State Responds and Hearing Date Set in Margin Tax Constitutional Challenge

The State of Texas has responded to the Allcat Claims Service petition challenging the constitutionality of the current Texas Franchise tax (the Margin tax).  The state’s response contends that the so-called Bullock amendment prohibiting an income tax on natural persons, including the income share of partners, is not applicable to the Margin tax because the Margin tax does not tax natural persons and the Bullock Amendment does not prohibit the taxing of business entities.  The response says the Bullock amendment only prohibits a tax on natural persons, not the business ventures of natural persons.  The response also claims that the state Supreme Court lacks jurisdiction on the other claims of disparate treatment and awarding of attorney’s fees.

The Court has ordered parties to the lawsuit to file briefs addressing the constitutionality of the Court’s original jurisdiction as mandated by the Margin tax law, the merits of the Bullock amendment claim and whether the other claims in the suit are beyond the Court’s jurisdiction.  Briefs are due between now and Oct. 10, 2011 and the case is tentatively set for oral arguments during the week of Oct. 24, 2011.

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