No. 03- 13 -00463- CV

____________________________________________________________ In The Court Of Appeals For The Third Court Of Appeals District

Austin, Texas

____________________________________________________________

AETC II PRIVATIZED HOUSING, LLC

Appellant,

v. TOM GREEN COUNTY APPRAISAL DISTRICT

Appellee.

____________________________________________________________ O N A PPEAL F ROM T HE 391 ST D ISTRICT C OURT , T OM G REEN C OUNTY , T EXAS

T RIAL C OURT C AUSE N O
. D- 10 -0377-C

____________________________________________________________ APPELLANT’S MOTION FOR REHEARING AND FOR

RECONSIDERATION EN BANC

____________________________________________________________ RYAN LAW FIRM, LLP John Brusniak Texas Bar No. 03261500 john.brusniak@ryanlawllp.com Tracy Turner Texas Bar No. 24076743 tracy.turner@ryanlawllp.com 100 Congress Avenue, Suite 950 Austin, Texas 78701 Telephone: (512) 459- 6600 Facsimile: (512) 459-6601 August 10, 2015 Attorneys for Appellant ACCEPTED 03-13-00463-CV 6433628 THIRD COURT OF APPEALS

AUSTIN, TEXAS 8/10/2015 4:59:24 PM JEFFREY D. KYLE

CLERKAppellant’s Motion for Rehearing and Reconsideration En Banc

– Page 2 ISSUES PRESENTED FOR REVIEW For purposes of property taxation, o wnership, is viewed substantively, not technically and narrowly. Further, in enacting the statute at issue here, it was the intent of the United States Congress to create military housing for its own use , regardless of
the manner in which it was achieved. The Court fa iled to take these matters into account, and issued an opinion in direct conflict with its sister courts. A rehearing and reconsideration en banc should be granted. The Court’s opinion erroneously authorizes
the State of Texas to tax the United States on its military housing.
ARGUMENT The Court, in its opinion, fails to acknowledge that the United States is operating
the military housing , at issue, under the financing authority granted to it in subchapter IV, 10 U.S.C. §§ 2871

- 2885, not AETC. Under the Supremacy Clause of the United States Constitution, the laws of the United States are “the supreme Law of the Land; ... any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.” U.S. Const. art. VI, cl. 2. T axing
the U nited States offends federal supremacy. The Court’s opinion violates the Supremacy Clause by allowing the State of Texas to tax prope rty owned by the United
States. Providing housing to federal military personnel, is an obligation of the United States gov ernment.Appellant’s Motion for Rehearing and Reconsideration En Banc

– Page 3

I. F EDERAL L

AW G RANTS THE S ECRETARIES OF THE A RMED F ORCES B ROAD A UTHORITY T O F UND M ILITARY H OUSING P ROJECTS . 10 U.S.C. §§ 2871

- 2885 , was enacted in 1996 to address the critical shortfall in military housing , which was causing low retention rates amongst the armed forces. It provides the secretaries of the armed forces , various means, to expeditiously cure the problem

. Pub. L. No. 104

- 106, 110 Stat. 186 (codified at 10 U.S.C. §§ 2871

- 2885 (2003)). Th is Court overlooked the broad discretion , granted by Congress, and focused narrowly on the means by which it was achieved. 10 U.S.C. §§ 2872, specifically states:
Title 10. Armed Forces Subtitle A. General Military Law Part IV. Servi ce , Supply , and Procurement Chapter 169. Military Construction and Military Family Housing Subchapter IV. Alternative Authority for Acquisition and Improvement of Military Housing. 1 In addition to any other authority provided under this chapter for the acquisition or construction of military family housing or military unaccompanied housing, the Secretary concerned may exercise any authority or any combination of authorities provided under this

1 When reading a statute, it is important to look at the placement of the statute within a code

. See Martinez v. Dallas Cent. Appraisal Dist., 339 S.W.3d 184, 192 (Tex.App.

- Dallas 2011, no pet.) (The Court determined that section 23.23 of the tax code is not an exemption because it is was not found in the exemption section of the tax code. Had t he legislature intended for section 23.23 to be an exemption, it would have included it in the exemption section of the Tax Code). The same applies here. This provision is in the part of the United States Code dealing with the Armed Forces and how military housing is to be constructed. The legislature specifically created a subsection within the m ilitary housing chapter authorizing alternative means for the acquisition or improvement of military housing, all of which is under Subtitle A, General Military Law.Appellant’s Motion for Rehearing and Reconsideration En Banc

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subchapter in order to provide for the acquisition or co nstruction by eligible entities of the following: (1) Family housing units on or near military installations within the United States and its territories and possessions. (2) Military unaccompanied housing units on or near such military installations.

This statute , along with the rest of Subchapter IV, came about as a result of the
d eterioration of military housing that had been constructed in the 1940’s and 1950’s

. 2
T he Military Housing Privatization Initiative (“MHPI”) was created to give the

secreta ries of the armed forces a range of tools in solving the problems of housing for military personnel and their families. See National Defense Authorization Act for Fiscal Year 1996, Pub. L. No. 104

- 106, 110 Stat. 186, Title XXVIII A, Military Housing
Priva tization Initiative, as amended and codified at 10 U.S.C. §§ 2871

- 2885

. Under the MHPI, the federal government is able to expedite new construction

. One of the ways
to do so is by entering into agreements with private companies who supply capital in
exchan ge for a steady stream of military tenants and reliable monthly payments. In the process of enacting the legislation, t he Armed Services Committee, supported by the Secretary of Defense , recommended that the military be able to use

2 “The committee recognizes that living conditions for single military service members and military families are in man y cases inadequate. Many of these housing units and quarters are over 30 years old and have received minimal funding for maintenance, repair, or modernization. The Department of Defense has found almost 60 percent of these units to be substandard. The comm ittee is concerned that these housing conditions may result in low retention rates for the military services, and believes that adequate housing is an integral part of the overall readiness of the Armed Forces. ” National Defense Authorization Act for Fisca l Year 1996, Pub. L. No. 104

- 106, 110 Stat. 186, Title XXVIII A, Military Housing Privatization Initiative, as amended and codified at 10 U.S.C. §§ 2871

- 2885

.Appellant’s Motion for Rehearing and Reconsideration En Banc

– Page 5

private sector financing for construction and revitalization projects. 10 U.S.C. § 2811;
Pub. L. No. 104

- 106, 110 Stat. 186; S. REP. 104

- 112, 104 th Cong., 1 st Sess. 1195, WL 419056 (Leg.Hist) 3

. The United States, f

ollowing the authority granted to it in 10 U.S.C. §§ 2871

- 2885, entered into an agreement with two pr ivate companies, and formed AETC II Privatized Housing, LLC ( hereinafter “AETC”) in July 2007. Through AETC, the
United States constructed military housing in Tom Green County, for milita ry personnel at Goodfellow Air Force Base , on Tract G, which is wholly owned by the
United States

. 4 AETC provided the financial means for the United States to build
milita ry housing for its personnel. Simply put, t he United States was using a private company to fund the project. The sole purpose of AETC was to construct , and operate, military housing in conjunction with the United States

. In order t o assure that the property could not be used for any other purpose,

t he United States, pursuant to 10 U.S.C. §§ 2871

- 2885 , placed many operational restrictions upon AETC . If AETC were to violate any of the res trictions, the United
States could regain title to the property. The property is used, and can only be used, as military housing. A t the end of the lease term, AETC is instructed to either, remove all

3 National Defense Authorization Act for Fiscal Year 1996, Pub. L. No. 104

- 106, 110 Stat. 186, Title XXVIII A, Military Housing Privatization Initiative, as amended and codified at 10 U.S.C. §§ 2871

- 2885

. 4 Tract G is exempted from property taxation by App ellee.Appellant’s Motion for Rehearing and Reconsideration En Banc

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of the improvements and restore the land at no expense to the government, or transfer title to the United States. AETC, is in no way, able to sell the property, or use the property for an other means. Along with these restrictions, the United States controls and restricts the use of the property. Specifically, the Unites States restricts AETC’s: (1) access to the property, (2) the construction and leasing of the property, (3) business
whic h may be conducted on the property, and (4) naming the property.
T he Court’ s opinion fails to address, and consider, Congress’s intent for in enacting the MHPI. 10 U.S.C. §§ 2871

- 2885 . Th e initiative allowed the United States
to become a 49% interest owner in AETC , and to act in the manner that it did , to wit, use AETC to fund the construction of military housing in Tom Green County

. The Texas Supre me Court has specifically acknowledged : “The District argues that since taxation ordinaril y falls only on legal ownership, exemptions should benefit only legal owners. While the argument has the virtue of symmetry the Legislature is not so constrained in authorizing tax exemptions. The District also argues that entities that are separate for p urposes of imposing tax liability should not be treated as one for purposes of qualifying for tax exemptions. But federal law disregards the separate identity of some entities, as it does with Atlantic and the Arbors, and there is no reason why Section 11. 182 should do the same.”
AHF

- Arbors at Huntsville I

, 410 S.W.3d at 838.
II. T HE C OURT F AILED TO A CKNOWLEDGE T HAT E QUITABLE T ITLE I S H ELD B Y T HE U NITED S TATES The Court ’s opinion is in direct conflict with its sister court as well as opinions issued by the Texas Supreme Court and other appellate courts . Appraisal districtsAppellant’s Motion for Rehearing and Reconsideration En Banc

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throughout the state , like this Appellee, have argued that transaction s need to be viewed narrowly, and not as a whole. This is not the law of the state.
In Texas Department of Corrections v. Anderson County Appraisal District, 834 S.W.2d 130 (Tex. App.

- Tyler 1992, writ denied) , the Tyler Court of Appeals decided a similar

case. At that time , a demand for prison space exceeded the number of prisons in the
state of Texas. T he Texas Department of Corrections (her einafter “TDC”) needed a new prison. The state lacked adequate financing so the TDC devised a plan that would

“ avoid the appearance of creating debt”. Id at 130. TDC entered into a lease agreement
with a c orporation . The corporation agreed to lease t he state’s land and build the prison.
TDC als o signed an agreement with the c orporation to lease back the prison once it was complete. Thereafter, t he c orporation ass igned all its leases, agreement s and the construction contract to MBank Dallas, as Trustee. MBank honored the agreement and the prison was opened in August 1987. The appraisal district determined the prison was taxable because the title was held by a pr ivate entity, MBank

. However, the Tyler Court of Appeals held that “while it is true that the Trustee has legal title, the burden of taxation is placed on the equitable title which is held by the state”. Id at 131. The Court further stated that “the impro vements, in equity, are owned by the state ‘no different[ly] from that of any private owner who holds property against which there is an outstanding lien.’” Id at 131.
TDC would acquire legal title once all th e lease payments were made. The Court held
tha t until that event, the State had equitable title because it could compel the deliveryAppellant’s Motion for Rehearing and Reconsideration En Banc

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of legal title to the facility. Id. at 131. In reality, the “lease” was a financing method to make it appear that the state was not incurring debt.
As in Texas Department of Corrections , AETC provided the financial means, and construction, fo r the United States to achieve the governmental purpose of c reating housing for its military personnel

. In reviewing this opinion , the Court needs to look at
the substance of the transaction and the United States’ control of the property. As in Texas Department of Corrections , t he property will revert back to the United States at the
end of the lease. More significantly, should the property be used for anything other than
mil itary housing, or if AETC otherwise violates the lease terms, the United States has the right to immediately regain title. The military housing sits on Tract G, which is wholly owned by the United States. There is no provision in the lease for AETC to

eve r acquire the federal government’s interest in Tract or in the project itself. This constitutes equitable title for purposes of property tax law and makes the United States the owner of the property.
Numerous other cases address the issue of equitable ti tle

. They come to the same
conclusion

- an equitable title holder is the owner of the property for purposes of property taxation

. In each of these cases, the c ourts looked at the substance of the
transactions and disregarded the form

. By not considering these cases, the opinion is in
direct conflict with these Courts.

- Harris County Appraisal Dist. v. Southeast Texas Housing Finance Corp., 991 S.W. 2d 18 (Tex. App.

- Amarillo 1998, no writ) (property exempt where subsidiary held legal title, because state a gency owned andAppellant’s Motion for Rehearing and Reconsideration En Banc

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controlled subsidiary, received any profits from operati on of property, and could force conveyance of legal title to property at any time; under these facts state held equitable title to property

- governmental purpose was to provide housing for low income, and elderly persons );

- Orange County Appraisal Dist. v. Agape Neighborhood Improvement, Inc. 57 S.W. 3d 597 (Tex. App.

- Beaumont 2001, no writ) (property exempt where legal title held by wholly

- owned subordinate unit of CHDO; parent CHDO considered to equitable owner for exemption purposes
- governmental purpose was to provide housing for low income individuals );

- Travis Central Appraisal Dist. v. Signature Flight Support Corp. 140 S.W. 3 d 833 (Te x. App

- Austin 2001, no writ) (observing that a person holding equitable title to property may be the owner for taxation purposes; equitable title is defined as the present right to compel legal title

- governmental purpose was to construct facilit ies for a full service fixed

based operation for general aviation at Austin

- Bergstrom International Airport) ;

- Sweetwater Indep. Sch. Dist. v. ReCor, Inc., 955 S.W.2d 703 (Tex. App Eastland 1997, pet. denied) ( equitable title existed in juvenile detention center; no taxes were due

- governmental purpose was to open a new juvenile detention center )

.

- AHF

- Arbors at Huntsville I, LLC v. Walker Cnty. Appraisal Dist. , 410 S.W.3d 831 (Tex. 2012)( legal title is not required to qualify for an exemption; equitable title constitutes sufficient ownership

- governmental purpose was to provide housing to low income individuals );

- Galveston Cent. Appraisal Dist . v. TRQ Captain's Landing , 423 S .W.3d 374 (Tex. 2014) ( equitable ownership interest is sufficient to support an entity's claim of property ownership for purposes of a tax exemption

governmental purpose was to provide housing to low income individuals ).
CONCLUSION In reviewing the Appellant’s briefing, the Court disregarded the Tyler Court of Appeals decision in Texas Department of Corrections , and multiple other appellate cases,Appellant’s Motion for Rehearing and Reconsideration En Banc

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incorrectly applied the Texas Supreme Court cases to the facts of this case, and issued its opi nion in d irect conflict with case law . In reaching its decision, the Court did not take into consideration the authority the United States has , to enter into agreement with private companies to achieve a governmental purpose. 10 U.S.C. §§ 2871

- 2885 . The
Court s hould have looked at the entirety of the transaction between the United States and AETC, and not in a technical, procedural sense. As shown above, the United States , through AETC, built military housing in Tom Green County pursuant to 10 U.S.C. §§ 2871

- 2 885 . The United States holds equitable title to the property , as de fined by numerous Texas Courts. Had the Court followed the rulings and analys is of the other appellate court s and Texas Supreme Court, it would have reached a different conclusion. From th e facts presented to the Court, the only conclusion that should have be en reached is that , the United States is not subject to ta xation on the military housing located in Tom Green County.
PRAYER Appellant, AETC II Privatized Housing , LLC, respectfully prays that the Court grant this Motion for Rehearing and Motion for Reconsideration En Banc.Appellant’s Motion for Rehearing and Reconsideration En Banc

– Page 11 Respectfully submitted,

_ /s/ D oug Sigel

__________ John Brusniak Texas Bar No. 03261500 john.brusniak@ryanlawllp.com Doug Sigel Texas Bar No. 18347650 d oug. sigel@ryanlawllp.com Tracy Turner Texas Bar No. 24076743 tracy.turner@ryanlawllp.com RYAN LAW FIRM, LLP 100 Congress Avenue, Suite 950 Austin, Texa s 78701 Telephone: (512) 459

- 6600 Facsimile: (512) 459

- 6601 Attorneys For Appellant AETC II Privatized Housing, LLC
Certificate of Compliance This computer

- generated document created in Microsoft Word complies with the typeface requirements of Tex. R. A pp. P. 9.4(e) because it has been prepared in a conventional typeface no smaller than 14

- point for text and 12

- point for footnotes. This document also complies with the word

- count limitations of Tex. R. App. P. 9.4(i), if applicable, because it contains 2 495 words, excluding any parts exempted by Tex. R. App. P. 9.4(i)(1). In making this certificate of compliance, I am relying on the word count provided by the softwar e used to prepare the document.

_ /s/ D oug Sigel

__________ D oug SigelAppellant’s Motion for Rehearing and Reconsideration En Banc

– Page 12 Certificate of Service I certify that a copy of the foregoing Motion for Rehearing and Motion for
Reconsideration En Banc was s erved on Defendant , Tom Green County Appraisal District, through counsel of record, James Robert Evans, Jr., Hargrove & Evans, LLP, 4425 Mopac South, Building 3, Suite 400, Austin, Texas 78735, jim@hellplaw.com , by
electronic service through Efile.TXcourts.gov on August 10, 2015

.

_ /s/ D oug Sigel

__________ D oug Sigel