TRQ Captain's Landing L.P. v. Galveston Central Appraisal District

I would I sustain the Dos’ second issue.

would hold that trial court arbi- acted

trarily and capriciously striking para-

graphs 6 and of Dr. Katz’s affidavit.

addition, if I were to reach the issue

whether GHA bore its of proving burden

aas matter of law that Dr. Riddle was not protection

excluded from the of the Good

Samaritan statute subsections

74.001(c)(1) (d), I would hold that it carry

did not its burden.

Conclusion

Because GHA did not establish its Good

Samaritan affirmative defense as a matter law, I would reverse and remand this

case trial on the merits. L.P., CAPTAIN’S LANDING A Partnership

Texas Limited and Amer Housing Foundation,

ican A Texas Corporation, Appellants,

Non-Profit

GALVESTON CENTRAL APPRAISAL

DISTRICT, Appellee.

No. 01-05-00496-CV. Texas, of Appeals

Court (1st Dist.).

Houston

5,Oct.

Rehearing En Banc Overruled

Nov. majority’s objections, competent summary judgment statement of the Dos’ were evidence. issue, however, agree objections, disagree with the I would reach this be- majority's foregoing dispositive. conclusion that these affidavits cause the issues are (“AHF”), appeal

Foundation from an order granting summary judgment in favor of appellee, Galveston Central Dis- District”). trict (“Appraisal As a result of summary judgment against entered them, appellants were unable to claim an exemption from they ad valorem taxes1 sought pursuant for 2003 to section 11.182(b) of the Texas Tax Code. See TEX. 11.182(b) (Vernon § TAX CODE ANN. 2001). In appeal, two issues on appellants contend they improperly were denied because exemption extends of qualified owners application their for the timely pursuant was filed an exception contained within section 11.436 § Texas Tax Code. id. See (Vernon Supp.2005). judgment.

We reverse and render

BACKGROUND dispute This centers around the Cap- tain’s Landing Apartments (“apartments”), Little, Andrew Jensen, Christopher L. apartment complex located Galves- Blanchard, John Ben Sprouse Shrader apartments ton. The constructed in were P.C., Amarillo, Smith for Appellant. and, 1980s, pur- were Beliveaux, Brown, Ian R. Anthony P. by TRQ, chased acquired who them McLeod, Alexander, P.C., Apffel, Powel & special warranty deed from WHUD Real Galveston, Appellee. (‘WHUD”). Estate, December, L.P. KEYES, Panel consists of Justices AHF obtained control ALCALA, and BLAND. TRQ. TRQ AHF’s had the acquisition

following consequences: structure and tax OPINION 1. TRQ is a partnership. Texas limited KEYES, V. EVELYN Justice. Any TRQ’s tax on income flows Appellants, TRQ Land Captain’s through partners to its under feder- (“TRQ”) L.P. ing, Housing American al principles.2 taxation 1. An "ad valorem” tax is a tax v. Northwood Mun. Util. Dist. No. (Tex.App. [1st property’s a certain rate based on the value. — Houston denied). pet. Dist.] League Intergovernmental Texas Mun. Risk Comm’n, Comp. Pool Texas Workers' seq.; See 26 U.S.C. 701 et TREAS. REG. (Tex.2002). Obligations 301.7701-3(b). provisions, Under these from, pay, as well as ad valorem partners on the are not taxed entirely taxes are derived from constitutional they produce; partners income are liable statutory provisions. City generated partnership. Houston for income (“CHDO”) to Landing, Development Organization3 Captain’s 2. AHF formed CD taxes (“CD”) from ad valorem sole LLC and became its claim against wholly be assessed owned would otherwise member. CD organization. by the AHF. real for this pertinent provision id. The TRQ a See and obtained purchased CD (b), provides TRQ’s dispute is subsection membership interest 100% TRQ that: general partner, sole Galves-

ton, LLC. (b) ex- to an An entitled improved or purchase of was struc- taxation of emption 4. CD’s from possessed a 99% if tured such CD owns real unimproved TRQ. in interest limited organization: percent The interest remaining one (1) hous- community as a organized is Galveston, TRQ by TRQ in was held organization; ing development LLC, TRQ’s in general partner (2) of a chari- meets possessed 100% mem- which CD a provided organization table bership interest. 11.18(e) (f);4 and Sections sum, following the relevant December (3) pur- owns the transactions, possessed a 100% building repairing or poses CD, in TRQ’s partner; limited CD housing to sell on the TRQ and 99% of 100% to or a low-income profit without Galveston, Galveston, LLC; TRQ gen- or individual moderate-income TRQ, remaining partner eral owned the satisfying organization’s family times, TRQ; and, all 1% interest requirements or to rent eligibility TRQ, warranty through special deed an individu- such profit without WHUD, hold acquired from continued to family; and al or apartments. legal title to the (4) build- exclusively engages The transactions described above were repair, and sale or rental ing, 30, 2003. That completed on December housing as described Subdivi- day, application filed with the same CD an (3) activities. and related sion seeking District a 2003 ad valo- Appraisal 11.182(b). §id. See exemption apartments pur- rem tax for the demonstrate, AHF, as the attachments Texas Tax suant section 11.182 CHDO, eligible it is therefore is a TEX. TAX ANN. Code. See CODE ex- ad valorem under section organi- § 11.182. 11.182 allows Section CD, it owns. Housing emptions qualifying Community a zation (£) 11.182, (e) and section 11.18 of a 4. Subsections 3. For the of section CHDO alia, meaning assigned by provide, Sec- U.S.C. inter that a “has Tax Code Texas (1) 12704.” TEX. TAX CODE tion not accrue charitable 11.182(a)(2). § Section 12704 of Title exceeding profits pay or salaries distributable as, a CHDO the United States Code defines rendered; for services a reasonable allowance (1) orga- non-profit organization alia: a inter (2) perform charitable use assets must laws; (2) state local whose nized under or functions; (3) adopt bylaw must or housing provide purpose affordable is dissolution, mandating upon regulation persons; and moderate income low-income to be transferred organization’s assets are "maintains, (3) significant through who organiza- qualified charitable State organization’s govern- representation on the 11.18(e)- CODE ANN. tion. See TEX. TAX. otherwise, accountability to ing board and (0- community See residents.” low-income (2000). § 12704 U.S.C. against assessed, whom the taxes were District moved for sum- CHDO, not a mary judgment nor either AHF or CD the in October contend- (as holder of that it was apartments judgment title to the entitled aas (1) noted, name). of law matter because CD TRQ’s title remains in was not a this, CHDO and did not apartments own the Recognizing application CD’s for the (2) application CD’s exemption indicating included attachments not timely Appellants was filed. filed that CD was sole amended for partial cross-motion summary TRQ and membership held a 100% inter- judgment February 2005. Appellant’s in TRQ’s partner, est TRQ Galves- cross-motion trial asked the court to enter ton, and that AHF possessed 100% (1) judgment finding the exemption membership interest in CD. CD’s application timely pursuant was filed application effectively asserted that be- (2) Tax Code 11.4366 and that AHF (1) cause AHF would be entitled to an apartments was owner of the for the apartments for the if it held purposes of section 11.182. id. legal title to them and AHF owned a In April 11.182. the trial court CD, full interest in taxpayer, granted Appraisal for District’s motion TRQ, owned a full the holder of summary judgment appellant’s and denied (4) legal title apartments, CD was judg- cross-motion partial summary exemption. essence, entitled to the In appeal ment. This followed. then, the application contended that exemption should be imputed through the DISCUSSION partnership chain and back to AHF. present Appellants appeal: two issues on 5, 2004, April On Appraisal District (1) whether owners of denied CD’s application exemption. an may obtain tax exemptions ad valorem Appraisal The District’s denial letter of pursuant to section of the Texas application stated CD’s had been re- (2) Tax Code and whether section 11.436 jected “applicant because the does not own exception the Texas Tax provides Code 19, 2004, property.” April appel- On extending filing organiza- deadline lants filed a protest notice of with the acquire property qualifies tions which Appraisal challenging District its decision for a section 11.182 file deny the application. Appraisal application exemption. for the District, hearing, after a appellant’s denied Standard Review 6, protest July 2004. Appellants then Summary 1. Judgment brought seeking judi- suit court district cial review of the District’s deni- Summary question judgment is a of law. application. al their Appellants’ original v. Provident & Accident Ins. Co. Life petition asserted the Appraisal (Tex.2003). Dis- Knott, 211, 128 S.W.3d concluding trict erred in that AHF did not Thus, summary we review a trial court’s apartments, own the and it sought de- judgment decisions de novo. Id. at 215. claratory judgment delineating appellants’ The standard of review a traditional rights under section 11.182 of Texas summary judgment motion is threefold: (1) Tax Code.5 movant no must show there is Appellants sought declaratory judgment (Ver- PRAC. & REM. CODE ANN. 1997). pursuant Chapter non 37 of the Civil Practice & Remedies Code. CIV. See TEX. TEX. TAX. CODE ANN. 11.436. Statutory Interpretation and that it is 2. genuine issue of material fact law; judgment as a matter of entitled re Resolving appeal the issues on deciding disputed whether there is a interpreting sections 11.436 quires summary- precluding Statutory issue material fact Tax 11.182 of the Texas Code. In re question of interpretation court must take evidence is a law. judgment, (Tex.2001). Canales, 698, 701 52 S.W.3d true; and to the nonmovant as favorable and effec primary goal is ascertain Our indulge every must reason the court Albertson’s, legislature’s intent. tuate the of the nonmovant able inference favor (Tex. Sinclair, 958, 960 Inc. v. 984 S.W.2d any and resolve doubts the nonmovant’s 1999). so, begin we with the doing 166a(c); Pustejov TEX. R. CIV. P. favor. as we plain language because statute’s sky Rapid-Am. Corp., 35 S.W.3d v. say what legislature tried sume that (Tex.2000); Prop. 645 - 46 Nixon v. Mr. and, thus, are meant that its words Co., (Tex. Mgmt. 548 - 49 guide to intent. v. Fitzgerald surest 1985). summary A seeking defendant Inc., Spine Sys., Fixation Advanced judgment negate must as a matter of law (Tex.1999). In ascer 865 — 66 plain one element of each of the least intent, taining legislative we do confine recovery plead tiffs theories words, statutory our review isolated prove each element of an affirmative de clauses, but we instead exam phrases, or Lely R.R. Dev. fense. Missouri Pac. Auto., Inc. v. act. Meritor ine entire (Tex.App Corp., 86 S.W.3d (Tex. Co., 44 Leasing . —Aus Ruan dism’d). If pet. tin a trial court’s 2001). consider, among oth also We summary granting judgment order things, or not the statute is er whether objectives, ambiguous, the statute’s ruling, for the court’s specify basis which the statute was circumstances under here, summary judgment is case law, enacted, legislative history, common any will affirmed if of the theories be law, provisions, and the former similar by the movant meritorious. advanced consequences statutory of construction. (Tex. Brasher, 567, Carr v. 776 569 S.W.2d TEX. GOVT CODE 1989). 2005). 311.023(l)-(5) (Vernon A court legislature in presume the appeals should When both sides move sum just result tended a and reasonable mary judgment grants and the trial court Segal Capi enacting a statute. v. Emmes other, one motion denies the we review but (Tex. L.L.C., 267, tal, 155 287 evidence, questions all all determine 2004, de pet. App. [1st Dist.] — Houston presented, judgment and render the nied). con appellate court should not An court should have rendered. Com trial in a that will lead statute manner strue v. County Agan, Titus missioners Court of result when another to foolish absurd (Tex.1997). However, 77, 81 940 S.W.2d University Tex. is available. alternative may appellate court reverse “[b]efore Dallas v. Lout Med. Ctr. at Southwestern summary one and ren judgment party (Tex. zenhiser, 351, n. 356 20 140 S.W.3d all judgment party, par der for the other 2004) omitted). addition, (quotations sought judgment final relief must have ties conferring exemptions are to statutes summary judg their cross-motions taxing strictly construed favor Blue v. Blue Cross & Montgomery ment.” Supply authority. North Alamo Water Texas, Inc., 147, Dist., Willacy County Appraisal 923 S.W.2d v. Corp. Shield of (Tex.1991). denied). 894, 1996, 804 S.W.2d (Tex.App. writ — Austin Equitable May Whether an Title Holder An entity equitable holds title Exemption Claim a Tax Pursuant it possesses present when “the right 11.182(b) Section legal [compel] title.” Harris County Ap praisal Dist. v. Southeast Texas Hous. In their appeal, appellants first issue on Corp., Fin. 991 S.W.2d 23 (Tex.App.— contend the Texas Tax Code allows an Amarillo no pet.); see also Comerica equitable owner claim the Acceptance Corp. v. Apprais Dallas Cent. provided by section of the Texas Dist., (Tex. al Tax Flowing contention, 497-98 Code. from this denied). (1) appellants App. pet. equitably aver AHF The — Dallas compel arises, instance, owns apartments legal its through 100% title (2) CD; membership (1) interest AHF under the following circumstances: meets parent company A full holds 11.182(b); (3) and, therefore, the trial B; (2) subsidiary B holds court by upholding Appraisal erred (3) legal title to property; certain real District’s application denial CD’s for an B, upon dissolution of title to its real exemption. District, Appraisal con- (4) A; property will revert A has versely, argues the exemption power B at anytime. dissolve only be claimed when an Fin., Southeast Tex. Hous. 991 S.W.2d at holds title for which Significantly, 21-23. “where a tax exempt the exemption sought. According holds entity title to property, the (1) District, TRQ is the record property is tax Id. at exempt.” owner apartments and is vested Here, summary judgment evi (2) and, legal title, therefore, CD’s dence shows that AHF holds ti application properly was denied. apartments. tle to the According to CD’s Typically, ad valorem tax liabilities organization: articles is CD’s fall entity holding legal to a title member; (2) sole the members of CD can given property. County See Childress anytime; vote to dissolve CD at State, 127 Tex. dissolution, upon shall CD’s assets revert (1936) (holding that the holder of members, to namely, its AHF. More is pur owner of for taxation over, the AHF boards of and CD are courts, poses). however, recognize comprised of the same directors. Accord that, instances, in entity certain an “hold TRQ’s partnership agreement, ing equitable title to the property be CD, partners comprise which holds a 99% purposes.” owner for taxation Travis in partnership TRQ, interest Cent. Dist. v. Signature Flight Galveston, TRQ which holds a 1% (Tex. Support Corp., 140 S.W.3d partnership TRQ. TRQ in Gal App. no pet.); Orange see —Austin partnership agreement veston’s lists CD as County Appraisal Dist. Agape Neigh dissolution, partner. its sole the case Inc., borhood Improvement, TRQ TRQ Galveston’s assets revert to (Tex.App. pet. — Beaumont members, CD, respective namely their denied) (holding that subordinate unit of any which in turn can be time dissolved qualified may be CHDO considered CHDO AHF, by with the result CD’s assets for purposes tax when subordinate unit to AHF. revert reversion of operates property owns and for reasons can apartments effectively that are title for the be consistent applicable AHF eligibility requirements compelled TRQ estab from at AHF’s CHDOs). result, lished for behest. As a we conclude that above, compel respon- AHF bears ultimate present AHF cussed has sibility any placed upon tax apartments title to the and thus holds burden i.e., TRQ on will flow equitable TRQ, any placed title to them. tax chain to through back next consider whether section We seq. § et AHF. See 126 U.S.C. 11.182(b) allows title holders to statute, it would As we read the taxes claim the from ad valorem Legisla- intent with the inconsistent provides. it 11.182(b)in such a to interpret ture section plain A of section 11.182 indi- reading AHF, which holds way purpose encourage cates that its is to ultimately apartments; responsi- is housing availability affordable for low- paying any taxes associated with ble income and moderate-income Texans them, spends at least 40% of the qualified exempting CHDOs from ad valo- in on paid amount that would be taxes properties they rem on certain own. taxes improvements to the social services and To See TEX. TAX CODE 11.182. tax apartments, ineligible receive a exemp- the granting ensure that of such qualify it exemption that would otherwise tions a on exert deleterious effect apartments. if it title to the held the tax revenue available to communities Legislature enacted section provides programs, for social statute availability of promote in 1997 to low- organization may that an not receive housing through provision income given property on a in the sub- charitable or- tax certain sequent year spent tax unless it at “at ON FI- ganizations. HOUSE COMM. least 40 amount of percent total NANCE, ANALYSIS, BILL Tex. H.B. taxes imposed that would have been on the (1997). Leg., 75th To R.S. social, educational, ... eco- though wholly separately, even development services, nomic im- capital (AHF), exempt entity and controlled projects, provement reduction.” rent Legislature’s purpose would defeat 11.182(d). TEX. TAX CODE ANN. enacting section 11.182. See Southeast Thus, the uses ad ex- statute valorem tax Fin., Tex. 991 S.W.2d at 22-28. Hous. emptions encourage as an incentive to qualified organizations housing invest supported Our conclusion is South- development for persons low-income while Housing east Texas Finance which those a requiring organizations to reinvest Appeals Amarillo reached simi- Court portion their savings social wel- involving case lar conclusion fare programs. 394.905 of the Texas Local Government Code, statutory provision provides

The record before us indicates publicly owned is a CHDO whose sole is purpose business public purposes. used for See id. at provision housing the of affordable low- (“[T]o wholly [appellant’s] that the hold income persons and moderate-income separately owned subsidiaries are taxable it that at least total spends 40% the [appellant] exempt the is would de- while amount that of taxes would have been ...” in legislature’s purpose that social, feat the imposed apartments on on edu- enacting by tax exemption provided the for cational, development and economic ser- vices, section 394.905 the Local Government improvements, capital or rent reduc- Code). sup- is further entity Our conclusion exempt tion. AHF is a tax 11.182(b). by the fact that courts have ported the As purposes for of section status, necessary a con- effectively and controls found that CHDO owns receiving exemption under sec- through dis- an partnership arrangements the dition 11.182(b), tion imputed can be to non- that requires addition to meeting “[i]n the CHDO wholly (b) subsidiaries that are owned applicable requirements subsections ” by (c), and controlled qualify- an an organization seeking an ex- a Agape as CHDO. Neighborhood (b) emption under subsection Inc., Improvement, at S.W.3d 602. constructed after December must Thus, for 11.182(b), the of section gener- “control 100% of the interest in the AHF’s CHDO status imputed project al if is owned TRQ. partnership.” limited TEX. TAX. CODE 11.182(e) added). (emphasis The Appraisal District cites American court held that addition of subsection Housing County Foundation Brazos 11.182(e) expanded exemption the tax support District its posi available to in section CHDOs 11.182 to tion only legal that title holders can claim organizations include with own- 11.182(b) exemptions. section valorem ad AHF, ership, like that were previously 885 (Tex.App. — Waco exemption barred from pur- denied). pet. Although the Appraisal Dis poses. County, Brazos at County trict reads holding Brazos disagree this We construction of the qualify owner cannot for an statute for two reasons. 11.182(b), exemption under section Waco court specifically did not address First, County’s Brazos construction of Rather, that question. it assumed that section internally 11.182 is inconsistent. the term “owner” in subsection 11.182(e) requires New subsection that an owner, only referred to a not organization seeking an exemption under (1) equitable owner. It then reasoned requirements section 11.-182meet the required was owner as 11.182(b), County subsection which Brazos 11.182(b); by subsection own legal ownership requiring construes as er, partnership, as here a not a was exemption which an and, therefore, CHDO; exemption 11.182(e) sought. provides But subsection was not available. “if project

The court then went to construe partnership,” organization seeking sub- 11.182(e),7 which was to sec- added must “control 100 percent of 11.182(e) tion 2001. Subsection general partner.” the interest TEX. 11.182(e) provides Section community housing development organi- that: zations; and (e) meeting In addition to (3)submit annually Depart- to the Texas (b) ... to receive an ex- Subsection! 1 Housing Community ment of Affairs emption (b) under Subsection for im- governing body taxing and to the of each proved real includes hous- project unit for which receives an ing project constructed after December housing project evi- 31, 2001, qualified and financed with demonstrating organiza- dence that the 501(c)(3) bonds issued under Section 145 spent equal tion an amount least 90 Internal Revenue Code of percent project's in the cash flow tax-exempt private activity subject bonds preceding year fiscal as determined cap, housing to volume or low-income credits, by (g), the required audit Subsection for organization the must: eligible persons county percent in the in which control 100 of the interest located, social, general property the partner project the if is on edu- the is cational, by partnership; development owned a or economic ser- limited vices, comply capital improvement projects, all rules and laws adminis- or by Department tered the Texas of Hous- rent reduction. Community 11.182(e). § applicable Affairs TAX. TEX. CODE ANN. 11.182(e). purposes. See Texas Turn TAX. for taxation CODE ANN. Subsec- 474, 11.182(e) County, Tex. for Co. Dallas clearly provides pike tion an ex- (1954). 2001, 400, 401 - 02 only equi- a that the emption for CHDO is that or Legislature became concerned of whose owner table owner for easily ganizations qualifying But if were too partnership, is a as here. the owner 11.182(b), subsection satisfy exemptions tax under must be the owner in order 11.182(b), thereby community tax revenues depleting then no CHDO which subsection equivalent return to low- indirectly qualify owns ever without an can housing income market. To counteract exemption under subsection 11.182(e) because, definition, this, subsection Legislature it is not enacted so, 11.182(d), required organizations But if is re owner. that subsec- which 11.182(e) portion tion because it a of meaningless ceiving exemptions is to reinvest that a controls a pro assumes CHDO which into social welfare exemption 11.182(e), partnership limited that owns taxable subsection grams, and property can the owner of that an requirements added obtaining exemption, so satisfy qualify exemption must for an long 100% the general controls any property constructed after December partner partnership. of the FI 2001. See COMM. ON HOUSE NANCE, ANALYSIS, Tex. H.B. BILL 11.182(e) way The only that subsection (2001). Leg., 77th One of the R.S. makes it is sense if understood not as an organi that additional un- expanding exemption available can receive a tax zation der section 11.182 to CHDOs control project partnership a limited partnerships which own taxable only if it a 100% interest in the controls property, limiting but as partnership. TEX. already un- available owners 11.182(e). But this TAX CODE ANN. der section those only CHDOs specifically only to requirement applies general partner which control of the 100% after December properties built of a limited that owns taxable Recognizing id. the former abuse See housing. non-profit committed reform, purpose Eddie Senator This reading sup- natural the statute is Lucio, Jr., sponsor of the 2001 amend ported by history legislative 11.182, stated, am ments to subsection “I amendment. accountability provisions pleased above, As the Legislature stated enacted rents, this bill result in lower clean will promote in 1997 to stronger properties; er accountabili availability housing through of low-income community housing ty pro standard for provision exemptions for certain jects. It is not uncommon for abuses to organizations. charitable HOUSE not backed occur when tax are FINANCE, COMM. ON BILL ANALY- measures, tightens rigorous so bill this (1997). SIS, H.B. Leg., Tex. 75th R.S. regulations and enhances the reinvestment 11.182(b) did Subsection not define “own- program.”8 “owns,” existing but Texas common er” lan of the statute’s long that an This review recognized law had yields origins and amendments guage, title holder be considered owner Release, Development Organiza- Housing Community From the Office of State Sen- Press Jr., 2001), Lucio, http://www. (May Ap- available ator Eddie District Senate tions proves Sponsored by Bill Sen. Lucio senate.state.tx.u s/75r/senate/mem- l/p052201 Tightens Requirements 7/prO a.htm. Reinvestment bers/dist2 conclusion, only by one that namely, en- 11.436 of the Texas Tax Code extends the 11.182(e) acting Legislature subsection filing deadline for applications for ex- sought exemptions restrict available pursuant emptions to section 11.182. 11.182, owners under section not Generally, eligibility exemption for a tax expand Thus, reading them. a natural on January year is determined 1 of in statute, taking plain of the of its account sought. See exemption which the TEX. language history, and legislative demon- 11.42(a). Moreover, TAX. CODE ANN. (1) 11.182(b) strates that: subsection en- exemption “To an eligibility receive qualifying organizations abled obtain ad which determined the claimant’s tax exemptions properties valorem on of qualifications January year, on 1 of the tax they were either the owner or person required exemption to claim an (2) “owner”; a determination a completed application must file before was made that were being id. May 11.43(d). 1.” to claim (3) too granted liberally; Legislature an for the exemption apartments 11.182(e) require enacted subsection 11.43(d), appellants under section would an organization that seeking exemption an to file their application prior have had for a partner- owned a limited 11.436(a), however, May 1, Section 2003. ship must control a 100% interest provides exception general filing an to the limited partnership’s general partner; and According deadline. to the version sec- (4) subsection 11.436(a) tion effect 2003: 11.182(e) were applied only prospectively, (a) organization acquires prop- An ie., properties built after December qualifies exemption an erty that Therefore, interpret we subsection 11.182(a) 11.181(a) under Section or 11.182(b) to mean that an may apply exemption for the for the seeking an exemption on year acquisition not later than the by a and built be- day organiza- 30th after the date the fore December 2001 need not show tion and the acquires property, it controls a in the 100% interest 11.43(d) provided by deadline Section partner. limited partnership’s not Rather, apply application only it need show that “owns” year. property, equitably legally. be it Consequently, reject we R.S., 17, 1997, Leg., Act of June 75th ch. District’s contention that an 715,1997 Tex. Gen. Laws of a property owner built before Decem- Here, appellants application filed their 31, 2001 an qualify exemp- ber cannot 30, 2003, on December and thus would 11.182(b). tion under subsection obtaining exemp- from disqualified we Because conclude that an otherwise section filing tion if deadlines stated in qualified equitable property owner contend, Appellants howev- applied. tax- obtain from ad valorem they 30-day er that are entitled to the pursuant es to subsection be- exception provided by section 11.436 Code, Tax appellant’s we sustain on they acquired apartments cause appeal. issue on first apartments 2003 and December Does 11.436 of the Texas Tax under qualify did not for an extending provide exception Code acquired section 11.182 until were exemptions? ñling deadline for 11.182 Dis- appellants. Conversely, the Appraisal Appellant’s appeal argues trict section 11.436 does second issue requires apply appellant’s us to consider whether section case because under a possession by grantee the takes apartments acquired have not been reserved lien is TRQ them from deed in which a vendor’s anyone purchased since effect, sale which the by a contract of in 1998. In the or under WHUD purchase argument obligated pay it used in the District reasserts the vendee is also, Undoubtedly, that AHF could not receive an this court claiming price.... 11.182(b) legal convey- under section grantee has said the — AHF, never transferred to and title was is the owner held escrow ance apart- acquired AHF the hence never con- title to the equitable ments, 11.436. required by as section tax- But in the latter cases veyed_ was not the issue. able Having appellants. We with held agree Moreover, delivery of in such cases the equitably apartments, that AHF owns the by agent the was conveyance escrow similarly acquired hold that AHF the we of certain dependent upon performance purposes of section apartments the grantee; grantee the conditions 11.436 when AHF obtained an effective power perform his the con- had it in TRQ. It controlling interest was not delivery compel ditions to acquired by apartments until were transferring legal title. conveyance qualified AHF AHF for an Therefore, under we con- section 11.182. (citations omitted) (emphasis Id. at 402 that, 11.436, clude pursuant added). on to distin- The court then went 30, 2003, days AHF from had 30 December bar, holding in the case at guish the facts file for an application which to its ex- state, under the circumstances emption. case, equitable owner of was not the “the purposes land tax because application As was filed on December state, acquire the grantee, deeds as appellant’s we sustain second is- entirely legal they convey and title appeal. sue on dependent upon performance of conditions THE TO RESPONSE DISSENT Thus, the state’s grantors.” Id. disagree in the was not vested respectfully We dis- interest, contingent. Id. reasoning sent’s purely conclusions. but Here, contrast, admits dissent The dissent asserts that “[a]n Captain’s owns 100% of that AHF CD title is not an owner for taxation holder TRQ Landing, which in turn owns 100% legal unless the title holder is Galveston, legal taxpayer encumbered, as to the legally dispute or TRQ As the Landing. Captain’s holder of identity It legal title holder’s exists.” cites entities, intervening Co., 401-02, 100% owner both Turnpike Texas right to com- present have “the authority for and then proposition, as this “ Land- pel legal Captain’s title” to ‘Equitable title’ for states: being stop no one there purposes thus does not exist absent uncer- —there actual, title, AHF satis- tainty power. or exercise of that (as, definition example, Turnpike between fies Texas Co.’s encumbrance pur- admin- trustees and beneficiaries estate owner of heirs).” respect progeny. With all due See Texas poses istrators and that of its dissent, proposition Co., (defining is not the this at 402 Turnpike Turnpike progeny for which Texas and its one who has “within equitable owner as Turnpike states: power perform stand. the conditions his conveyance compel delivery of the Undoubtedly equitable title title”); Flight transferring Signature title in those taxable situations (observ Support (and, Corp., company 140 S.W.3d by implication, members ing shareholders).” that “a person holding ‘equitable Rather, title’ corporate to owner property may be for taxation and AHF avail seek to tax themselves of a purposes; equitable title is defined as the clearly contemplated by benefit plain the present title”); right compel legal Com language of section 11.182—which express- Acceptance Corp., erica 52 S.W.3d at 497 ly provides meeting “[i]n addition to (construing “owner” as used in section (b) of Subsection ... [ ] Code, imposing of Texas proper Tax to receive an under Subsection ty property, taxes on per owner of as “a (b) real improved property in- son entity holding legal or title to the housing cludes a project constructed after property, equitable holding right to December and financed with legal obtain property”); title to the South 501(c)(3) qualified bonds issued under Sec- Fin., east Tex. Hous. 991 S.W.2d at 23 tion 145 of the Internal of Revenue Code (defining “equitable title” as present “the 1986, tax-exempt private activity bonds right to legal holding title” and that sub subject cap, to volume or low-income hous- sidiary corporations created housing fi credits, ing tax CHDO] must: con- [a nance corporation operate to hold and low trol percent of the housing income entitled were to tax ex project if is owned emption for property because owner ” partnership.... limited TEX. TAX of subsidiary corporations had present 11.182(e). CODE And seek right legal stating, title and “Where princi- this tax under established benefit tax exempt entity equitable holds title to ples recognize of Legis- state law that property, property exempt”); is tax right lature’s to confer tax bene- Dept. Tex. Corrections v. Anderson fits on an owner of indirect used Dist., County Appraisal 834 S.W.2d for statutorily public prescribed purposes denied) 131 (Tex.App. Tyler writ — as an “equitable owner” of the (holding that had state taxable title to when present the indirect owner has a improvements unit prison based on eq right compel title to the legal property. state); uitable title held Carmichael v. Interpreting section 11.182 as the dis- Co., Delta Drilling urges sent us to do—to exclude a CHDO 'd) (Tex.Civ.App. writ ref — Texarkana which general partner controls of the 100% “An (stating, equitable present title is the title”). a limited that holds right to the This Court’s non-profit title to low and moderate in- adoption of recog the dissent’s refusal to equitable housing nize the come from the concept of title as dis tinct from legal title for taxation available to of such the owner person claiming equitable only when the gen- under section would title 11.182—not present has compel plain language trans erate a conflict with fer of up title to itself would set 11.182, established law con- conflict between Court and this each of the title for struing concept foregoing courts. tax purposes, govern- with federal law arrangements, similar would also addition, reading the dissent’s legislative express purpose undermine the scope of our far opinion is too broad. It is 11.182, promote of section is to claim, simply incorrect as the dissent availability housing through does, low-income “TRQ expand seek to provision for certain principle ‘owners’ to CHDO’s, namely ie., organizations, included charitable part- classes of investors: ners, partners, liability limited and limited in return for investment of at least liability entity to allow the legislatively cient of that lost tax revenue 40% Therefore, Be- we status. CHDO public purposes. assert investor’s approved adopt agree that this should imputed cannot Court does not confer the statute cause 11.182. dissent’s construction of section respectfully I dissent. exemptions, ownership. requires The statute CONCLUSION Tax Code 11.182 of the Texas Section summary judgment reverse the We property tax a to claim a allows CHDO District, the Appraisal in favor of granted it property real owns. exemption for partial cross-motion for grant appellant’s (Vernon § 11.182 TAX ANN. TEX. CODE summary judgment judgment, and render (b) subsection particular, Supp.2005). that, TRQ, AHF equitable as the owner provides: exemption the qualifies 11.182(b) (b) an ex- that An is entitled to organization of the Texas Tax Code and time- exemption for the was application improved taxation of emption from ly pursuant filed section 11.436 of it property real owns unimproved or Code. if the organization: (1) community housing a organized BLAND, dissenting.

Justice organization; development BLAND, Justice, dissenting. JANE (2) aof charita- requirements meets the TRQ property could not claim a tax organization provided by ble Sec- it is the owner and exemption 11.18(e) because (f);2 and tions issue, legal property title holder (3) purposes for the property owns the community but it is not a charitable hous- housing on building repairing or Instead, development organization. it ing profit to sell without property not is a Texas limited that did in- or moderate-income a low-income non-profit or seek obtain or CHDO status satisfying the or- family dividual or during provision The applicable ganization’s eligibility tax governing plainly restricts profit or to rent without such qualified them to CHDOs who own family; individual or and subject Although taxation. (4) building, engages exclusively in the CHDO, AHF is a not own housing repair, and sale or rental it is property, legally obligat- and thus not (3) as described Subdivision any tax pay property. ed to levied on activities. related majority that an concludes investor added). (emphasis Id. duly organized entity liability a once, twice, requires not but the statute “equitable title” to holds It does invests, property. the CHDO own the that entity in which it and then majority ob- title define “owns.” As the further concludes such is suffi- not (1) may accrue distributable argument, not 1. At oral counsel for exceeding pay represented non-profit profits was un- or salaries reasonable status rendered; (2) partnerships must use available for Texas limited allowance for services Moreover, functions; and perform that created transaction its assets to charitable bylaw regulation adopt occurred on December mandat- the entities involved must 30, 2003, dissolution, practical exigencies creating organization’s in ob- upon taining exempt tax status. or a are be transferred State assets qualified organization. See TEX. charitable 11.18(e), (f) (Vernon 11.18(e) (f) Tax TAX CODE 2. Sections alia, Supp.2005). provide, Code inter charitable serves, TRQ and AHF contend “that title holder is not an owner imputed through should be taxation unless the title partnership chain and back to AHF.” encumbered, legally dispute holder is or a Thus, our on decision turns whether we exists; as to identity title holder’s impute beyond title rather, exceptions, legal eq with rare holder for exemption pur- merged in uitable title are a single owner. poses. Nothing plain language Tpk. See Tex. Co. Dallas County, permits the statute an interpretation, such 477-78, Tex. 401-02 interpreting and cases the Tax Code have (rejecting private not contrary, done so. To the the Texas turnpike entity provi based contractual Supreme Court held that an exemption has sion that State was holder from taxation should be found unless property). “Equitable title” plain language of the statute confers it: tax purposes thus does not exist absent Statutory exemptions from taxation are actual, uncertainty legal legal as to title or subject they to strict construction since (as, for example, encumbrance between equality are the antithesis of and unifor- trustees and beneficiaries or estate admin mity place greater because heirs). istrators in Even in those burden on taxpaying other businesses stances, property lies obligation individuals. An cannot legal with the title owner if one is deter be raised implication, but must affir- Bailey County minable. See v. Cherokee matively all appear, and doubts are re- (Tex. Dist., 581, Appraisal 862 S.W.2d 584 solved in taxing authority favor of [the] 1993)(“While it is true that the hold heirs against the claimant. equitable property, title to estate this in Bullock v. Corp., Nat’l Bancshares 584 give liability. terest does not rise to tax (Tex.1979). 271-72 S.W.2d The responsibility taxes lies with the property obligation thus title.”). —and legal administrator holder of corresponding exemption —rests Moreover, contingent not interest is legal holder, title as the owner. in property. interest Tex. “The person having proper title to lienholder, Tpk., 271 at 402. A S.W.2d is ty generally to be considered the owner example, is not an “owner” for thereof for of taxation.” Chil though taxation have purposes, State, 343, 349, County dress 127 Tex. 92 some future in the (1936); 1011, 1015 Travis Cent. County, event of See default. Childress Signature Flight Dist. v. Sup 1016; 127 Tex. at 92 S.W.2d Com (Tex. port Corp., 140 Acceptance Corp. Ap erica v. Dallas Cent. App. pet.)(holding no — Austin Dist., (Tex. praisal lessees could not taxed on App. pet. denied)(holding — Dallas title). City held legal which of Austin In possession lienholder in of collateral instances, rare when the title holder pending is not owner for prop foreclosure or legally is unclear encum erty tax purposes). bered, courts will examine whether a party “equi- Investors are neither owners nor equitable real property. holds title to table title holders.” (“In Signature Flight, S.W.3d at case, TRQ this and AHF seek title-holder, absence of a clear expand principle holder of the title is considered owner, “owners” to classes of the taxable while include investors: someone with not.”). only i.e., contingent partners, partners, An interest and limited AHF has an interest (and, Secondarily, liability by impli- pany.3 company members CD, shareholders). AHF, be- cation, TRQ, through interest corporate partner of is the sole limited however, “equitable title” to cause CD hold TRQ TRQ Rather, general partner for TRQ. The apartments. partner- it owns Galveston, L.L.C., liability another limited liability company equity ship and limited holds a also 100% primarily, company, various interests of sorts— L.L.C., it looks membership Graphically, interest. Captain’s Landing, virtue CD com- like this: membership its 100% that, property tax associated

Although pay any not state majority be correct — the limited the real assets of property of taxa- principles under federal income liability compa- and limited partnerships in- tion, ultimately pays taxes Rather, liability in which it invests. nies limited partnerships curred L.P., Landing, TRQ Captain’s rests with invests, liability in which it companies default, holder, in of the case as title liability for—and does AHF does not bear lien. via a tax property itself liability Tax at 584. Bailey, 862 S.W.2d lies with AHF.4 never (or liability company corporate a liability companies have "mem- limited 3. Limited bers,” shareholder) opposed partners prove to could as shareholders. the extent one to § ANN. resulting See TEX. BUS. ORG. CODE in engaged in conduct a loss that it (Vernon Supp.2005). protections to it under various of afforded provisions governing these business or- code perhaps theoretically be held 4. AHF could (i.e., theory), piercing a veil ganizations partner a of a or member liable as a limited This is because nor a of organizations neither a table owners the business Thus, in present right disagree limited has “the invest. I compel legal title” to owned a with the Amarillo Court of inter property Appeals’s partnership. partner- pretation “equitable It is of axiomatic title” and its hold Finance, ship property in Housing is not the Southeast Texas general partner. majority even of a partners, See which the concludes is applicable provision TEX. BUS. Code in ORG. CODE 152.101 to the Tax this case. (Vernon (“Nature Supp.2005) County Partner- See Harris Dist. Se. ship Property: Fin. Partnership property Corp., is not Tex. Hous. 991 S.W.2d partners.”). (Tex.App. pet.).5 The same is no — Amarillo classify liability deciding true for members of com- investors as “equitable (“A owners,” our ap court and the panies. See id. court member peals in Texas Housing a limited or an Southeast Finance liability company assign- incorrectly apply Turnpike. Texas of a in membership ee a limited interest liability company does not have Turnpike, Supreme In Texas the Texas any specific property company”). Court denied majority acknowledges, as the holder, sought title who claim it gain order to title to this public entity on the basis that a —the case, AHF wind-up must dissolve or equitably property, State — partnerships affairs the various and lim- upon express based characterization liability companies ited in which it has it legislation holder Undeniably, possesses invested. governing Turnpike Authority. so, power do but that is not tantamount 153 Tex. at Tpk., Tex. present, compel vested title— Decided the case did is, at

it best on (assuming no default credi- modern vehi- equity deal with investment secured material tors’ interests or other cles, overarching the court’s determi- but part- or liens claims on the assets any right property must be nation that nership company), or liability limited claim in exemption applies vested to contingent right that asserted could be via today’s contingent rights are not context— Comerica, a future course of action. See 478, equitable ownership rights. See id. at S.W.3d at 497 (noting 52 that lienholders (noting that “[the 271 402 they not part owners in have are because in not a property State’s] right to use or of possession interest; no purely contingent”). vested it is upon from future apart right possession own- Classifying investors as default). loan very ignores legal ers formalities Investors, more, simply without are not exist investors from the to differentiate title holders” for real and “equitable business entities which invest Rather, tax purposes. equi- multiple are the “owners” for property investors creates County Agape liability Orange such its role but investor, stems from as an See Dist. v. Inc., properly not a Improvement, owner. Neighborhood (Tex.App. pet. de — Beaumont express opinion I no whether CHDO about nied) quali (holding that subordinate unit of may imputed CHDO-related status be to a be considered CHDO for fied CHDO entity, proper- imputation in contrast to the purposes where subordinate unit owns ownership beyond ty property owner. operates property reasons and for appeals One court of has such to be the held eligibility applicable with that are consistent guidelines, under as case federal CHDO in- CHDOs). requirements established for corporated statutory into the Texas scheme. 11.182(e),6 case, Finally, added to it subsection purposes. example, this AHF; suggest does Captain’s at least four: CD not creates Galveston, 25, 2001, L.L.C.; L.L.C.; different result. TRQ May Act of Landing, R.S., 1,§ TRQ Captain’s Leg., L.P. The last 2001 Tex. Landing, 77th ch. title, (current too, 2694, 2695, has one cannot these but ver- Gen. Laws title, it ignore also has at TEX. TAX CODE ANN. sion 11.182(e) (Vernon no encumbrance exists as its own- Supp.2005)). By § ership, undisputed. and the title is terms, imposes the amendment express compliance limitation addition to” “[i]n Moreover, nothing requires three (c). TEX. with subsections (all AHF) comply these entities but with 11.182(e). § TAX ANN. Whatever CODE provisions of Tax other Code section Legislature’s adding intent subsec- 11.182(b). See TEX. TAX CODE (e), requires that the tion which CHDO 11.182(b). TRQ example, Captain’s For general partner partner- sole pay need not salaries that are Landing apply, for an ship projects within “a reasonable allowance for services case, change not the result in this does rendered,” and need not “use its assets amendment apply because the functions,” perform required charitable (as this projects constructed before 11.182(b)(2). 11.182(b)(2). Id. by section was), existing and is addition to” “[i]n one Legislature conditioned the to a Id. Further- requirements. exemption upon fulfilling certain statu- more, general partner AHF is not the tory compels the obligations, nothing but rather, TRQ; holds that Galveston entity non-CHDO with an investor classi- interest.7 “equitable comply fied as an owner” obligations.

with these 11.182(e) provides percent project’s flow the 6. Subsection that: cash preceding year fiscal as determined (e) meeting In addition to required by (g), audit Subsection (b) an ex- ] ... to receive Subsection! eligible persons county in in the (b) emption im- under Subsection located, social, edu- proved real a hous- that includes cational, development ser- economic ing project constructed after December vices, capital improvement projects, or qualified financed rent reduction. 501(c)(3) 145 bonds issued under Section 11.182(e) (Vernon TAX CODE ANN. TEX. the Code of Internal Revenue of Supp.2005). tax-exempt activity subject private bonds housing cap, or to volume low-income (e) wording Although the in subsection re- 7. credits, organization the must: partnership,” “organization,” to "limited fers (1) percent the control 100 of "general partner” though "organi- as the and general partner project the if the zation” used in the amendment is differ- as partnership; a limited partnership entity ent than the limited (2) comply ad- with all rules of and laws project, the owns the it then restricts defini- Department the ministered Texas qualifying to those limit- tion Housing Community applica- and Affairs (1) (2) property, partnerships that own the ed community housing development ble general partner the as sole have CHDO the organizations; and project, the state and otherwise meet annually Depart- submit the Texas for CHDOs. See TEX. and federal criteria Housing Community ment of Affairs 11.182(e). As limited taxing TAX CODE governing body and to of each general partnership partner are dis- its project unit for which receives organizations, it is unclear how exemption housing project evi- tinct business for the entity demonstrating organiza- the same could both own dence general partnership and spent equal to at 90 as a limited tion an amount least 744 11.182(b) (“The confer a tax

Section does not at 584 responsibility S.W.2d for tax- exemption based on the charitable status es lies with the administrator as holder of of an investor in a company title.”); Bullock, legal at 584 272 S.W.2d partnership that owns property. Us- (“An exemption impli- cannot be raised required strict principle of con- cation, must affirmatively appear but struction, we impute should not one where ”); .... County, Childress Tex. at 127 not “affirmatively it does appear.” See (“The 349, 92 at S.W.2d 1015 hav- person Bullock, 584 S.W.2d at 271-72. ing legal title to property generally Housing Southeast Texas Finance is in- considered be the owner thereof for with consistent caselaw from the Texas taxation.”). Supreme Court and the Court of Waco majority relies on a number of cases Appeals. that define title as present “the equity Because are not own investors compel legal title.” South Save ers the real assets Finance, however, Housing east Texas invest, companies they we should do equita those cases not define who holds decline follow the Amarillo Court rather, title; they ble define who does not. Appeals’s decision in Southeast obligees, Contractual while the contract is (Tex. Housing Finance. 991 18 S.W.2d do executory, not. Tex. Tex. at Tpk, 153 Instead, App. pet.). no we — Amarillo at do not. Lessees Housing should follow American Founda Signature Flight, 140 S.W.3d at 840. Se District, County tion Brazos Comerica, cured do creditors not. and hold that an seeking investor a sec either, not, S.W.3d at 498. Investors do 11.182(b) tion exemption on behalf of an County, and we should so hold.8 Brazos entity in qualify which it not invests does entity as an “owner” the stat under entity, holder, ute when the CONCLUSION qualify right. not does its own own the (Tex.App. pet. — Waco tax, appraisal district and the seeks denied). approach This is consistent in Tax Code section Supreme the Texas opinions Court’s provide does not investors charitable Bailey and County, regarding Childress title, Bullock, assert behalf opinion re they strict non-charitable entities in which in- quiring construction of statutes that vest, tax exemptions. Bailey, confer if qualify those entities do not do, partner. reading One is that the limited both 8. Estate beneficiaries but are not rather, tax; obligated pay must be obli CHDOs, qualifying gation Bailey even the same if not rests with the title holder. Another, out, Dist., points majority County CHDO. as v. Cherokee only (Tex. 1993). general partner need be a Trust beneficia CHDO, "ownership” majori equitable who then assert ries likewise hold title. The held, property partner- ty Tyler on Appeals behalf of the limited Court of notes that that, ship. Still a Supreme third is under federal and before the Texas Court’s decision guidelines, Bailey, state a limited property that the tax burden rests with general qualifies beneficiary. has CHDO as its Dep’t as the trust See Tex. Correc Dist., right. Orange County, County Appraisal a CHDO in its own tions v. Anderson possible 57 S.W.3d at 602. (Tex.App.-Tyler Given its various writ enactment, interpretations denied). light opinion its later on does not shed light meaning ap amendment sheds little question as (b). plied of "owns” in organizations. subsection to investors business own under their as Classifying business investors statute. by the owners of held departs in which invest

businesses

from the rule pur-

holder is owner uncertainty

poses and creates rights obligations

real The trial court

Texas business entities. must

correctly ruled that the respectfully I dissent. paid. therefore PIERCE, II, Appellant, L.

John COMMISSION,

TEXAS RACING

Appellee.

No. 03-04-00699-CV. Texas, Appeals

Court

Austin.

Oct.

Rehearing Dec. Overruled

Case Details

Case Name: TRQ Captain's Landing L.P. v. Galveston Central Appraisal District

Court Name: Court of Appeals of Texas

Date Published: Nov 21, 2006

Citation: 212 S.W.3d 726

Docket Number: 01-05-00496-CV

Court Abbreviation: Tex. App.