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. 

____________________________________________________________ 

ON APPEAL FROM THE 391ST DISTRICT COURT, TOM GREEN COUNTY, TEXAS

TRIAL COURT CAUSE NO. 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

CLERK

 FILED IN 3rd COURT OF APPEALS AUSTIN, TEXAS 8/10/2015 4:59:24 PM JEFFREY D. KYLE Clerk
Appellant’s Motion for Rehearing and Reconsideration En Banc – Page 2

ISSUES PRESENTED FOR REVIEW

For purposes of property taxation, ownership, 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 failed 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. Taxing 

the United States offends federal supremacy. The Court’s opinion violates the 

Supremacy Clause by allowing the State of Texas to tax property owned by the United 

States. Providing housing to federal military personnel, is an obligation of the United 

States government. 
Appellant’s Motion for Rehearing and Reconsideration En Banc – Page 3

I. FEDERAL LAW GRANTS THE SECRETARIES OF THE ARMED FORCES BROAD 

AUTHORITY TO FUND MILITARY HOUSING PROJECTS.

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)). This 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. Service, 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 the 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 military 

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 – Page 4

subchapter in order to provide for the acquisition or construction 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 

deterioration of military housing that had been constructed in the 1940’s and 1950’s.

2

 

The Military Housing Privatization Initiative (“MHPI”) was created to give the 

secretaries 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 

Privatization 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 

exchange for a steady stream of military tenants and reliable monthly payments.

In the process of enacting the legislation, the 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 many 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 committee 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 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.
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, 104th Cong., 1st Sess. 1195, WL 

419056 (Leg.Hist)3. 

The United States, following the authority granted to it in 10 U.S.C. §§ 2871-

2885, entered into an agreement with two private 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 military 

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 

military housing for its personnel. Simply put, the 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 to assure that the property could not be used for any other purpose,

the United States, pursuant to 10 U.S.C. §§ 2871-2885, placed many operational 

restrictions upon AETC. If AETC were to violate any of the restrictions, the United 

States could regain title to the property. The property is used, and can only be used, as 

military housing. At 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 Appellee.
Appellant’s Motion for Rehearing and Reconsideration En Banc – Page 6

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 another 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 

which may be conducted on the property, and (4) naming the property. 

The Court’s opinion fails to address, and consider, Congress’s intent for in 

enacting the MHPI. 10 U.S.C. §§ 2871-2885. The 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 Supreme Court has specifically acknowledged:

“The District argues that since taxation ordinarily 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 purposes 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. THE COURT FAILED TO ACKNOWLEDGE THAT EQUITABLE TITLE IS HELD 

BY THE UNITED STATES

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 districts 
Appellant’s Motion for Rehearing and Reconsideration En Banc – Page 7

throughout the state, like this Appellee, have argued that transactions 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. The Texas Department of Corrections (hereinafter “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 corporation. The corporation agreed to lease the state’s land and build the prison. 

TDC also signed an agreement with the corporation to lease back the prison once it 

was complete. Thereafter, the corporation assigned all its leases, agreements 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 private 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 

improvements, 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 the lease payments were made. The Court held 

that until that event, the State had equitable title because it could compel the delivery 
Appellant’s Motion for Rehearing and Reconsideration En Banc – Page 8

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, for the United States to achieve the governmental purpose of creating 

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, the 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 

military 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 

ever 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 title. 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 courts 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 agency owned and 
Appellant’s Motion for Rehearing and Reconsideration En Banc – Page 9

controlled subsidiary, received any profits from operation 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. 3d 833 (Tex. 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 facilities for a full service fixedbased 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 exemptiongovernmental 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 – Page 10

incorrectly applied the Texas Supreme Court cases to the facts of this case, and issued 

its opinion in direct 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 should 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. §§ 2871-2885. The United States holds 

equitable title to the property, as defined by numerous Texas Courts. Had the Court 

followed the rulings and analysis of the other appellate courts and Texas Supreme 

Court, it would have reached a different conclusion. From the facts presented to the 

Court, the only conclusion that should have been reached is that, the United States is 

not subject to taxation 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/ Doug Sigel__________

John Brusniak

Texas Bar No. 03261500

john.brusniak@ryanlawllp.com

Doug Sigel

Texas Bar No. 18347650

doug.sigel@ryanlawllp.com

Tracy Turner

Texas Bar No. 24076743

tracy.turner@ryanlawllp.com

RYAN LAW FIRM, LLP

100 Congress Avenue, Suite 950

Austin, Texas 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. App. 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 2495 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 software used to prepare the document.

_/s/ Doug Sigel__________

Doug Sigel
Appellant’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 served 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/ Doug Sigel__________

Doug Sigel