Can a Texas state agency pay the professional license fees or occupation taxes for accountants, engineers, and other licensed employees on its staff?

Texas AG Opinion JM-1063: Can a State Agency Pay Its Employees' Professional Fees and Taxes?

Plain-English summary

The Office of Public Utility Counsel asked a money question that touches almost every state agency. In 1987 the Legislature passed House Bill 61, which raised the fees on a long list of licensed professions and, alongside them, imposed a temporary occupation tax on attorneys. Accountants, engineers, physicians, dentists, optometrists, chiropractors, psychologists, architects, real estate brokers, securities dealers, and veterinarians all saw their fees jump. Many of these professionals work for the state. So the question was simple to ask and hard to answer: can the agency that employs them foot the bill for those higher fees out of public funds, or does the Texas Constitution forbid it?

The constitutional worry comes from article III, section 51, which says the Legislature has no power to make a grant of public money to any individual. On its face, an agency writing a check to cover an employee's personal license fee looks like exactly that kind of grant. An earlier opinion, Letter Opinion 88-79, had already said an agency could pay the attorney occupation tax for its attorney employees, and this request asked the Attorney General to extend that reasoning to the other House Bill 61 professions.

The Attorney General said yes, but he cleaned up the legal test along the way. Some of the briefs argued the answer should turn on a distinction drawn in earlier opinions: whether the payment covered a "minimum qualification" for the job (which they said the state could not pay for) or "additional training or specialization" for extra duties (which it could). The AG rejected that framework for constitutional purposes. He disapproved the rationale of Letter Opinion 88-79 and the implication of Opinion JM-313 that this minimum-qualifications line controls whether an expenditure is allowed under article III, section 51. The right test, he held, is the one from Opinion MW-251 (1980): an expenditure of public money on an individual is permissible so long as it is directly and substantially related to the agency's governmental function and the agency receives an adequate return for it.

Applied here, that meant an agency may pay the temporary fee increases for accountants, engineers, and other affected professionals in its employ if the responsible authority determines the payment is directly and substantially related to the agency's governmental function and that the agency will get adequate value in return. The AG stressed two limits on that conclusion. First, being allowed to pay is not the same as being required to pay; even if an agency would get its money's worth, paying remains a policy choice. Second, no single factor decides it. Whether the employee is full-time or part-time, whether the employee also uses the credential in outside work, and whether the credential is required or merely useful all matter to the adequate-return analysis, but none of them standing alone controls.

The opinion closed with an equal-protection point. An agency does not have to treat every profession the same. It can pay the attorney tax for its lawyers and decline to pay the fee increases for other professionals, as long as it has a rational basis for the difference and its lines are not drawn on suspect grounds like race or gender.

Currency note

This opinion was issued in 1989. 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.

The temporary fee increases at the center of this opinion came from House Bill 61, a 1987 measure whose increases were, by their terms, temporary. The specific professional fee statutes cited here, including V.T.C.S. article 41a-1 for accountants and Tax Code section 191.142 for the attorney tax, have been amended and in places recodified since 1989. What survives is the constitutional analysis: article III, section 51 still bars grants of public money to individuals, and the governing test for whether a public expenditure benefiting an individual is permissible remains whether it is directly and substantially related to the government's function with adequate return. Anyone weighing whether an agency may pay a present-day license fee or professional tax should check the current fee statute and current case law on public-purpose expenditures rather than rely on the 1987 fee provisions named here.

Who this opinion affected (as of 1989)

State agency budget officers and executives: The opinion gave them room to pay the higher professional fees for licensed staff, but put the decision squarely on the agency's own judgment. The responsible authority had to make a real determination that the payment served the agency's function and returned adequate value, and had to be ready to defend that call for abuse of discretion.

Licensed professionals on the state payroll: Accountants, engineers, and the other House Bill 61 professionals working for the state learned that their agency could cover the temporary increase, but was not obligated to. Whether it did came down to agency policy, not a right.

Attorneys employed by the state: The opinion reaffirmed the bottom-line result of Letter Opinion 88-79 that an agency may pay the temporary attorney tax, even as it swapped out that opinion's reasoning for the MW-251 test.

Common questions

Can a Texas state agency legally pay an employee's professional license fee?
Yes, if the agency reasonably determines the payment is directly and substantially related to its governmental function and that it receives an adequate return. Article III, section 51 of the Texas Constitution does not bar the expenditure when that test is met.

Does the agency have to pay these fees?
No. The Attorney General was explicit that being allowed to pay is not the same as being required to pay. Even when an agency would receive adequate value, paying the fees is a policy decision, not a constitutional mandate, and it remains subject to any statutory limits on how the agency's funds may be spent.

Can an agency pay for some professions but not others?
Yes. An agency may pay the tax or fee for some classes of professional employees and decline to pay for others, so long as it has a rational basis for the distinction and does not draw the line on grounds like race or gender that would trigger heightened constitutional scrutiny.

What is the test for whether a public expenditure on an individual is constitutional?
Under this opinion, the test is whether the expenditure is directly and substantially related to the agency's governmental function and whether the agency receives an adequate return, drawn from Opinion MW-251. The opinion disapproved the earlier idea that constitutionality turns on whether the payment covers a "minimum qualification" versus "additional training."

Background and statutory framework

The request came from the Public Counsel of the Office of Public Utility Counsel and followed Attorney General Letter Opinion 88-79, which concluded that a state agency is not prohibited by the Texas Constitution from paying the attorney occupation tax imposed by Tax Code section 191.142 for any attorney in its employ on the date the tax becomes due. The new question was whether a state agency is likewise constitutionally permitted to pay the temporary increase in fees imposed on accountants by V.T.C.S. article 41a-1, section 31, and, more broadly, the temporary fee increases House Bill 61 imposed on all affected professional employees. Section 31 of article 41a-1, added by House Bill 61, provided for temporary fee increases for accountants; the same bill imposed similar increases on physicians, dentists, optometrists, chiropractors, psychologists, architects, engineers, real estate brokers, securities dealers, and veterinarians, along with the temporary attorney tax. H.B. 61, Acts 1987, 70th Leg., 2d C.S., ch. 5, at 9. Letter Opinion 88-135 had noted that the "fee" increases imposed on engineers had the legal character of occupation taxes, raising revenue to support state and local government, and the opinion treated the other increases the same way. See Conlen Grain & Mercantile, Inc. v. Texas Grain Sorghum Producers Bd., 519 S.W.2d 620 (Tex. 1975).

The controlling authority was Attorney General Opinion MW-251 (1980), which concluded that the State Purchasing and General Services Commission might spend appropriated funds to pay the notary license fees of employees if the executive director determined that the agency needed the notarial services and would receive an adequate return for the expenditure. That opinion discussed article III, section 51 of the Texas Constitution, which provides that the "Legislature shall have no power to make any grant or authorize the making of any grant of public moneys to any individual," and concluded that the provision would not bar such expenditures so long as they were "directly and substantially related to the performance of the state's governmental function." Barrington v. Cokinos, 338 S.W.2d 133, 140 (Tex. 1960); Brazoria County v. Perry, 537 S.W.2d 89 (Tex. Civ. App. - Houston [1st Dist.] 1976, no writ); see also Attorney General Opinions H-133 (1973), WW-638 (1959), WW-433 (1958).

Two briefs pointed to the distinction drawn in Attorney General Opinion JM-313 (1985) and Letter Opinion 88-79 between "minimum qualifications for public employment" and "additional training and/or specialization for additional duties." Those opinions indicated that state payments to obtain or maintain the "minimum qualifications" of individual employees would be barred by article III, section 51, and the briefs suggested that if a House Bill 61 fee was requisite to obtaining or maintaining a professional license, the state might be barred from paying it.

The opinion declined to adopt that distinction as the constitutional test. Opinion JM-313 had first drawn the minimum-qualifications line in deciding whether the bar dues of a prosecutor's office personnel could be paid from the "hot check fund" established under article 53.08 of the Code of Criminal Procedure, concluding that bar dues were an expense related to the individual's profession rather than an "office expense" within article 53.08(e). Without reopening that statutory conclusion, the AG disapproved any implication in JM-313 that the minimum-qualifications distinction governs the propriety of an expenditure under article III, section 51. The proper test, absent more restrictive statutory provisions governing specific expenditures, is the MW-251 test: whether the expenditure is directly and substantially related to the agency's governmental function and whether the agency receives an adequate return. Likewise, to the extent Letter Opinion 88-79 had relied on the fact that the attorney tax was not an expenditure for maintaining "minimum qualifications," the AG disapproved that rationale while adhering to its result, holding that payment of an employee's temporary attorney tax is not prohibited by article III, section 51 if the agency reasonably determines the expenditure is directly and substantially related to its governmental function, subject to review for abuse of discretion. See County School Trustees of Callahan County v. District Trustees of Dist. No. 15, 192 S.W.2d 898 (Tex. Civ. App. - Eastland 1946, writ ref'd n.r.e.).

Answering the question, the opinion concluded that if the responsible agency authority determines the agency will receive adequate return on the expenditures, that is, that they would be directly and substantially related to the agency's governmental function, the fees may be paid by the agency. Because the question was one of constitutional permissibility, the opinion did not address statutory restrictions that might apply, such as the appropriation items from which the fees might be payable. It cautioned that concluding an agency may constitutionally pay the fees does not mean an agency is required to pay them, even if it determines it would receive an adequate return. Factors such as whether the employee is full-time or part-time, whether the employee also uses the professional credentials outside state employment, and whether the credentials are required or merely useful in performing the employee's duties would carry weight in the adequate-return analysis, but none standing alone would be determinative. So long as the agency reasonably determines it will receive an adequate return, whether to pay the fees of particular classes of professional employees is a policy decision rather than a constitutionally mandated one, subject to any statutory restrictions.

Finally, the opinion addressed the agency's question whether it would be "constitutionally correct" to pay the attorney tax for attorney employees while refusing to pay the fee increases for other professionals. Absent distinctions based on race, gender, or other classifications that would trigger heightened constitutional scrutiny, an agency may, consistent with state and federal equal protection principles, opt to pay the fee or tax for some kinds of professionals and not others, so long as there is a rational basis for its actions. Massachusetts Bd. of Retirement v. Murgia, 427 U.S. 307 (1976). Because the request went to the practices of state agencies generally, the opinion did not speculate about which factors might supply a rational basis in a particular agency's operations.

Citations

Constitutional and statutory authority:

• Tex. Const. art. III, § 51 (no grant of public money to an individual)
• Tax Code § 191.142 (temporary attorney occupation tax)
• V.T.C.S. art. 41a-1, § 31 (temporary accountant fee increase, added by H.B. 61)
• H.B. 61, Acts 1987, 70th Leg., 2d C.S., ch. 5, at 9 (temporary professional fee increases)
• Code of Criminal Procedure art. 53.08, 53.08(e) ("hot check fund")

Cases cited:

• Barrington v. Cokinos, 338 S.W.2d 133, 140 (Tex. 1960)
• Brazoria County v. Perry, 537 S.W.2d 89 (Tex. Civ. App. - Houston [1st Dist.] 1976, no writ)
• Conlen Grain & Mercantile, Inc. v. Texas Grain Sorghum Producers Bd., 519 S.W.2d 620 (Tex. 1975)
• County School Trustees of Callahan County v. District Trustees of Dist. No. 15, 192 S.W.2d 898 (Tex. Civ. App. - Eastland 1946, writ ref'd n.r.e.)
• Massachusetts Bd. of Retirement v. Murgia, 427 U.S. 307 (1976)

Attorney General materials referenced:

• MW-251 (1980)
• JM-313 (1985)
• Letter Opinion 88-79
• Letter Opinion 88-135
• H-133 (1973)
• WW-638 (1959)
• WW-433 (1958)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/jim-mattox/jm-1063
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1989/jm1063.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor OCR errors may remain; the linked PDF is authoritative.

June 26, 1989

Ms. C. Kingsbery Ottmers
Public Counsel
Public Utility Counsel
8140 Mopac
Westpark III, Suite 120
Austin, Texas 78759

Opinion No. JM-1063

Re: Whether a state agency may pay the temporary fees assessed against accountants and engineers in its employ (RQ-1619)

Dear Ms. Ottmers:

You refer to Attorney General Letter Opinion 88-79, which concluded that a state agency is not prohibited by the Texas Constitution from paying the attorney tax imposed by Tax Code section 191.142 for any attorney in its employ on the date on which the tax becomes due.

You ask whether a state agency is likewise constitutionally permitted to pay the temporary increase in fees imposed on accountants by V.T.C.S. article 41a-1, section 31. You also ask that our response cover all professional employees affected by the temporary fee increases imposed by House Bill 61. H.B. 61, Acts 1987, 70th Leg., 2d C.S., ch. 5, at 9. Section 31 of article 41a-1, added by House Bill 61, provided for the temporary fee increases for accountants. That bill also imposed similar fee increases on physicians, dentists, optometrists, chiropractors, psychologists, architects, engineers, real estate brokers, securities dealers, and veterinarians, as well as the temporary tax on attorneys addressed in Attorney General Letter Opinion 88-79. We will address the constitutionality of a state agency paying such fee increases for any such professionals within its employ.1

1. Attorney General Letter Opinion 88-135 noted that the "fee" increases imposed by House Bill 61 on engineers had the legal character of occupation taxes, their purpose being, per the bill's caption, "raising revenue to support state and local government." The other "fee" increases imposed by that bill on members of other professions would thus appear to be, in fact, occupation taxes as well, the proceeds from each of those fee increases being subject to identical provisions as to their apportionment between the foundation school fund and the general revenue fund. See Conlen Grain and Mercantile, Inc. v. Texas Grain Sorghum Producers Bd., 519 S.W.2d 620 (Tex. 1975).

Attorney General Opinion MW-251 (1980) concluded that the State Purchasing and General Services Commission might spend appropriated funds to pay the notary license fees of employees if the executive director determined that the agency needed such notarial services and would receive an adequate return for such expenditures. The opinion discussed the language of article III, section 51, of the Texas Constitution, providing that the "Legislature shall have no power to make any grant or authorize the making of any grant of public moneys to any individual," and concluded that it would not bar such expenditures so long as they were "directly and substantially related to the performance of the state's governmental function." Id., citing Barrington v. Cokinos, 338 S.W.2d 133, 140 (Tex. 1960); Brazoria County v. Perry, 537 S.W.2d 89 (Tex. Civ. App. - Houston [1st Dist.] 1976, no writ); see also Attorney General Opinions H-133 (1973); WW-638 (1959); WW-433 (1958).

Two briefs submitted in response to your request point to the distinction made in Attorney General Opinion JM-313 (1985) and Attorney General Letter Opinion 88-79 between "minimum qualifications for public employment" and "additional training and/or specialization for additional duties." Those opinions indicated that payments by the state for obtaining or maintaining such "minimum qualifications" of individual employees would be barred by article III, section 51, of the constitution.

The briefs distinguish payment of the tax on attorneys from payment of the other temporary professional fee increases imposed by House Bill 61, suggesting that if the latter fee is requisite to obtaining or maintaining the professional licenses in question, the state might be barred from paying it as payment for the obtaining or maintaining of "minimum qualifications."

Attorney General Opinion JM-313 (1985) first made the distinction between "minimum qualifications" and "additional training and/or specialization" in considering whether the bar dues of a prosecutor's office personnel could be paid from the "hot check fund" established under article 53.08 of the Code of Criminal Procedure. That opinion concluded that the payment of bar dues was an "expense related to the individual's profession rather than an 'office expense'" within the meaning of the article 53.08(e) provision that the "hot check fund" could be used only for "defraying the salaries and expenses of the prosecutor's office." While we decline to review here the appropriateness of these distinctions in reaching the conclusion in Attorney General Opinion JM-313 that attorney bar dues were not authorized expenditures under article 53.08, we now disapprove any implication in that opinion that such distinctions are to be applied in determining the propriety of an expenditure for purposes of the constitutional restrictions set out in article III, section 51, of the state constitution. We think that the proper test under article III, section 51, absent more restrictive statutory provisions governing specific expenditures, is that set out in Attorney General Opinion MW-251, i.e., whether the expenditure is "directly and substantially related to the agency's governmental function," and whether the agency receives adequate return for its expenditures.

Likewise, to the extent that Attorney General Letter Opinion 88-79 relied on the fact that the payment of the Tax Code section 191.142 attorney tax was not an expenditure for obtaining or maintaining "minimum qualifications" of public employment (payment of the tax not being requisite to maintaining the license) in concluding that a state agency might constitutionally pay the tax for its attorney employees, we now disapprove that opinion's rationale, while adhering to its result. We think that payment of an employee's temporary attorney tax by a state agency is not prohibited by article III, section 51, of the Texas Constitution if the agency reasonably determines that such expenditure is directly and substantially related to the agency's governmental function. The agency's decision is subject to review for abuse of discretion. See, e.g., County School Trustees of Callahan County v. District Trustees of Dist. No. 15, 192 S.W.2d 898 (Tex. Civ. App. - Eastland 1946, writ ref'd n.r.e.).

Therefore, in answer to your question whether a state agency may constitutionally pay the temporary increase in fees imposed by House Bill 61 for accountants and other affected professionals in its employ, we conclude that if the responsible agency authority determines that the agency will receive adequate return on such expenditures, that is, that such expenditures would be directly and substantially related to the agency's governmental function, the fees may be paid by the agency.

Since your question is whether such payments are constitutionally permissible, we do not address here any statutory restrictions which might apply to an agency's payment of such fees, such as the appropriation items from which such fees might be payable. We do caution that by concluding that any agency may constitutionally pay such fees, we do not mean that an agency is required to pay them, even if it determines that it would receive an adequate return on such expenditures. We would also note that while certain factors, such as whether the employee in question is employed full-time or part-time, whether he also uses his professional credentials in working outside the confines of state employment, or whether the professional credentials in question are required or merely useful in performing his duties, would certainly carry weight in determining whether the agency receives an adequate quid pro quo for paying the fees, none of these factors standing alone would be determinative of the constitutional propriety of paying the fees. So long as the agency reasonably determines that it will receive an adequate return for the payments under the test discussed above, the determination of whether to pay fees of particular classes of professional employees would be a policy decision rather than a constitutionally mandated one, subject of course to any statutory restrictions on such payments.

You also ask whether a state agency would be "constitutionally correct" when it pays the temporary attorney tax under Tax Code section 191.142 for attorney employees but refuses to pay the temporary fee increases for other professional employees upon whom House Bill 61 imposed fee increases. We think that, absent distinctions based on race, gender, or other classifications which would trigger heightened constitutional scrutiny of its actions, an agency may, consistent with state and federal equal protection principles, opt to pay the temporary fee or tax for some kinds of professionals in its employ and not for others, so long as there is a "rational basis" for its actions. See, e.g., Massachusetts Bd. of Retirement v. Murgia, 427 U.S. 307 (1976). Since your question goes to the practices of state agencies generally, we will not speculate as to which factors to be considered in a particular agency's operations might furnish such a "rational basis" for paying the professional fees of some groups of professional employees but not others.

SUMMARY

A state agency is not prohibited by article III, section 51, of the Texas Constitution from paying, for professionals in its employ, the temporary fee increases imposed on certain professionals if the agency determines that such expenditures would be directly and substantially related to its governmental function. An agency may pay the fees of some such classes of professionals in its employ, but not others, if there is a rational basis for its actions.

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 William Walker
Assistant Attorney General