Bullock v. Texas Monthly, Inc., 14692

• Decision Date: 27 May 1987
• Docket Number: No. 14692,14692
• Citation: 731 S.W.2d 160
• Parties: Bob BULLOCK, Comptroller of Public Accounts of the State of Texas, Jim Mattox, Attorney General of the State of Texas and Ann Richards, Treasurer of the State of Texas, Appellants, v. TEXAS MONTHLY, INC., Appellee.
• Court: Texas Court of Appeals

Page 160

731 S.W.2d 160

Bob BULLOCK, Comptroller of Public Accounts of the State of

Texas, Jim Mattox, Attorney General of the State

of Texas and Ann Richards, Treasurer of

the State of Texas, Appellants, v. TEXAS MONTHLY, INC., Appellee.

No. 14692.

Court of Appeals of Texas,

Austin.

May 27, 1987.

Rehearing Denied June 24, 1987.

Jim Mattox, Atty. Gen., David Mendez, Asst. Atty. Gen., Austin, for appellants.

R. James George, Jr., Eric G. Behrens, Graves, Dougherty, Hearon & Moody, Austin, for appellee.

Before SHANNON, C.J., and BRADY and CARROLL, JJ.

ON MOTION FOR REHEARING

SHANNON, Chief Justice.

The opinion handed down by this Court on March 18, 1987, is withdrawn and this opinion is filed in its place.

Appellee, Texas Monthly, Inc., sued the Comptroller of Public Accounts and others in the district court of Travis County seeking recovery of sales taxes paid under protest. After trial to the court, the district court rendered judgment that Texas Monthly recover $149,107.74. This Court will reverse the judgment.

Texas Monthly publishes a general interest magazine on a monthly basis. Effective October 2, 1984, the sales of its magazine became subject to the sales tax. Tex. Tax Code Ann. § 151.051 (Supp.1987). Texas Monthly paid, under protest, $149,107.74 which sum represented the tax on the sale of its magazine between January 21, 1985 and December 18, 1985.

Texas Monthly's suit for refund was predicated upon the fact that certain publications are exempted from payment of the sales tax. Tex. Tax Code Ann. § 151.312. That section provides:

Periodicals that are published or distributed by a religious faith and that consist wholly of writings promulgating the teaching of the faith and books that consist wholly of writings sacred to a religion or religious faith are exempted from the taxes imposed by this Chapter.

In its trial petition, Texas Monthly pleaded that:

Section 151.312 exempts from the sales tax religious periodicals. Such an exemption constitutes an unlawful discrimination based on the content of a publication and thus violates Plaintiff's rights guaranteed by the First and Fourteenth Amendments to the Constitution of the United States and Article 1, § 8 of the Constitution of Texas.

The district court's judgment declared § 151.312 unconstitutional "because it constitutes an unlawful discrimination based on the content of [Texas Monthly's] publication in violation of its rights under the First and Fourteenth Amendments of the U.S. Constitution and Article VIII § 1 of the Texas Constitution...."

Although the trial petition and the judgment are not entirely clear, the Comptroller and Texas Monthly in their briefs and oral argument took the position that the district court's judgment was grounded upon the premise that the § 151.312 exemption violated the equal protection and free speech clauses of the First and Fourteenth Amendments to the Constitution of the United States and the equal and uniform clause of Article 8 § 1 of the Constitution of Texas. In its brief, Texas Monthly discusses the establishment clause of the First Amendment but only as a part of its equal protection analysis.

Under point of error one, the Comptroller first asserts that the district court erred in concluding that § 151.312 violated the equal protection clause of the United States Constitution and the equal and uniform clause of the Texas Constitution. We agree.

It is inherent in the exercise of the power to tax that a state be free to select the subjects of taxation and to grant exemptions. Equal protection does not impose on a state any rigid equality of taxation. Inequalities which result from singling In its effort to meet this burden, Texas Monthly suggests that the § 151.312 exemption constitutes a law "respecting an establishment of religion," in violation of the United States Constitution, ¹ and therefore is unsupported by any legitimate basis.

                out one particular class for taxation or exemption infringe no constitutional limitation.  Carmichael v. Southern Coal & Coke Co., 301 U.S. 495, 57 S.Ct. 868, 81 L.Ed. 1245 (1937).  Like considerations govern exemptions from the operation of a tax imposed on the members of a class.  The legislature is not bound to tax every member of a class or none at all.  The legislature may make rational distinctions of degree having a rational basis.  Carmichael v. Southern Coal & Coke Co., supra; Hurt v. Cooper, 130 Tex. 433, 110 S.W.2d 896 (1937);  American Transfer & Storage Co. v. Bullock, 525 S.W.2d 918 (Tex.Civ.App.1975, writ ref'd).  The exemptions, when subjected to judicial scrutiny, must be presumed to rest on a rational basis if any state of facts would support such basis.  Carmichael v. Southern Coal & Coke Co., supra.   Indeed, it is said that "the presumption of constitutionality can be overcome only by the most explicit demonstration that a classification is a hostile and oppressive discrimination against persons and classes.  The burden is on the one attacking the legislative arrangement to negate every conceivable basis which might support it."   Madden v. Kentucky, 309 U.S. 83, 60 S.Ct. 406, 84 L.Ed. 590 (1940)
                

The United States Supreme Court has created a three-part test to aid in determining whether a statute violates the establishment clause:

First, the statute must have a secular legislative purpose; second, its principal or primary effect must be one that neither advances nor inhibits religion, ... finally, the statute must not foster "an excessive entanglement with religion."

Lemon v. Kurtzman, 403 U.S. 602, 612-13, 91 S.Ct. 2105, 2111, 29 L.Ed.2d 745 (1971). "Each value judgment under the religion clauses must ... turn on whether particular acts in question are intended to establish or interfere with religious beliefs and practices or have the effect of doing so." Walz v. Tax Commission, 397 U.S. 664, 669, 90 S.Ct. 1409, 1411, 25 L.Ed.2d 697 (1970). Applying this criteria, this Court concludes that § 151.312 does not violate the establishment clause. Furthermore, we are of the view that the classification established by this tax exemption has a rational basis and, accordingly, does not deny appellee equal protection of the law.

The secular purpose served by a tax exemption for religious organizations was described in Walz, supra. In Walz the Supreme Court reasoned that such a tax exemption "restricts the fiscal relationship between church and state, and tends to complement and reinforce the desired separation insulating each from the other." Id. at 676, 90 S.Ct. at 1415 (emphasis supplied).

Furthermore, the opinion in Walz demonstrates that the tax exemption at issue does not have the primary effect of advancing or inhibiting religion. To the contrary, the effect of religious tax exemptions such as § 151.312 is to permit religious organizations to be independent of government support or sanction. Although Walz recognized that "[g]ranting tax exemptions to churches necessarily operates to afford [them] an indirect economic benefit," the Court concluded that

[t]he grant of a tax exemption is not sponsorship since the government does not transfer part of its revenue to churches but simply abstains from demanding that the church support the state. No one has ever suggested that tax exemption has converted libraries, art galleries, or hospitals into arms of the state....

Id. at 674-75.

Nor does the fact that Walz involved an exemption granted to other "nonprofit, quasi-public corporations," as well as to Finally, this Court concludes that § 151.312 does not excessively entangle the state in religious activities and, accordingly, the statute meets the third prong of the Lemon v. Kurtzman test. Once again, we refer to Walz as authority for our view. In Walz the Court noted that, generally, the grant of an exemption to religious organizations leads to lesser involvement by the State than does taxation. Nevertheless, "[i]n analyzing either alternative the questions are whether the involvement is excessive, and whether it is a continuing one calling for official and continuing surveillance leading to an impermissible degree of entanglement." Id. at 675. This analysis involves examination of "the character and purposes of the institutions that are benefitted, the nature of the aid that the State provides, and the resulting relationship between the government and the religious authority." Lemon, supra at 615, 91 S.Ct. at 2112.

religious groups, distinguish it from this appeal. Although the broader based exemption in Walz provided a clearer case of non-sponsorship than is here present, the neutrality toward religion effected by the grant of an exemption for religious periodicals is just as evident. To discover an advancement of religion in this statutory scheme is to turn the intent and effect of § 151.312 on its head.

To the extent § 151.312 creates entanglement, it creates entanglement between government and institutions with purely religious purposes. We are not faced, therefore, with the difficulties presented when the government attempts to limit its intrusion to the secular endeavors of a religious organization--for example, where government attempts to provide aid for the non-religious curriculum of sectarian schools and yet creates excessive entanglement by oversight measures intended to insure that the aid is not directed to religious purposes. See Lemon, supra; Meek v. Pittenger, 421 U.S. 349, 372, 95 S.Ct. 1753, 1766, 44 L.Ed.2d 417 (1975). Accordingly, our focus is on the nature of the State's aid and the relationship between the State and religious publishers that results from the aid.

The aid at issue is, of course, the indirect subsidy provided by the tax exemption to religious periodicals. No affirmative action by state government is necessary to bestow this benefit. Due to its passive nature, the tax exemption does not create the appearance of an ongoing partnership between the State and religion presented by direct aid. More...