." In this respect, the interest at issue here is more akin to the records management fee established by section 118.011(b) of the Local Government Code, and these funds may not be used for general office expenses of the assessor-collector which are unrelated to the costs of the prepayment program.

Moreover, the same restrictions which apply to hot-check funds as public moneys also apply to the funds at issue here. Accordingly, these funds are subject to audit by the county auditor. Cf. Attorney General Opinion DM-357 at 8 (1995) (hot-check fund subject, as part of county attorney's accounts, to examination at least yearly). More generally, these funds, like the hot-check fund, must be "administer[ed] within the confines of laws applicable to the use of county funds." Attorney General Opinion JM-313 (1985); see also Attorney General Opinion JM-967 (1988); Attorney General Opinion DM-357 (1995). With these restrictions in mind, however, the funds generated by the interest on the dealer's motor vehicle inventory escrow account are not subject to the control of the commissioners court.

SUMMARY

The interest generated by the dealer's motor vehicle escrow account held by the tax assessor-collector pursuant to section 23.122 of the Tax Code constitutes a fund which is to be used at the discretion of the collector to defray the cost of administration of the statutory prepayment procedure. The funds may be kept in a special account, and the collector does not need the approval of the commissioners court for their disbursement.

Such funds may, however, only be used to defray the cost of administration of the prepayment procedure. They may not be used for general office expenses of the assessor-collector which are unrelated to the cost of administering the program.

DAN MORALES
Attorney General of Texas

JORGE VEGA
First Assistant Attorney General

SARAH J. SHIRLEY
Chair, Opinion Committee

Prepared by James E. Tourtelott
Assistant Attorney General