HonorableJoe Resweber OpinionNo. w-.691

County Attorney Harris County Courthouse Re: Severability of improveHouston 2, Texas ments from land and classification thereof as realty
Dear Mr. Resweber: or personaltyfor tax purposes. We quote from your opinionrequest as follows:
"'On March lst, 1957 this office, at the : request of Mr. Carl S. Smith, Tax Assessor and Collectorof Harris County,renderedan opinion regardingthe severability of improvements erected by a lessee on land owned by anotherparty, but under lease to said lessee, and the classification of such improvements as realty or personalty.
"It is the feeling of this writer that the provisionsof Article 7146, V.C.S., are very clear c and definiteas to what Is real property for the purpose of taxation. It is our further feeling that the effects of this Statute cannotbe varied by contractsor.agreements to the contrarybetween privateparties.
"On March 34d, 1943 your Office rendered Its OpinionNo. O-5059 regardinga similar situation where improvements had been erectedby the vendee under a contract for deed. In this opinionviews similar to ours were expressed. However,with the great number of leases currently in existence in Harris County providing that the improvements shall remain the property of the Lessee and that the Lessee shall have the right to remove such at the terminationof the lease, (with taxes becoming delinquenton many of such improvements), Mr. Smith feels that anopinion shouldbe requestedfrom your Office." Article 7146, Vernon's AnnotatedCivil Statutes, provides that:HonorableJoe Resweber,page 2 Opinion NO. WW-691

"Real propertyfor the purpose of taxation, shall be construedto include the land Itself, whether laid out in town lots or otherwise,and all buildings,structuresand improvements,or other fixturesof whatsoever kind thereon, and all the rights and privileges belonging or in anywise appertainingthereto, and all mines, minerals, same. Id."

quarriesand fossils in and under the

The early case of W. J. Hutchins v. Masterson and Street, 46 Tex. 551, 26 Am. Rep. 28b (l&%77), establishedt ee criteria for determining whether improvementsshouldbe classed as real orpersonal property: (1) there must be a real or constructive

annexationof the article in question to the realty; (2) the articlemustbe adapted to the uses or purposes of the realty to which it is connected; (3) the party 'makingthe annexation must intend that the improvementbecome a permanent accessionto the freehold. Of the three tests, pre-eminenceis given the question of intention. See Maro Company v. State, 168 S.W.2d 510 (Tex.Civ.App.,1943, error refused). However, the rules of common law which govern 'the right of private persons to fixtures are not necessarily controllingIn the field of taxation. This question turns primarilyupon the intention;ofthe Legislatureas expressed '-. in the tax statutesand construedby the courts. 1% A.L.R. 1309, 1311.

The A.L.R. Annotation cited above discusses the varying treatment of this problem,by different jurisdictions. Certain jurisdictions hold that the improvementsare part of the realty and as such are taxable to the lessor. Other jurisdictions

hold that the improvementsmay be severed for the purpose of taxationbut are taxable to the lessee as realty. A third school of though taxes the improvementsto the lessee as personalty. Texas falls,within the third group.

The case of Maro Company v. State, supra, held tha casings,rods, tubing,pumps and tanks which the lesseewas entitled to remove from-the leasehold were personal property for the purpose of taxation. In reaching its conclusion, the court stated:,

"Appelleetries to make a distinctionbetween -the rule making accessoriesorappliances such as these a part of the realty for taxable purposes and any other rules governing the question of.whether such appliances or accessories are personal property or a part of the realty. After,

Honorable Joe Resweber, page 3 

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making an exhaustiveresearch we have failed to find any distinctionor any difference in the rules applicable in such cases."
To the same effect is Shugart v. Nocona Independent School District, 288 S.W.2d 243 (Tex.Clv.App.,1956).

The case of Armstrongv. Mission IndependentSchool District, 195 S.W. 895 (Tex.Civ.App. 1917) specifically stated that certain buildings constitutinga cottonmill located on the property of a lessor were and not real estate because "it improvementsplaced upon the lan of a railroad company by a lessee with an agreement that it was for the use of the lessee and with the further agreement that it could be removed." This case was reversed in Mission v. Armstrong 222 S.W. 201 (Tex.Com.App.1920, opinion approved),but o;ly upon the point of whether or not the school districthad a lien for taxes upon thepersonal property in question.~

For further support of the proposition that Texas regards the general principlesof the law of fixtures as controlling the determinationof whether property is real or personal for the purposes of taxation, see the case of 900 Main, Inc. v. City of Houston, 150 S.W.2d 468 (Tex.Civ. App. 1941, Dism.Judg.Cor.),in Which it was held that an air conditioning system was realty for the purpose of taxation; the court rested its decision on the general law of fixtures and in particularupon the intention of the parties as evidenced by the contractbetween the lessor and lessee.

In view of the foregoingauthorities,you are respectfully advised that improvements placed upon demised premises by the lessee which remain the property of the lessee and which may be removed at the terminationof the lease are personal property for the purpose of taxation.

SUMMARY

Improvementsplaced upon leased land by a lessee which remain the property of the lessee and which may be removed at the termination of the lease are severable for the purpose,‘?f?.3c- ,J:P.-LFP Honorable Joe Resweber,page 4 Opinion No. w-691

of taxationand are classifiedas personalty.

Yours very truly,
WILL WILSON Attorney General

JNP:cm
APPROVED: OPINION COMMITTEE: Geo. P. Blackburn,
C. K. Richards J. Arthur Sandlin Howard Mays Chairman

... .._ REVIEWED FOR THE ATTORNEYGENERAL By: W. V. GEPPERT