Can a Texas school district offer an early-payment tax discount if an appraisal district collects its taxes?

TX AG Opinion GA-0373: Can a school district give an early-payment tax discount if an appraisal district collects its taxes?

Plain-English summary

Texas lets taxing units (counties, cities, school districts, and the like) offer a small discount to taxpayers who pay their property taxes early. That authority does not come from a unit's own choice; it traces to article VIII, section 20 of the Texas Constitution, which empowers the Legislature to set up prompt-payment discounts, and to Tax Code section 31.05, the statute the Legislature passed to do it. A taxing unit can offer a discount only as the Legislature has allowed.

The Killeen Independent School District did not collect its own taxes. It had contracted with the Bell County Tax Appraisal District to collect them, and it wanted to keep offering an early-payment discount. A senator asked the Attorney General, on the district's behalf, whether it could. The timing mattered, because the 79th Legislature had just amended section 31.05, with a transition period, so the office analyzed both the old and the new version.

Under the old section 31.05(a), a discount was available two ways: the first sentence let "a taxing unit that collects its own taxes" adopt one, and the second sentence let a unit whose taxes were collected by another taxing unit ride on that collecting unit's discount. Neither fit Killeen ISD. The office had already held that "collects its own taxes" means a unit that literally does its own collecting, so the first sentence did not apply to a district whose taxes the appraisal district collected. And the second sentence did not apply either, because an appraisal district is not a "taxing unit": it is not authorized to impose ad valorem taxes. So before the amendment, the district could not offer the discount.

The 2005 amendment changed that. The Legislature deleted the phrase limiting the discount to "a taxing unit that collects its own taxes." Giving effect to that deletion, the office concluded that section 31.05(a) now let a taxing unit offer an early-payment discount no matter who collected its taxes. Because of the transition rules, whether the discount applied to the 2005 tax year or only beginning in 2006 depended on when the district mailed its tax bills: a non-self-collecting unit whose 2005 bills went out before September 1, 2005 had to wait until the 2006 tax year, while one whose bills were mailed on or after that date could offer it for 2005. The amendment superseded the office's earlier Opinions GA-0225 and DM-171 in part.

Currency note

This opinion was issued in 2005. 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.

Who this opinion affected (as of 2005)

School districts that contracted out tax collection: The opinion told a district like Killeen ISD that the just-passed amendment removed the barrier. Under the new section 31.05(a) it could offer an early-payment discount even though the appraisal district, not the district itself, collected the taxes.

Taxpayers in those districts: It explained that whether an early-payment discount was available for the 2005 tax year depended on the timing of the district's tax bills, with the discount sometimes not reaching taxpayers until the 2006 tax year.

Appraisal districts and other collecting entities: It confirmed that an appraisal district is not a "taxing unit," so the old second-sentence route did not apply, and it described the amendment's new authority for a collecting unit to prepare separate bills and charge an additional fee.

Anyone relying on Opinions GA-0225 or DM-171: The opinion flagged that those earlier opinions were superseded in part by the 2005 statute, to the extent they said a non-self-collecting unit could not offer a discount.

Common questions

Could a school district that didn't collect its own taxes offer an early-payment discount before 2005?
No. Under the old section 31.05(a), the discount was limited to a unit that literally collected its own taxes, or one whose taxes were collected by another taxing unit that offered the discount. A district whose taxes the appraisal district collected fit neither.

Why didn't the "collected by another taxing unit" route work?
Because an appraisal district is not a "taxing unit." Under Tax Code section 1.04(12), a taxing unit must be authorized to impose and be imposing ad valorem taxes, and appraisal districts are not authorized to impose a tax.

What did the 2005 amendment change?
It deleted the phrase restricting the discount to "a taxing unit that collects its own taxes." The office read that deletion as letting a taxing unit offer an early-payment discount regardless of who collects its taxes.

Did the discount apply right away for 2005?
It depended on the bills. For a non-self-collecting unit whose 2005 tax bills were mailed before September 1, 2005, the old law governed 2005 and the discount could start with the 2006 tax year. If the bills were mailed on or after September 1, 2005, the discount could apply for 2005.

Were earlier AG opinions still good law after the amendment?
Only in part. The opinion stated that GA-0225 (2004) and DM-171 (1992) were superseded in part by the 2005 statute, to the extent they barred a non-self-collecting unit from offering a discount.

Background and statutory framework

Article VIII, section 20 of the Texas Constitution empowers the Legislature to establish discounts for prompt payment of ad valorem taxes; local taxing units have no independent authority to grant a tax discount (Tex. Const. art. VIII, § 20; City of Taylor v. Taylor Bedding Mfg. Co., 215 S.W.2d 215, 217 (Tex. Civ. App.-Austin 1948, writ ref'd)). The Legislature exercised that power in Tax Code section 31.05 (Tex. Tax Code Ann. § 31.05 (Vernon 2001)). Before the 2005 amendment, section 31.05(a)'s first sentence let "[t]he governing body of a taxing unit that collects its own taxes" adopt the subsection (b) or (c) discounts, and its second sentence extended a discount to a unit whose taxes were collected by another taxing unit that adopted or approved it (id. § 31.05(a), 31.05(b), 31.05(c)).

The office had twice held that a unit may offer a discount only under one of those two sentences, and in Opinion GA-0225 it construed "a taxing unit that collects its own taxes" to mean a unit that literally collects its own taxes (Tex. Att'y Gen. Op. Nos. GA-0225 (2004) at 2-3, DM-171 (1992) at 3; see also DM-470 (1990) at 4-5). Applying that, the office reasoned that Killeen ISD could not use the first sentence because the appraisal district did its collecting, and could not use the second sentence because an appraisal district is not a "taxing unit" (a unit must be "authorized to impose and is imposing ad valorem taxes," and appraisal districts are not) (Tex. Tax Code Ann. § 1.04(12) (Vernon 2001); see id. § 6.01-.14 (Vernon 2001 & Supp. 2004-05)). So before the amendment, a district that did not collect its own taxes could not offer a section 31.05 discount.

The 79th Legislature then amended section 31.05, deleting the "collects its own taxes" limitation (Act of May 29, 2005, 79th Leg., R.S., H.B. 2491, ch. 1126, § 9, 2005 Tex. Sess. Law Serv. 3719, 3721). Giving effect to the deletion under the rule that omitting significant words on amendment is presumed deliberate, the office concluded the amended statute authorized a taxing unit to offer the discount regardless of who collected its taxes, while also letting the collecting unit prepare separate bills and charge an additional fee (Gateley v. Humphrey, 254 S.W.2d 98, 101 (Tex. 1952)). The amendment's general effective date was September 1, 2005, applying to discount adoptions beginning with the 2005 tax year, except that for units that mailed 2005 bills before that date, the prior law governed 2005 and the amendment applied beginning with the 2006 tax year. The office stated that GA-0225 and DM-171 were superseded in part by statute.

Citations

Statutes and constitutional provisions:

• Tex. Const. art. VIII, § 20
• Tex. Tax Code Ann. § 31.05, 31.05(a), 31.05(b), 31.05(c) (Vernon 2001)
• Tex. Tax Code Ann. § 1.04(12) (Vernon 2001)
• Tex. Tax Code Ann. § 6.01-.14 (Vernon 2001 & Supp. 2004-05)
• Act of May 29, 2005, 79th Leg., R.S., H.B. 2491, ch. 1126, § 9, 2005 Tex. Sess. Law Serv. 3719, 3721 (amending Tex. Tax Code Ann. § 31.05(a))

Cases:

• City of Taylor v. Taylor Bedding Mfg. Co., 215 S.W.2d 215 (Tex. Civ. App.-Austin 1948, writ ref'd)
• Gateley v. Humphrey, 254 S.W.2d 98 (Tex. 1952)

Other authorities:

• Tex. Att'y Gen. Op. Nos. GA-0225 (2004), DM-171 (1992), DM-470 (1990)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/greg-abbott/ga-0373
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2005/ga0373.pdf

Original opinion text

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

ATTORNEY GENERAL OF TEXAS

GREG ABBOTT

November 4, 2005

The Honorable Troy Fraser
Chair, Committee on Business and Commerce
Texas State Senate
Post Office Box 12068
Austin, Texas 78711-2068

Opinion No. GA-0373

Re: Whether a school district that contracts with a tax appraisal district to collect school district taxes may offer taxpayers an early payment discount (RQ-0344-GA)

Dear Senator Fraser:

On behalf of the Board of Trustees of the Killeen Independent School District ("KISD") and its Superintendent of Schools, you ask whether a school district may offer its taxpayers an early payment discount if, by interlocal agreement, a tax appraisal district collects the school district's taxes.[1] KISD informs us that it "has contracted with the Bell County Tax Appraisal District for the collection of property taxes from its taxpayers" and further states that it "offers discounts for the payment of said taxes in accordance with Section 31.05 of the Tax Code."[2]

Section 31.05 was amended by the 79th Legislature during the regular session. See Act of May 29, 2005, 79th Leg., R.S., H.B. 2491, ch. 1126, § 9, 2005 Tex. Sess. Law Serv. 3719, 3721 (to be codified at TEX. TAX CODE ANN. § 31.05(a)). However, as we will discuss below, the amendment provides for a transition period during which the prior law will continue to apply in certain circumstances. Accordingly, we will review an independent school district's authority to offer a discount in general and its specific authority under section 31.05 both as it read prior to the recent amendment and as it presently provides.

Article VIII, section 20 of the Texas Constitution authorizes the Legislature to establish discounts for prompt payment of state and governmental or political subdivision ad valorem taxes.[3] The constitution does not give local taxing units independent authority to grant a tax discount. See City of Taylor v. Taylor Bedding Mfg. Co., 215 S.W.2d 215, 217 (Tex. Civ. App.-Austin 1948, writ ref'd) (holding that a city has no authority to extinguish ad valorem tax liabilities except as authorized by TEX. CONST. art. VIII, § 20 and enabling legislation). Accordingly, a taxing unit may offer statutory discounts only as established by the legislature under article VIII, section 20. Id.

Pursuant to its constitutional authority, the Legislature has provided for early payment discounts in section 31.05 of the Tax Code. See TEX. TAX CODE ANN. § 31.05 (Vernon 2001). Until its amendment during the regular session of the 79th Legislature, section 31.05 provided in pertinent part:

             (a) The governing body of a taxing unit that collects its own taxes may adopt the discounts provided by Subsection (b) or Subsection (c) of this section, or both, in the manner required by law for official action by the body. The discounts, if adopted, apply to taxes for a taxing unit for which the adopting taxing unit collects taxes if the governing body of the other unit, in the manner required by law for official action by the body, adopts the discounts or approves of their application to its taxes by the collecting unit . . . .

             (b) [stating the generally applicable discount]

             (c) [stating the discount available for bills mailed after September 30]

TEX. TAX CODE ANN. § 31.05 (Vernon 2001) (emphasis added) (amended 2005).[4]

In two opinions this office has determined that a governmental entity may offer its taxpayers a discount only if authorized either by the first sentence in section 31.05(a), pertaining to taxing units that collect their own taxes, or by the second sentence, pertaining to taxing units the taxes of which are collected by another taxing unit. See Tex. Att'y Gen. Op. Nos. GA-0225 (2004) at 2-3, DM-171 (1992) at 3. In the most recent opinion, GA-0225, we considered whether a school district could continue to offer its taxpayers an early payment discount if its taxes were collected by a county that no longer offered its own discount for county taxes. See Tex. Att'y Gen. Op. No. GA-0225 (2004) at 1. The school district there suggested that in section 31.05(a)'s first sentence, the phrase "a taxing unit that collects its own taxes" could be construed to mean a taxing unit authorized to collect its own taxes, even if another entity does the actual collecting. Id. at 2. We concluded that the section's plain language would not support such a construction. Instead, we determined that the phrase "a taxing unit that collects its own taxes" means a taxing unit that literally collects its own taxes. Id. Accordingly, the section's first sentence did not authorize a taxing unit to offer a discount if its taxes were collected by another taxing unit. We also determined that the section's second sentence would not allow a taxing unit to offer a discount if its taxes were collected by another taxing unit that did not offer the discount. Id. at 2-3.

KISD has asserted that the principles discussed in GA-0225 should not prevent it from offering a discount, because the appraisal district that collects KISD's taxes is not a "taxing unit." KISD Letter, supra note 2. A political unit is not a "taxing unit" for property tax purposes unless it is "authorized to impose and is imposing ad valorem taxes on property." TEX. TAX CODE ANN. § 1.04(12) (Vernon 2001).[5] Tax appraisal districts are not authorized to impose an ad valorem tax. See generally TEX. TAX CODE ANN. §§ 6.01-.14 (Vernon 2001 & Supp. 2004-05) (Tax Code chapter 6, subchapter A, governing tax appraisal districts). Therefore, a tax appraisal district is not a taxing unit, and as KISD points out, the second sentence of section 31.05(a) does not apply to taxing units whose taxes are collected by a tax appraisal district. See KISD Letter, supra note 2. But under section 31.05(a) as it read prior to amendment during the regular session of the 79th Legislature, a taxing unit without authority under subsection (a)'s second sentence could offer a discount only if it was a "taxing unit that collects its own taxes" under the subsection's first sentence. TEX. TAX CODE ANN. § 31.05(a) (Vernon 2001). Before its recent amendment, section 31.05(a) did not authorize an independent school district that did not collect its own taxes to offer an early payment discount. Id.; cf. also Tex. Att'y Gen. Op. No. DM-470 (1990) at 4-5 (when county taxes are collected by another entity, the county tax collector is not actively engaged in tax collection).

The recent amendment to section 31.05 of the Tax Code eliminated the phrase that restricted the authority to grant an early payment discount to a "taxing unit that collects its own taxes." Act of May 29, 2005, 79th Leg., R.S., H.B. 2491, ch. 1126, § 9, 2005 Tex. Sess. Law Serv. 3719, 3721 (to be codified at TEX. TAX CODE ANN. § 31.05(a)).[6] Giving effect to that deletion, section 31.05(a) must be construed as authorizing a taxing unit to offer an early payment discount regardless of whether the taxing unit collects its own taxes. See Gateley v. Humphrey, 254 S.W.2d 98, 101 (1952) (holding that the fact that significant words are omitted from the re-enactment or amendment of a statute "imports a conclusive presumption that the Legislature intended to exclude the object theretofore accomplished by the abandoned words"). If a noncollecting taxing unit adopts a discount, however, section 31.05 of the Tax Code now authorizes a taxing unit that collects the noncollecting taxing unit's taxes to prepare and mail separate tax bills and charge an additional fee for doing so. See Act of May 29, 2005, 79th Leg., R.S., H.B. 2491, ch. 1126, § 9, 2005 Tex. Sess. Law Serv. 3719, 3721 (to be codified at TEX. TAX CODE ANN. § 31.05(a)).

The amendment's general effective date is September 1, 2005. Id. § 30 at 3733. The amendment generally applies to a taxing unit's adoption of a discount beginning with the 2005 tax year, which began on January 1, 2005. Id. § 29(c) at 3732. However, for taxing units that mailed bills for the 2005 tax year prior to September 1, 2005, the amendment does not apply until the 2006 tax year, "and the law in effect when the bills were mailed applies to the 2005 tax year with respect to that taxing unit." Id. § 29(d) at 3732. Consequently, a taxing unit that does not collect its own taxes and whose tax bills for the 2005 tax year were mailed prior to September 1, 2005 may not offer a section 31.05 discount for the 2005 tax year but may do so beginning with the 2006 tax year. On the other hand, a taxing unit whose tax bills are mailed on or after September 1, 2005 may offer such a discount for the 2005 tax year and subsequent years. To the extent that they state that a taxing unit that does not collect its own taxes may not offer a discount inconsistent with the discount offered by that of the collecting unit, Attorney General Opinions GA-0225 (2004) and DM-171 (1992) are superseded in part by statute.

                                   SUMMARY

                    Prior to its amendment, Tax Code section 31.05(a) did not authorize an independent school district to adopt an early payment discount when the school district did not collect its own taxes but instead had contracted for the county appraisal district to collect school district taxes. Under section 31.05(a), as amended during the regular session of the 79th Legislature, an independent school district may offer such a discount regardless of the entity that collects its taxes; whether the discount applies to the 2005 tax year or the 2006 tax year depends on whether the district's tax bills were mailed on or after September 1, 2005.

                    Attorney General Opinions GA-0225 (2004) and DM-171 (1992) are superseded in part by statute.

                                         Very truly yours,

GREG ABBOTT
Attorney General of Texas

BARRY R. McBEE
First Assistant Attorney General

NANCY S. FULLER
Chair, Opinion Committee

William A. Hill
Assistant Attorney General, Opinion Committee

Footnotes

[1] See Letter from Honorable Troy Fraser, Chair, Senate Committee on Business and Commerce, to Honorable Greg Abbott, Texas Attorney General (May 6, 2005) (on file with Opinion Committee, also available at http://www.oag.state.tx.us) [hereinafter Request Letter].

[2] Letter from Jim Hawkins, Ph.D., Superintendent of Schools, Killeen Independent School District, to Honorable Troy Fraser (May 5, 2005) (submitted as part of Request Letter, on file with Opinion Committee, also available at http://www.oag.state.tx.us) [hereinafter KISD Letter].

[3] Article VIII, section 20 states: "that in order to encourage the prompt payment of taxes, the Legislature shall have the power to provide that the taxpayer shall be allowed by the State and all governmental and political subdivisions and taxing districts of the State a three per cent (3%) discount on ad valorem taxes due the State or due any governmental or political subdivision or taxing district of the State if such taxes are paid ninety (90) days before the date when they would otherwise become delinquent; and the taxpayer shall be allowed a two per cent (2%) discount on said taxes if paid sixty (60) days before said taxes would become delinquent; and the taxpayer shall be allowed a one per cent (1%) discount if said taxes are paid thirty (30) days before they would otherwise become delinquent. The Legislature shall pass necessary laws for the proper administration of this Section." TEX. CONST. art. VIII, § 20.

[4] Amended by Act of May 29, 2005, 79th Leg., R.S., H.B. 2491, ch. 1126, § 9, 2005 Tex. Sess. Law Serv. 3719, 3721 (to be codified at TEX. TAX CODE ANN. § 31.05(a)).

[5] As the Tax Code defines the term: "(12) 'Taxing unit' means a county, an incorporated city or town (including a home-rule city), a school district, a special district or authority (including a junior college district, a hospital district, a district created by or pursuant to the Water Code, a mosquito control district, a fire prevention district, or a noxious weed control district), or any other political unit of this state, whether created by or pursuant to the constitution or a local, special, or general law, that is authorized to impose and is imposing ad valorem taxes on property even if the governing body of another political unit determines the tax rate for the unit or otherwise governs its affairs." TEX. TAX CODE ANN. § 1.04(12) (Vernon 2001).

[6] Section 9 of the amendment provides: "(a) The governing body of a taxing unit may adopt the discounts provided by Subsection (b) or Subsection (c), or both, in the manner required by law for official action by the body. The discounts, if adopted, apply only to that taxing unit's taxes . . . . If a taxing unit adopts both discounts under Subsections (b) and (c), the discounts adopted under Subsection (b) apply unless the unit's tax bills for the unit are mailed after September 30, in which case only the discounts under Subsection (c) apply. A taxing unit that collects taxes for another taxing unit that adopts the discounts may prepare and mail separate tax bills on behalf of the adopting taxing unit and may charge an additional fee for preparing and mailing the separate tax bills and for collecting the taxes imposed by the adopting taxing unit. If under an intergovernmental contract a county assessor-collector collects taxes for a taxing unit that adopts the discounts, the county assessor-collector may terminate the contract if the county has adopted a discount policy that is different from the discount policy adopted by the adopting taxing unit." Act of May 29, 2005, 79th Leg., R.S., H.B. 2491, ch. 1126, § 9, 2005 Tex. Sess. Law Serv. 3719, 3721 (to be codified at TEX. TAX CODE ANN. § 31.05(a)) (deletions shown as stricken, additions in italics).