Untitled Texas Attorney General Opinion
KP-0066
| Tex. Att'y Gen. | Jul 2, 2016Background
- Texas A&M University System (the System) owns land on which private developers will build and operate student housing under long-term ground leases.
- One ground lease vests title to improvements in the private lessee during the lease term, with improvements reverting to the System at lease end and the System holding an option to purchase the lessee’s leasehold interest during the term.
- A second 40-year lease permits housing to be occupied by Texas A&M students/faculty, Blinn College students/faculty, and (potentially) others under certain circumstances.
- Requestor asks whether equitable title can establish public ownership for Tax Code § 11.11 exemption and whether leasing to persons other than the owner’s students/employees (or to students of another institution) affects exemption status.
- Attorney General’s Office will not construe specific contracts or decide exemption for particular property, but provides legal guidance on applicable standards.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether equitable title (right to compel legal title) suffices for § 11.11 exemption | Requestor: equitable title can establish public ownership for exemption | System: factual question whether System has a present right to compel legal title under the lease | Held: Equitable title (present right to compel legal title) can support exemption; determination is fact-specific. |
| Whether the System holds equitable title under the described ground lease that vests improvements in lessee during the term | Requestor: lease terms (reversion and option to purchase) may give System equitable title | System: ownership of legal title rests with lessee during lease; whether System has right to compel title transfer depends on facts/contract | Held: Cannot opine on specific contract; generally, a right to compel transfer indicates equitable title—application depends on the lease’s actual terms and facts. |
| Whether leasing residential housing to students/employees of another institution (Blinn) defeats exemption under § 11.11(d)/(e) | Requestor: concern that leasing to Blinn students or others may make property taxable under § 11.11(d) | System: property may be "held or dedicated" for higher education benefit and thus governed by § 11.11(e), which is likely controlling as more specific | Held: A court is likely to apply § 11.11(e) (specific to institutions of higher education) to allow exemption for housing leased to students/employees of such institutions; facts control. |
| Whether subleasing part of the property to non-students/non-employees causes loss of exemption | Requestor: partial subleasing may end exemption | System: limited exceptions may apply; factual inquiry | Held: Property may lose exemption in whole or in part if leased to private members of the public other than students/employees; exemption loss depends on extent and nature of the nonqualifying use. |
Key Cases Cited
- Harris Cty. Appraisal Dist. v. Se. Tex. Haus. Fin. Corp., 991 S.W.2d 18 (Tex. App.-Amarillo 1998) (equitable title can support taxation exemption where lessee arrangement created right to compel legal title)
- Tex. Dep't of Corr. v. Anderson Cty. Appraisal Dist., 834 S.W.2d 130 (Tex. App.-Tyler 1992) (recognizing public property exemption where public entity effectively held ownership interest)
- Travis Cent. Appraisal Dist. v. Signature Flight Support Corp., 140 S.W.3d 833 (Tex. App.-Austin 2004) (equitable title defined as present right to compel legal title)
- TRQ Captain's Landing L.P. v. Galveston Cent. Appraisal Dist., 212 S.W.3d 726 (Tex. App.-Houston [1st Dist.] 2006) (cases applying right-to-compel test), aff'd, 423 S.W.3d 374 (Tex. 2014) (affirming legal principles on title and taxation)
- AHF-Arbors at Huntsville L LLC v. Walker Cty. Appraisal Dist., 410 S.W.3d 831 (Tex. 2012) (discussing equitable-title principles)
- Hays Cty. Appraisal Dist. v. Sw. Tex. State Univ., 973 S.W.2d 419 (Tex. App.-Austin 1998) (university did not hold equitable title where no right to compel transfer)
- Jackson v. State Office of Admin. Hearings, 351 S.W.3d 290 (Tex. 2011) (statutory-construction principle: specific provision controls over general)