Opinion
03-19-00740-CV
10-29-2021
1st Global, Inc., Appellant v. Glenn Hegar, Comptroller of Public Accounts of the State of Texas, and Ken Paxton, Attorney General of the State of Texas, Appellees
FROM THE 53RD DISTRICT COURT OF TRAVIS COUNTY NO. D-1-GN-18-003916, THE HONORABLE DUSTIN M. HOWELL, JUDGE PRESIDING
Before Justices Baker, Triana, and Jones [*] Dissenting Opinion by Justice Triana
MEMORANDUM OPINION
J. Woodfin Jones, Justice
This is a franchise-tax suit. 1st Global, Inc. sued the state Comptroller and Attorney General (collectively "the State") to recover an amount of franchise taxes it paid for the year 2018 that it claims was excessive. The State filed a motion to dismiss the suit, asserting that 1st Global had not complied with one of the requirements for the waiver of sovereign immunity. The trial court granted the motion and dismissed the suit for lack of jurisdiction. We will affirm.
Factual and Procedural Background
1st Global describes itself as the reporting entity of a combined group of investment advisors who assist individuals with their investments. Although 1st Global maintains a Dallas office to support transactions initiated by the advisors, at least some of these advisors live and work outside of Texas. 1st Global generates its revenue in the form of commissions and fees from the services performed by the advisors. 1
The underlying dispute between 1st Global and the Comptroller goes back several years and involves how 1st Global's gross receipts should be apportioned for franchise-tax purposes. Under the Texas Tax Code, apportionment of taxable margin is based on a taxable entity's "business done in this state." Tex. Tax Code § 171.103(a)(2). In a separate administrative proceeding involving 1st Global, the Comptroller previously announced his position that receipts generated through the provision of services by 1st Global's financial advisors, wherever they are located, should all be apportioned to Texas because of its Dallas office. 1st Global, on the other hand, asserts that it earns its revenues in the states where its advisors perform services on its behalf, which would result in its owing substantially less franchise taxes to the State of Texas.
Chapter 171 of the Tax Code contains provisions pertaining to franchise taxes. Payment of franchise taxes by an ongoing taxable entity is due May 15 for the preceding calendar year. Id. § 171.152(c). Pursuant to section 171.202(a), a taxable entity must file an annual report containing the financial information necessary to compute the amount of franchise tax owed. The entity's regular annual report must be filed "before May 16." Id. § 171.202(b).
Chapter 112 of the Tax Code contains provisions relating to taxpayer suits. Subsection (a) of section 112.052 provides that a person may bring a tax-protest suit against the state to recover a tax only if the person has first paid the tax under protest "as required by Section 112.051." Id. § 112.052(a); see Texley, Inc. v. Hegar, 613 S.W.3d 322, 326 (Tex. App.-Austin 2020, no pet.). Section 112.051(a), in turn, provides that a person who intends to bring a suit complaining about the imposition of a tax must first pay "the amount claimed by the state" and must submit a protest along with the payment:
If a person who is required to pay a tax or fee imposed by this title or collected by the comptroller under any law, including a local tax collected by the comptroller,2
contends that the tax or fee is unlawful or that the public official charged with the duty of collecting the tax or fee may not legally demand or collect the tax or fee, the person shall pay the amount claimed by the state, and if the person intends to bring suit under this subchapter, the person must submit with the payment a protest.Tax Code § 112.151(a) (emphasis added).
1st Global filed this tax-protest suit in connection with its 2018 regular annual report. In its 2018 report, 1st Global self-assessed its franchise taxes due for that tax year on the basis of the Comptroller's earlier-stated position regarding apportionment, i.e., that receipts generated through the provision of services by 1st Global's financial advisors must all be apportioned to Texas. Along with its annual report, 1st Global paid that amount of taxes and, at the same time, filed a protest letter contesting the correctness of the amount paid. At that time, however, the Comptroller had not determined, by any available process, that any specific amount was due from 1st Global for the 2018 tax year.
The State moved to dismiss 1st Global's suit on the ground that 1st Global had not paid "the amount claimed by the state" as required by section 112.151(a) because the state had not claimed any specific amount at that time and 1st Global therefore had not met section 112.151's requirements for a waiver of sovereign immunity. It is undisputed that at the time 1st Global filed its suit the Comptroller had not, as to 1st Global, conducted an audit, assessed a liability, issued a jeopardy determination, determined a deficiency, or issued a refund denial for tax year 2018. There are no disputed fact issues in this case. The trial court granted the State's motion and dismissed 1st Global's suit for lack of jurisdiction. 1st Global perfected this appeal.
Discussion
1st Global asserts three issues on appeal: (1) Whether Texas Tax Code section 112.052(b) recognizes that a taxpayer may file a protest letter with its regular annual report; 3
(2) Whether the phrase "amount claimed by the state" in section 112.051(a) of the Tax Code includes the tax calculated and self-assessed by a taxpayer in its regular annual report; and (3) Whether 1st Global's live petition pleads sufficient facts to establish a waiver of sovereign immunity. Because we believe the second issue is the dominant issue in this appeal, we will discuss it first.
This Court has held that section 112.052 of the Tax Code can operate as a waiver of the state's immunity in franchise-tax protest suits only if the taxpayer "strictly complies with the statute's administrative and procedural requirements." OGCI Training, Inc. v. Hegar, No. 03-16-00704-CV, 2017 WL 4899015, at *5 (Tex. App.-Austin Oct. 27, 2017, no pet.) (mem. op.). Thus, since section 112.051(a) requires that the taxpayer "pay the amount claimed by the state" along with its protest, the dispositive issue here is whether 1st Global paid "the amount claimed by the state" when it submitted its protest.
In the context of the present legal issue, this Court is not free to give section 112.051(a) whatever interpretation we think is the fairest or most efficient or even the most reasonable. Rather, we are bound by the well-established rule that "a statute shall not be construed as a waiver of sovereign immunity unless the waiver is effected by clear and unambiguous language." Tex. Gov't Code § 311.034; see also In re Nestle USA, Inc., 359 S.W.3d 207, 212 (Tex. 2012); Texas Facilities Comm'n v. Speer, 559 S.W.3d 245, 249 (Tex. App.-Austin 2018, no pet.). Thus, even if ambiguity exists in the phrase "the amount claimed by the state," we are bound by the rule that "when construing a statute that purportedly waives sovereign immunity, we generally resolve ambiguities by retaining immunity." Texas Dep't of Transp. v. York, 284 S.W.3d 844, 846 (Tex. 2009) (quoting Wichita Falls State Hosp. v. Taylor, 106 S.W.3d 692, 697 (Tex. 2003)). Thus, the issue for decision here is a narrow one: Under the 4 undisputed facts of the present case, did the statutory requirement for payment of "the amount claimed by the state" clearly and unambiguously include 1st Global's self-assessment of its franchise tax liability even though the Comptroller had not affirmatively asserted-or even identified-a specific amount of franchise taxes owed by 1st Global?
1st Global argues that this Court's opinion in Hegar v. Mahindra USA, Inc., No. 03-18-00126-CV, 2020 WL 962415, at *5 (Tex. App.-Austin, Feb. 28, 2020, no pet.) (mem. op.), stands for the proposition that a person need only be required to pay a tax imposed by the Tax Code to be permitted to file a protest suit. 1st Global misreads Mahindra. Mahindra focused on a different requirement of section 112.051(a)-that a taxpayer is "required" to pay a tax or fee before section 112.051(a) can operate as a waiver of sovereign immunity. Because the taxpayer there made no assertion that it was required to pay the self-assessed amount, this Court held that that provision of section 112.051(a) had not been satisfied. Id. at *5-6 ("Erroneously paid taxes not required by law or the Comptroller, as Mahindra's apportionment claim alleges, are recoverable as a tax refund claim, but not as a refund request in a protest payment suit."). Because Mahindra did not address the portion of section 112.051(a) at issue here, it cannot be read so broadly as to represent a holding on that separate statutory requirement.
1st Global next argues that the term "state" in section 112.051(a) is not limited to the Comptroller, but also includes statutes enacted by the legislature. Consequently, the argument goes, "[t]he state, through the laws set out in Chapter 171 of the Tax Code, imposes an annual liability for the franchise tax on all taxable entities doing business in Texas." This argument may be correct as far as it goes but does not take into account that section 112.051(a) requires that there be payment of an "amount claimed." Under other circumstances, a statute might, by itself, represent an "amount claimed by the state" if, for example, the legislature 5 enacted a law fixing the annual franchise tax for a named class of taxpayers at a specific amount. But there is no such statute here.
See, e.g., In re Nestle USA, Inc., 387 S.W.3d 610, 612 (Tex. 2012) ("Texas' first franchise tax, enacted in 1893, was $10 annually for 'each and every private domestic corporation heretofore chartered or that may be hereafter chartered under the laws of this State '").
Finally, 1st Global argues that the Texas Supreme Court's opinion in In re Nestle USA, 387 S.W.3d at 612, "impliedly" held that a self-assessment and payment of taxes would satisfy section 112.051(a)'s requirement of "amount claimed by the state" even in the absence of an affirmative demand or declaration by the Comptroller. In that case Nestle protested its self-assessed franchise-tax payment on the ground that the entirety of Texas's franchise tax scheme violated the Texas Constitution's mandate that "taxation shall be equal and uniform." Id. at 612. It is true that the supreme court accepted jurisdiction over (and rejected) the merits of Nestle's claims, but the issue of whether Nestle had paid an "amount claimed by the state" was not raised by the parties or discussed by the court. Although courts do have a duty to raise jurisdictional issues on their own motion, we decline to hold that an acceptance of jurisdiction by an appellate court in an earlier case constitutes an affirmative and authoritative decision on a jurisdictional issue that was neither raised by the parties nor discussed in the court's opinion. See Town of Shady Shores v. Swanson, 590 S.W.3d 544, 555 n.12 (Tex. 2019) ("Carowest asserts that it is 'significant' that we did not question jurisdiction in those cases in the first instance. Perhaps so, but we simply cannot ascribe to tacit acceptance the same significance we would give to an express consideration and analysis of the issue." (Citation omitted.)).
We believe the phrase "the amount claimed by the state" can reasonably be read to require some sort of affirmative claim by the state for a specific amount of franchise taxes. Accordingly, regardless of how appealing 1st Global's argument may be that the words "the 6 amount claimed by the state" should be read to include a self-assessment based on the Comptroller's previously announced general legal position regarding apportionment, the language of section 112.051(a) does not rise to the level of "clear[ly] and unambiguous[ly]" waiving sovereign immunity when the only "amount claimed" is a self-assessment. We overrule 1st Global's second issue.
In its first issue, 1st Global argues that section 112.052(b) of the Tax Code recognizes that any taxpayer may file a protest letter with a regular annual report. We disagree. That subsection of the Code created an exception whereby the protest required by section 112.051 could be filed with the taxpayer's annual report "if an extension is granted to the taxpayer under Section 171.202(c) for filing the report." Tax Code § 112.052(b). Section 171.202(c), however, provides for an extension only to a "taxable entity that is not required by rule to make its tax payments by electronic funds transfer." Id. § 171.202(c). But 1st Global is required to make its tax payments by electronic funds transfer. See Hegar v. 1st Glob., Inc., No. 03-18-00411-CV, 2019 WL 6765754, at *5 (Tex. App.-Austin, Dec. 12, 2019, no pet.) (mem. op.) ("We agree with the Comptroller that 1st Global sought and received an extension under Subsection (e), not Subsection (c)."). Section 112.052(b) therefore does not apply to 1st Global. Nor do we think section 112.052(b) can reasonably be read to mean that all taxpayers can file a protest letter with their regular annual report. We overrule 1st Global's first issue.
By a statute effective September 1, 2021, the legislature amended section 112.052(b) to delete this exception in its entirety. See Act of May 19, 2021, 87th Leg., R.S., ch. 331, § 5, sec. 112.052(b), 2021 Tex. Sess. Law Serv. 682, 682. The present case, however, is governed by the old law, id. § 12, which can be found at Act of May 19, 1989, 71st Leg., R.S., ch. 232, § 5, sec. 112.052, 1989 Tex. Gen. Laws 1070, 1070-71.
1st Global's third issue is whether its live petition pleaded sufficient facts to establish a waiver of sovereign immunity. In its Appellant's Brief, 1st Global asserts that "[t]he 7 only disputed issue in 1st Global's case is whether, under the specific facts present herein, 1st Global paid the 'amount claimed by the state.'" But the basic facts underlying the question of whether 1st Global paid "the amount claimed by the state" are undisputed. Accordingly, 1st Global's assertion that a disputed issue of fact exists as to whether it paid an "amount claimed by the state" is merely a conclusion of fact or law, and no amount of repleading could alter the underlying facts. We overrule 1st Global's third issue.
Conclusion
Having overruled 1st Global's issues on appeal, we affirm the trial court's judgment dismissing 1st Global's suit for lack of jurisdiction.
Affirmed 8
DISSENTING OPINION
Gisela D. Triana, Justice
I respectfully dissent. I disagree with the Court's conclusion that the phrase "the amount claimed by the state" in Section 112.051(a) of the Tax Code does not include the franchise tax owed to the state that is calculated each year by taxable entities and must be paid with their regular annual report by May 15. Instead, I would conclude that the phrase unambiguously includes the franchise-tax amount that the Tax Code imposes annually "on each taxable entity that does business in this state or that is chartered in this state" and that the Code requires to be paid on May 15 each year. Tex. Tax Code §§ 171.001(a) (imposing tax), .152(c) (establishing date upon which payment is due). Failure to timely pay this mandatory self-assessed tax amount and submit the required annual report can result in a corporation's loss of corporate privileges, as well as penalties for delinquent taxes and other enforcement actions. Id. §§ 171.152(c), .202(a)-(b) (requiring filing of annual report on forms supplied by Comptroller), .251 (providing that 1
Comptroller shall forfeit corporate privileges of corporation if corporation does not file report and pay tax after receiving notice of forfeiture), .362 (establishing penalties for failure to pay tax when due and payable or to file report when due); see generally id. §§ 171.351-363 (Subchapter H, Enforcement). Consequently, considering the statutory language in the context of the entire Tax Code as we must, see TGS-NOPEC Geophysical Co. v. Combs, 340 S.W.3d 432, 439 (Tex. 2011), I would conclude that the Comptroller, acting on behalf of the State, "claims" that taxable entities owe the State franchise taxes to be paid each year in the amount prescribed by the Tax Code, and thus a taxable entity may file a protest letter with its annual report challenging any portion of that amount owed that it contends is unlawful. Accordingly, I dissent from the Court's holding that a taxpayer can never pay under protest its annual self-assessed franchise-tax amount due on May 15 and then later file a protest suit.
The Comptroller asserts that "protest suits are reserved for those who[m] the Comptroller has demanded to pay a specific amount" and that the only remedy now available to 1st Global is to request a refund of the amounts at issue and proceed with an administrative hearing for Tax Report Year 2018, see Tex. Tax Code § 111.104 (authorizing refund claim), to be followed by a refund suit if it were dissatisfied with the outcome of that proceeding, see id. § 112.151 (allowing suit after denial of refund request). The Court agrees, and it holds that until the Comptroller reviews an annual report and assesses a liability, conducts an audit, issues a jeopardy determination, determines a deficiency, or issues a refund denial for 2018, 1st Global cannot challenge the lawfulness of the tax. (Slip op. at 6-7.) However, the Texas Legislature chose not to limit the broad language-"the amount claimed by the state"-to an amount that the Comptroller calculates that a particular taxpayer has underpaid on the original "amount claimed by the state." If the Legislature had sought to limit protest suits to situations in which the 2 2
Comptroller assesses a liability, conducts an audit, issues a jeopardy determination, determines a deficiency, or issues a refund denial, as the Comptroller contends and the Court now holds, the Legislature would have included language specifying that protest suits are limited to those circumstances. See TGS-NOPEC, 340 S.W.3d at 439 (noting that courts presume the Legislature carefully chooses a statute's language, "purposefully omitting words not chosen").
While it is true that protest suits are most often filed after the Comptroller takes some action to inform a taxpayer that it has underpaid the amount claimed by the state, the statutory language does not limit a taxpayer's ability to file a protest suit to only those situations. The Comptroller asserts that if a taxpayer has reason to believe that the Comptroller will disagree with the taxpayer about the amount that the taxpayer owes, the taxpayer has only two options. The first option is to pay the amount it would owe under the Comptroller's position, request a refund of the amount it believes to be unlawful, request a hearing if the Comptroller denies its refund request, and once its administrative remedies are exhausted, file a refund suit. See Tex. Tax Code §§ 111.104 (allowing refund claims), .105 (allowing taxpayer to request hearing if Comptroller denies refund claim), 112.151 (allowing taxpayer to file refund suit after exhaustion of administrative remedies). The taxpayer's second option is to pay only the amount it believes it owes and wait for the Comptroller to perform an audit or review the report, assess the taxpayer's additional liability for the disputed amount, and issue a deficiency determination or a jeopardy determination, at which point the taxpayer can pay the amount under protest and file a protest suit. See id. §§ 111.004 (providing Comptroller with power to examine books and records necessary for conducting examination), .0043 (detailing general audit and prehearing powers), .008 (establishing that Comptroller may compute and determine amount of tax to be paid if he "is not satisfied with a tax report or the amount of the tax required to be paid to the state by a person" and 3 then must provide notice of deficiency determination to taxpayer), .009 (requiring petition for redetermination to be filed before expiration of 60 days after date notice of determination is issued and allowing taxpayer to request hearing and file motion for rehearing if dissatisfied with Comptroller's decision on motion for redetermination), .022 (establishing that Comptroller shall issue jeopardy determination stating amount due and that tax collection is in jeopardy if he believes collection of tax required to be paid to state or amount due for tax period is jeopardized by delay and further establishing that jeopardy-determination amount becomes due and payable immediately), 112.052 (allowing suit to recover tax paid under protest). Under the second option, the taxpayer is liable for interest and penalties. See id. §§ 111.060 (establishing that yearly interest rate on all delinquent taxes is prime rate plus one percent and that delinquent taxes draw interest beginning 60 days after due date), .061 (imposing penalty of at least 5% of tax due on person who fails to pay tax imposed or file report required by Title 2, e.g., franchise tax, when due).
The history of 1st Global's engagement with the Comptroller illustrates why, under the particular circumstances present here, a taxpayer should be able to protest with payment the annual amount of franchise taxes owed and not be required to wait for a review or an audit followed by an assessment or a jeopardy or deficiency determination from the Comptroller. The unusual situation present here also illustrates why most taxpayers are unlikely to take the step that 1st Global has taken of initiating litigation with the Comptroller, which means this construction of the statutory language would not result in a sudden abundance of such suits, as the Comptroller implies.
The underlying dispute between 1st Global and the Comptroller began in 2012 when 1st Global's CPAs reviewed 1st Global's annual tax reports for 2008, 2009, 2010, and 2011 and discovered that 1st Global had apportioned revenue by its out-of-state financial advisors to 4
Texas. 1st Global then filed amended tax reports correcting the error and sought refunds for the franchise taxes that 1st Global believed it had overpaid. The Comptroller audited the amended annual reports. Two years later, in 2014, the Comptroller denied 1st Global's refund requests. In response, 1st Global timely filed formal refund claims for all four years, seeking to recover $503, 846 in overpaid tax, and requested a refund hearing to contest the Comptroller's position. 1st Global subsequently requested status updates and resolution eighteen times. In his Tax Position Letter and in his Response to Interrogatories served in connection with the administrative proceedings, the Comptroller has stated that 1st Global must calculate its Texas franchise-tax liability by apportioning all of its revenues at issue to Texas. Seven years later, 1st Global's refund claims are still pending before the Comptroller.
Between 2012 and 2016, 1st Global filed its report and paid the amount that it calculated was owed, using the apportionment method that it asserts is the correct one. Had the Comptroller audited 1st Global and issued a tax assessment for those years, then 1st Global could have paid the amount under protest and filed its protest suit in district court. The Comptroller has not done so. However, as 1st Global pointed out at the hearing on the plea to the jurisdiction, because the difference between the tax owed under 1st Global's apportionment method and the tax it would owe under the Comptroller's method is more than 25%, there is no statute of limitations that establishes a deadline by which the Comptroller must audit its report. See id. § 111.205(b) (providing that four-year statute of limitation established in Section 111.201 does not apply and Comptroller may assess tax imposed by Title 2 at any time if information contained in report contains "gross" error, defined as underpayment of at least 25%). Thus, 1st Global must carry on its books the liability of potential taxes, interest, and penalties that goes back almost ten years with no potential ending date. 5 Faced with this large and annually growing liability, which affects its ability to make business decisions, 1st Global determined in 2017 that under the plain language of the Tax Code, it could pay under protest the amount claimed by the State and file suit. It did so, but this Court dismissed that suit because we determined that 1st Global had not timely filed its protest statement because it filed the statement with its later-filed franchise-tax report instead of filing it when an extension of time to file its report was requested and payment was made. See Hegar v. 1st Glob., Inc., No. 03-18-00411-CV, 2019 WL 6765754, at *5 (Tex. App.-Austin Dec. 12, 2019, no pet.) (mem. op.) ("1st Global I") (reversing trial court's denial of Comptroller's motion to dismiss and rendering judgment dismissing 1st Global's protest suit because we determined that exception allowing later filing applied only to smaller taxpayers).
After 1st Global filed its protest suit in October 2017, the Comptroller abated the administrative proceedings for Report Years 2008 through 2011 "[t]o avoid the possibility of the administrative body and the courts arriving at inconsistent decisions on the same question." At the time the suit was abated, the Tax Division's Reply to 1st Global's Amended Response to the Tax Division's Position Letter was the next procedural step that was supposed to occur. Because the suit underlying this appeal was filed before the 2017 suit was dismissed, the Comptroller never lifted the abatement. The Comptroller asserts in his brief that he offered to lift the abatement and proceed with 1st Global's administrative hearing after the hearing on the plea to the jurisdiction in this suit, but that 1st Global never responded when the Comptroller "attempted to lift the stay by agreement." 1st Global replies that it never requested an abatement and that it "would like the Comptroller to resolve its 2008-2011 administrative claims post haste."
We explained in 1st Global I that our construction of the relevant statutes and rules to require a larger taxpayer like 1st Global to file its protest letter at the time it seeks an extension to file its report comports with both the statutory language and the Legislature's purpose in providing for both protest and refund suits:
A protest suit is intended to "provide an adequate legal remedy whereby a taxpayer may test the validity of a tax without having to resort to the traditional equitable remedy of injunction, which would restrain the state's collection of the tax and disrupt the tax-collection process," while a refund suit allows the Comptroller "to refund the payment of certain taxes found to have been paid through mistake of fact6
or law, thereby relieving the legislature of time-consuming claims made directly to lawmakers."Id. (quoting Strayhorn v. Lexington Ins., 128 S.W.3d 772, 779 n.9 (Tex. App.-Austin 2004), aff'd, 209 S.W.3d 83 (Tex. 2006)). We further noted that "it is logical to conclude that a taxpayer of such a size that it has paid sufficient taxes in past years to fall within the [electronic funds transfer] provisions of Subsection (e) will often know that it believes the franchise-tax framework is invalid or does not apply at the time it seeks an extension to file its report, as opposed to [filing] a later refund request that contests the amount of taxes assessed by the Comptroller based on the taxpayer's franchise-tax report" and that 1st Global knew the grounds for its protest because it had pending requests for refunds from past years. Id. &n.7.
In 2018, 1st Global submitted a protest letter with the payment it made on May 15 to extend its deadline to file its regular annual report and submitted the letter again on July 16 when it filed its report and the remainder of the payment claimed by the State based on 1st Global's regular annual report. 1st Global paid under protest a total of $184, 912 in franchise taxes for Report Year 2018 and seeks recovery of $123, 205. In response to 1st Global's requests for disclosure, the Comptroller reiterated that he maintains his position expressed in the 2008-2011 administrative proceedings that 1st Global should apportion its revenue to Texas because its revenue is created by its performance of services at its Dallas office. It is difficult to square the Comptroller's argument that 1st Global's suit should be dismissed because "no amount has been claimed by the state" with his continued position that 1st Global should apportion its revenue as it did in its 2018 regular annual report; that is, all of its receipts should be apportioned to Texas regardless of where its financial advisors provided their services. 7
Furthermore, even under the Court's proposed construction of the statutory language, as the Court points out in its opinion, in this specific case, the Comptroller has already made a claim:
The underlying dispute between 1st Global and the Comptroller goes back several years and involves how 1st Global's gross receipts should be apportioned for franchise-tax purposes. Under the Texas Tax Code, apportionment of taxable margin is based on a taxable entity's "business done in this state." Tex. Tax Code § 171.103(a)(2). In a separate administrative proceeding involving 1st Global, the Comptroller previously announced his position that receipts generated through the provision of services by 1st Global's financial advisors, wherever they are located, should all be apportioned to Texas because of its Dallas office. 1st Global, on the other hand, asserts that it earns its revenues in the states where its advisors perform services on its behalf, which would result in its owing substantially less franchise taxes to the State of Texas.
(Slip op. at 2) (emphasis added). The Comptroller continues to assert his position in this litigation, meaning that he "claims" that 1st Global's 2018 franchise tax should be calculated the way that 1st Global calculated it.
Most importantly, however, in my view, the plain language of Section 112.051(a) provides a taxpayer with a third option for challenging a tax that it believes is unlawful: paying the amount of its self-assessed franchise-tax liability under protest with its timely filed regular annual report. The Texas Supreme Court explicitly recognized the validity of this option when it allowed a taxpayer's second suit challenging the franchise tax as unconstitutional to proceed after dismissing the taxpayer's first suit for want of jurisdiction because the taxpayer had failed to comply with the statutory prerequisite of first paying the tax under protest. Compare In re Nestle USA, Inc., 387 S.W.3d 610, 616 (Tex. 2012) (orig. proceeding) ("In re Nestle II") (explaining that in prior suit, supreme court "held that payment under protest was a jurisdictional prerequisite to [taxpayer's] challenge and dismissed the proceeding. Nestle then paid the $8, 682, 999 due for 2012 8 under protest and re-filed its challenge."), with In re Nestle USA, Inc., 359 S.W.3d 207, 208-10 (Tex. 2012) (orig. proceeding) ("In re Nestle I") (dismissing taxpayer's first suit for want of jurisdiction). Contrary to the Court's conclusion that the supreme court's decision in In re Nestle II does not constitute "an affirmative and authoritative decision" on this jurisdictional issue because it was neither raised by the parties nor discussed in the court's opinion, the supreme court considered precisely the issue of whether a taxpayer could file a protest suit after paying its selfassessed tax under protest in In re Nestle I. The fact that no one raised the issue of whether that self-assessed tax was an "amount claimed by the state" speaks to the unambiguous nature of the phrase. And although the Comptroller attempts to distinguish the Nestle cases because the taxpayer there sought to challenge the constitutionality of the franchise tax rather than the legality of the Comptroller's position on how the taxpayer should calculate the amount of tax due on its report, in effect arguing that a taxpayer can pay under protest with its annual report only if it intends to challenge the entire amount of tax due rather than some portion of the tax, there is no such limitation present in Section 112.051(a).
If this were true, Section 112.051(a) also would allow a taxpayer to challenge only the entire amount of tax due when filing a protest suit after an assessment, a deficiency or jeopardy determination, or a denied refund claim, but there is no statutory language in Section 112.051(a) indicating that the Legislature intended such a result. Indeed, because the protest statement must set forth each reason for recovering the payment, and because the issues in the suit are limited to those issues arising from the reasons expressed in the written protest, the statutory scheme contemplates that a taxpayer may seek recovery for only some portions of the tax paid if it challenges only some parts of how the tax is calculated by the Comptroller. See Tex. Tax Code §§ 152.051(b), .053(b).
Because I would conclude that 1st Global has complied with the statutory prerequisite to establish a waiver of sovereign immunity by timely paying "the amount claimed by the state" under protest, I respectfully dissent. 9
[*]Before J. Woodfin Jones, Chief Justice (Retired), Third Court of Appeals, sitting by assignment. See Tex. Gov't Code § 74.003(b).