Tax Lawsuit Could Threaten State’s Bottom Line

AUSTIN, Texas (AP) _ An attorney for the state says that a constitutional challenge to the state’s main business tax could undermine the state budget.

The Austin American-Statesman reports Deputy Solicitor General Danica Milios says removing the state’s power to tax business partnerships would “obviously send the Legislature back into a special session.”

However, the attorney for the business raising the challenge, Allcat Claims Service LP, says the justices have the power to impose a remedy that would little affect state revenues.

The case hinges on whether the margins tax — implemented in 2006 as part of the court-ordered school finance fix — constitutes an income tax when applied to certain business partnerships. Allcat contends the Texas Constitution requires voter approval for such a tax.

(Copyright 2011 by The Associated Press.  All Rights Reserved.)

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