State officials are agitated about a new line on Sprint and Nextel bills telling customers of that phone company that a new charge has been added to cover the costs of the state's new business tax. The language from the bill goes like this: "Texas Margin Fee Reimbursement. Effective January 2007, Sprint will begin charging Texas customers a 1% Texas Margin Fee Reimbursement in the Additional Sprint Charges section of the invoice. For details on fees, see the Subscriber Agreement..." That has won the attention of legislative leaders, the attorney general and comptroller, who are digging around to see whether the pass-through is legal. The company says it's doing with this tax what it does with an array of other fees added by various governments Lt. Gov. David Dewhurst raised the issue, without naming the company, at a press conference, protesting that the tax isn't even due until 2008. Texas businesses that owe the tax won't pay it until May 2008, but the amount they owe will be based on their 2007 business year. That'd be the business reason to pass it along to customers now. But no business in the state will owe tax collectors 1 percent. The tax maxes out at 0.7 percent, and that's where the state lawyers and tax experts are focusing their attention. It might be okay to pass along the tax, but not to over-collect and blame it on the state. The company says it has the right to add a surcharge to phone bills to cover the cost of the new tax, and that the surcharge doesn't have to exactly match the tax as long as the company doesn't collect more than it'll eventually owe. The surcharge on wireless bills is higher than the maximum rate of the new business tax. But the surcharge on bills for wired phone services is lower. They added a one percent fee on wireless bills for Sprint and Nextel customers (the companies are in the middle of a merger) and a 0.6 percent fee on "wire-line" bills (long distance and other services involving phones that actually plug into the wall). When it nets out, a spokesman said, the company will have collected in surcharges about what it will owe for the state's new margin tax next year. No matter which calculation the company uses, the maximum margin tax is 0.7 percent of its gross revenues in Texas. Put another way: The company will owe a maximum of $0.70 on every $100 in revenues. It added a $1 surcharge for every $100 it gets from mobile customers and $0.60 for every $100 it gets from wired customers. The bill for the margin tax isn't due until next year, but businesses are being taxes on their activities in fiscal 2007. For many companies, like Sprint, the fiscal year matches the calendar year. They're collecting the taxes along with the business being taxed, and they'll pay up on the due date in May 2008. "The average Texan pays nearing 18 percent of their wireless invoice in taxes, surcharges and fees," said Sprint spokesman John Taylor of Reston, Virginia (An industry group, CTIA, puts the Texas number at 19.7 percent). He said the company "considers it good business" to tell customers which part of their bill is for the phone and which part is for various taxes, and said only six states (Illinois, Florida, Nebraska, New York, Rhode Island, and Washington) hang more charges on cell phones than Texas. "What we decided to do was to pass on that tax to our customers in the form of a surcharge," he said. He said the company never added a surcharge to bills for the current corporate franchise tax, and so won't be giving a rebate when that one expires and is replaced by the new margins tax.

Comptroller Susan Combs is asking Sprint to get rid of the line on its bill seeking customer "reimbursement" for the state's new margins tax.

The company doesn't intend to honor her request.

Combs says her office never signed off on the charge (it's not clear they have the power to do that anyway). And she's not happy that the rate charged on some customers' bills is higher than the highest rate for the new tax. The tax can't go higher than 0.7 percent of any company's gross receipts; on bills sent to Sprint and Nextel wireless customers, the company has set the reimbursement at 1 percent (it's at 0.6 percent on the bills sent to the company's wire-line customers).

A spokesman says the company will end up under-collecting the amount needed to cover the tax, and welcomed a review of the company's tax return when it's filed in 16 months.

This is the first public faceoff over how the state's new business tax will actually be administered. Companies will owe the tax based on business done in their 2007 fiscal years, but it's not actually due until May 2008. They and the state's tax collector are feeling their way through a new minefield.

Combs also isn't happy that the company is seeking "reimbursement" for taxes it won't pay for more than a year.

The new comptroller wants the company to take the charge off its bills until the Legislature has a chance to take a look. If they won't do that, she's threatening "audit and collection action by this office and a possible injunction by the attorney general."

A company spokesman, John Taylor, said the company is reviewing the letter from Combs, that they'll continue to collect the surcharge, and that the comptroller doesn't have the power to regulate what the company puts on its bills. Sprint, he said, wants to be "open, honest and up front with everyone involved," and explained the charge to customers on their bills, on the company's website, and with live operators if people call in and ask about the fees. He said the Legislature already addressed the tax issue and didn't do anything to prevent what the phone company is doing. He ended with a line that'll probably appear, in some form, in the company's official response: "We are absolutely in compliance with state and federal law."

A national taxpayer group's report says Texas' new business tax is really a bastardized income tax.The report from COST — the Council on State Taxation — attacks gross receipts taxes at the state level but lets Texas off the hook, sort of, by saying our new tax isn't exactly what they're fighting. "Texas also enacted a new business tax in 2006, to become effective in 2008... This tax is not included here because it is more a badly designed business profits tax, like those that emerged in the newly independent states of the former Soviet Union, than either traditional or newer gross receipts taxes." The Texas tax starts with a company's gross receipts but lets the taxpayers deduct either their cost of goods sold or their payroll before figuring their tax. A classic gross receipts tax wouldn't have those deductions. But the Texas tax, like a gross receipts tax, is due even when the taxpayer didn't have a profit. Income taxes are typically levied against profits. Texas politicos who don't want to be tagged by voters say the Texas tax isn't an income tax because it's due even when companies are losing money. COST's assessment is packaged in a footnote in the 16-page report. They don't spend much time on it, but they got downright snarky about state business taxes — in Texas, New Jersey, and Kentucky — that are hybrid receipts/income levies. "These taxes combine all the problems of minimum income taxation in general—excess compliance and administrative cost, penalization of the unsuccessful business, undesirable incentive impacts, doubtful equity basis—with those of taxation according to gross receipts."

The House and Senate will hash out their differences over electric utility regulations in conference committee. Several bills are in the legislative digestive system, and two are on the way to negotiators. The bills are semi-related, but the conferees are different.

On SB 483, the Senate is sending five Republicans: Troy Fraser of Horseshoe Bay, Kip Averittof Waco, Kevin Eltife of Tyler, Chris Harris of Arlington, and Kyle Janek of Houston. The House hasn't named its team for that one. That legislation would limit electric generators' share of markets in the state in an effort to promote competition and lower prices. State regulators would have the power to order refunds and fines for companies that manipulate markets to keep prices high. It also forces utilities and distribution and transmission companies to seek Public Utility Commission approval when they're about to be sold or merged.

SB 482 will be worked out by a Senate crew that includes Fraser, Harris, Eltife, Kim Brimer of Fort Worth and John Whitmire, a Houston Democrat. The House has five negotiators — four Republicans and a Democrat — for SB 482: Phil King, R-Weatherford, Will Hartnett, R-Dallas, Sid Miller, R-Stephenville, Joe Straus, R-San Antonio, and Sylvester Turner, D-Houston. That one's supposed to promote retail electric competition.

Give Jim Keffer his due — he got a tax bill through the House without getting skinned or junking up the bill in the process. The Eastland Republican's bill patches three holes in the state's new business tax and frees about 60,000 taxpayers who otherwise would have paid it.

Now it's off to the Senate for Round Two.

The bill adds about $200 million in taxes for partnerships that own and lease property. That's a difference between a gross margins tax, which lawmakers intended, and a net margins tax, which would have been more forgiving to the taxpayers, to the tune of 200 million samolians each year. It fixes the formula for calculating securities and other sales by banks and brokerages with offices outside state lines, and it repairs the rules for charging a company's losses against future profits for tax purposes.

To make sure they weren't raising taxes, Keffer & Co. raised the trigger on the new tax from gross annual revenues of $300,000 to $600,000, meaning companies can make that much more money before they have to pay the state any taxes at all. The state comptroller's number-crunchers say that frees about 60,000 Texas companies from having to pay.

Sprint got popped for adding a reimbursement for the new business tax to bills its customers are paying now. The tax applies to this tax year, but it isn't due until next year. State officials want Sprint and others to hide the tax — to stop putting it on the bill where customers can see it and blame it on the Legislature.

But if they do have a line item "billing or invoicing the tax as a fee, charge, reimbursement, or other item," they have to hold the money gathered to pay the tax in trust "for the benefit of the state." Any and all money collected that way goes to the state, regardless of the tax owed.

Sprint got lawmakers' attention earlier this year by adding a "reimbursement" for the state tax to customers' bills (The original stories are here and here). That company's in a tussle with the state's attorney general now as a result, and the Keffer tax bill could make the practice stupid, if not illegal.

They're Running for the Roses this week in the 133rd Kentucky Derby beneath the Twin Spires at historic Churchill Downs in Louisville, Kentucky. Under the historic Pink Dome in Austin, Texas, they're on the backstretch at the 80th running of the Texas Legislature. Derby favorites? Street Sense, Scat Daddy and NoBiz Like ShoBiz. Session odds? Kevin Kennedy went Out There to see.

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Poll Tax... In The Race Or Out?

Vince Leibowitz at Capitol Annex finds some fun in the Texas House, where the 24th Amendment to the U.S. Constitution was ratified on the same day members voted for a voter ID bill he calls a new poll tax. Meanwhile, Paul Burka posted talk of a compromise on a controversial voter registration bill. The Burkablog had Rep. Phil King, R-Weatherford, talking with key Democrats about the legislation. That deal didn't pan out, but the bill passed the House and moved on toward the Senate.

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School Prayer Breezes Through House

The Texas Observer Blog reports Rep. Charlie Howard, R-Sugar Land, had a fairly easy time passing his "freedom of religious expression" legislation this session. The Senate hasn't taken a crack at it, but the bill passed the lower chamber 110-33. Blogger Ed Cognoski doesn't seem to think this is a real big deal and only instructs schools to do what they are supposed to do, i.e., protect the First Amendment.

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Could Be A Sleeper

Grits for Breakfast captured the debate on HB 312 on the House floor and thinks it might be a winner for supporters of criminal justice reform. The bill, from Rep. Sylvester Turner, D-Houston, addresses probation revocation for some offenders and puts the burden on the state to prove a defendant could have paid fees assessed in their sentencing but chose not to.

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Keel-Hauling TxDOT

Eye on Williamson County posted the State Auditor's report on the Texas Department of Transportation's funding gap numbers. EOWC says TxDOT officials seem to be proud they were caught apparently cooking the books.

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Early Primary Bill is Late, but Alive

Burnt Orange Report posts there are life in the effort to move up the date of Texas' primary elections so the Lone Star State could be a major player in the presidential election. Republican Senators are supposedly cool to the move, but former Rep. Glen Maxey, a Democrat, says this is one to watch.

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NoBiz Like ShoBiz

That's the name of a top horse at this year's Kentucky Derby. Critics of this colt say they want to see a little more biz and a little less show out of this colt. You can hear that the same criticism applied to freshman Sen. Dan Patrick, R-Houston, but the Observer Blog says they find themselves agreeing with the rookie sometimes.

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Dallas Morning News Fading In The Stretch?

Right of Texas took obvious pleasure in posting the latest (dismal) circulation audits of major newspapers. Especially the part about the declining circulation of the Dallas Morning News. The blog claims the DMN is leaning to the left these days and is losing readers because of that shift.

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Roll Some Heads

The Sharpstown scandal pales in comparison to the mess at the Texas Youth Commission, according to Brains & Eggs. Perry Dorrell says the governor and the attorney general are among those who ought to pay, politically, for the foul-ups there.

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Back In The Blogosphere Again

It seemed like Billy Clyde was too busying making money lobbying over at the Big Pink to do much blogging. But he has resurfaced to find that his beloved pine trees are dirty polluters in this installment of Billy Clyde's Political Hot Tub.

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This edition of Out There was compiled and written by Kevin Kennedy of Austin. We cherry-pick the state's political blogs each week, looking for news, info, gossip, and new jokes. The opinions here belong (mostly) to the bloggers, and we're including their links so you can hunt them down if you wish. Our blogroll — the list of Texas blogs we watch — is on our links page, and if you know of a Texas political blog that ought to be on it, just shoot us a note. Please send comments, suggestions, gripes or retorts to Texas Weekly editor Ross Ramsey.

The strongest tool in the box for House minorities — and here we're talking about political minorities — is the rulebook.

It's the great leveler, making it possible for someone on the losing side of a bill to find and exploit the majority's errors, maybe to kill the legislation and maybe just to buy some time before it's up for final consideration.

And they came within an inch of tossing it out, during a debate over a homeland security/border protection bill authored by State Affairs Chairman David Swinford, R-Dumas.

Three or four hours into a long debate, Rep. Abel Herrero, D-Robstown, called a point of order on the bill after finding a defect in the bill analysis. Some time later, House Speaker Tom Craddick came out and sustained the point of order. Swinford went to the front microphone with a most unusual request, asking the House to suspend its rules, to ignore the point of order, and to pick up the debate where Herrero cut it off. Craddick spoke, saying it was an important bill, that time is running short, and that he thought it would be a good idea to continue. He said he'd leave it to the House, and he said he wouldn't entertain similar motions whenever someone's bill got knocked down. All it would take, he said, was a nod from two-thirds of the members present in the House.

That's potentially a huge deal. It would allow a supermajority — two-thirds — to toss the rules whenever someone on the other side called a legitimate foul. It would defang the opposition, and let a ruling majority get sloppy about the rules and about the way things run. The purists around the Capitol — you'd be surprised at the number — were standing up and pacing while this was in play.

But the House didn't get a chance to set that precedent. A tearful Swinford went back to the microphone and withdrew his motion. He said the bill he was carrying was much more important that "some silly little thing" and said he was ashamed of the House for knocking it down with a technicality. It'll go back through his committee, through the Calendars Committee that puts things on the House agenda and could be back, Craddick said, by Monday or Tuesday. But the House will have to start the debate all over again and then hope the Senate moves relatively quickly.

Points of order have a long and honored tradition in the Texas House, though they're rarely called in the Senate. A member calls a foul and the chair has to rule on whether it's a real rule violation or not. It's often not in the chair's interest to honor the foul, but they honor them anyhow. Craddick honored this one. His predecessor ruled in favor of a point of order at the end of the 1997 legislative session that killed 52 bills. This year, Rep. Robert Talton, R-Pasadena, has been the gunslinger with the rulebook, calling points of order on bills with such regularity that he reminded people of a previous assassin at the back mike, Rep. Warren Chisum, R-Pampa. And of Rep. Ron Wilson, D-Houston, before that. And Jim Nugent before him, and so on.

But the decision is up to the Speaker (or whoever is in the chair at that moment). We couldn't find anyone on short notice who could recall a precedent for what Swinford and Craddick were advocating, but another way to flip the result has been used. Then-Speaker Billy Clayton once sustained a point of order and was over-ruled when the House — after some quick work — appealed the ruling and voted him down.

• The substantive fight over Swinford's bill — at least part of it — has to do with who's in charge. Swinford has the authority going to the governor's office, and some legislators say they'd prefer to put it somewhere less political, like with the Texas Department of Public Safety. The Texas Observer caught some noisy traffic between the Guv's homeland security director and one of the three legislators who've gone off to war in the last few years. Steve McCraw's letter to Rep. Rick Noriega, D-Houston, questions the legislator's commitment to border security; Noriega's letter to Rick Perry says McCraw's letter is evidence that there should be more distance between law enforcement and politics in the state. You have to read the letters to catch the heat; they're on the Observer's website.

With less than four weeks left in the session, legislators and lobbyists are watching things wither. And freestanding bills are turning into amendments to legislation that's still moving.

House committees have to have House bills out by the end of Monday, and they have to be on the calendar for consideration by Tuesday night. House bills that haven't made it to the floor by midnight next Thursday are dead. (Local bills have an extra week or so). The same House countdown begins for Senate bills on the 19th and everything that's still out on the town after the 23rd turns into a pumpkin. There's a copy of the calendar in our Files section.

The governor wants to tap that budget surplus...

The Legislature left a lot of money unspent when they were assembling the budget. The budget folks say they want to keep that in the piggy bank as insurance against the property tax cuts and new business taxes that go into effect over the next year. Their fear is that the business taxes might not cover the cuts and they don't want to come up short.

But the governor has designs on that surplus. He is reiterating his February call for a $2.5 billion tax cut. Legislative budgeteers socked away more than $7 billion — some in the Rainy Day account and some just available but unspent — and Perry views that as an overcharge that should be refunded.

"If the session were to be over with today, we could point to precious few accomplishments on behalf of the taxpayers," he said. "... taxpayers have pretty much been shut out to date.

"Both the Senate and the House budgets leave roughly $8 billion sitting on the table," Perry said. "I think it's reasonable to take a third of that, give it back to the people."

Perry said he doesn't believe talk that the new state tax will fall short of expectations. House Speaker Tom Craddick will probably give tax cut legislation a shot, but Lt. Gov. David Dewhurst — who wants to squirrel away some acorns against the tax cut — wants to leave the surplus alone in case there's a shortfall.

Perry "hasn't decided" what he'll do about a road moratorium and legislation blocking mandatory HPV vaccinations.

A two-year moratorium on toll roads (HB 1892) went to the House on a vote of 138-to-Krusee. That'd be Mike Krusee, R-Round Rock, the chairman of the House Transportation Committee. He's the author of the legislation that allowed the current privately built long-term concessions on toll roads, and he's been one of the few legislative opponents of braking development.

The moratorium started in the Senate, where the author, Sen. Robert Nichols, R-Jacksonville, is a former Texas Transportation Commissioner.

The House action sends the legislation to Gov. Rick Perry, who hasn't said publicly whether he'll veto it, sign it, or let it become law without his signature. He told reporters he hasn't made up his mind yet. But if he chooses a veto, he has to do it within ten days. The legislative session ends on Memorial Day, so there's plenty of time for lawmakers to override a veto if they're so inclined.

The Legislature's ban on mandated HPV shots is also on the governor's desk, with the same dynamics in place. Perry's not saying what he'll do with that one, either. It overturns his executive order that girls get vaccinations against human papillomavirus before they enter sixth grade in public schools. Parents could opt out, but the public — and the lawmakers listening to it — revolted when Perry announced his order in February. For his part, the governor says he can't see why they oppose a shot that would block a leading cause of cervical cancer.

Slow voting, trash talk, cancer and debt, sonograms, oysters and a mess of other stuff...

The House and Senate are working on voter ID and registration bills to make sure Americans with photo ID cards are the only people who cast ballots. But nobody's breaking down the doors for a chance to vote in the state's May 12 elections, according to figures compiled by the Texas Secretary of State. In the first two days of early voting, only 81,172 people voted in the state's top 15 counties. That's out of 7,861,081 registered voters in those counties. On the ballot: A constitutional amendment that allows elderly homeowners in Texas to get their share of the property tax cuts approved by the Legislature a year ago.

• Lawmakers are still trash-talking the governor, but they don't want to take his "emerging technology fund" away. A proposal that would have moved control of that economic development money from the governor to the comptroller got swatted down in the House by a 79-55 margin. The Yup side was predominantly Republican, with a handful of Democrats; the Nopes were mostly Democrats, with a handful of Republicans.

• Remember the $3 billion cancer research idea? The state would put $300 million annually into cancer research, partly to focus the attack on that disease and partly to make the state a center for the medical and economic development that would result. Gov. Rick Perry took that idea (it started outside of government) and proposed selling or leasing the state lottery to pay for it (and other programs). The lottery notion fell flat, but more than 100 House members have signed on to legislation creating the program and paying for it with bond money. Now that's stuck, in part because House Speaker Tom Craddick and other legislative leaders don't like the financing. Perry understands, to a point: "I don't like to borrow money when I can pay cash for it." But doing nothing, he said, would leave a "dark stain" on the state: There's money available, he said, and "an opportunity to do something really big and important."

• The Senate okayed "informed consent" legislation that would require women seeking abortions to first have sonograms showing the progress of their fetuses. The legislation by Sen. Dan Patrick, R-Houston, originally required the women to look at the images, but that was changed. The doctor has to tell the woman she's not required to look at the sonogram, but senators turned down an amendment that would have blocked the doctors from charging the patients for the sonogram. Under the Senate's final version, patients do have to pay for the sonogram (which is normally part of the procedure anyway), but have to be told they're not required to look at the pictures.

• The Senators who'll huddle with the House to fix differences in the state's proposed new child rape law are: Bob Deuell, R-Greenville, Kim Brimer, R-Fort Worth, Juan "Chuy" Hinojosa, D-McAllen, Steve Ogden, R-Bryan, and Florence Shapiro, R-Plano. That's the Jessica's Law promoted by Lt. Gov. David Dewhurst, among others; it would add the death penalty to the list of sanctions against violent child abusers. The House conferees, named a few days earlier: Debbie Riddle, R-Tomball, Joe Deshotel, D-Beaumont, Dan Gattis, R-Georgetown, Jerry Madden, R-Richardson, and Aaron Peña, D-Edinburg.

• Beware the bivalve. The Texas Senate added oysters to the list of things that are so obviously dangerous that you can't sue the sellers for products liability if you find Hell on a Half Shell. Oysters, if this goes through, will join sugar, castor oil, alcohol, tobacco, and butter as an item that is "inherently unsafe and... known to be unsafe by the ordinary consumer who consumes the product with the ordinary knowledge common to the community."

• The Senate okayed a first step toward putting public notices — long the bread and butter of newspaper classified sections — on the Internet. Robert Duncan's SB 1812 would allow the state's Office of Court Administration to contract with a single website where legal notices could be officially posted. That posting would be in addition to required postings in newspapers, so it doesn't kill the print folk so much as create an alternate way to get the notices. But unlike the papers, it would create one spot where all state notices (and presumably, local and regional ones) could be published. If that works, it'll raise a logical question: Why pay for both?

• Legislation designed to allow Indian gaming — run by the Tigua Indians in El Paso and the Alabama Coushatta tribe in East Texas — died in the House, first by one vote, then on a tie. After a long debate, the measure failed by one vote. When they recounted to make sure, it came up 66-66, with five members present but not voting. That killed it.

• It's not unusual to hear about presidential candidates this far in front of primaries, but it's creeping down the ballot. Austin district court Magistrate Jim Coronado — who ran unsuccessfully for the state's 3rd Court of Criminal Appeals last year — will run for a spot on a newly created state district court. He says he'll be on the ballot next March (or, if they move the primaries, next February). Larry Joe Doherty, an attorney and Houston Democrat, filed to run against U.S. Rep. Mike McCaul, R-Austin. Doherty's treasurer is Jim "Mattress Mac" McInvgvale. Doherty will face Dan Grant of Austin, who has a civilian tour in Iraq on his resume. He's an international relations consultant.