Does a Texas city need a voter election before collecting crime and fire district sales tax in limited-purpose annexed areas?

Plain-English summary

This opinion grew out of a tax-collection dispute in Lewisville. In 2009 the City entered a strategic partnership agreement with several water supply districts: the City agreed to provide fire, emergency medical, and law enforcement services, and in exchange the districts were annexed for limited purposes and agreed to a sales and use tax equal to the City's tax. The Comptroller had been collecting that tax in the limited-purpose areas ever since. In 2011 the City held an election to create crime control and fire control districts and to levy an additional sales tax to fund them. When the City asked the Comptroller to collect the additional tax in the limited-purpose areas, the Comptroller refused. A state representative then asked whether the Comptroller could implement rules that prevent a municipality from imposing a sales tax, under an existing strategic partnership agreement, on districts annexed for limited purposes.

Local Government Code section 43.0751(k) lets a municipality that has annexed part of a district for limited purposes impose a sales and use tax in that area, and provides that chapter 321 of the Tax Code governs the imposition, computation, administration, governance, and abolition of that tax except where inconsistent. Chapter 321, in turn, requires that fire control and crime control district taxes be adopted at an election held under Local Government Code chapters 344 and 363, with approval by a majority of the qualified voters of the proposed district. The Comptroller's office told the Attorney General it had not collected the additional tax in the limited-purpose districts because the statutory requirements for imposing a fire control or crime control district tax, including the required election, had not been met for those areas.

The opinion applied the rule that an agency's interpretation of a statute it is charged with enforcing is entitled to serious consideration, so long as the construction is reasonable and does not conflict with the statute's language. It reasoned that while section 43.0751(k) gives a municipality general authority to impose sales taxes in limited-purpose areas, it does not let a municipality alter the statutory requirements for imposing the tax or ignore chapter 321's procedures for fire control and crime control district taxes. So it was reasonable, as the Comptroller had concluded, to require that voters in the limited-purpose areas be given the chance to vote on those district taxes before the municipality imposes them. As the agency charged with administering, collecting, and enforcing chapter 321 taxes, the Comptroller's reasonable interpretation would likely be shown deference by the courts.

Currency note

This opinion was issued in 2013. Subsequent statutory amendments, court decisions, or later Attorney General 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.

What the opinion meant for those who asked

Municipalities with strategic partnership agreements (as the opinion described it): The opinion described section 43.0751(k) as giving general authority to impose a sales tax in limited-purpose areas, but not as authority to skip chapter 321's election requirement for fire control and crime control district taxes.

The Comptroller (as the opinion described it): The opinion treated the Comptroller's refusal to collect the additional tax as a reasonable interpretation of the statutes it enforces, one likely to receive judicial deference.

Voters in limited-purpose districts (as the opinion described it): The opinion described the Comptroller's position as requiring that these voters be given the opportunity to approve the district taxes at an election before the City imposes them.

Common questions

Can a Texas city collect a new crime or fire district sales tax in a limited-purpose annexed area without an election there?
The opinion explained that the Comptroller had concluded a city cannot, because chapter 321 requires an election approving fire control and crime control district taxes, and section 43.0751(k) does not let a city bypass that requirement.

Why did the Comptroller refuse to collect the extra tax?
According to the opinion, the Comptroller's office stated the statutory requirements for imposing a fire control or crime control district tax, including the required voter approval, had not been met for the limited-purpose areas.

Does the Comptroller's reading bind the courts?
The opinion did not say it binds the courts. It said an agency's reasonable interpretation of a statute it enforces is entitled to serious consideration and would likely be shown deference, so long as it is reasonable and does not conflict with the statute.

Did the existing strategic partnership agreement already cover this tax?
The opinion described the agreement as imposing a sales tax equal to the City's tax in the limited-purpose areas, which the Comptroller had collected; the dispute was over the additional crime/fire control district tax added in 2011, which had not gone through the required election in those areas.

Background and statutory framework

Local Government Code section 43.0751 lets a municipality and a conservation and reclamation district operating under Water Code chapter 49 enter a written strategic partnership agreement by mutual consent, which may provide for limited-purpose annexation of the district. Subsection 43.0751(k) lets a municipality that has annexed all or part of a district for limited purposes impose a sales and use tax within that part, and makes Tax Code chapter 321 govern the tax except where inconsistent with section 43.0751.

Chapters 344 and 363 of the Local Government Code set the procedures for creating, operating, and financing fire control and crime control districts, including (sections 344.053 and 363.053) approval by a majority of the qualified voters of the proposed district at an election held for that purpose. Tax Code sections 321.106 and 321.108 tie the fire control and crime control district taxes to elections held under those chapters. The Comptroller administers, collects, and enforces chapter 321 taxes (sections 321.106, .108, .301) and may adopt reasonable rules for enforcement (section 321.306). The opinion's deference analysis rested on R.R. Comm'n of Tex. v. Tex. Citizens for a Safe Future & Clean Water.

Citations

Cases:

• R.R. Comm'n of Tex. v. Tex. Citizens for a Safe Future & Clean Water, 336 S.W.3d 619, 624 (Tex. 2011)

Statutes:

• Tex. Loc. Gov't Code Ann. § 43.0751(a)-(b), (f)(1), (k) (West Supp. 2012)
• Tex. Loc. Gov't Code Ann. §§ 344.001-.302; 363.001-.302 (West 2005 & Supp. 2012); §§ 344.053, 363.053 (West 2005)
• Tex. Tax Code Ann. §§ 321.106, .108, .301 (West 2008); § 321.306 (West 2008)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/greg-abbott/ga-0987
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2013/ga0987.pdf

Original opinion text

Best-effort transcription from the official PDF. Minor extraction artifacts were corrected; the linked PDF is authoritative.

ATTORNEY GENERAL OF TEXAS
GREG ABBOTT

February 5, 2013

The Honorable James L. Keffer Opinion No. GA-0987
Chair, Committee on Energy Resources
Texas House of Representatives Re: Authority of the Comptroller to implement
Post Office Box 2910 rules regarding the imposition and collection of a
Austin, Texas 78768-2910 sales and use tax by a municipality under
particular circumstances (RQ-1078-GA)

Dear Representative Keffer:

Your former colleague, Representative Burt R. Solomons, asked about the authority of the Texas Comptroller of Public Accounts (the "Comptroller") to implement rules with regard to the collection of a municipal sales and use tax authorized under section 43.0751 of the Texas Local Government Code.[1] His request letter explained that in 2009, the City of Lewisville (the "City") entered into a strategic partnership agreement (the "Agreement") with multiple water supply districts. Request Letter at 1. The City agreed to provide fire services, emergency medical services and law enforcement services to the districts. Id. In exchange for those services, the water supply districts were annexed by the City for limited purposes and agreed to the imposition of a sales and use tax, which the City has collected since entering into the Agreement and which is equal to the sales and use tax imposed within the city boundaries.[2] Id. at 1-2.

The request letter also explained that in 2011, the City held an election to create crime control and fire control districts and to levy an additional sales and use tax to fund those districts. Id. at 2.[3] The City requested that the Comptroller collect the additional tax in the areas annexed for limited purposes, but the Comptroller declined to do so. Id. Based on these facts, Representative Solomons asked the following question:

Is the Comptroller permitted to implement rules with regard to the imposition and collection of a sales and use tax that prevent a municipality from imposing a sales and use tax, levied pursuant to an existing Strategic Partnership Agreement, on districts that have been annexed for limited purposes?

Request Letter at 2.

The Legislature has authorized a municipality to impose a sales and use tax on the part of the districts that have been annexed for limited purposes pursuant to a strategic partnership agreement:

A municipality that has annexed all or part of a district for limited purposes under [section 43.0751] may impose a sales and use tax within the boundaries of the part of the district that is annexed for limited purposes. Except to the extent it is inconsistent with this section, Chapter 321, Tax Code, governs the imposition, computation, administration, governance, and abolition of the sales and use tax.

TEX. LOC. GOV'T CODE ANN. § 43.0751(k) (West Supp. 2012). Pursuant to this provision, the Agreement states that in the areas of limited-purpose annexation, a sales and use tax shall be imposed "at a rate equal to the Sales and Use Tax imposed by the City within its corporate boundaries."[4] Since the inception of the Agreement, the Comptroller's "office has collected the City's sales and use tax" in the areas annexed for limited purposes.[5] However, in response to the request letter, the Comptroller's office informs us that it "has not collected the additional sales and use tax amount in the Limited Purpose Districts because the statutory requirements for imposing a fire control district or crime control and prevention district tax have not been met for those areas." Comptroller Brief at 2.

The Comptroller is charged with the administration, collection and enforcement of taxes imposed under chapter 321, which include fire control district and crime control district taxes. TEX. TAX CODE ANN. §§ 321.106, .108, .301 (West 2008). Consistent with those duties, the Comptroller may adopt reasonable rules for its enforcement of chapter 321. Id. § 321.306 (West 2008). "[A]n agency's interpretation of a statute it is charged with enforcing is entitled to 'serious consideration,' so long as the construction is reasonable and does not conflict with the statute's language." R.R. Comm'n of Tex. v. Tex. Citizens for a Safe Future & Clean Water, 336 S.W.3d 619, 624 (Tex. 2011). In light of this rule, we analyze the Comptroller's construction of the relevant statutes.

While Local Government Code subsection 43.0751(k) expressly authorizes a municipality to impose a sales and use tax on an area that is annexed for limited purposes, chapter 321 "governs the imposition, computation, administration, governance, and abolition of the sales and use tax," except when inconsistent with section 43.0751. TEX. LOC. GOV'T CODE ANN. § 43.0751(k) (West Supp. 2012). Chapter 321 requires that elections must be held to adopt fire control and crime control district taxes in accordance with Local Government Code chapters 344 and 363. TEX. TAX CODE ANN. §§ 321.106(a), .108(a) (West 2008). Furthermore, the district taxes must be "approved by a majority of the qualified voters of the proposed district voting at an election called and held for that purpose." TEX. LOC. GOV'T CODE ANN. §§ 344.053, 363.053 (West 2005). Briefing submitted to our office indicates that "voters in the Limited Purpose Districts never received the statutorily required opportunity to give their approval for creation of the [districts] and imposition of the associated taxes." Comptroller Brief at 2. As a result, the Comptroller has not collected the additional sales and use tax in those areas. Id.

Subsection 43.0751(k) provides municipalities with the general authority to impose sales and use taxes in areas annexed for limited purposes. It does not, however, empower municipalities to alter the statutory requirements associated with the imposition of a sales and use tax. Specifically, section 43.0751(k) does not empower municipalities to ignore the procedures in chapter 321 for imposing and collecting taxes in fire control and crime control districts. It is therefore reasonable to conclude, as the Comptroller has concluded, that municipalities must comply with chapter 321 by providing voters in areas annexed for limited purposes the opportunity to vote on the imposition of fire control and crime control district taxes before the municipality imposes them on those areas under subsection 43.0751(k). As the agency charged with administration, collection and enforcement of the taxes authorized by chapter 321, the Comptroller's reasonable interpretation of the statute would likely be shown deference by the courts.

SUMMARY

The Comptroller has concluded that, pursuant to Tax Code sections 321.106 and 321.108, voters in areas annexed for limited purposes under Local Government Code section 43.0751 must be given the opportunity to vote on the imposition of fire control and crime control district taxes before a municipality may impose them on those areas. As the agency charged with administration, collection and enforcement of the taxes authorized by chapter 321, the Comptroller's reasonable interpretation would likely be shown deference by the courts.

Very truly yours,

DANIEL T. HODGE
First Assistant Attorney General

JAMES D. BLACKLOCK
Deputy Attorney General for Legal Counsel

JASON BOATRIGHT
Chairman, Opinion Committee

Virginia K. Hoelscher
Assistant Attorney General, Opinion Committee

[1] See Letter from Honorable Burt R. Solomons, Chair, House Comm. on Redistricting, to Honorable Greg Abbott, Tex. Att'y Gen. (Aug. 29, 2012), http://texasattorneygeneral.gov/opin ("Request Letter").

[2] Local Government Code section 43.0751 authorizes the governing body of a municipality and a conservation and reclamation district operating under chapter 49 of the Water Code to "negotiate and enter into a written strategic partnership agreement for the district by mutual consent." TEX. LOC. GOV'T CODE ANN. § 43.0751(a)-(b) (West Supp. 2012). The strategic partnership agreement may provide for "limited-purpose annexation of the district." Id. § 43.0751(f)(1).

[3] Chapters 344 and 363 of the Local Government Code outline the procedures for the creation, operation and financing of fire control and crime control districts, respectively. See TEX. LOC. GOV'T CODE ANN. §§ 344.001-.302; 363.001-.302 (West 2005 & Supp. 2012).

[4] See Strategic P'ship Agreement Between the City of Lewisville, Tex. and Denton Cnty. Fresh Water Supp. Dists. 1-A, 1-B, 1-C, 1-D, 1-E, 1-F, 1-G, and 1-H, at 6 (submitted with Request Letter) (on file with the Op. Comm.).

[5] See Letter from Ashley Harden, Gen. Counsel, Tex. Comptroller of Pub. Accounts, to Honorable Greg Abbott, Tex. Att'y Gen. (Dec. 21, 2012) (on file with the Op. Comm.) (hereafter "Comptroller Brief").