BRUSNIAK'S 2002 PROPERTY TAX CASE LAW DIGEST




© 2002 John Brusniak, Jr. (All rights reserved. Reprinted with permission.)




Texas Supreme Court | Texas Court of Appeals | Texas Attorney General


UNITED STATES COURTS OF APPEALS




PROPERTY TAX LIEN IN BANKRUPTCY EXTENDS TO THE VALUE OF THE GROSS ESTATE ENTERING BANKRUPTCY; SALE OR RETURN OF PROPERTY DOES NOT DIMINISH THE AMOUNT OF THE LIEN.


In re: Universal Seismic Associates, Inc., 288 F.3d 205 (5th Cir. 2002). [OPINION]


Taxpayer filed for bankruptcy protection under Chapter 11 of the Bankruptcy Code. Prior to filing for bankruptcy and subsequent thereto, the taxpayer returned various personal property to its secured creditors keeping only property totaling $58,200. The taxing units filed proofs of claims for delinquent taxes (including taxes on the returned property) totaling $81,054. The taxpayer claimed, pursuant to 11 U.S.C.§502(b)(3) that it was only responsible for the property taxes up to the value of the property which it retained. The court disagreed, ruling that the bankruptcy laws did not overrule the state law on this point and that the property tax liens extended to the full value of the property remaining in the bankruptcy estate, to wit, $58,200.


UNITED STATES BANKRUPTCY COURT


PARTY PAYING PROPERTY TAXES MAY FILE CLAIM FOR ADMINISTRATIVE EXPENSE IF PROPERTY BENEFITTED BANKRUPTCY ESTATE; DEMAND FOR TRUSTEE TO PAY SUCH TAXES, OR PAYMENT DURING PENDENCY OF PROPERTY IN ESTATE IS CONDITION PRECEDENT TO VALID CLAIM.


In re: Tri-City Health Centre, Inc., 283 B.R. 2004 (N.D. Tex. 2002). [OPINION]


Taxpayer sought protection under Chapter 11 and obtained an order barring its secured creditor from foreclosing on its building. It did not pay the property taxes due for three years thereafter. The bankruptcy was converted to a Chapter 7 proceeding and the secured creditor purchased the building at a foreclosure sale. Prior to selling the building to a third party, the secured creditor was required to pay the delinquent property taxes. It, thereafter, sought reimbursement of the taxes as administrative claim from the bankruptcy court. The court concluded that the property benefitted the bankruptcy estate during the period of attempted reorganization and as such the secured creditor was eligible to file an administrative claim for the taxes; however, the court denied the claim because the secured creditor had neither requested the trustee to pay the taxes while the property was in the bankruptcy estate nor had it paid the taxes during the pendency of the bankruptcy to protect its secured position.


TEXAS COURTS OF APPEALS


THE OWNER OF A TAXABLE LEASEHOLD WHICH IS PERFORMING GOVERNMENTAL-TYPE SERVICES IS REQUIRED TO EXHAUST ADMINISTRATIVE REMEDIES PRIOR TO FILING SUIT CLAIMING EXEMPTION.


Wackenhut Corrections Corp. v. Bexar Appraisal District, 100 S.W.3d 289 (Tex. App. -San Antonio 2002, no pet.).[OPINION]


A private entity leased a county jail for use as a privatized correctional facility. Subsequent to the normal appeals period and without exhausting administrative remedies, it filed suit claiming that it was entitled to exemption under Article XI, section 9 of the Texas Constitution which provides that "the property of counties, cities and towns, owned and held only for public purposes...shall be exempt." The court disagreed, ruling that a private entity leasing a property from a governmental owner could not claim the Article XI exemption, regardless of the ultimate issue of whether or not the interest itself might otherwise qualify for exemption. Accordingly, the entity was required to exhaust its administrative remedies prior to filing suit.


STATUTORY AMENDMENT ALLOWING TAXING UNITS TO RECOVER POST-JUDGMENT DELINQUENT TAXES FROM EXCESS PROCEEDS AFTER TAX SALE IS CONSTITUTIONAL.


Hall v. Aldine Independent School District, 95 S.W.3d 485 (Tex. App. -Houston [1st Dist.] 2002, pet. denied). [OPINION]


Delinquent tax judgment was taken in 1997 against taxpayer. In 2000, the taxpayer's property was sold at a foreclosure sale and excess proceeds resulted. Both the taxpayer and the taxing units claimed the proceeds. In the previous year, the legislature amended the Tax Code to allow taxing units to recover taxes which become delinquent after the date of judgment from any excess proceeds. The taxpayer complained that this amendment violated constitutional prohibitions against re-adjudication of cases already decided on the merits. The court of appeals rejected the challenge finding that the taxpayer had failed to overcome the presumption of constitutional validity of the statute and noted that the award of the excess proceeds to the taxing units was not made under the statute but under the direct provisions of the judgment itself.


EVIDENCE OF PRIOR ACTION BY AN APPRAISAL REVIEW BOARD OR CHIEF APPRAISER IS ADMISSIBLE WHEN JURISDICTION IS IN QUESTION; NOTICE OF INCREASE IN VALUE TO TAXPAYER SUBSEQUENT TO TAXING UNIT CHALLENGE MUST BE DELIVERED BY JULY 20 OR SUCH INCREASE IS NULLIFIED; TAXPAYER IS NOT ENTITLED TO NOTICE OF HEARING ON TAXING UNIT CHALLENGE; AMBIGUITIES IN TAX LAWS ARE TO BE CONSTRUED STRICTLY AGAINST TAXING AUTHORITIES.


Lamar County Appraisal District v. Campbell Soup Co., 93 S.W.3d 642 (Tex. App. - Texarkana 2002, no pet.). [OPINION]


Taxing unit filed a challenge with the appraisal review board challenging the level of appraisal of property in the district. The appraisal review board ruled in favor of the challenge. The chief appraiser mailed a notice of appraised value to the taxpayer after the July 20 deadline for certification of the appraisal roll. The taxpayer contested the legality of the notice contending that Section 41.11 of the Texas Tax Code required the notice of increase be delivered to the taxpayer by no later than July 20. The appraisal district contended that Section 42.23 of the Texas Tax Code prohibited the admission into evidence of any prior actions of the appraisal review board or the chief appraiser, and that therefore, none of these administrative actions could be considered by the court. The court of appeals, while agreeing that Section 42.23 bars the admission of such evidence in general, ruled that it did not apply when jurisdiction of the appraisal district to tax a property was in issue. The taxpayer contended that its rights had been violated by the failure of the appraisal review board to give it notice of the challenge hearing. The court ruled that a taxpayer is not entitled to notice of a challenge hearing since no specific property's valuation can be contested in such a hearing. It further ruled that the taxpayer's due process rights were satisfied in full by the taxpayer's actual appearance at the hearing and also by the statutory judicial appeals scheme. It held that all ambiguities in a tax statute had to be resolved strictly against the tax authorities and in favor of the taxpayer, and ruled that the deadline for notification of a taxpayer of an increase in valuation subsequent to a taxing unit challenge is July 20, the certification deadline. Any notifications sent after that deadline are a nullity.


COMPARABLE PROPERTIES UNDERLYING SECTION 42.26(D) EQUITY REPORT MUST BE RELIABLE OR ENTIRE REPORT IS TO BE EXCLUDED AT TRIAL; FOLLOWING A STATUTORY FORMULA DOES NOT GUARANTEE A REPORT'S RELIABILITY.


Weingarten Realty Advisors v. Harris County Appraisal District, 93 S.W.3d 280 (Tex. App. -Houston [14th Dist] 2002,no pet.). [OPINION]


Taxpayer purchased a 400,000 square foot shopping center for $36,000,000. Appraisal district appraised the center at $30,000,000. Taxpayer filed suit challenging the valuation on an equity basis under Section 42.26(d) of the Texas Property Tax Code and offered an expert's report showing an equitable valuation of $19,149,962. Based on a motion filed by the appraisal district, the trial court excluded the report from evidence on the grounds that it violated the reliability standards set forth in E.I. du Pont de Nemours & Co. v. Robinson, 923 S.W.2d 549 (Tex. 1995). No other evidence was offered, and the court entered judgment for the appraisal district. The court of appeals upheld the judgment and the exclusion of the report finding that the district judge did not abuse his discretion citing the following challenges to the report: (1) the comparable properties were only 105,897 to 258,513 square feet in size; (2) nine of the ten comparable properties had significantly lower appraised values than the subject; (3) only portions of some of the comparable properties were used due to disparate ownership; (4) the appraiser only made adjustments to the comparables for condition, age, size and location; and (5) the amount of the percentage adjustment for each characteristic was subjective. Taxpayer argued that it should have prevailed because its expert followed the statutory formula prescribed in Section 42.26(d). The court disagreed, ruling that merely following a statutory formula does not insulate an expert from having to comply with the reliability requirements ofRobinson.


STATUTORY AMENDMENT VOIDING TRANSFERS OF RIGHTS TO RECOVER EXCESS PROCEEDS DOES NOT APPLY TO TRANSACTIONS WHICH WERE CONSUMMATED PRIOR TO THE EFFECTIVE DATE OF THE STATUTE.


Loera v. Interstate Inv. Corp., 93 S.W.3d 224 (Tex. App. -Houston [14th Dist.] 2002, pet. denied). [OPINION]


Taxpayer's residence was foreclosed for nonpayment of property taxes and sold at foreclosure sale. Thereafter, taxpayer was approached by a third party seeking to purchase taxpayer's right to recover excess proceeds. The third party offered to pay the taxpayer $1,000 immediately and $6,000 later if it succeeded in the recovery efforts. The third party did not disclose to the taxpayer that the excess proceeds amounted to more than $23,000. Taxpayer agreed to the transaction, but later attempted to withdraw from the transfer and retain a different party to assist it in the recovery of these funds when it learned of these facts. Ultimately, the trial court upheld the original agreement and ordered the funds disbursed in accordance with that agreement. While the case was pending on appeal, the legislature amended Section 34.04 of the Texas Property Tax Code to place severe restrictions on these types of transactions and declaring transactions not in compliance with the statute to be void. The legislature made this provision applicable to all transactions "regardless of the date on which the judgement was rendered, the tax sale was conducted, or the deposit of proceeds with the court was made." Taxpayer sought to void the transfer in the appellate court based on the new provisions. The appellate court refused, ruling that since the transfer had already been completed as of the effective date of the new statute, the statute did not apply.


CALCULATING THE TAXABLE VALUE OF AN INVENTORY BASED ON THE SALE OF THE UNDERLYING ITEMS INDIVIDUALLY, WHICH WOULD BE THE SUBSTANTIAL EQUIVALENT OF BOOK VALUE, MAY BE APPROPRIATE.


Stuckey Diamonds, Inc. v. Harris County Appraisal District, 93 S.W.3d 212 (Tex. App.-Houston [14th Dist.] 2002, no pet.). [OPINION]


Taxpayer, wholesaler and manufacturer of jewelry, filed a rendition showing the original cost of its inventory to be $7,884,673, but claimed a market value of 10% of its cost. After losing its appeal before the appraisal review board, taxpayer's expert witness testified at trial to a value equivalent to 57% of cost while the appraisal district's expert testified to a value of 98% of cost. The appraisal district witness valued each item of jewelry on a cost basis while giving a 2% discount for clearance sales and a transportation discount. He relied on several reported market transactions of sales of jewelers in which the inventory transferred at a value close to its original cost. Taxpayer's expert testified that a deep discount of the inventory was needed to keep purchasers from going to New York to purchase the items of merchandise individually. The appellate court viewed this as a concession by taxpayer's expert, and based on this testimony concluded that the market value of this inventory, calculated on the basis of what it would sell to a purchaser who would carry on the business, was the price at which each item could be purchased individually. The appellate court affirmed the trial court's decision to value the inventory at 98% of its original cost.


TAXPAYER HAS EXHAUSTED ITS ADMINISTRATIVE REMEDIES WHEN IT STATES THE SUBSTANCE OF ITS COMPLAINT IN ITS NOTICE OF PROTEST; TAXPAYER IS NOT REQUIRED TO DETAIL ITS ARGUMENTS BEFORE THE APPRAISAL REVIEW BOARD; AWARD OF ATTORNEY'S FEES IS MANDATORY TO A PREVAILING TAXPAYER.


Zapata County Appraisal District v. Coastal Oil & Gas Corp., 90 S.W.3d 847 (Tex. App. -San Antonio 2002, pet. denied). [OPINION]


Taxpayer sued appraisal district over the valuation of its natural gas and prevailed at trial. On appeal, the appraisal district claimed that the lawsuit should have been dismissed by the trial court because the taxpayer failed to exhaust its administrative remedies. This argument was based on the fact that the taxpayer's expert witness had presented a valuation theory at trial which had not been presented before the appraisal review board. The court disagreed and ruled that as long as the taxpayer had presented the substance of its complaint to the appraisal review board (to wit, that the property was over-appraised), it had exhausted its administrative remedies. The taxpayer complained to the appellate court that the trial court had improperly refused to award it attorney's fees. The court of appeals agreed and ruled that the award of attorney's fees to a prevailing taxpayer is mandatory.


TAXPAYER DOES NOT NEED TO EXHAUST ADMINISTRATIVE REMEDIES IF THE GOVERNMENT HAS VIOLATED THE TAXPAYER'S CONSTITUTIONAL RIGHT TO DUE PROCESS; DUE PROCESS RIGHTS ARE VIOLATED WHEN AN APPRAISAL DISTRICT RAISES A TAXPAYER'S VALUE WITHOUT DELIVERY OF NOTICE; SUCH INCREASES IN VALUATION ARE VOID; VOLUNTARY PAYMENT RULE DOES NOT APPLY TO VOID TAX ASSESSMENTS; ATTORNEY'S FEES MAY BE RECOVERED IN SUCH SUITS.


Appraisal Review Board of the El Paso Central Appraisal District v. Fisher, 88 S.W.3d 807 (Tex. App.-El Paso 2002, pet. denied). [OPINION]


Taxpayer acquired title to property in 1977, and in 1984 he recorded his deed properly in the deed records. Appraisal district increased the property's valuation in 1985, but did not give notice to Taxpayer of the increase. Notwithstanding Taxpayer's efforts to have notices correctly mailed to him, which efforts commenced in 1989, the appraisal district did not list the property in the taxpayer's name until 1993, and only did so prospectively. Throughout these years, Taxpayer did not receive any tax bills and hence no taxes were paid on the property. Taxpayer began selling portions of the property as residential lots under contracts for deed in 1984. Thereafter, the taxing units began harassing the lot purchasers in an attempt to collect the delinquent taxes. Taxpayer began making payments to the taxing authorities to stop the collection efforts. In 1993, Taxpayer sought relief from this prior erroneous taxation from the appraisal review board, but the relief was denied. Taxpayer appealed the decision to district court claiming violation of his due process right to notice, but failed to add the appraisal district as a party to the suit until three years later. Defendants sought to have the suit dismissed on jurisdictional grounds due to the failure to timely sue the appraisal district. The court refused to dismiss the suit, ruling that under such circumstances "courts have historically asserted jurisdiction over suits where a taxpayer alleges violations of his/her constitutional rights." The court further ruled that the appraisal district acquired no jurisdiction to raise Taxpayer's value when it failed to send out the requisite notice of appraised value in 1985 and that all increases in value thereafter were void as a matter of law. The court further ruled that the voluntary payment rule did not apply to cases where the tax was void. It held that the voluntary payment rule was limited to situations where the tax was merely illegal. Finally, the court upheld an award of attorney's fees under the declaratory judgment act, ruling that the court had the discretion to award such fees, and the award would not be disturbed without a showing of an abuse of discretion.


PURCHASERS OF PROPERTY WHO DID NOT BENEFIT FROM A PRIOR ILLEGAL EXEMPTION ARE NONETHELESS LIABLE FOR RETROACTIVE TAXES WHICH ARISE UPON THE REMOVAL OF THE ERRONEOUS EXEMPTION; PURCHASERS ARE "ON NOTICE" TO INVESTIGATE ALL MATTERS PERTAINING TO THE TAXATION OF PROPERTY PRIOR TO ITS PURCHASE; A GOVERNMENTAL TAX CERTIFICATE SHOWING NO TAXES DUE WOULD PROVIDE A COMPLETE DEFENSE TO THE COLLECTION OF SUCH TAXES; POTENTIAL ISSUES OF SUBSTANTIVE AND PROCEDURAL DUE PROCESS MAY ARISE FROM THIS TYPE OF GOVERNMENTAL CONDUCT.


Dallas Central Appraisal District v. Wang, 82 S.W.3d 697 (Tex. App.-Dallas 2002, pet. denied). [OPINION]


Taxpayers purchased in August 1999, a residence from the estate of an elderly man who died in August 1998. The appraisal district in December 1999 removed the homestead and "over-65" exemptions retroactively for tax year 1999. Taxpayers had obtained a tax certificate from a private entity at the time of the purchase showing that no taxes were outstanding. The parties conceded, at trial, that this certificate was the equivalent of one which would have been issued by the government, had one been sought from the government. Taxpayers contended that it was illegal and unconstitutional to tax them for an exemption benefit which they never enjoyed. The court disagreed, ruling that the appraisal district had a non-discretionary obligation to back assess the property for any previous illegal exemptions and that the lien for such illegal exemptions would have arisen as January 1 of the first year of illegality. It ruled that a taxpayer has an obligation to investigate the facts surrounding the taxation of the property to determine whether all exemptions in place were appropriate, and that the retroactive assessment of the property was constitutional. It ruled that the taxpayers could have protected themselves from such a retroactive assessment by obtaining a tax certificate from the government, but that the tax certificate which the taxpayer had obtained from a private party (even though equivalent) provided no such protection. The court suggested that issues of substantive and procedural due process might be implicated by the government's requirement that a subsequent purchaser defend the conduct of a predecessor in title, but since the taxpayer failed to raise those issues, the court could not rule on them.


GOVERNMENT OWNED PROPERTY WHICH IS LEASED TO A PRIVATE PARTY FOR PRIVATE BUSINESS DOES NOT RESULT IN THE CREATION OF A TAXABLE LEASEHOLD; SUCH PROPERTY IS TO BE TAXED IN FEE SIMPLE AND PAYMENT OF AD VALOREM TAXES IS DUE IN ACCORDANCE WITH THE TERMS OF THE LEASE.


Gables Realty Limited Partnership v. Travis Central Appraisal District, 81 S.W.3d 869 (Tex. App. -Austin 2002, pet. denied). [OPINION]


Taxpayer leased land under long term leases from the state of Texas and constructed apartment complexes thereon. The appraisal district listed the land accounts in the taxpayer's name and taxed the land in fee simple to the taxpayer. Taxpayer challenged the legality of this assessment contending that its interest in the land should have been taxed as a taxable leasehold under Section 25.07 of the Texas Property Tax Code. The court disagreed. It found that the statute in question was an exemption statute under which all questions were required to be construed strictly and narrowly against the determination of an exemption. The court reviewed Section 11.11(d) of the Texas Property Tax Code which provides that property which is leased for compensation to a private business enterprise for a nongovernmental use is not exempt. Reading these statutes together, the court concluded that the property was not exempt and therefore, no taxable leasehold could hae been created. Under the circumstances, the property had to be taxed in fee simple to the taxpayer in accordance with the terms of the lease between the state and the taxpayer.


DELINQUENT TAX CITATION IS SUFFICIENT EVEN IT FAILS TO NAME ALL OF THE TAXING UNITS WHICH TAX THE SUBJECT PROPERTY.


Conseco Finance Servicing v. Klein Independent School District, 78 S.W.3d 666 (Tex. App. -Houston [14th Dist.] 2002, no pet.). [OPINION]


School district sued taxpayer and lienholder for foreclosure of it's property tax lien. In accordance with Rule 117a of the Texas Rules of Civil Procedure, it identified the county and a water district as being entities which also taxed the property; however, it failed to list in the citation other taxing entities which taxed the property as well. The county and the water district, as well as other taxing entities, intervened into the suit. The taxpayer and lienholder failed to answer and a default judgment was taken but only on behalf of the school district, county and water district. The lienholder challenged the validity of the judgment on appeal claiming that the failure of the school district to list all of the taxing entities in the citation as required by Rule 117a required a reversal of the judgment. The court disagreed and ruled that the purpose of Rule 117a was to provide the taxing entities with the right to intervene into a suit without the issuance of further process and not to accord additional rights to a defaulting taxpayer. Given the fact that the judgment was taken only by the parties named in the citation and the lienholder's inability to articulate any harm caused by the failure to name the additional taxing units in the citation, the court upheld the default.


THE SYSTEM OF PARTIALLY FINANCING PUBLIC SCHOOL EDUCATION THROUGH A PROPERTY TAX IS NOT UNCONSTITUTIONAL BECAUSE SCHOOL DISTRICTS HAVE NOT LOST ALL MEANINGFUL DISCRETION IN SETTING THE RATE OF TAX TO MEET THE MINIMUM STANDARD OF EDUCATION PRESCRIBED BY THE LEGISLATURE.


West Orange-Cove Consolidated Independent School District v. Alanis, 78 S.W.3d 529 (Tex. App. -Austin 2002, pet. granted). [OPINION]


School district filed suit claiming that the current system of financing public school education was unconstitutional because it required the school district to assess a maintenance and operating tax at or near the statutory cap of $1.50 per $100 of valuation and that as a result, the school district could not furnish the kind of education it wanted to provide its students under that cap. The court dismissed the suit on the grounds that it did not state a legally valid claim. For the suit to be valid and the tax to be held unconstitutional, the district would have had to have claimed and proven that it was taxing at the maximum tax rate, and under that rate, it was only able to provide a bare, accredited education to its students. The court stated that the determination of what constituted a "bare, accredited education" was within the sole province of the legislature, and not the province of the judiciary. For the same reason, the court also found that the suit was not ripe for adjudication.


TAXPAYER MAY CHALLENGE OWNERSHIP IN DEFENSE OF DELINQUENT TAX SUIT FOR TAX YEARS SUBSEQUENT TO 1987; FILING OF NOTICE OF PROTEST IN ONE TAX YEAR IS SUFFICIENT TO SATISFY EXHAUSTION OF REMEDIES REQUIREMENT FOR ALL SUBSEQUENT YEARS ON THE SAME ISSUE.


City of Pharr v. Boarder to Boarder Trucking Svc., Inc. 76 S.W.3d 803 (Tex. App. -Corpus Christi 2002, pet. denied).[OPINION]


Appraisal district appraised personal property as being owned by a taxpayer for tax years 1989 through 1995. Taxpayer filed a notice of protest in tax year 1989 disputing ownership of the property. The appraisal review board denied the protest. The taxpayer did not dispute the tax assessments in any of the subsequent years. After the taxpayer failed to pay the taxes assessed against the property, the taxing units filed suit to recover the delinquencies. Taxpayer defended the suit on the grounds of nonownership. The taxing units claimed that the trial court did not have jurisdiction to rule on this defense and that the defense should have been barred due to the taxpayer's failure to exhaust administrative remedies. The court disagreed and ruled in favor of the taxpayer finding that the legislature amended the tax code in 1987 and therein authorized the defense of nonownership of property for all years subsequent thereto. It further ruled that the taxpayer had exhausted administrative remedies by filing its notice of protest and that the taxpayer was not required to file notices of protest in the subsequent years because the property in question in the subsequent years was the same property on which ownership was contested in the protest in 1989.


EXCESS PROCEEDS FROM DELINQUENT TAX FORECLOSURE SALES MUST BE USED TO PAY TAXES ON THE PROPERTY ACCRUING SUBSEQUENT TO THE DATE OF JUDGMENT ON THE SUBJECT PROPERTY AND OTHER TAXES DUE UNDER THE JUDGMENT ON RELATED PROPERTIES PRIOR TO FUNDS BEING DISPERSED TO THE TAXPAYER.


Nipper-Bertram Trust v. Aldine Independent School District, 76 S.W.3d 788 (Tex. App. -Houston [14th Dist.] 2002, pet. denied). [OPINION]


Taxpayer owed delinquent property taxes on two lots on which the taxing units obtained a judgment ordering foreclosure. Seventeen months after the date of the judgment, the lots were sold by the sheriff. Excess proceeds were recovered by the sheriff above the amounts owed on one of the lots under the judgment, while the second lot was struck off to the taxing units since no one bid on that property. Both the taxpayer and the taxing units sought recovery of the excess proceeds from the sale of the first lot. The taxpayer contended that it was inappropriate to apply sales proceeds from the sale of one lot to taxes due on the other lot. The court disagreed and ruled that the statute required that excess proceeds from the sale of a property be applied initially to the taxes which accrued on the property subsequent to the date of judgment and thereafter to satisfy all other delinquencies due under the same judgment. All claims to the contrary were waived by the taxpayer's failure to object to the inclusion of both properties in the same judgment.


AN INTERSTATE ALLOCATION FOR AIRCRAFT TRAVELING BETWEEN TEXAS AND THE OUTER CONTINENTAL SHELF IS NOT UNCONSTITUTIONAL; AN APPRAISAL DISTRICT MUST REBUT THE STATUTORY FORMULA PRESUMPTION BEFORE A COURT IS FREE TO CONSIDER OTHER FORMULAS; THE FAILURE OF THE LEGISLATURE TO PROVIDE FOR ATTORNEY'S FEES IN SUITS INVOLVING INTERSTATE ALLOCATION IS NOT UNCONSTITUTIONAL.


Tex-Air Helicopters, Inc. v. Galveston County Appraisal Review Board, 76 S.W.3d 575 (Tex. App. - Houston [14th Dist.] 2002, pet. denied). [OPINION]


Taxpayer flew helicopters between Texas and oil platforms located on the outer continental shelf. The taxpayer sought commercial aircraft allocation for the use of these aircraft in the stream of interstate commerce. The appraisal district claimed such an allocation would be unconstitutional as applied and that the statutory formula itself was also unconstitutional and inappropriate. The court disagreed, ruling that the outer continental shelf was a portion of the United States and governed by federal law. As such, the federal government barred taxation by the states over property located there, but did have the right to levy a property tax itself if it chose to do so. Under these circumstances, aircraft traveling between Texas and the outer continental shelf were entitled to interstate allocation, and the granting of such an allocation did not constitute an unauthorized, unconstitutional exemption. The court further ruled that it was the burden of the appraisal district to rebut the statutory presumption of accuracy of the allocation formula before the court was free to consider other allocation methods for those aircraft. Since the appraisal district failed to do so, the formula was required to be utilized and could not be considered to be unconstitutionally arbitrary and capricious. Finally, the court dismissed a challenge as to the constitutionality of the attorney's fees statute wherein the taxpayer claimed that its equal protection rights were violated because the statute failed to provide for the recovery of attorney's fees in interstate allocation cases even though such fees are recoverable in excessive value and equity cases. The court found that there was a rational basis for the legislature to bar recovery in such suits and as such there was no federal constitutional violation.


INTERSTATE ALLOCATIONS OF AIRCRAFT VALUATION ARE NOT PROPER SUBJECTS OF MOTIONS TO CORRECT VALUATIONS UNDER SECTION 25.25(C)(3).


Curtis C. Gunn, Inc. v. Bexar County Appraisal District, 71 S.W.3d 425 (Tex. App.-San Antonio 2002, pet. denied).[OPINION]


Taxpayer owned an aircraft which it leased to an interstate charter service. The taxpayer filed annual renditions with the appraisal district, but did not contest any of the valuations of the aircraft during the normal appeals period. The taxpayer subsequently filed a motion to correct error pursuant to Section 25.25(c)(3) of the Texas Tax Code seeking to obtain a three year retroactive interstate allocation of the valuation of the aircraft reflective of its out of state travel. The court refused to grant such an allocation ruling that Section 25.25(c)(3) was not a proper means for obtaining such a correction since the aircraft had in fact been "located" within the boundaries of the appraisal district. It ruled that such relief could only be obtained during the course of the normal appeals process.


ANY PERSON CLAIMING AN INTEREST IN A PROPERTY HAS STANDING TO SUE TO AN APPRAISED VALUE; REVERSIONARY ESTATES OWNED BY TAX-EXEMPT LESSORS MAY NOT BE TAXED; LEASEHOLD ESTATES ARE TO BE TAXED AT MARKET VALUE; FEE SIMPLE SALES ARE NOT COMPARABLES FOR LEASEHOLD ESTATES.


Panola County Fresh Water Supply District Number One v. Panola County Appraisal District,69 S.W.3d 278 (Tex. App.-Texarkana, 2002, no pet.). [OPINION]


A tax-exempt entity which leased lakeside lots to individuals sued the appraisal district challenging the methodology by which the appraisal district was valuing the lots contending that the valuation method resulted in the inclusion of the reversionary estate owned by the tax-exempt entity in the leasehold value; thereby creating an illegal lien on the tax-exempt entity's property. The appraisal district contended that the tax-exempt entity was not the owner of the property and therefore did not have standing to sue. The court overruled the appraisal district's challenge finding that "one who claims an interest in property" is deemed to be a property owner under the provisions of the tax code for purposes of challenging an appraised value. The court further determined that the use of "fee simple" sales transactions in valuing taxable leasehold properties would improperly result in the taxation of the reversionary estate belonging to the tax-exempt entity and as a result such sales could not be used for valuation purposes; however, the court ruled that limiting the value of the leasehold estate to the amount of rent being paid annually was not appropriate where market sales of leasehold estates were available to be analyzed.


TEXAS ATTORNEY GENERAL OPINIONS


NON-VOTING TAX ASSESSOR-COLLECTOR MEMBER OF APPRAISAL DISTRICT BOARD OF DIRECTORS IS COUNTED FOR PURPOSES OF DETERMINING WHETHER A QUORUM EXISTS AND MAY SERVE AS AN OFFICER OF THE BOARD; THE RIGHT OF SUCH PERSON TO MAKE OR SECOND MOTIONS IS LEFT TO THE APPRAISAL DISTRICT BOARD TO DETERMINE.


Op. Tex. Att'y Gen. JC-0580 (2002). [OPINION]


If a tax assessor-collector is not appointed as a voting member of an appraisal district board of directors, the tax assessor-collector automatically becomes a non-voting member of the board. A non-voting tax assessor-collector is to be counted for purposes of determining whether a quorum exists and may serve as an officer of the board of directors if elected by the other directors. Whether the tax assessor-collector can make or second motions before the board is left to the discretion of the board of directors.


A COMMUNITY HOUSING AND DEVELOPMENT ORGANIZATION MUST OWN AND EXCLUSIVELY OPERATE A PROPERTY FOR IT TO QUALIFY FOR TAX EXEMPTION.


Op. Tex. Att'y Gen. JC-0576 (2002). [OPINION]


To qualify for community housing exemption from ad valorem taxation, the owner must meet all statutory and constitutional provisions including the provisions requiring that the property be owned and used exclusively by the charitable entity.


BUILDING OWNED BY PUBLIC HOSPITAL AUTHORITY, BUT PARTIALLY LEASED, IS NOT ENTITLED TO EXEMPTION UNLESS IT IS USED EXCLUSIVELY FOR THE PUBLIC'S BENEFIT.


Op. Tex. Att'y Gen. JC-0571 (2002). [OPINION]


A public hospital authority owns and operates a building. It leases a portion of the building to a private business for operation as a long term care hospital. It sought the opinion of the attorney general as to whether the building should be exempted from taxation. The attorney general ruled that the building could only be exempted from taxation if the constitutional and statutory requirement of exclusive public use was satisfied. That requirement could only be met if the property was used exclusively for the health, comfort and welfare of the public. If the leased space was not used exclusively for such purposes, then the taxing authority would be responsible for paying taxes on the building.