Carole Keeton Rylander, Comptroller of Public Accounts of the State of Texas And John Cornyn, Attorney General of the State of Texas v. 3 Beall Brothers 3, Inc.
3 Beall Brothers 3, Inc. (Bealls), a fiscal year taxpayer, sued the Comptroller for a refund of an "additional tax" after its merger, claiming the tax was unconstitutional as it resulted in fiscal year taxpayers paying tax on earned surplus over a longer period than calendar year taxpayers upon ceasing business. The district court sided with Bealls. However, the Texas Court of Appeals reversed this decision, upholding the constitutionality of the additional tax. The court found the tax rationally related to legitimate state purposes of revenue generation and mitigating fiscal effects of corporate reorganizations, and it did not violate equal protection, equal and uniform taxation, or the federal commerce clause. The court determined the tax applied even-handedly based on previously untaxed earned surplus and Bealls had a substantial nexus with Texas.