Untitled Texas Attorney General Opinion ( 1977 )

Honorable William P. Hobby Opinion No. H-1022
Lieutenant Governor of Texas
State Capitol
Austin, Texas
Honorable Bill Clayton
Speaker of the House Re: Valuation of property
State Capitol for ad valorem taxation
Austin, Texas purposes.
Dear Governor Hobby and Speaker Clayton:
You have asked our opinion on four questions relating to
ad valorem taxation and the distribution of funds for public
school purposes.
Your first question is:
Ray the' Legislature, in exercising its
duty under Articl.e 8, Section 1, of the
Texas Constitution, to provide by law how
value is to be ascertained for ad valorem
tax purposes, constitutionally provide that
land used to produce agricultural products
be valued for ad valorem tax purposes ac-
cording to some standard of value other
than market value, such as valuation on
the basis of use or capability to produce
agricultural products?
We initially note that the first question is directed
solely to article a, section 1 and does not involve article
9, section l-d which is discussed in your second question
and which involves valuation of certain agricultural land.
Article a, section 1 of the Texas Constitution provides in
part:
Taxation shall be equal and uniform. All
property in this State, whether owned by
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Honorable William P. Hobby
Honorable Bill Clayton - Page 2 (H-1022)
natural persons or corporations, other
than municipal, shall be taxed in propor-
tion to its value, which shall be ascer-
tained as may be provided by law.
On several occasions Texas courts have specifically in-
dicated that the term "value," as used in article 8, section
1, means market value. Lively v. Missouri, K. & T. Ry. of
Texas, 120 S.W. 852, 856 (Tex. 1909); Rowland v. City of Tyler,
5.2d 756, 760 (Tex. Comm'n App. 1928, jdgmt adoptea) Har-
lingen Independent School Dist. v. DunlaE, 146 S.W.2d 235, m
(Tex. Civ. App. -- San Antonio 1940, writ ref'd); Atlantic
Richfield Co. v. Warren Independent School Dist., 453 S.W..2d
190 19/ (Tex. Civ. App. -- Beaumont 1970 writ ref'd n.r.e.);
Diekrich v. Phipps, 438 S.W.2d 900, 902 (&ex. Civ. App. --
Houston [lst Dist) 1969, no writ). See Whelan v. State, 282
-
S.W.2d 378, 380 (Tex. 1955); State v. Whittenburq, 26 5 S.W.Zd
569, 572 (Tex. 1954). While it can be argued that the portion
of article a, section l,.which refers to a~scertainment of value
"as provided by law" permits the Legislature to establish a
standard of value for taxation purposes other than market value,
the courts have clearly ruled otherwise. See also Tex. Const.
art. 8, § 20. Accordingly, it is our opinion that article 8,
section 1 of the Constitution does not permit the Legislature
to provide for the taxation of property other than in propor-
tion to its market value.
Your second question is:
If the answer to question #l is negative,
could the Legislature constitutionally .pro-
vide for use of a standard of value other
than market value for taxation of agricul-
tural land if Article 8, section l(d), of the
Texas Constitution were repealed?
Article a, section l-d permits assessment of certain land
at its agricultural use value. While this technique is based
on market value principles, see King v. Real, ~466 S.W.Zd 1
(Tcx. Civ. App. -- San Antonliol971, writ ref'd n.r.e.); At-
torney General Opinion H-863 (1976). it will generally result
in a lower value than assessment at full market value.
If article 8, section l-d were repealed the standard of
value would be determined by the requirements of article 8,
section 1. In light of the judicial authority reviewed in
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Honorable William P. Robby
Honorable Bill Clayton - Page 3 (H-1022)
discussion of your first question, it is apparent that the
repeal of article a, section l-d, would leave the Legislature
without authority to value agricultural land other than in
proportion to its market value.
Your third question is:
May the Legislature, by statute, consti-
tutionally provide that single-family res-
idences be valued for tax purposes on the
basis of a percentage of market value?
We understand this question to involve the power of the
Legislature to provide for the assessment of residential prop-
erty at a different percentage of market value than other prop-
erty. As noted above, article 8, section 1 of the Texas Con-
stitution requires that taxation be equal and uniform. The
courts have found schemes to tax one class of property at a
percentage of its value and another class at a differentper-
centage to be unconstitutional. Among the plans the courts
have overturned include an omission of certain types of pro-
perty from the tax rolls, City of Arlington v. C%Inon, 251
S.W.2d 414, 416 (Tex. 1954); the assessment of railroad intan-
gible property at full market value while all other property
was assessed at 67 percent of value, 176 S.W. 820, 623 (Tex. Civ. App. -- Galveston 1915,
writ ref'd). See Yudof, The Property Tax in Texas under State
-
and Federal Law, 51 Tex. L. Rev. 885,' 899-900 (1973). Accord-
ingly, it is well established that-any plan to value or assess
one class of property at a smaller percentage of market value
than other property is prohibited by the Constitution.
Your final question is:
In calculating the local share of finan-
cing the Minimum Foundation Program in
public education, may the Legislature, by
statute, set local fund assignments based
on property values estimated at less than
market value?
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Honorable William P. Hobby
Honorable Bill Clayton - Page 4 (H-1022)
While your first three questions relate to assessment
and taxation of property, the final question involves distri-
bution of State funds to local school districts. We note
that the current formulas for distributing state funds for
education are under attack in the United States District Court
for the Western District of Texas in Wilson v. Brockette
(Civil Action No. A-76-CA-2231 and Bennett v. Brockette (Civil
Action No. A-77-CA-21). Plaintiffs ins thes e cases allege that
the current formula for distribution of state funds is invalid
since it is alleged to entirely omit the value of substantial
amounts of property which are required by law to be taxed.
See also Sheffield v. Driscoc (No. B-6829) now pending in the
---
Tcxasiipi%iiieCourt. 'l'hczadings in these suits do not pre-
cisely raise the issues involved in your more general inquiry,
but the issues are similar and we call your attention to the
litigation.
In determining how to allocate state funds for public
education, the Legislature has broad authority. Efunnnev.
Marrs, 40 S.W.2d 31 (Tex. 1931). In fact, the Texas Consti-
tution even provides a method other than property valuation
for the distribution of certain school funds. Tex. Const.
art. 7, § 5. It also requires the Legislature to 'make suit-
able provision for the'support and maintenance of an effi-
cient system of public free schools." Tex. Const., art. 7,
§I. The federal constitutional requirement that will have
to be satisfied by any school finance plan is that it must
bear some rational relationshio to a leaitimate state DurDose.
San Antonio Independent School*Dist. v.-Rodriguez, 411-U.S. 1
(1973). For example, WC have already indicated that assess-
ments determined pursuant to article 8, section l-d of the
Texas Constitution, which permits certain land to be assessed
on the basis of agricultural use factors, could constitutionally
be utilized in the formula by which school aid was apportioned
among districts. Letter Advisory No. 109 (1975).
Whether a particular proposal will meet the constitutional
test will depend on the details of the proposal and its rela-
tionship to the overall statutory scheme of which it is a part.
your question is broadly phrased, and no specific legislative
proposal is before us. Unless and until a specific proposal
is presented, we have no basis on which to say that any and all
proposals which might fall within the scope of your inquiry
would meet the constitutional test we have outlined. We be-
lieve that any proposal the Legislature adopts should specifi-
c;I``L~indicate the legitimate state purpose which is being
served by the formula and should clearly reflect the rational
relationship between the legitimate state purpose and the formula.
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,.._ . .
* (. ”
Honorable William P. Hobby
Honorable Bill Clayton - Page S (H-1022)
SUMMARY
The Texas Constitution requires that prop-
erty be assessed for taxation purposes in
proportion to its market value. The Legis-
lature may not provide that one type of
property be assessed at a smaller percen-
tage of its market value than other types
of property.
The Legislature has a constitutional ob-
ligation to provide for the support and
maintenance of an efficient system of public
free schools. It has broad authority to
devise a plan to distribute state funds
for public education. Any proposal the Leg-
islature adopts should specifically indicate
the legitimate state purpose which is being
served by the formula and should clearly re-
flect t,he rational relationship between the
legitimate state purpose and the formula.
Very truly yours,
JOHN L. HILL
Attorney General of Texas
APPROVED:
DAVID M. KENDALL, First Assistant
Opinion Committee
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