Could a Texas taxing unit impose the full 15 percent delinquent-tax collection penalty, pay its contract attorney less, and keep the difference?

Texas AG Opinion JM-857: Delinquent Tax Collection Penalty

Plain-English summary

The Ector and Williamson county attorneys asked whether a taxing unit could impose the full 15 percent additional penalty authorized by Tax Code section 33.07, pay a private delinquent-tax attorney a smaller percentage, and retain the balance for the unit's own collection expenses.

The Attorney General concluded that it could not. Section 33.07 allowed an additional penalty only when the taxing unit or its collector had contracted with a private attorney under section 6.30. That link showed that the penalty proceeds had to be applied to the attorney's contractual compensation.

The 15 percent figure was a ceiling, not a mandatory amount. A taxing unit could set a lower percentage and could change the percentage from year to year through proper official action. If the contract compensated the attorney at 12.5 percent, the taxing unit did not have to impose a 15 percent penalty.

The opinion treated the penalty as a substitute for court-awarded attorney fees. Section 33.07(c) barred recovery of attorney fees in a delinquent-tax suit when the additional penalty applied, and section 33.48 directed contract-attorney fees toward the compensation due under the contract.

Accordingly, the taxing unit could not keep a 2.5 percent difference to pay its own expenses. All collected section 33.07 penalties had to compensate the attorney, although the contract could specify which collection costs the attorney would absorb.

Currency note

This opinion was issued in 1988. 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.

Common questions

Did a taxing unit have to impose the full 15 percent penalty?

No. The opinion described 15 percent as the maximum and said the unit could set a lower percentage.

Could the penalty percentage change from year to year?

Yes, if the taxing unit acted in the manner required for official action by its governing body.

Could the county retain part of the penalty for staff or administrative costs?

No. The opinion concluded that all section 33.07 penalty proceeds had to be used for the contract attorney's compensation.

Could the attorney receive the penalty plus separate court-awarded attorney fees?

No. Section 33.07(c) prohibited recovery of attorney fees in a suit involving taxes subject to the penalty.

Could the contract make the attorney responsible for supplies and similar expenses?

Yes. The opinion said the taxing unit could include specific terms defining the collection costs the attorney would absorb.

Background and statutory framework

Tax Code section 6.30 allowed a taxing unit to contract with a competent attorney to collect delinquent taxes. The contract set compensation, subject to a cap of 20 percent of delinquent tax, penalty, and interest collected.

Section 33.07 allowed an additional collection penalty, capped at 15 percent, when a section 6.30 contract existed. If the penalty applied, subsection (c) prevented the taxing unit from recovering attorney fees in a collection suit.

The opinion reviewed former articles 7335 and 7335a, which had authorized private delinquent-tax collection contracts and capped compensation at 15 percent. Bell applied those statutes to school districts, and Morrison held that attorney compensation had to be provided for in the county budget rather than paid from a prescribed source.

Attorney General Opinion O-4004 had treated supplies and similar costs as part of the attorney's capped compensation. JM-857 used that history to explain that "costs of collection" could include more than professional fees but still referred to the contract attorney's costs.

Section 33.48 identified recoverable litigation expenses and directed contract-attorney fees toward the contractual compensation. The legislative fiscal note called the section 33.07 penalty an amount "for attorney's fees," and Salvaggio repeatedly described it as an attorney-fee charge. Hatch supplied the rule that penalty statutes were strictly construed.

Citations

Statutory and legislative materials:

• Tax Code sections 6.30, 33.01, 33.07, and 33.48
• Government Code section 311.023
• Former V.T.C.S. articles 7335 and 7335a
• House Bill No. 30, 67th Legislature, First Called Session

Cases:

• Bell v. Mansfield Independent School District, 129 S.W.2d 629 (Tex. 1939)
• Morrison v. Lane, 157 S.W.2d 466 (Tex. Civ. App. - Beaumont 1941, no writ)
• Salvaggio v. Houston Independent School District, 709 S.W.2d 306 (Tex. App. - Houston [14th Dist.] 1986, writ dism'd)
• Hatch v. Davis, 621 S.W.2d 443 (Tex. App. - Corpus Christi 1981, writ ref'd n.r.e.)

Prior Attorney General materials referenced: O-4004 (1941), MW-67 (1979), WW-217 (1980), JM-135 (1984), and JM-285 (1984).

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/jim-mattox/jm-857
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1988/jm0857.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Obvious character-level OCR errors have been corrected, but minor errors may remain; the linked PDF is authoritative.

THE ATTORNEY GENERAL
OF TEXAS

February 16, 1988

Honorable Gary Garrison Opinion No. JM-857
Ector County Attorney
Room 218, Courthouse Re: Whether a taxing
Odessa, Texas 79761 unit that contracts with
a private attorney pur-
Honorable Billy Ray Stubblefield suant to section 6.30 of
Williamson County Attorney the Tax Code may impose
P.O. Drawer 1139 the additional penalty
Georgetown, Texas 78627 of 15 percent authorized
by section 33.07 of the
Tax Code in an instance
in which the section
6.30 contract provides
that the delinquent tax
attorney will be com-
pensated by a percentage
of less than 15 percent
(RQ-984)

Gentlemen:

You request an opinion on the authorized expenditure of penalties imposed pursuant to section 33.07 of the Tax Code, which permits taxing units to provide that delinquent ad valorem taxes incur "an additional penalty to defray costs of collection" if the taxing unit has contracted with an attorney under section 6.30 of the Tax Code. See generally Attorney General Opinion JM-285 (1984) (discussing circumstances under which section 33.07 penalty may be applied to delinquent taxes). Section 6.30 of the Tax Code provides in part:

(a) The county attorney or, if there is no county attorney, the district attorney shall represent the county to enforce the collection of delinquent taxes if the commissioners court does not contract with a private attorney as provided by Subsection (c) of this section.

. . . .

(c) The governing body of a taxing unit may contract with any competent attorney to represent the unit to enforce the collection of delinquent taxes. The attorney's compensation is set in the contract, but the total amount of compensation provided may not exceed 20 percent of the amount of delinquent tax, penalty, and interest collected. (Emphasis added.)

Tax Code § 6.30; see also Attorney General Opinion JM-135 (1984) (neither county attorney nor city attorney may enter into a contract pursuant to section 6.30(c) of the Tax Code).

Section 33.01 of the Tax Code establishes the penalty and interest imposed on delinquent taxes. Section 33.07 of the Tax Code authorizes the additional penalty as follows:

(a) A taxing unit or appraisal district may provide, in the manner required by law for official action by the body, that taxes that remain delinquent on July 1 of the year in which they become delinquent incur an additional penalty to defray costs of collection if the unit or district or another unit that collects taxes for the unit has contracted with an attorney pursuant to Section 6.30 of this code. The amount of the penalty may not exceed 15 percent of the amount of taxes, penalty, and interest due.

. . . .

(c) If a penalty is imposed pursuant to this section, a taxing unit may not recover attorney's fees in a suit to collect delinquent taxes subject to the penalty. (Emphasis added.)

Tax Code § 33.07.

Mr. Stubblefield informs us that some attorneys who have applied to collect delinquent taxes for Williamson County have proposed that the county impose the full 15 percent penalty under section 33.07 of the Tax Code, but compensate them only at the rate of 12.5 percent, with the county retaining 2.5 percent to defray its own costs of collecting the delinquent taxes. You both ask whether the penalty imposed and collected under section 33.07 may be used to defray the taxing unit's costs of collecting delinquent taxes, or whether the penalty may only be used to compensate the attorney who contracts to collect delinquent taxes pursuant to section 6.30 of the Tax Code. The answer to your question depends on whether "costs of collection" in section 33.07 refers only to the cost of contracting with an attorney pursuant to section 33.07, or whether it includes costs incurred by the county.

Before addressing your specific question, we point out that the 15 percent figure represents the maximum penalty that may be imposed by a taxing unit. A taxing unit may impose a section 33.07 penalty of a lesser percentage. In addition, the taxing unit may change the amount of penalty from year to year, if it does so "in the manner required by law for official action by the body. . . ." Tax Code § 33.07(a). Thus, by referring in this draft to the "15 percent penalty," we do not intend to negate the taxing unit's power to set an amount less than 15 percent and to change the amount of penalty from year to year.

Turning to your question, we will first examine former statutory provisions, to establish some of the circumstances under which section 33.07 of the Tax Code was enacted. See Gov't Code § 311.023 (construction of statutes in a code). The provisions you inquire about are found in the Property Tax Code, which was adopted in 1979 and codified as Title I of the Tax Code. Tax Code § 1.01; see Acts 1979, 66th Leg., ch. 841. Section 33.07 was added to the Property Tax Code in 1981, in a bill which adopted a series of amendments to the Property Tax Code. See H.B. No. 30, Acts 1981, 67th Leg., 1st C.S., ch. 13, at 168.

Before the Property Tax Code was adopted, former article 7335, V.T.C.S., authorized the commissioners court to contract with a private attorney

to enforce or assist in the enforcement or the collection of any delinquent State and county taxes for a percent on the taxes, penalty and interest actually collected. . . .

Acts 1923, 38th Leg., 2d C.S., ch. 13, at 37; Acts 1923, 38th Leg., 3d C.S., ch. 21, at 182. Former article 7335a, V.T.C.S., provided that the compensation under a contract to collect delinquent taxes could not be more than 15 percent of the amount collected. Acts 1930, 41st Leg., 4th C.S., ch. 8, at 9. These provisions also applied to school districts. Bell v. Mansfield Independent School District, 129 S.W.2d 629 (Tex. 1939). Articles 7335 and 7335a, V.T.C.S., were revised and recodified as subsections 6.30(c) through 6.30(e) of the Tax Code, and the total compensation payable to the attorney under the contract was increased, so that it now "may not exceed 20 percent of the amount of delinquent tax, penalty, and interest collected." Under former law, there was no requirement that the compensation be paid from delinquent tax collections. Morrison v. Lane, 157 S.W.2d 466 (Tex. Civ. App. - Beaumont 1941, no writ); see generally Attorney General Opinion WW-217 (1980). The county had to provide in its budget for the contract attorney's compensation. Morrison v. Lane, supra.

Fifteen percent of the amount collected constituted an absolute limit on the amount that could be paid to an attorney under contract pursuant to former articles 7335 and 7335a, V.T.C.S. Attorney General Opinion O-4004 (1941) concluded that the attorney contracting with a school district could not make claims in excess of the 15 percent limit to pay for stationery, stamps, and other similar items used in collecting delinquent taxes. The opinion stated as follows:

It is manifest that unless the school district pays for the stationery, stamps, etc., the tax attorney must provide such items. It is also manifest that if the tax attorney receives 15% of the amount collected plus a payment for the above mentioned items he will receive more than 15% of the amount collected, the maximum amount allowed by law.

Attorney General Opinion O-4004 (1941).

Thus, at the time section 33.07 of the Tax Code was adopted, no particular source of funds was designated to pay the private attorney's compensation under section 6.30 of the Tax Code. The legislature was, moreover, presumably aware that compensation for the attorney might include payment for his expenditures for supplies and other items which could not strictly speaking be described as attorney fees. See Attorney General Opinion O-4004 (1941).

Section 33.07 of the Tax Code provides for

an additional penalty to defray costs of collection if the unit or district or another unit that collects taxes for the unit has contracted with an attorney pursuant to Section 6.30 of this code. (Emphasis added.)

Tax Code § 33.07(a). This penalty provides funds to pay some or all of the attorney's compensation under a section 6.30 contract. The additional penalty may be imposed upon a delinquent taxpayer only if the taxes are going to be collected by a private attorney pursuant to section 6.30 of the code. This condition for imposing the additional penalty suggests that funds realized from collecting it must be applied to payment of the attorney's compensation.

This reading of section 33.07(a) is supported by subsection (c) of that statute, which provides as follows:

If a penalty is imposed pursuant to this section, a taxing unit may not recover attorney's fees in a suit to collect delinquent taxes subject to the penalty.

Tax Code § 33.07(c). The section 33.07 penalty may be seen as a substitute for court-ordered attorney fees, with the advantage that the taxing unit determines the amount of penalty up to the 15 percent maximum, and that the penalty can be collected even if the case does not go to court. See Tax Code § 33.48(a)(4) (reasonable attorney's fees approved by the court).

Section 33.48 of the Tax Code provides for the costs and expenses that a taxing unit may recover in a suit to collect a delinquent tax:

(a) In addition to other costs authorized by law, a taxing unit is entitled to recover the following costs and expenses in a suit to collect a delinquent tax:

(1) all usual court costs, including the cost of serving process;

(2) expenses of foreclosure sale;

(3) reasonable expenses, subject to approval by the court, that are incurred by the taxing unit in determining the name, identity, and location of necessary parties and in procuring necessary legal descriptions of the property on which a delinquent tax is due; and

(4) reasonable attorney's fees approved by the court and not exceeding 15 percent of the total amount of taxes, penalties, and interest adjudged due the unit.

. . . .

(c) Fees collected for attorneys and other officials are fees of office, except that fees for contract attorneys representing a taxing unit that is joined or intervenes shall be applied toward the compensation due the attorney under the contract. (Emphasis added.)

Tax Code § 33.48. The attorney's fees authorized by subsection (a)(4) of section 33.48 may not be recovered if the taxing unit imposes a penalty pursuant to section 33.07 of the code. Subsection (c) of section 33.48 provides that fees for contract attorneys shall be applied toward the contractual compensation rather than supplementing it. See generally Attorney General Opinion MW-67 (1979) (contract entered into under former articles 7335 and 7335a, V.T.C.S., does not permit contract attorney to receive attorney fees in connection with motion to compel answers to interrogatories). The provisions of section 33.48 support the view that there is an equivalence of purpose between the section 33.07 penalty, court-ordered attorney fees, and compensation payable to the private attorney under a section 6.30 contract.

There is support in the legislative history of section 33.07 that the penalty it authorizes is to be allocated only to the compensation payable to an attorney under a section 6.30 contract. The fiscal note to House Bill No. 30 of the 67th Legislature, First Called Session, stated as follows:

Some increase in revenue to taxing units would result from the increase in penalty and interest rates on delinquent taxes and from allowing the taxing unit to impose additional penalty on delinquent taxes of up to 15% for attorney's fees, if delinquent on July 1 and if the unit has contracted with a delinquent tax attorney.

Fiscal Note on file in Legislative Reference Library for H.B. No. 30, 67th Leg., 1st C.S. (July 17, 1981). This document refers to the section 33.07 penalty as being imposed "for attorney's fees," thus supporting the view that the penalty is applied solely to compensate the contracting attorney.

A Texas court, in considering whether taxpayers could bring a class action to recover section 33.07 penalties which they had paid, repeatedly referred to the section 33.07 penalties as "attorney fees," and "attorney fee charges." See Salvaggio v. Houston Independent School District, 709 S.W.2d 306 (Tex. App. - Houston [14th Dist.] 1986, writ dism'd). For example, the court in Salvaggio characterized the penalty as "§ 33.07 attorney fee charges imposed to cover the collection of the delinquent taxes." 709 S.W.2d at 308. The court thus assumed that the penalty was allocated to the contract attorney's costs of collection. Even though the court was not addressing the issue before us, its assumption as to the use of the section 33.07 penalties demonstrates the reasonableness of construing "costs of collection" to refer to the cost of having a private attorney collect delinquent taxes.

We conclude that the penalty imposed and collected under section 33.07 of the Tax Code may not be spent to defray costs of collection incurred by a taxing unit itself. The penalty payments must go to compensating the attorney with whom the taxing unit has contracted to collect its delinquent taxes. The taxing unit need not impose the full 15 percent penalty authorized. That figure is a maximum, and the statute does not compel a taxing unit to pay an attorney more than his services are worth. In drafting the contract, the taxing unit has the opportunity to include specific terms on the "costs of collection" which the attorney will absorb.

If a taxing unit does not contract with an attorney under section 6.30 of the Tax Code, the delinquent taxes are collected by the attorney who ordinarily represents it, and the taxing unit has to pay for all costs of tax collection. Section 33.07 of the code permits the taxing unit to shift to the delinquent taxpayer the cost of compensating the outside attorney with whom it contracts. We have found no evidence that the legislature also intended the delinquent taxpayer to absorb the taxing unit's collection costs over and above the attorney's compensation under a section 6.30 contract. Statutes imposing penalties are to be strictly construed. Hatch v. Davis, 621 S.W.2d 443 (Tex. App. - Corpus Christi 1981, writ ref'd n.r.e.); see Attorney General Opinion JM-285 (1984) (discussing applicability of section 33.07 penalty). Accordingly, we advise you that the penalty imposed and collected under section 33.07 of the Tax Code may not be used to defray the taxing units' costs of collecting delinquent taxes.

SUMMARY

Pursuant to section 33.07 of the Tax Code, a taxing unit that has contracted with an attorney to collect delinquent taxes under section 6.30 of the Tax Code is authorized to impose a penalty not to exceed 15 percent against delinquent taxpayers to cover the attorney's compensation. The taxing unit may not apply any part of the penalties collected under section 33.07 to any additional costs of collection which it incurs but must use all of the assessed penalties solely to compensate the attorney with whom it contracted.

JIM MATTOX
Attorney General of Texas

MARY KELLER
First Assistant Attorney General

LOU McCREARY
Executive Assistant Attorney General

JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General

RICK GILPIN
Chairman, Opinion Committee

Prepared by Susan L. Garrison
Assistant Attorney General