EBS Solutions, Inc. v. Hegar
| Decision Date | 08 May 2020 |
| Docket Number | NO. 18-0503,18-0503 |
| Citation | 601 S.W.3d 744 |
| Parties | EBS SOLUTIONS, INC., Petitioner, v. Glenn HEGAR, Comptroller of Public Accounts of the State of Texas; and Ken Paxton, Attorney General of the State of Texas, Respondents |
| Court | Texas Supreme Court |
Michael B. Seay, Amanda Marie Traphagan, for Petitioner.
W. Kenneth Paxton Jr., Atty. Gen., Bill Davis, Rance L. Craft, Jeffrey C. Mateer, Austin, Kyle D. Hawkins, Alison D. Andrews, Brittney Rachelle Johnston, for Respondent Glenn Hegar.
Bill Davis, Rance L. Craft, Jeffrey C. Mateer, Kristofer S. Monson, Austin, Kyle D. Hawkins, Alison D. Andrews, Brittney Rachelle Johnston, Scott Keller, for Respondent Ken Paxton.
Ken Paxton, pro se.
Joshua Veith, Doug Sigel, for Amicus Curiae Duncan Burch, Inc.
In this case, we must determine whether the trial court has subject matter jurisdiction over a taxpayer's suit to challenge the Comptroller's franchise tax assessment. Having prepaid some of the taxes due under the assessment and filed an oath of inability to pay the remainder, the taxpayer contends that it satisfied Chapter 112's jurisdictional requirements under section 112.108 of the Tax Code. See TEX. TAX CODE § 112.108. The Comptroller asserts that the court of appeals previously declared section 112.108 unconstitutional and argues that partial prepayment of taxes owed is insufficient to waive the State's sovereign immunity. See Rylander v. Bandag Licensing Corp. , 18 S.W.3d 296, 305 (Tex. App.—Austin 2000, pet. denied). The court of appeals held that the trial court lacked jurisdiction to consider the suit because by failing to prepay the taxes due in full, the taxpayer did not comply with the Tax Code's statutory requirements. 549 S.W.3d 849 (Tex. App.—Austin 2018). We hold that section 112.108 of the Texas Tax Code, as applied to EBS, does not create an unreasonable financial barrier of access to the courts, but instead allows EBS to exercise its right to access the courts to seek judicial review of its tax assessment. Because the taxpayer satisfied the statute's requirements to waive the State's sovereign immunity, we reverse the court of appeals' judgment and remand the case to the trial court for further proceedings
I. Factual Background
The facts in this case are undisputed. The Comptroller audited EBS Solutions, Inc.'s franchise tax report for years 2009 through 2012, assessing additional taxes, penalties, and interest in the amount of $298,519.50. EBS timely filed for redetermination. See TEX. TAX CODE § 111.009. After a hearing, the administrative law judge ruled in the Comptroller's favor, leaving the assessment at $298,519.50. EBS then made two partial payments in protest, totaling $150,000. EBS included a protest letter with each payment. Additionally, EBS filed with the Attorney General a statement of grounds for seeking an injunction, as required by Texas Tax Code section 112.101. See id. § 112.101(a)(1). Soon after, EBS filed suit seeking return of the partial payment and an injunction to prohibit the Comptroller from taking action to collect the remainder of the taxes owed under the assessment.1
Relying on the inability-to-pay provision of section 112.108, EBS filed an oath of inability to pay the remainder of the taxes assessed, claiming that requiring it to prepay the full amount of taxes assessed would constitute an unreasonable restraint on EBS's access to the courts. See id. § 112.108 (). After EBS requested a hearing on its oath of inability to pay, as required by section 112.108, the Comptroller objected, arguing "that such an inquiry is wholly irrelevant" because the court of appeals had previously ruled that section 112.108 was unconstitutional. See Bandag , 18 S.W.3d at 305 ; see also Combs v. Tex. Small Tobacco Coal. , 440 S.W.3d 304, 310 (Tex. App.—Austin 2014) (), overruled on other grounds sub nom. Hegar v. Tex. Small Tobacco Coal. , 496 S.W.3d 778 (Tex. 2016). After a hearing, the trial court found that requiring EBS to pay "the franchise taxes, penalties, and interest assessed ... would constitute an unreasonable restraint on [EBS]'s right of access to the courts."
Incorporated into its original answer, the Comptroller filed a plea to the jurisdiction asserting that the trial court lacked subject matter jurisdiction because EBS had failed to meet the applicable prepayment prerequisite by only paying about half of the tax assessment. See TEX. TAX CODE §§ 112.051(a), .101. Because EBS did not pay the full amount of the assessment, as required by sections 112.051 and 112.101, and the court of appeals had previously ruled that section 112.108 as amended failed to cure the constitutional defect we identified in R Communications v. Sharp , 875 S.W.2d 314 (Tex. 1994), see Bandag , 18 S.W.3d at 305, the Comptroller took the position that sovereign immunity was not waived and the trial court was required to dismiss EBS's protest suit and request for an injunction. See TEX. TAX CODE §§ 112.051, .101. The trial court denied the Comptroller's plea to the jurisdiction.
The court of appeals reversed the trial court's denial of the plea to the jurisdiction. 549 S.W.3d at 864. The court referenced this Court's analysis in R Communications , in which we held section 112.108, before amendment, was unconstitutional, and the court of appeals' earlier holding in Bandag to hold that "the amended version of section 112.108 was unconstitutional and explained that ‘the entirety of section 112.108' was an ‘unreasonable financial barrier against access to the courts.’ " Id. at 856 (citing Bandag , 18 S.W.3d at 304–05 ). Noting that the Bandag decision remained undisturbed by this Court and the Legislature after almost twenty years, the court of appeals determined that EBS "ignore[d] the effect of [its] ruling in Bandag " and did not satisfy the statutory prerequisites necessary to waive the State's sovereign immunity or pursue a common-law declaratory judgment claim. Id. at 863. The court held that after Bandag , "the legal landscape ... reverted back to what it was when the [S]upreme [C]ourt invalidated the original version of section 112.108." Id. at 864. Accordingly, the court of appeals concluded whether EBS complied with section 112.108's inability-to-pay procedural requirements was irrelevant because " section 112.108 is invalid." Id. at 864 n.7.
II. Standard of Review
Sovereign immunity implicates a court's subject matter jurisdiction. Tex. Dep't of Parks & Wildlife v. Miranda , 133 S.W.3d 217, 226 (Tex. 2004). "As subject-matter jurisdiction is a question of law, we review a trial court's ruling on a plea to the jurisdiction de novo." Hous. Belt & Terminal Ry. Co. v. City of Hous. , 487 S.W.3d 154, 160 (Tex. 2016) ). In determining whether the State has waived sovereign immunity, we apply traditional principles of statutory interpretation. See City of San Antonio v. City of Boerne , 111 S.W.3d 22, 25 (Tex. 2003). When we interpret a statute, our purpose is to give effect to the Legislature's intent by looking at its plain and ordinary meaning, "and then consider the term's usage in other statutes, court decisions, and similar authorities." Tex. State Bd. of Exam'rs of Marriage & Family Therapists v. Tex. Med. Ass'n , 511 S.W.3d 28, 35 (Tex. 2017). We turn to extrinsic sources only if the statute is ambiguous or if applying the statute's plain meaning would produce an absurd result. See Tex. Health Presbyterian Hosp. of Denton v. D.A. , 569 S.W.3d 126, 135 (Tex. 2018) ; Entergy Gulf States, Inc. v. Summers , 282 S.W.3d 433, 437 (Tex. 2009).
III. Analysis
Although the trial court generally lacks jurisdiction to hear a taxpayer's challenge to a tax assessment, see TEX. TAX CODE § 112.108, the Legislature has waived the State's sovereign immunity as to three types of tax challenges—protests, injunctions, and refunds—conferring exclusive, original jurisdiction on the district courts of Travis County. In re Nestle USA, Inc. , 359 S.W.3d 207, 208–09 (Tex. 2012) ; R Commc'ns , 875 S.W.2d at 318–19 ; see TEX. TAX CODE §§ 112.001, .051, .101, .108. For each of these suits, the taxpayer normally must meet some prepayment prerequisite prior to bringing the tax suit. See TEX. TAX CODE §§ 112.001, .051, .101. For a protest or refund suit, the taxpayer must first pay the amount allegedly owed in taxes and fees, accompanied by a statement as to which type of challenge the taxpayer makes. Id. §§ 112.051, .151. For a suit seeking a statutory injunction, the taxpayer elects to either pay the taxes, fees, and penalties allegedly owed or file a "good and sufficient bond" equal to twice the amount of taxes, fees, and penalties allegedly owed. Id. § 112.101(a). We have referred to these prepayment prerequisites as jurisdictional requirements to challenging a tax assessment. See In re Nestle USA, Inc. , 387 S.W.3d 610, 616 (Tex. 2012) (citing Nestle , 359 S.W.3d at 208 ).
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