December 31, 1986 

Eonosable Ray Farabee 

Chairman 

Committee on State Affairs 

Texas State Senate 

P. 0. Box 12068 

Austin, Texas 78711 

Opinion No. JM-612 

Re: Whether cooperative housing is 

entitled to the residence homestead 

tax exemption under article VIII, 

section l-b, of the Texas Constitution and related questions 

Dear Senator Parabee: 

You ask the following two questions: 

1. Are the homes (and stock) of persons who 

live in cooperative housing entitled to the 

residence homestead tax exemption provided by 

article VIII, section l-b, of the Texas Constiution? In a cooperative housing arrangement, the 

homeowqers purchase stock in a nonprofit corporation which is organized to provide housing to its 

members. Title to the real estate, however, is 

held in the corporate name, and the homeowners 

obtain long-term leases from the corporation, but 

do not have title to any real property. 

2. Are these same home and stock in cooperative housing eligible for protection from forced 

sale under article XVI, section 50, of the Texas 

Constitution. and section 41.002 of the Property 

Code? Assume for both of these questions that the 

stockholder lives in the home as his primary 

residence and does hot claim a different home as 

au exempt homestead. 

We answer both your questions in the negative. We will answer 

each in turn. For purposes of this opinion, we assume that the 

nonprofit corporation providing the cooperative housing was organized 

pursuant to article 1396-50.01, V.T.C.S., the Cooperative Association 

Act. Section 44 of the act exempts each association organized under 

the act from the franchise tax, see also Tax Code 1171.075. and from 

license fees imposed by the state or by any political subdivision. 

There is, however, no provision in the act which purports to exempt, 

either partially or totally, the property of such associations from ad 

valorem taxation. 

p. 2747 
Honorable gay Farabee - Page 2 (JM-612) 

Article VIII, section l-b, of the Texas Constitution permits in 

some instances and requires in other instances the granting by taxing 

units of residence homestead exemptions from ad valorem taxation. 

Section l-b itself does not define "residence homestead;" rather, it 

provides that "[tlhe legislature by general law may define residence 

homestead for, purposes of this section." Tex. Const. art. VIII, 

51-b(c). The legislature defined the phrase in section 11.13 of the 

Tax Code and set forth the following iu subsection (3): 

For purposes of this section, 'residence homestead' 

means a structbre (including a mobile home) or a 

separately secured and occupied portion of a 

structure (together with the land, not to exceed 20 

acres. and improvements used in the residential 

occupancy of the structure, if the structure and 

land and improvements have identical ownership) 

that: 

(1) is owned by one or more individuals; 

(2) is designed or adapted for human residence; 

(3) is used a5 a residence; and 

(4) is occupied as his principal residence by 

an owner who qualifies for the exemption. (Emphasis 

added). 

Essentially, you first ask whether a person, otherwise qualified, 

may receive a residence homestead exemption in an instance In which 

the individual seeking the exemption does not own the structure upon . 

which the exemption is sought; rather, the individual owns stock in a 

nonprofit corporation whose assets consist of the structure upon which 

the exemption is sought. 

For two reasons, ke conclude that ownership of stock in a 

corporation whose assets consist of a structure upon which the owner 

of the stock seeks aa exemption is not an omership interest 

sufficient to entitle the owner of the stock to claim an exemption on 

the corporation's assets. First. stock in corporation5 is not taxed 

in Texas. Article VIII, section 1. of the Texas Constitution provides 

in pertinent part that 

[a]11 real property and tangible personal property 

in this State, whether owned by natural persons or 

corporations, other than xuuicipal, shall be taxed 

in proportion to its value, which shall be ascertained a5 may be provided by law. The Lagislature may provide for the taxation of intangible 

property. . . . 

p. 2748 
Honorable Ray Farabee - Page 3 (m-612) 

Section 11.02(a) of.the Tax Code provides in pertinent part, except as 

provided in a subsection not relevant here, that "intatigible personal 

property is not taxable." Quite obviously, no ad valorem tax 

exemption can attach to property which is not taxed in the first 

place. Accordingly, no residence homestead ad valorem tax exemption 

can attach to stock in a corporation. 

Second, irrespective of whether stock in a corporation is taxed, 

stock owuers are not liable for taxes on the assets of a corporation. 

An ownership interest less than ownership in fee simple absolute may 

be sufficient to confer a tax liability. For example, conveyance of 

an interest in minerals conveys an interest in realty which is taxable 

in the hands of the grantee seoarately from the grantor's interest. 

Bashara v. Saratoea I~debendent'School~District, 163 S.W.Zd 631 (Tex. 

rk, 231 S.W.2d 981 (Tex. 

It in aoasossion of a life 

1942); Watkins v. Certain-Teed Products CoCiv. App. - Amarillo 1950, no writ). A tena-- --~ =-. 

estate possesses an interest which is taxable. Triwble v. Farmer, 305 

S.W.2d 157 (Tex. 1957); State v. Vaughan, 319 S.W.2d 349 (Tex. Civ. 

ADD. SI - Austin 1958. no writ). An oil lease constitutes "real 

propertyw and is subject to taxation. Eager v. Stakes, 294 S.W. 835 

(Tex. 1927); Big Lake Oil Co. v. Reagan County, 217 S.W.2d 171 (Tex. 

Civ. App: - El Paso 1948, writ ref'd). A vendee of land is considered 

the owner for purposes of taxation even though a vendor's lien is 

retained for the price. Rarve v. Provident Insurance Co.. 156 S.W. 

1127 (Tex. Civ. App. - Austin 1913. no writ). 

Ou the other hand, a contingent remainder in property does not 

constitute a taxable title to real property. Tarrant County Water 

Supply Corp. v. Hurst-Euless-Bedford Independent School District. 391 

S.W.2d 162 (Tex. Civ. APP. - Fort Worth 1965, writ ref'd n.r.e.). 

Except as provided by section 25.07 of the Tax Code, a leasehold 

interest in real property is not subject to taxation. See Tax Code - 

$523.13, 25.06; Irving Independent School District v. Delta Airlines, 

Inc., 534 S.W.2d 365 (Tex. Civ. App. - Texarkana 1976. writ ref'd 

n.t.e.). See also Tax Code 525.02; Underwood v. Pigwan, 32 S.W.2d 

1102 holding approved (Tex. Comm'n App. 1932); Connell v. State, 55 

S.W. 980 (Tex. Civ. App. 1900, no writ). 

The corporation is liable for any ad valorem taxes imposed upon 

the assets of the corporation; an owner of stock in that corporation 

is not so liable. Thus, no tax exemption cau be claimed by such an 

owner. Accordingly, no residence homestead ad valorem tax exemption 

can attach to stock in a nonprofit corporation, even if the assets of 

that corporation consist of cooperative housing. We next turn to 

whether a corporation way qualify as a residence homestead exemption 

claimant or whether only natural persons may qualify. We conclude 

that only natural parsons may qualify. 

First, it is clear from a reading of the relevant portions of the 

Tax Code that the legislature intended only natural persons and not 

corporations to be entitled to claim a residence homestead exemption. 

p. 2749 
Elonorable Ray Farabee - Page 4 (m-612) 

The shove-underscored portions of section 11.13(j) clearly evince 

legislative intent that only natural persons receive the exemption: 

subsection (j) requires that the structure be "owned by one or more 

individuals" and "is occupied as his principal residence by an owner 

who qualifies for the examption." (Emphasis added). Subsection 

11.13(b) confers an exemption from taxation by a school district to 

"an adult.', Subsection5 (c) and (d) of section 11.13 confer a 

mandatory and a so-called "local option,' exemption to lran individual 

who is disabled or is 64 or older.', Subsection (h) prohibits "joint 

or community owners” from receiving the same exemption for the same 

residence homestead in the same year. See also Tax Code 911.41 

(concerning the administration of exemptions where a person who 

qualifies for axamption is not the sole owner of the exempt property). 

In contrast, it is instructive to examine the language employed 

by the legislature in setting forth ownership requirements for other 

exemption5 from ad valorem taxation. Section5 11.18 and 11.20 employ 

the term "an organization." Sections 11.21 and 11.27 use "a person.,' 

Section 11.19 refers to a qualifying "association' of a very particular kind. And section 11.23 purports to confer exemption5 to 

specified "organi5ation5," "associatlon5," "persons,', and "corporations." Manifestly, the legislature chose such term5 with care; if 

the legislature intended that corporations be entitled to residence 

homestead cxamptions. it is reasonable to assume that the term 

"person,, would have been used in defining "residence homestead' in 

section 11.13 rather than the term 'individual.' 

There is a second, more compelling, reason to conclude that the 

legislature intended "individual,' in section 11.13 of the Tax Code to 

reach only natural persons and not corporations. The con5titution 

limits the homestead exemption to natural persons. The legislature 

may not broaden by statute the scope of an exemption beyond that which 

is conferred by the con5titution and any attempt to do so is void. 

Tex. Coast. art. VIII, '52; Dickison v. Woodmen of the World Life 

Insurance Society, 280 S.W.Zd 315 (Tex. Civ. App. - San Antonio 1955, 

writ ref'd) . If nronerdv comes within a statutory tax exemption, it 

can be exempt only because it clearly falls within the ambit of the 

constitution. State v. ,American Legion Post No. 58, 611 S.W.2d 720 

(Tex. Civ. App. - El Paso 1981, no writ). We could not constitutionally con5true section 11.13 to reach corporations. 

Article VIII, section l-b, of the Texas Constitution, the 

constitutional provision pursuant to which section 11.13 of the Tax 

Code was passed, unquestionably envinces legislative intent that only 

natural persons, and not corporations, be entitled to residence homestead ad valorem tax exemptions. Subsection (b) of section l-b, which 

authorizes political subdivisions to grant the so-called 'local 

option' residence homestead exemption codified in section 11.13(d) of 

the Tax Code imposes ownership requirements on "persons, married or 

unmarried, including those living alone . . .,' and "married or unmarried persons sixty-five (65) years of age or older, including those 

p. 2750 
Honorable Ray Farabee - Page 5 (JM-612) 

living alone. . . ." Subsection (b) permits by petition and referendum 

the granting of residence homestead exemptions of "disabled persons or 

of persons sixty-five (65) years of age or over. . . ." Subsection 

(c) of article VIII, section l-b confers a residence homestead exemption for public school purposes to a "married or unmarried adult, 

including one living alone. . . ." It further authorizes the 

legislature to exempt a specified value of the residence homestead 

exemption of "a person who is disabled as defined in Subsection (b) 

of this section and of a person sixty-five (65) years of age or 

older. . . ." Throughout subsection (c), language such as "eligible 

disabled person" and "eligible disabled or elderly person" is 

employed. Other subsections also refer to natural persons. See. 

s, Tex. Const. art. VIII, II-b, cd), (e). 

It has been suggested that our answer to your first question 

implicitly overrules Attorney General Opinion M-632 (1970) which 

concluded that certain agricultural products in the physical 

possc5sion of a cooperative marketing association were exempt from ad 

valorem taxation under article VIII, section 19. of the Texas 

Constitution which exempts, inter alla, "[flarm products, livestock, 

and poultry in the hands of the producer." See also Attorney General 

opinion E-938 (1977). The issue in Attorney General Opinion M-632 

turned upon ownership of the property claimed to be exempt. Legal 

title to the property remained with the farmers; at no point did title 

pass to the marketing association itself. See Agriculture Code 

0052.001 - 52.151 (successor statutes to now-repealed articles 5737 to 

5764, V.T.C.S.). In the facts you submit, you claim that legal title 

to the property remains with the association and at no time passed to 

those owning stock in the association. In both Attorney General 

Opinion M-632 and in the instant case, tax exempt status depends upon 

ownership. In the instances of the above-mentioned farming cooperatives, title to property remained with the farmers. Ownership of the. 

housing cooperative remains with a corporation. The conclusion we 

reach here in no way undermines the correctness of the earlier 

opinions. 

Additionally, it is suggested that the conclusion we have reached 

would have the effect of denying to an owner of a condominium the 

right to receive a residence homestead exemption. Again, we disagree. 

An even cursory perusal of chapter 81 of the Property Code indicates 

that ownership of a condominium combines separate ownership of an 

individual apartment with common ownership of other elaments. Property 

Code 1581.002. 81.104; see Dutcher v. Owens, 647 S.W.2d 948 (Tex. 

1983). In the instant Guest, an owner of the stock possesses no 

estate in the property sought to be deemed exempt. It is clear that 

the framers of article VIII, section l-b' intended that natural 

persons and not corporations be permitted to claim residence homestead 

exemptions from ad valorem taxation. 

The law does not favor tax exemptions, since they are the 

antithesis of equality and uniformity. Hilltop Village, Inc. v. 

p. 2751 
lionorable Kay Farabee - Page 6 (JM-612) 

Kerrville Independent School District, 426 S.W.2d 943 (Tex. 1968). 

Constitutional and statutorv nrovisions creatinn them are to be 

construed narrowly with all doubts resolved against granting the 

exemption. City of Longview v. Markham-McKee Municipal Hospital, 152 

S.W.2d 1112 (Tex. 1941). Accordingly, we conclude that neither the 

homas nor the stock of persons who live in cooperative housing is 

entitled to the residence homestead tax examption provided by section 

11.13 of the Tax Code and article VIII, section l-b, of the Texas 

Constitution when title to the real estate is held in the name of the 

corporation and the owners of the stock obtain only long-term leases 

from the corporation but do not possess title to the real property 

upon which the exemption is sought. 

With your second question, you ask whether these same homes and 

stock are eligible for protection from forced sale under section 

41.002 of the Property Code and article XVI, section 50, of the Texas 

Constitution. For essen ially 

1 

the same reasons that we answered your 

first question in the ne ative , we answer your second question in the 

negative. 

Article XVI, section 50, of the Texas Constitution provides the 

following: 

550. Homestead; protection fqrm forced. sale; 

mortgages, trust deeds and liens 

Sec. 50. The homestead of a family, or of a 

single adult person, shall be, and is hereby 

protected from forced sale, for the payment of all 

debts except for the purchase money thereof, or a 

part of such purchase. money, the taxes due 

thereon, or for work and material used in constructing improvements thereon, and in this last' 

case only when the work and material are contracted for in writing, with the consent of both 

spouses, in the case of a family homestead, given 

in the same manner as is required in making a sale 

and conveyance lof the homestead: nor may the owner 

or claimant &the property claimed as homestead, 

if married, sail or abandon the homestead without 

the consent of the other spouse, given in such 

manner as may be prescribed by law. No mortgage, 

trust deed, or other lien on the homestead shall 

ever be valid, except for the purchase money 

therefor, or improvements made thereon, as hereinbefore provided, whether such mortgage, or trust 

deed, or other lien, shall have been created by 

the owner alone, or together with his or her 

spouse, in case the owner is married. All pretended sales of the homestead involving any 

condition of defeaaance shall be void. This 

p. 2752 
Eonorable Ray Farabee - Page 7 (JM-612) 

amendment shall become effective upon its 

adoption. (Emphasis added). 

Article KVI, section 51, of the Texas Constitution defines residence 

homestead for purposes of protection from forced sale: 

551. Amount of homestead; uses 

Sec. 51. The homestead, not in a town or city, 

shall consist of not more than two hundred acres 

of land. which may be in one or more parcels, with 

the improvements thereon; the homestead in a city, 

town or village, shall consist of lot or lots 

amounting to not more than one acre of land, 

together with any improvements on the land; 

provided, that the same shall be used for the 

purposes of a home, or as a place to exercise the 

calling or business of the homestead claimant, 

whether a single adult person, or the head of a 

family; provided also, that any temporary renting 

of the homestead shall not channe the character of 

the same, when no other h&stead has been 

acquired. (Emphasis added). 

Section 41.001 of the Property Code essentially tracks article XVI, 

section 51, while section 41.002 essentially tracks the language of 

article XVI, section 50. 

Again, it is clear from even a cursory reading of the above-cited 

provisions that only natural persons as opposed to corporations may 

qualify for residence homestead protection ,from forced sale. See 

Shepler v. Kubena. 563 S.W.2d 382 (Tex. Civ. App. - Austin 1978.10 

writ). The public policy reasons for such a construction are clear. 

Exemptions from forced sale were unknown to the common law and are 

purely statutory creations. Pickens v. Pickens, 83 S.W.Zd 951 (Tex. 

1935). Under the c-on law. a debtor was deprived of all of his 

property and then, frequently, imprisoned. Smith v. McBryde, 173 S.W. 

234 (Tex. Civ. App. - San Antonio 1915, no writ). The purpose of 

exemption laws is to afford protection to a person in the pursuit of a 

lawful occupation and to assure to the family of the debtor the 

shelter of a home, the means of securina a livelihood. and the 

earnings of the head of the household. See. ;.g., Rodgers v.-Ferguson, 

32 Tex. 533 (1870). Exemption laws were passed not merely for the 

purpose of protecting the poor from creditors who would deprive the 

debtor and his family of their means of subsistence, but also to 

protect persons in the pursuit of legitimate occupations in order that 

they do not become charges on the public. Gaddy v. First 'National 

Bank, 283 S.W. 277 (Tex. Civ. App. - Beaumont 1923. no writ). 

We are well. aware that constitutional and statutory 'provisions 

regarding homestead exemptions from forced sale for debt traditionally 

p. 2753 
Eonorable Ray Farabee - Page 8 (JM-612) 

have been liberally construed in order to effectuate their beneficent 

purposes. Andrews v. Security National Bank of Wichita Falls, 50 

S.W.2d 253 (Tex. 1932); City of San Antonio V. Toeppewein, 133 S.W. 

416 (Tex. 1911). We are unwilling, however, to do violence to the 

clear language of the provisions at issue. The language of the 

constitutional and statutory provisions appears to us to be plain and 

unambiguous and its meaning clear and obvious. We must, therefore, 

"enforce the statute as written and have no right to create or to find 

an ambiguity where none exists in order to call into play generally 

recognized rules which are used as aids to the construction of 

ambiguous statutes.,, Col-Tex Refining Co. V. Railroad Commission of 

-, 240 S.W.Zd 747, 750 (Tex. 1951) (citations omitted). Our 

intrepretation must express 

only the will of the makers of the law, not forced 

nor strained, but simply such as the words of the 

law in their plain sense fairly sanction and will 

clearly sustain. 

Railroad Commission of Texas V. Miller, 434 S.W.2d 670, 672 (Tex. 

1968) (citation omitted). in the 

instance which you describe, 

Accordingly, we conclude that, 

the own& of the stock may not receive 

the benefit of article XVI. sections 50 and 51, of the Texas 

Constitution and sections 41.001 and 41.002 of the Property Code to 

claim on the homes which they lease the status of homesteads exempt 

from forced sale for debt. 

SUMMARY 

Neither the residence owned by the corporation 

nor the corporate stock owned by persons who live 

in cooperative housing is entitled to the residence homestead tax exemption provided by section 

11.13 of the Tax Code and article VIII, section 

l-b, of the Texas Constitution or to the protection afforded homesteads exempt from forced sale 

for debt. ~ 

JACK EIGRTOWBR 

First Assistant Attorney General 

MARY KELLER 

Executive Assistant Attorney General 

p. 2754 
Honorable Ray Farabce - Page 9 (34-612) 

RICK GILPIN 

Chairman, Opinion Committee 

Prepared by Jim Moellinger 

Assistant Attorney General 

p. 2755