2012 Attorney General Opinions and Court Decisions
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Listed below are recent opinions and decisions concerning various property tax issues. The list is does not include all opinions and decisions concerning property tax. The summaries are provided by the Comptroller's office as a public service intended solely as an informational resource. The summaries are not intended as substitutes for or interpretations of the opinions and decisions summarized and should not be relied upon as such. Additionally, the information provided neither constitutes nor serves as a substitute for legal advice. Questions regarding the meaning or interpretation of any information included or referenced herein should, as appropriate or necessary, be directed to an attorney or other appropriate counsel.
Attorney General Opinions
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Opinion No. GA-0924 Re: Evidence that must be submitted with regard to an application for a residence homestead exemption under section 11.43, Tax Code (RQ-1008-GA)
Summary: Only a driver's license, personal identification certificate or vehicle registration receipt issued by this state may be used to meet the requirements of Tax Code subsection 11.43(j)(4). -
Opinion No. GA-0918 Re: Proration of homestead property tax exemption under section 11.131 of the Tax Code for a fully disabled veteran who died during 2011; and application of that exemption to the surviving spouse of a veteran who dies during 2011 (RQ-1005-GA)
Summary: Effective January 1, 2012, subsection 11.131(c) of the Tax Code provides a residence homestead tax exemption to the surviving spouse of a fully disabled veteran who at the time of death qualified for an exemption under subsection 11.131(b) of the Tax Code. The fact that the disabled veteran died in 2011, prior to the effective date of subsection 11.131(c), does not deprive the surviving spouse of the exemption for the 2012 tax year.
The homestead tax exemption in subsection 11.131(b) of the Tax Code for a fully disabled veteran who died in 2011 continues for the remainder of the 2011 tax year. -
Opinion No. GA-0917 Re: Authority of the Department of Public Safety to contract with a county tax assessor-collector to perform its duties relating to the issuance of driver's licenses and personal identification certificates (RQ-1002-GA)
Summary: The Department of Public Safety lacks statutory authority to contract with a county tax assessor-collector to perform its duties relating to the issuance of driver's licenses and personal identification certificates. Similarly, counties lack statutory authorization to participate in such a program. -
Opinion No. GA-0911 Re: Jurisdiction of the Appraiser Licensing and Certification Board over a property tax appraiser's uniform and equal analysis (RQ-0992-GA)
Summary: Chapter 1103 of the Texas Occupations Code regulates the licensing and certification of real estate appraisers. Chapter 1103 subjects appraisers to the Uniform Standards of Professional Appraisal Practice ("USPAP") and Texas Appraiser Licensing and Certification Board ("Board") rules. If the USPAP or Board rules regulate a particular task that appraisers might perform, chapter 1103 would require appraisers to comply with those regulations. Subject to administrative and judicial review, the Board may determine whether the USPAP or Board rules regulate particular tasks that appraisers might perform. - Opinion No. GA-0908 Re: Whether the members of the board of trustees of the Clear Lake City Community Association may hold a meeting by means of a telephone conference call (RQ-0989-GA)
Summary: The members of the board of trustees of the Clear Lake City Community Association, a "property owners' association" as defined in the Open Meetings Act, chapter 551 of the Government Code, may not hold a meeting by means of a telephone conference call, even if only one member so participates, except in the limited circumstances described in section 551.125, Government Code.
Courts of Appeals Decisions
- Section 25.04
Dick DeGuerin et al. v. Washington County Appraisal District et al., No. 01-11-00548-CV (First Court of Appeals - Houston)
(April 19, 2012)This case involves taxation of private airplane hangars. The appellants argued that they did not hold an interest in the hangars that would subject them to taxation. The appellants leased the land at the City of Brenham Municipal Airport on which the hangars are located and used the hangars for storage of their private aircraft. The hangars are affixed to the land. As stipulated by the parties, the appellants “generally acquired their interest in the hangars through ‘bills of sale.’”
The appellate court held:
Assuming without deciding — as argued by appellants — that the lease agreement includes all of the improvements, including the hangar, this does not mean that the accompanying bills of sale are without effect. The bills of sale convey fee simple in the hangar improvements. A leasehold is less than fee simple. Dallas Cent. Appraisal Dist. v. Jagee Corp., 812 S.W.2d 49, 53 (Tex. App. — Dallas 1991, writ denied). Regardless of what portion of fee simple in the hangars was conveyed in the leases, the remainder was conveyed in the bills of sale. See Hall v. Prof’l Leasing Assocs., 550 S.W.2d 392, 394 (Tex. Civ. App. — Dallas 1977, no writ) (holding lease is merged when lessee acquires title to reversion). Accordingly, the appellants own the hangars.
As the parties acknowledge, the Tax Code contemplates that separate entities can own separate interests in land and improvements. See TEX. TAX CODE ANN. § 25.04 (Vernon 2008). Those entities can each be taxed on their separate interests. See id. Our state constitution requires that “[a]ll occupation taxes shall be equal and uniform upon the same class of subjects within the limits of the authority levying the tax; but the legislature may, by general laws, exempt from taxation public property used for public purposes . . . .” TEX. CONST. art. VIII, § 2. Because the hangars are owned by private entities and, accordingly, are not public property, whatever exemption may have applied to the City of Brenham does not extend to appellants.
At oral argument, appellants argued that the bills of sale were, in fact, assignments of a leasehold interest in the hangars. While the fourth stipulation of fact puts the term “bills of sale” in quotes, the two bills of sale included as attached exhibits refer clearly to the sale of the hangars, not a lease. There is no mention of monthly lease payments. There is no mention of a term of any lease. There is no mention of any matter typically attendant to a lease. Accordingly, there is no evidence in the stipulations of fact or the attached exhibits to support appellants’ claim that the bills of sale were anything other than sales of fee simple interests in the hangars subject to any listed encumbrances.
- Sections 25.25, 31.02, and 33.10
Atlantic Shippers of Texas, Inc. v. Jefferson County, Texas, No. 09-10-00511-CV (Ninth Court of Appeals - Beaumont)
(March 8, 2012)This case involves multiple challenges to a delinquent property tax judgment. Among several rulings, the appellate court held that Tax Code §33.10 does not allow a taxpayer to control the manner in which payments are applied to delinquent taxes, penalties, and interest; that the failure to exhaust the Tax Code’s “exclusive remedies provision” deprives a taxpayer of equitable defenses; and that “[b]ased on the language of section 25.25 . . . sending a corrected tax statement does not alter the delinquency date calculation provided by section 31.02.”
The appellate court affirmed the trial court’s judgment in part and reversed and remanded in part.
- Section 23.1241
Gregg Appraisal District v. Capacity of Texas, Inc., No. 12-11-00045-CV (Twelfth Court of Appeals - Tyler)
(February 29, 2012)This case involves interpretation and applicability of Tax Code §23.1241. Capacity of Texas, Inc. (Capacity) filed a Dealer’s Heavy Equipment Inventory Declaration pursuant to Tax Code §23.1241, but Gregg Appraisal District (GAD) “denied Capacity’s request” for valuation pursuant to §23.1241 “because it determined that Capacity did not have ‘any retail inventory’” and, therefore, “that Capacity’s inventory did not qualify for the special valuation.” As set forth by the appellate court:
Capacity manufactures and sells terminal tractors from its manufacturing facility in Gregg County, Texas. During calendar year 2006, Capacity sold 1,311 of these terminal tractors. During that same calendar year and on January 1, 2007, Capacity’s sales were outpacing its production. As a result, it maintained a backlog of orders. Capacity’s facility did not contain a showroom in which to display its products and did not have any completed inventory that did not have a buyer associated with it. Accordingly, if a potential buyer wanted to purchase a terminal tractor from Capacity during that time period, Capacity would manufacture the terminal tractor to the purchaser’s specifications on a first-come-first-served basis.
After GAD assessed Capacity’s inventory value at $1,981,918 for 2007, the tax year at issue, rather than at $151,408 as stated by Capacity in its Dealer’s Heavy Equipment Inventory Declaration, Capacity protested. The appraisal review board “denied Capacity’s special inventory valuation.” Capacity filed suit and the trial court entered judgment in favor of Capacity. GAD appealed.
On appeal, GAD argued that the trial court erred “because (1) Capacity’s inventory of heavy equipment was not held for sale at retail, (2) Capacity’s inventory is not subject to valuation under Texas Tax Code, Section 23.1241, and (3) the trial court’s interpretation of Section 23.1241 is unconstitutional.” With regard to the first two issues, the appellate court analyzed the concept of “held for sale,” reviewing Tax Code §23.1241 as well as a Tax Code sales tax section defining “’[s]ale’ or purchase.’” The appellate court found that
Capacity possessed the heavy equipment inventory after production and before shipping it to the purchaser. The time period for the transfer of possession from the dealer to the purchaser is irrelevant. Therefore, as long as Capacity had possession of the product before transferring to the purchaser, it “held” the item for sale.
The court held:
In sum, Capacity’s inventory of heavy equipment qualified as dealer’s heavy equipment inventory under Texas Tax Code, Section 23.1241 because those units of personal property were held for sale. Therefore, Capacity qualified for special valuation of its terminal tractor inventory pursuant to Section 23.1241.
With regard to GAD’s assertion that the trial court’s interpretation of the statute is unconstitutional, the appellate court held that the issue was not preserved for appellate review because the issue was not presented to the trial court.
The appellate court affirmed the trial court’s judgment.
- Section 33.53
Morad Mekhail d/b/a Abtrust v. Duncan-Jackson Mortuary, Inc. f/k/a Jackson Mortuary, Inc., No. 01-11-00485-CV (First Court of Appeals - Houston)
(March 1, 2012)This case involves a challenge to a trial court judgment setting aside a tax sale. Delinquent taxes on property owned by Duncan-Jackson Mortuary were the subject of a delinquent tax suit in which Harris County, on its own behalf and on behalf of seven other taxing authorities, obtained a default judgment awarding Harris County “$16,961.30 in taxes, penalties and interest, and research fees.” The judgment also set an interest rate of 1% on the base tax amount and awarded court costs, costs of service of process, and a Tax Master Fee. After a constable’s sale was set but prior to the sale, Duncan-Jackson Mortuary submitted an electronic payment of $17,483.40 through Harris County Tax Assessor-Collector’s website. $17,483.40 was the amount shown on the tax statement as the amount “equal to the amount of the taxes, penalties, and interest plus the interest on the taxes reflected in the judgment.” The amount did not include “the court costs, service of process fee, and Tax Master Fee that were also included in the judgment.” The tax sale proceeded and Mekhail was the highest bidder and received a constable’s deed. Duncan-Jackson Mortuary filed suit to set aside the sale based on the $17,483.40 payment. The trial court entered judgment in favor of Duncan-Jackson Mortuary and set aside the sale. Mekhail appealed.
Of the issues raised on appeal, the appellate court focused on whether the tax sale should be set aside based on either of two legal principles: de minimis non curat lex or substantial compliance. Describing de minimis non curat lex as “an infrequently used legal theory that ‘the law does not care for, or take notice of, very small or trifling matters,’” the court explained that “[t]he law is invoked to excuse negligible deviations from the letter of the law,” but “does not apply . . . just because the number complained of is small.” The court held that the unpaid amount on the date that Duncan-Jackson Mortuary made its electronic payment – $906.00 – was not a de minimis amount. Stating that “’[s]ubstantial compliance means one has performed the ‘essential requirements’ of the statute” and noting that “[t]he term has been applied to excuse deviations from a statutory requirement if such deviations do not seriously hinder the legislature’s purpose in imposing the requirement,” the court held “the principle of substantial compliance does not apply to subsection (e) of section 33.53” and “[b]ecause it did not pay the full amount owed under the judgment, Duncan-Jackson Mortuary was not entitled to have the tax sale set aside.”
The appellate court reversed the trial court’s judgment and remanded the case for entry of a take-nothing judgment.
- Sections 42.09 and 42.21
Jefferson County Appraisal District et al. v. Glen W. Morgan, No. 09-11-00517-CV (Ninth Court of Appeals - Beaumont)
(February 9, 2012)In December 2000, Glen W. Morgan (Morgan) entered into a lease agreement with Jefferson County under which Morgan leased land on which he intended to build a hangar at the Southeast Texas Regional Airport. Not until 2006 were the hangar and the leasehold interest in the land placed on the tax rolls. A fuel tank and fuel were added to the rolls under a third account number in 2007. Morgan protested the land and hangar for 2006, asserting in the protest, among other things, that he “leased the property and did not own it.” The appraisal review board held a hearing and issued an order on August 11, 2006. Morgan appealed to district court on September 5, 2006, but his original petition referenced 2005, not 2006. He filed a second amended petition on July 2, 2007 in which he referenced 2005, 2006, and 2007. Jefferson County Appraisal District and Appraisal Review Board of Jefferson County (JCAD), the named defendants, filed a motion to dismiss for want of jurisdiction. The trial court denied the motion and JCAD appealed.
JCAD argued that Morgan’s suit for tax year 2006 was not timely filed pursuant to Tax Code §42.21(a) because the second amended petition adding tax year 2006 was not filed until after the applicable 45-day deadline. Morgan argued that JCAD “had sufficient notice that he was challenging the appraisal value for the 2006 tax year” and that his pleadings, in accordance with cited rules of civil procedure, gave JCAD “fair notice of the claim involved.”
The appellate court held that the trial court has jurisdiction for tax year 2006, stating:
There was no tax assessment in 2005 to protest. Although Morgan did not refer to the 2006 tax year in his original petition, the record supports a conclusion that the 2005 tax year reference was simply a mistake, and that the appeal to district court was for the 2006 tax year on which he had filed a notice of protest. At the time Morgan filed the petition for review in September 2006, the only taxes that could have been at issue were those for 2006. There could be no confusion by the parties on that point.
JCAD also argued that “the trial court erred in denying their motion to dismiss because Morgan did not file a protest for the tax year 2008 on the hangar account and did not file a protest in tax year 2009 for either the hangar account or the fuel tank account.” Morgan argued “that he contested the question of ownership through a declaratory judgment action in his pleadings and maintains that, because he is not the owner of the property, he does not have to exhaust the ‘yearly, repetitive administrative requirements.’ He contend[ed] he was not precluded from amending his previous petition to include the new years for which he sought review.”
The appellate court held:
Here, the trial court has jurisdiction over other tax years and will be determining the ownership issue for those years. Assuming all material factual circumstances are the same in 2008 and 2009, the question of law regarding ownership will apparently be the same as in the other tax years. Under these circumstances, the trial court has jurisdiction to declare the effect of any ownership ruling on the 2008 and 2009 tax years. However, with respect to all other issues involved in the 2008 and 2009 tax years for the relevant accounts for which no protest or appeal was filed, the trial court lacks jurisdiction.
The appellate court affirmed the trial court’s judgment in part and reversed and remanded in part.
- Sections 25.25(c) and 1.04(18)
Dallas Central Appraisal District et al. v. Southwest Airlines Co., 05-10-00682-CV (Fifth Court of Appeals - Dallas)
(January 24, 2012)This case involves claims pursuant to Tax Code §25.25(c). Southwest Airlines Co. (Southwest) rendered aircraft for tax years 2003 through 2007, applying the allocation formula set forth in Tax Code §21.05(b) to the fleet as a whole. "In 2008, in response to an inquiry from another department, Southwest's property tax manager discovered that had Southwest calculated the allocated value of its fleet on an aircraft-by-aircraft basis, it would have paid nearly $25 million less in taxes for the years in question." Southwest filed a motion to correct, "asserting that section 21.05 mandates the allocated value of each aircraft be separately calculated or computed, and that it mistakenly calculated or computed the allocated value on a fleetwide basis." Southwest alleged the error was a clerical error and requested a value reduction for each tax year. The ARB denied the motion and Southwest filed suit against the Dallas Central Appraisal District and Dallas County Appraisal Review Board (DCAD).
The trial court ruled in Southwest's favor, "concluding as a matter of law that (1) section 21.05 of the tax code requires the formula for allocating the value of commercial aircraft be applied on an aircraft-by-aircraft basis, not on a fleetwide basis, and (2) Southwest mistakenly applied the allocation formula in section 21.05 on a fleetwide basis in tax years 2003 to 2007 and that this mistake was a clerical error permitting correction." DCAD appealed.
The appellate court held:
Here, Southwest made no error in determining by mathematical process the value of its aircraft. Southwest did not transpose any of the numbers; it used precisely the figures it intended to use and then correctly computed or calculated those figures within the formula it intended to use. Southwest made no mathematical errors in the process; it correctly added, subtracted, multiplied, and divided the figures. Although Southwest argues its mistake is "functionally no different" than if it had used the wrong numbers and that its ignorance of the correct approach is the equivalent of a failure to calculate, we cannot agree. In short, what Southwest wants is to revise the methodology it used to calculate the renditions. Applying one methodology when another is either called for or would produce better results is simply not a clerical error as that term is contemplated by the statute.
The appellate court reversed the trial court's judgment and rendered judgment that Southwest take nothing.
- Sections 25.25(c) and 1.04(18)
LFD Holdings, LLP v. Cameron County Appraisal District et al., No. 13-10-00672-CV and Lack's Valley Stores, Ltd. v. Cameron County Appraisal District et al., 13-10-00673-CV (Thirteenth Court of Appeals - Corpus Christi)
(January 5, 2012)These consolidated cases involve claims pursuant to Tax Code §25.25(c). LFD Holdings, LLP and Lack’s Valley Stores, Ltd. (collectively “LFD”) rendered merchandise inventory for tax years 2003, 2004, and 2005 “which did not deduct any amount for depreciation of the property.” Cameron County Appraisal District (CCAD) “appraised the property in accordance with the rendered values” and notified LFD. “LFD later determined that the appraised value of the inventory was ‘far in excess’ of its cash fair market value,” exhausted administrative remedies, and filed suit. The trial court denied LFD’s claims and LFD appealed.
LFD stated on appeal:
CCAD‘s alleged error originated with the inclusion of the words “INVENTORY = 100% ORIGINAL COST” in its personal property depreciation table for the tax years at issue. According to LFD, this language violates section 20 of article eight of the Texas Constitution, as well as various tax code provisions including sections 23.01 and 23.011. See TEX. CONST. art. VIII, § 20; TEX. TAX CODE ANN. §§ 23.01 (West Supp. 2010) (“Except as otherwise provided by this chapter, all taxable property is appraised at its market value as of January 1.”), 23.011 (West 2008) (stating that, if the cost method of appraisal is used to determine the market value of real property, the chief appraiser must “use cost data obtained from generally accepted sources” and “make any appropriate adjustment for physical, functional, or economic obsolescence”). LFD argues specifically that CCAD‘s adherence to this language in determining the inventory values was a clerical error under the statutory definition because it constitutes a “failure in . . . calculating.” See TEX. TAX CODE ANN. § 1.04(18)(A).
Citing its prior opinion in Lack’s Valley Stores, Ltd. v. Hidalgo County Appraisal Dist., No. 13-10-500-CV, 2011 Tex. App. LEXIS 4752 (Tex. App.—Corpus Christi June 23, 2011, pet. dism‘d w.o.j.)(mem. op.), the appellate court held:
CCAD‘s failure to account for depreciation of LFD‘s inventory was the result of a “deliberate determination” by CCAD in which it assessed the property and gave it a value which it deemed appropriate. See id. at *8. It was not a “mistake in writing or copying,” see Matagorda, 788 S.W.2d at 693, nor was it a “simple, inadvertent omission made while reducing a judgment into writing,” see Lack’s Valley Stores, Ltd., 2011 Tex. App. LEXIS 4752, at *8. Indeed, as was the case with HCAD in Lack’s Valley Stores, the judgment of the appraisal review board in this case was accurately reflected in CCAD‘s notice to LFD. See id. at *8–9.
LFD does not provide this Court with any basis for deviating from the reasoning expressed in Lack’s Valley Stores. We therefore conclude that CCAD‘s alleged failure to appropriately depreciate is not properly defined as a “clerical error” under the statutory definition.
The appellate court affirmed the trial court’s judgment.