Does a city council member have a conflict of interest voting on a county matter if their spouse is the county tax assessor-collector?

Plain-English summary

The Jefferson County Criminal District Attorney, Bob Wortham, asked the Attorney General about a possible conflict of interest on a city council. The setup: when the central appraisal district sends a wrong mailing address, a property owner can miss a tax statement and pay late, and the Tax Code lets a taxing unit waive the resulting penalties and interest. Two property owners sought waivers. Jefferson County approved its share, and the county tax assessor-collector then wrote to the City of Beaumont asking the city council to approve the city's share. The wrinkle is that the tax assessor-collector who sent the letter is married to a member of that city council. The question was whether the council member has to recuse from a vote because of that marriage.

The AG said no. Chapter 171 of the Local Government Code is the conflict-of-interest statute for local officials. Its central rule, in section 171.004(a), makes an official file an affidavit and abstain when the official has a "substantial interest in a business entity" and the vote will have a special economic effect on that entity. A person has a substantial interest if more than 10 percent of their gross income comes from the entity, and a spouse's substantial interest is imputed to the official. The tax assessor-collector does draw more than 10 percent of her income from Jefferson County. But the whole test only operates when the subject of the interest is a "business entity," defined in section 171.001(2) as a sole proprietorship, partnership, firm, corporation, and similar private forms. The office had already concluded, in opinion JC-0061, that a county is not a "business entity," reading the catch-all "any other entity recognized by law" to mean private entities, not governmental ones.

Because the county is not a business entity, the AG did not even need to decide whether the council member, through the marriage, has a substantial interest in the county. The chapter 171 conflict-of-interest requirements simply do not reach a council member voting on a county matter on these facts. The AG also noted, as a side point, that a county's waiver of interest under the Tax Code does not require approval or ratification by another taxing unit, and that the council would actually be voting on the city's own waiver, not the county's. The hypothetical county vote was addressed because the request asked for guidance in case such a matter came before the council.

What this means for you

This describes what the 2021 opinion holds about chapter 171 conflicts of interest. The opinion is now several years old, and the conflict-of-interest statutes can change, so confirm current law and consult a lawyer before relying on this.

City council members

Based on this opinion, a council member's chapter 171 duty to file an affidavit and abstain is keyed to a substantial interest in a "business entity." The opinion holds that a county is not a business entity, so a marriage to a county officeholder does not, by itself, create a chapter 171 conflict on a county matter. Other conflict rules or local ethics policies may still apply, so this opinion answers only the chapter 171 question.

County officials and tax assessor-collectors

The opinion treats income from a county as income from a governmental body, not a private business, for chapter 171 purposes. It does not address any other restriction that might bear on a spouse's participation in a related vote.

Property owners seeking penalty and interest waivers

The opinion restates that, under Tax Code section 33.011(a)(1), a taxing unit may waive interest (and must waive penalties) when an appraisal-district act or omission caused the late payment, and that one taxing unit's waiver does not require another's approval. It does not decide whether any particular waiver was proper.

Common questions

Q: Does a city council member have to recuse just because their spouse is the county tax assessor-collector?
A: Not under chapter 171, on these facts. The AG held that the conflict-of-interest requirements of section 171.004(a) do not apply to a council member voting on a county matter even though the member is married to the county tax assessor-collector.

Q: Why does it matter whether a county is a "business entity"?
A: Chapter 171's substantial-interest test only triggers when the interest is in a "business entity." The office has concluded that a county is not one, so the test never engages, regardless of the spouse's income from the county.

Q: What counts as a "substantial interest" under chapter 171?
A: Under section 171.002(a)(2), a person has a substantial interest if funds received from the entity exceed 10 percent of the person's gross income for the previous year, and a first-degree relative's substantial interest is imputed to the official. But the interest has to be in a business entity for the rule to apply.

Q: Can a city waive interest on delinquent property taxes after the county already did?
A: The opinion notes that a taxing unit's waiver of interest under Tax Code section 33.011(a)(1) does not require approval or ratification by another taxing entity. Each unit acts on its own taxes.

Background and statutory framework

Chapter 171 of the Local Government Code regulates conflicts of interest for local public officials, including members of a municipal governing body. Section 171.004(a) requires an official with a substantial interest in a business entity to file an affidavit and abstain when a vote will have a special economic effect on the entity distinguishable from the effect on the public. Section 171.002(a)(2) defines substantial interest in terms of income exceeding 10 percent of gross income, and section 171.002(c) imputes a first-degree relative's substantial interest to the official. The hinge of the analysis is section 171.001(2), which defines "business entity" by a list of private commercial forms followed by "any other entity recognized by law." Prior opinions, including JC-0061, GA-0031, and GA-0360, read that catch-all to cover private entities, not counties, cities, school districts, or emergency services districts. The factual backdrop comes from the Tax Code: section 6.23(a) lets the county assessor-collector collect for other taxing units, and section 33.011 governs waiver of penalties and interest when an appraisal-district error causes a late payment.

Citations and references

Statutory provisions:

• Tex. Loc. Gov't Code § 171.004(a) (affidavit and abstention for substantial interest in a business entity)
• Tex. Loc. Gov't Code §§ 171.001(1), 171.001(2), 171.002(a)(2), 171.002(c) (definitions and substantial-interest test)
• Tex. Tax Code § 33.011 (waiver of penalties and interest on delinquent taxes); § 6.23(a) (assessment and collection for other units)

Related AG opinions:

• Tex. Att'y Gen. Op. No. JC-0061 (1999) (a county is not a "business entity" under section 171.001(2))
• Tex. Att'y Gen. Op. No. GA-0031 (2003) (city council members are within chapter 171; private vs. political-subdivision distinction)
• Tex. Att'y Gen. Op. No. GA-0360 (2005) (emergency services districts and similar governmental entities are not "business entities")

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/ken-paxton/kp-0355
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2021/kp-0355.pdf

Original opinion text

KEN PAXTON
ATTORNEY GENERAL OF TEXAS

February 22, 2021

The Honorable Bob Wortham
Jefferson County Criminal District Attorney
1085 Pearl Street, 3rd Floor
Beaumont, Texas 77701

Opinion No. KP-0355

Re: Whether a conflict of interest exists under chapter 171 of the Local Government Code when a city council member votes to waive interest on delinquent property taxes accrued by an unrelated person under particular circumstances (RQ-0374-KP)

Dear Mr. Wortham:

You raise a potential conflict of interest concerning a city council member and a vote to waive interest on delinquent property taxes accrued by an unrelated person under particular circumstances.¹ You tell us the Jefferson County central appraisal district determines the appraised taxable value for property owners in the county and forwards this information to the Jefferson County tax assessor-collector to prepare and send tax statements to property owners on behalf of various taxing entities. See Request Letter at 1; see also TEX. TAX CODE § 6.23(a) (authorizing the county assessor-collector to assess and collect property taxes on behalf of other taxing units). You state that, "[o]ccasionally, the Central Appraisal District will provide an incorrect mailing address to the Tax Assessor[,] which may result in the property owner not receiving [the] tax statement before the payment deadline." Id. at 1-2. Subsection 33.011(a)(1) of the Tax Code provides that "[t]he governing body of a taxing unit . . . shall waive penalties and may provide for the waiver of interest on a delinquent tax if an act or omission of . . . the appraisal district in which the taxing unit participates caused or resulted in" the taxpayer not paying the tax on time, provided the tax is paid within a particular time period. TEX. TAX CODE § 33.011(a)(1).

You explain that "[i]n this instance, two property owners sought to have penalties and interest waived because they did not timely receive their tax statements," presumably because of the mailing address error you describe, and that they timely paid the underlying taxes. Request Letter at 2; see also TEX. TAX CODE § 33.011(d) (requiring that a written request be submitted by a certain date before the governing body of a taxing unit may waive penalties or interest under subsection 33.011(a)). One of the taxing units, Jefferson County, approved the waiver of interest after which, you tell us, "the Jefferson County Tax Assessor sent a letter to the City of Beaumont providing information about the two subject accounts and requesting that the City Council . . . approve the waiver." Request Letter at 2. The basis for the issue you raise is that the tax assessor-collector, who sent the letter, is married to a member of the city council, who was a recipient of the letter requesting approval of the waiver. See id. at 1, 2. Thus, you ask whether "a conflict exists" that would require recusal by a city council member on a vote to waive interest "for a property owner who has chosen to avail [himself or herself of subsection] 33.011 . . . merely because [the council member] happens to be married to the Tax Assessor Collector." Id. at 2.

Chapter 171 of the Local Government Code regulates conflicts of interest involving local public officials. See TEX. LOC. GOV'T CODE §§ 171.001–.010. Relevant here, subsection 171.004(a) requires a local public official with a "substantial interest in a business entity" to "file, before a vote or decision on any matter involving the business entity . . . , an affidavit stating the nature and extent of the interest" and to "abstain from further participation in the matter if . . . the action on the matter will have a special economic effect on the business entity that is distinguishable from the effect on the public." Id. § 171.004(a). A "local public official" subject to chapter 171 includes "a member of the governing body . . . of . . . [a] municipality." Id. § 171.001(1). Thus, the requirements of subsection 171.004(a) apply to a city council member in the current situation if a vote or decision involving a business entity in which the council member has a substantial interest comes before the council. See Tex. Att'y Gen. Op. No. GA-0031 (2003) at 1 (noting the inclusion of city council members in the scope of chapter 171's applicability).

As an initial matter, we observe that a taxing unit's waiver of interest paid on delinquent property taxes pursuant to subsection 33.011(a)(1) of the Tax Code does not require the approval or ratification of that action by another taxing entity. See TEX. TAX CODE § 33.011(a)(1). You tell us the commissioners court approved the waiver of interest on delinquent property taxes paid to the county, and we assume the city council would be voting on the waiver of interest on delinquent property taxes paid to the municipality. See Request Letter at 2. While such a vote would thus concern the municipality and not the county, your letter suggests that guidance would nonetheless be useful in the event that a county matter came before the city council under the present relational circumstances. Id.

Subsection 171.002(a)(2) of the Local Government Code provides that a person has a substantial interest in a business entity if "funds received by the person from the business entity exceed 10 percent of the person's gross income for the previous year." TEX. LOC. GOV'T CODE § 171.002(a)(2); see also id. § 171.002(c) (providing that if a person related to the local public official in the first degree by consanguinity or affinity has a substantial interest, the local official "is considered to have a substantial interest" under subsection 171.002 as well). You tell us that the tax assessor-collector receives more than 10 percent of her gross income from Jefferson County. Request Letter at 2. However, the substantial interest test applies only when the subject of the interest constitutes a "business entity." The term "business entity" means "a sole proprietorship, partnership, firm, corporation, holding company, joint-stock company, receivership, trust, or any other entity recognized by law." TEX. LOC. GOV'T CODE § 171.001(2). This office previously concluded that a county is not a "business entity" under subsection 171.001(2). Tex. Att'y Gen. Op. No. JC-0061 (1999) at 3 (explaining that the term "any other entity recognized by law" in that section should be construed to refer to private entities organized to carry out purposes similar to the listed entities); see also Tex. Att'y Gen. Op. Nos. GA-0360 (2005) at 6 (concluding that emergency services districts, like counties, cities, school districts, and other local governmental entities, are not "business entities" under subsection 171.001(2)), GA-0031 at 2 (recognizing a distinction between a private entity and a "political entity or subdivision that carries out local governmental purposes"). Because the county is not a "business entity" as defined by subsection 171.001(2), we need not determine whether the council member, by virtue of his marriage to the tax assessor-collector, has a substantial interest in Jefferson County. Accordingly, the conflict-of-interest requirements of section 171.004(a) do not apply to a council member voting on a matter concerning the county even though the council member is married to the county tax assessor-collector.

¹ See Letter from Honorable Bob Wortham, Jefferson Cty. Crim. Dist. Att'y, to Honorable Ken Paxton, Tex. Att'y Gen. at 1 (Aug. 18, 2020), https://www2.texasattorneygeneral.gov/opinions/opinions/51paxton/rq/2020/pdf/RQ0374KP.pdf ("Request Letter").

S U M M A R Y

The conflict-of-interest requirements of section 171.004(a) of the Local Government Code do not apply to a city council member voting on a county matter even though the council member is married to the county tax assessor-collector.

Very truly yours,

KEN PAXTON
Attorney General of Texas

BRENT E. WEBSTER
First Assistant Attorney General

LESLEY FRENCH
Chief of Staff

MURTAZA SUTARWALLA
Deputy Attorney General for Legal Counsel

VIRGINIA K. HOELSCHER
Chair, Opinion Committee

BECKY P. CASARES
Assistant Attorney General, Opinion Committee