Untitled Texas Attorney General Opinion ( 1992 )

QBffice of tip S!Utornep @eneral
&ate of ?Il;exas
DAN MORALES December lo,1992
ATTORSEY
CWERAL
Honorable Dale W. Elliott Opinion No. DM-188
Potter County Attorney
303 Courthouse Re: Tax exemptions for public property
Amarillo, Texas 79101 leased to private entities (RQ-18)
Dear Mr. Elliott:
On behalf of the Potter-Randall County Appraisal District, you ask whether
real property owned by three governmental bodies in Potter County is exempt from
ad valorem taxation under the circumstances you describe. Your letter stipulates
certain facts, and the governmental entities in separate briefs supply additional
facts. We will address your questions in light of all the information provided.
However, because tbe answers to your questions depend on the resolution of fact
issues, a function that this office cannot perform in the opinion process, our
responses are necessarily subject to the facts in a given case. Before addressing the
specific scenarios, we will briefly describe the source, nature, and limits of property
tax exemptions for government-owned property. ’
A. Tawzmpt statu ofpubIic&owdprv~.
Article VIII, section 1 of the Texas Constitution declares in relevant part that
[a]ll real property and tangible personal property in tbis State,
unless exempt as required or permitted by this Constitution,
whether owned by natural persons or corporations, other than
municipal, shah be taxed in proportion to its value, which shall
be ascertained as may be provided by law.
Tex. Const. art. VIII, 5 l(b). Article XI, section 9 of the Texas Constitution declares
in part that
property of counties, cities, and towns, owned and held only for
public purposes, . . . and all other property devoted exclusively to
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Honorable Dale W. Elliott - Page 2 (k-188)
the use and benefit of the public shall be exempt from forced
saleandfromtaxation....
This provision is self-executing and requires no enacting legislation A & M Consol.
h&p. Sch. Dirt. v. Ci& ofBryan, 184 S.W.2d 914 (Tex. 1945). Prior decisions of the
courts held that despite the specific reference to counties, cities and towns, this
provision applied to all political subdivisions. See, es., Lower Colomdo River Auth.
v. Chemical Bunk & Tnut Co., 190 S.W.2d 48 (Tex. 1945). However, more recent
decisions have clarified that the provision applies solely to the enumerated
gwernmental entities. State v. Houston Lighting & Power Co., 609 S.W2d 263,266
(Tex Civ. App.-Corpus Christi 1980, writ refd n.r.e.) (citing L.eunder Indep. Sch.
Dirt. v. Cedar Park Water Supply Corp., 479 S.W.2d 908 (Tex. 1972)); see also
Satterlee v. Gulf Cocat W&e DisposalAuth., 576 S.W.2d 773,778-79(Tex. 1978).
Article VIII, section 2(a) of the Texas Constitution provides in part that the
“legislature may, by general laws, exempt from taxation public property used for
public purposes.” Pursuant to the latter provision, the legislature has enacted
section 11.11 of the Tax Code, which provides the following in pertinent part:
(a) Except as provided by Subsections (b) and (c) of this
section, property owned by this state or a political subdivision of
this state is exempt from taxation if the property is used for
public purposes.
Subsections (b) and (c), which provide for the limited taxation of land owned by the
Permanent University Fund and counties, are not relevant to your questions.
Section 11.11 supplies other qualifications to the general exemption described in
subsection (a), which we w-illaddress as appropriate in this opinion.
You ask initially whether the phrase “other than municipal” in article WI,
section l(b) of the Texas Constitution creates an implied exemption for municipal
property. You conclude that it does not. We agree.
As you note in your brief, the supreme court has held that article WI,
section 1 merely specifies the types of property the legislature is required to tax. Ci@
of Beuumonr v. Fertina, 415 S.W.2d 902 (T’ex. 1967). Article VIII, section 17 states
that the specification of the objects and subjects of taxation in the constitution does
not deprive the legislature of the power to require other objects or subjects to be
taxed consistently with other provisions of the constitution. The phrase “other than
p. 986
Honorable Dale W. Elliott - Page 3 C&55188)
municipal” in article VIII, section 1 thus means the legislature is not required to tax
municipal property, but may provide for such unless the property is othenvise
exempted from taxation, Section 11.01 of the Tax Code states in part that all real
property that the state has jurisdiction to tax (Le., any real property located in the
state) is taxable unless exempt by law. Tax Code 0 11.01(a), (b). Article XI, section
9 exempts from taxation municipal property owned and held for public purposes
and section 11.11 of the Tax Code exempts property owned by political subdivisions
that is used for public purposes. Thus, the legislature has, consistent with the
constitution, provided for the taxation of municipal property.
The essential substantive inquiry under the constitutional and statutory
provisions cited above is whether the public property in question is being used for a
public purpose. The courts instruct that the test for public purpose is whether the
public property is used primarily for the health, comfort, and welfare of the public.
A & M ConsolidatedIndependent School Dism’ct,184 S.W.2d 914; Houston Lighting &
Power Cornpuny, 609 S.W2d at 266. In addition, it must be shown that the property
is held only for public purposes and is devoted tzc&veIy to the use and benefit of
the public. Satterlee, 576 S.W.2d at 778-79. Consequently, public property that is
acquired and held with the intention that it not be used primarily for the health,
comfort, and welfare of the public is not entitled to a tax exemption under these
provisions. See Grand Prairie Hosp. Auth. v. @llas County Appraisal Disk, 730
S.W2d 849 (Tex. App.-Dallas 1987, writ refd n.r.e); Grand Prairie Hosp. Auth. v.
Tarant Appraisal Dirt., 707 S.W.2d 281 (Tex. App.-Fort Worth 1986, writ refd
n.r.e.).
Each of the scenarios you describe involves public property that is leased to
private individuals or other political subdivisions. Property of a political subdivision
will not lose its tax exemption if a charge is made for the property or a profit is
generated thereby, provided the charges are incidental to its use by the public and
the proceeds inure to the benefit of tbe political subdivision. Lower Colorado River
Authority, 190 S.W.2d 48; A & M Consolidated Independent School Dism’ct, 184
S.W2d 914. However, where a political subdivision specifically intends its public
property to be put to private commercial uses, it is not used exclusively for the use
and benefit of the public within the meaning of these provisions and, thus, is not
entitled to tax-exempt status. GrMd Prairie Hospital Authority, 730 S.W.2d 84%
Tanant Appraisal District, 707 S.W.2d 281; Attorney General Opinions JhMOS
(1985); MW-430 (1982).
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Honorable Dale W. Elliott - Page 4 (G-188)
B. Tax-aemptstamofpm#owdbycityofAmado.
I. Ailpthangar.
You advise that the City of Amarillo is constructing an airport hangar at the
city-owned Amarillo International Airport which will be leased to a private entity as
a facility for the repair, maintenance, and storage of aircraft You ask whether this
property, owned by the municipality but dedicated to an allegedly private use, is
exempt from ad valorem taxation. If it is exempt, you ask whether the leasehold is
exempt from taxation to the lessee pursuant to section 25.07 of the Tax Code.
In a brief to this office, the City of Amarillo indicates that the airport
property is being developed pursuant to the Municipal Airports Act, V.T.C.S.
articles 46d-1 through 46d-22. Article 46d-15 in pertinent part broadly declares that
the acquisition of any land or interests in land pursuant to the act, and the
development, maintenance, construction, equipment, and operation of airports and
air navigation facilities are public, governmental, and municipal purposes. Attorney
General Opinion JM-464 (1986) in similar fashion concluded that
as a matter of law.. . [a] city’s airport and airport facilities,
including those leased to a private individual, are impressed with
a public purpose sufficient to meet Texas constitutional and
statutory tests regarding ad valorem taxes.
Attorney General Opinion JM-464 at 3. In In& Indep. Sch. Dist, v. Delta Aidines,
Inc., 534 S.W.2d 365 (Tex. Civ. App.-Texarkana 1976, writ refd n.r.e.), the court
ruled that a maintenance hangar is necessary to the operation of an airport under
the Municipal Airports Act, and thus was entitled to a tax exemption under the
statutory predecessor to section 25.07 of the Tax Code.1 The case did not concern
the tax-exempt status of the underlying real property, but the case is instructive
because it acknowledges that under usual circumstances aircraft maintenance
facilities are necessary to the safe and efficient operation of a municipal airport On
the basis of the factual similarity of the city’s intended use of the airport hangar to
the uses considered in these authorities, the city argues that the hangar is entitled to
tax exempt status.
%ection 25.07 is &rived from V.T.C.S. arti& 7173. It will be discwed in greater detail
beknv.
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Honorable Dale W. Elliott - Page 5 D+l88)
At issue in Attorney General Opinion M-464 was the tax status of property
owned by a municipality and operated as an airport A portion of the airport proper
was leased to an individual who operated an aircraft fueling facility, and another
portion was operated by the United States Government as a weather station and air
traffic control facility. Land surrounding the airport was leased to private persons
and corporations for private commercial and agricultural purposes. The opinion
concluded that the airport facility itself was exempt from ad valorem taxation, but
the surrounding land was not exempted because it was not put to fan actual,
exclusive public use as required by the constitution and Tax Code.
Under the facts presented in the opinion, it is apparent that the use of the
airport property by the fueling facility lessee and the federal government was in
direct support of the city3 operation of the airport.2 In cotmasS the private use of
the surrounding airport property extinguished the city’s tax exemption precisely
because the use bore no relationship to the city’s operation of the airport. We thus
construe Attorney General Opinion JM-464 to requires a showing that the use of
municipal airport property is in direct support of the city3 operation of the airport.
In the absence of such a showing, the mere use of airport property for aircraft-
related maintenance is insufficient to protect the city from liability for ad valorem
taxes.
The City of Amarillo contends that the airport hangar in question will be
used to support the city’s safe and efficient operation of the airport. If this is the
case, then we agree that the private commercial use of the facility will not
jeopardize the property’s tax-exempt status. However, you contend that most of the
aircraft stored and serviced at the city-owned hangar will be brought there solely for
purposes of maintenance and storage and will not be engaged in the transport of
passengers and cargo to and from the airport. If this representation is correct, the
facility would not be used exclusively in support of the city’s operation of the airport,
but would instead be used to serve the private commercial interests of the lessee.
The property under these circumstances would not be entitled to a tax exemption
because it is not used exclusively for public purposes and therefore does not satisfy
constitutional and statutory criteria. See Grand Prairie Hospital Authorify, 730
*under the Iease agreemcn~ the operation of the fueling facility, though admittedly for private
commercid gain, was subject to the direction and control of the city. The weather station and air
traffic coatr01 facility were obviously necessary to the operation of the airport.
p. 989
Honorable Dale W. Elliott - Page 6 K&%188)
S.W2d 849; Tamnt Appraisal Dktrict, 707 S.W.2d 281; Attorney General Opinions
JM-405; MW-430.
As noted, this office cannot resolve disputed questions of fact in the opinion
process. Because the city offers facts that conflict with the information supplied by
your office, we cannot resolve your first question as a matter of law. Rather, the
resolution of this issue must await the development of facts in an appropriate
administrative or judicial forum.
The same must be said with respect to your next question-whether the
leasehold interest in the hangar is exempted from taxation to the lessee. Leasehold
interests generally are not taxable to a lessee. See Cherokee Water Co. v. Gregg
County Appraiwl Dist., 801 S.W.2d 872 (Tex. 1990). Rather, the lessor is
traditionally held responsible for taxes on the full value of the property. Id.
Consequently, if the airport property is determined not to be tax exempt, the city
rather than the lessee would be liable for ad valorem taxes on the property.3 If, on
the other hand, the underlying real property is determined to be tax-exempt, it will
become necessary to determine the tax status of the leasehold interest in the hangar.
Section 23.13 of the Tax Code requires appraisal at market value of a
“taxable leasehold or other possessory interest” in, real property that is exempt from
taxation to the owner. Section 25.07, meanwhile, requires certain leaseholds and
other possessory interests in real property that is exempt from taxation to the owner
to be listed on the appraisal rolls in the name of the owner of the possessoty interest
if the interest is at least one year in duration.4 Tax Code 925.07(a). These
provisions have consistently been interpreted to require taxation of leasehold
interests in tax-exempt real property, including property owned by political
subdivisions. See Tamnt Appraisal Dirt. v. AmericM Abfhes, Inc., 826 S.W.2d 767
(Tex. App.-Fort Worth 1992, writ denied); Delta Airline-s,534 S.W.2d 365; Attorney
General Opinion JM-1049 (1989).
3Partiu to a lease typically take into account the Icssar’s property tax liabiity when negotiating
the terms of the lease, either by wntrachully providing for a pass through of taxs to the lessee. or
setting rentals in an amount that reflects the estimated tax liabiity. Chemke W&r Company, 801
S.W.Zdat 875 d3 (Tex. 1990).
4We assume for purposes of this opinion that the lease of the city’s airport hangar is for a term
of at least one year.
p. 990
Honorable Dale W. Elliott - Page 7 (15~488)
Section 25.07 excepts certain leasehold and possessory interests from its
listing requirements. A leasehold interest that is excepted from the listing
requirement of section 25.07 is itself exempt from taxation to the lessee. Delta
Akfines, 534 S.W2d 365. Among the exceptions is one for a “public transportation
facility owned by an incorporated city or town” Tax Code 5 2507(b)(3). In addition
to constituting a public transportation facility, the property in which the leasehold or
other possessory interest lies must satisfy one of several alternative requirements.
One such alternative is that the property be used as
an airport passenger terminal building or a building rued
prima+ for maint-e of aircrafl or other airaaft services, for
aircraft equipment storage, or for air cargo.
Tax Code 5 25.07(b)(3)(A) (emphasis added).
Aircraft maintenance facilities, including maintenance hangars, which are
intended for use in the safe and efficient operation of a municipal airport are public
transportation facilities for purposes of section 25.07. Delta Airlines, 534 S.W.2d
365. The city in its brief contends that the airport hangar in question will be
devoted to similar uses. If the city’s representations are correct, the leasehold
interest in the city-owned airport maintenance hangar is exempt from taxation to the
lessee so long as the facility is used to support thesafe and efficient operation of the
airport by the city?
SThe city alludes to other lwchold interwts at the airport, e.g., restaurant, lounge, and airline
leases, and argues that these interests are also exempted from taxation to the lessees because they
support the general public purpose of air transportation at the airport. A recent case indicates that the
mere operation of a facility in support of airliae operations may not be sufficieat to confer tax-exempt
stahu on a leasehold interest in airport property. Tamm Appnaid Din. Y. Amvicon Aides, 826
S.WJd 767 (Tex App.-Fort Worth 1992, tit denied) conuxns the proper method for valuation of an
airline’s leasehold interest in tax-exempt airport property. American Airlines leased MO acres of land
aud improvements from the DFW Regional Airport Board. Neither the nature nor the purpose of the
Ieased property were descriid in the opinion. Tbe court did not examine in detail the tax-exempt
status of the lwehold interest under section 25.07 of the Tax Code. Rather, the court concluded that
the lease “resuhs in a taxable leasehold estate to American because the DFW Board is 811exempt
owner.’ 826 S.W.2d at 768. Furthermore, section 25.07 attaches several comiitions to the exemption of
leasehold interests in public transportation facilities, most of wbkh relate either to uircm~?services or
foreign trade zone status. Thus, it should not be assumed that any leasehold interest in airport
propertyis entitledto tax-exempt
statusperse. SeeulroAttorneyGeneralOpinionJM-464.Whether
suchpropertyis usedby a lesseefor a publicpurposewilldependOIIthe factsof eachcase.
p. 991
Honorable Dale W. Elliott - Page 8 (m-188)
2 Bui&grleadtopktebu&em
You also state that the City of Amarillo owns several buildings which
currently are not used by the city but are instead leased to private businesses. You
do not describe the conditions under which the city holds and leases such property
or the particular uses put to the property. The city does not contest your
representation of the facts. You ask whether these buildings are exempt from ad
valorem taxation; you conclude they are not.
Prior opinions of this office conclude that public property put to a private use
will remain tax-exempt where the private use can either be characterized as a public
purpose or is in direct support of a public purpose of the political subdivision. See
Attorney General Opinions JM-1049 (lease of real property comprising permanent
school fund to private commercial interests is a public purpose where proceeds
deposited in permanent school fund); JM-464. However, the leasing of public
property purely for private commercial uses removes the tax exemption for the
property under both constitutional and statutory standards. See Gmnd Pr&ie
Hospital Authority, 730 S.W.2d 849; Tammt Appraisal Distnkt, 707 S.W.2d 281;
Attorney General Opinions JM-405; MW-430 and authorities cited therein. If the
buildings in question are owned by the city purely for the purpose of leasing them to
private commercial interests, the property would not, in our opinion, be tax-exempt.
Whether the private use constitutes or supports a public purpose of the city must be
determined on the basis of the facts of the case abd the terms of any constitutional
or statutory provisions authorizing the city’s acquisition and use of the property. See
Attorney General Opinions JM-1049; JM-464..
C. O@ecomp~ownedbyaschool~.
You state that the Amarillo Independent School District (AISD) recently
purchased an office complex consisting of six separate buildings-five office
buildings and a restaurant facility. One of the office buildings serves as the
administrative office of the district and is the sole structure used or occupied by the
district at this time. Portions of the other office structures are leased to private and
governmental entities. The remaining office space and the restaurant facility are
vacant
The school district in its brief states that the office complex, known as
Security Park, was purchased in its entirety for economic reasons. It asserts that the
school board’s intention at the time of purchase was to sell all of the complex except
p. 992
Honorable Dale W. Elliott - Page 9 (m-188)
the district’s administrative office, and it describes some of the steps it has taken to
sell the property. As of tbe date of its brief, the surplus property had not been sold,
and the AISD resorted to leasing some of the property and depositing the rentals in
its treasury. The AISD concedes that at the time the property was acquired it did
not anticipate using all of the facility itself, but it reserves the option of retaining any
of the property that may be required for the district’s operations.
The AISD argues that the Security Park complex is exempt from ad valorem
taxation because it was acquired in the pursuit of the school district’s legitimate
functions and is held for tbe purpose of resale.6 It directs us to cases which conclude
that a political subdivision’s ownership of land under such circumstances is a public
purpose for purposes of the constitution and section 11.11 of the Tax Code and the
land therefore is tax-exempt to the political subdivision. See State v. City of San
Antonio, 209 S.W.2d 756 (Tex. 1948); City of Austin v. Sheppard, 190 S.W.2d 486
(Tex. 1945); Lubbock Indep. Sch. Dirt. v. Owens, 217 S.W.2d 186 (Tex. Civ.
App.-Amarillo 1948, writ refd); Stare v. C&vof Houston, 140 S.W.2d 277 (Tex. Civ.
App.-Galveston 1940, writ refd); see also Stare v. Moak, 207 S.W.2d 894 (Tex.
1948); Eason v. David, 232 S.W.2d 427 (Tex. Civ. App.-Beaumont 1950, writ refd
n.r.e.). However, with a single exception, each of the cases cited involved the
acquisition of land by a taxing unit for purposes of collecting taxes (either through
enforcement of a tax lien or purchase at a tax sale) and the holding of such property
for resale. Taxing units are expressly authorized to acquire and dispose of property
in satisfaction of taxes due on the property. Tax Code 03 34.01(c), 34.05. None of
the tax cases involved the temporary leasing of the property pending the resale. We
therefore do not find these cases dispositive of the AISD’s tax liability on the
Security Park complex.
The single exception among the cited cases is State v. City of Houston, 140
S.W2d 277. There the city purchased a tract of land, a portion of which it intended
to develop as a public street. The city intended to sell the surplus property if it
%e board of trustees of an independent school district is vested with the exclosive power to
“manage and govern the public free schools of the district”and may, in the name of the school district,
aquirc and hold real and personal property. Edu~ Code 5 2326(a), (b). The board of trustees of a
school district may seIl real property of the district if the proceeds of the sale are used for the pu.rchase
of ‘more convenient and more d&able school property,’ the construction or repair of school
buildings, or arc deposited in the local maintenance fund of the district. Id. 5 7330(a), (c). In addition,
the property must no longer be needed for school purposes. Attorney General Opioioos JM-X00
(1988); O-1570 (1939).
p. 993
Honorable Dale W. Elliott - Page 10 CN-188)
received a fair offer. Pending the sale of the property, the city rented houses on the
unused portion of the tract to private parties. The state and Harris County sought
to collect back taxes on the property that were levied after the city acquired the
tract The court of civil appeals concluded that the property was tax-exempt
because the record reflected that the city’s motive in acquiring the entire tract was
to conserve city road funds. The city chose to buy the entire tract because it
received a much better bargain than it would have had it purchased only the portion
necessary for the road. The renting of tbe property pending its sale did not, in the
view of the court, change the character of the city’s interest in the property or the
essential public purpose of the city3 use of the property. The property therefore
remained tax-exempt.
The AISD states that its acquisition of the Security Park complex was
motivated by economic interests similar to those of the city in Cr?yof Houston, 140
S.W.2d 277. It explains that the former owner of the property initially indicated a
willingness to sell the AISD only that portion of the complex that the district sought
for its administrative offices, but later decided to offer only the entire complex for
sale. After considering other alternatives, the board of trustees concluded that
purchase of the entire Security Park complex was the most economical alternative.
Once again we emphasize that we cannot resolve the fact issues that are at
the center of your inquiry. However, the facts portrayed by the AISD tend to
support a tax exemption for the Security Park complex under section 11.11 of the
Tax Code. The court in C& of Houston, 140 S.W.2d 277, concluded that public
acquisition of land in excess of actual need constitutes a public purpose if the
acquisition was intended to conserve the fund that made the public work possible.
The public purpose is not lost if the political subdivision puts the property to
productive use pending its disposal and the proceeds of this use are deposited to the
credit of the public fund used to purchase the tract.7 The private use in these
circumstances further conserves the public fund, serving yet an additional public
purpose. Accordingly, if it is determined that the Security Park complex was
acquired and is used in similar fashion, we believe that property would be tax-
exempt to the district
?he funds used to purchasethe tract were bond funds dedicated to road improvements. It is
not dear whether the court would have required deposit of rentals to the credit of the original funding
sowx if the bond funds had not been so dedicated. We are not ad&cd as to the SOUTCS. of the funds
used by AISD to purchase the Security Park complex
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Honorable Dale W. Elliott - Page 11 (1~1-188)
You also inform us that the Amarillo Junior College District has purchased
real property adjoining the campus of knarillo College for purposes of future
expansion. It has leased some of the property to private individuals pending the
expansion. The district explains that it acquired 29 parcels of property, many with
improvements., pursuant to a long-range expansion plan adopted by its board of
regents in 1983. Four residences on the properties are currently leased to students
or employees of &narillo College; eleven others evidently are leased to persons
who are not students or employees of the college. Two units of an eight-unit storage
garage facility are rented to persons who are not students or employees of the junior
college. The remaining 20 structures were razed or moved or are currently used by
the district. The district deposits rental income in its building fund.
The district advises that the lease of these properties is temporary, pending
implementation of the long-range expansion plan. It advances arguments and
authorities similar to the AISD. In particular, it cites City ofAbilene v. State, 113
S.W.2d 631 (Tex. Civ. App.-Eastland 1937, writ dism’d w.o.j.) which involved the
lease of city property acquired for construction of a reservoir. The property
involved in the dispute constituted only a portion of the property that was required
for the project; the city was unable at the time to acquire all of the property
required for tbe project. Pending the acquisition bf the remaining property, the city
leased the land acquired to that point. The court concluded that the temporary
rental of the property would not remove its tax exemption because the purpose for
which the property was originally acquired - construction of a reservoir -- was a
public purpose, a purpose which the city had not abandoned when it leased the
property for private use.s
Tbe junior college district stipulates facts which, if true, would conform to the
uses of public property approved in Ciiy of Abilene, 113 S.W2d 631. However, we
tie CityofAbi.he casewasdisapproved ia CityofBeaumont Y. Fe&a, 4l5 S.W.2d 902 (Tcx
1967). because the wurt of civilappealswronglyassumedthat mrmicipalproperlywas withinthe.
legislature’sauthorityto tax and that article VIII, sectlou2 appliedto municipalproperty. The
supreme court in Fetiaa ruled that municipalpropertywas not subjecrto taxationunder the
constitution.The supremecourt has sinczretreatedhorn this holding,thoughit has not expressly
overruledF&a@. See Saaedee, 576 S.W.Zd ?E$ Leader Independent School Disbkt, 479 S.WZd 908.
Andas notedearlierin this opinion,the legislahrrehasprovidedfor the taxationof municipalproperty
consistent with the constitution.
p. 995
Honorable Dale W. Elliott - Page 12 (``-188)
believe this case governs only the renting of the storage garage units. This use of
public property pending its ultimate public use does not destroy its tax-exempt
status. The tax status of the residences owned by an institution of higher education
and rented for housing purposes is governed by section 11.11 of the Tax Code.
As previously noted section 11.11 of the Tax Code contains a number of
qualifications to the general tax exemption provided public property under sub-
section (a). One such qualification is subsection (e), which provides the following in
pertinent part:
It is provided, however, that property that is held or
dedicated for the support, maintenance, or benefit of an
institution of higher education as defined in Chapter 61, ‘Texas
Education Code, but is not rented or leased for compensation to
a private business enterprise to be used by it for a purpose not
related to the performance of the duties and functions of the
state or institution or is not rented or leased to provide private
residential housing to members of the public other than students
and employees of the stateor imtitutionis not taxable. . . .
The language of subsection (e) plainly implies that property of an institution
of higher education dedicated to the support,’ maintenance, or benefit of the
institution that is leased or rented to employeesor students of tbe institution for
private residential housing is tax-exempt. Chapter 61 of the Education Code defines
“institution of higher education” to include, inter u&r, a public junior college. Educ.
Code g 61.003(g). A public junior college is any junior college certitied by the
Coordinating Board of the Texas College and University System. Id. I) 61.003(2).
We are informed that Amarillo Junior College is so certified. It is also apparent
from the description of the facts that the parcels of property on which the houses sit
are dedicated to the benefit of the junior college. Accordingly, the property of the
junior college that is rented or leased to employees and students for residential
housing is not taxable. On the other hand, property that is rented~ or leased to
provide private residential housing to individuals who are not employees or students
of the junior college is not tax-exempt. The property containing the storage garage
units remains tax-exempt since its use conforms to the uses approved in City of
Abilene, 113 S.W.2d 631.
p. 996
Honorable Dale W. Elliott - Page 13 D+l88)
SUMMARY
Property owned by the City of Amarillo consisting of an
airport maintenance hangar that is leased to a private party for
operation as such is exempt from ad valorem taxation if the
property is used in direct support of the operation of the airport
by the city. Buildings that are owned by the city are not tax-
exempt if they are owned purely for the purpose of renting them
to private commercial interests. An office complex owned by
the Amarillo Independent School District and partially leased to
private parties and other political subdivisions remains tax-
exempt if the facility was acquired in its entirety for the purpose
of conserving school district funds. Property acquired by the
Amarillo Junior College District for purposes of future
expansion and temporarily leased to private persons as storage
units is tax-exempt. Property rented to students and employees
of the junior college for residentisl housing also remains tax-
exempt, but property rented for these purposes to persons who
are not students or employees is subject to taxation.
DAN MORALES
Attorney General of Texas
p. 997
Honorable Dale W. Elliott - Page 14 M-188)
WILL PRYOR
First Assistant Attorney General
MARYKELLER
Deputy Assistant Attorney General
RENEAHICKS
Special Assistant Attorney General
MADELEINE B. JOHNSON
Chair, Opinion Committee
Prepared by Steve Arag&
Assistant Attorney General
p. 998