Honorable J. AlbertDickle OpinionNo. M-897

County Attorney Coryell County Courthouse Re: Gatesvllle,Texas **76528** Exemption from ad valorem taxes of property owned by a non-profit corporation organized for the purpose of promoting Industrialdevelopment in Copperas Cove, Texas, Dear Mr. Dickle: and contiguous trade area. You have requested that we advise you as to the taxability of properties belonging to Copperas Cove IndustrialFoundation, Inc., hereinafter referred to as “Copperas”,a non-profit corporation organizedpursuant to the provisions of the Texas NonProfit CorporationAct.l The corporate purpose is stated In Article Four of the charter of Copperas: “Thepurpose or purposes for which the corporation is organizedare: Promoting Industrialdevelopment for and within said city of Copperas Cove, Texas, and Its contiguous trade territory and area, and with the intent of exercising all of the generalpowers authorized by Article 2.02 of the Texas Non-ProfitCorporation Act.‘I The charter also states that Copperas shallhave perpetual duration.Section **3** of the By-Laws of Copperasprovides that no offlcer or director shall ever draw compensationand that an,vassets held by Copperasat the time of corporatedissolutionwould pass to a successor corporation or organizationhaving a similar

**l 3**  **V.C.S.,** Ch. 9, Art. **1396-1.01,** et. seq.

-4368-Honorable J. AlbertMckle, page 2 (M-897)

purpose and like exempt status. With regard to the operation of Copperas,you have given us the following information In a letterpertaining to your opinion request. The Initialassets of the corporationwas obtained &r&h thepurchase of memberships, a list of which and the amountsdonated Is also enclosed. For each $100.00 membership entitles a member to vote. Contributions of less than $100.00 entltles the person contributing to a non-votingmembership. Any singlemember Is limited to the number of votes that he or It can cast,which is **5%** of the total number of votes. This Is a protection against large contributors, such as the~~~cove Bank, being able to control the organization.2 There is a continuation of the solicitationof members. The membership Is non-redeemable and cannotbe resold to the corporation. The assets of the corporation conslst~approximatelyof $600.00 cash and a 51-acre tract of land, **3** or 4 acres of which liewithin the city limits of Copperas Cove and the balance lying outside the city limits. The acreage within the city limits had previously been subdivided for residentialpurposes before It was purchased. It Is not the Intentionof the corporation to subdivide for residentialpurposes, however, due'to financialproblems, the corporationIs attempting to sell the tit limit acreage. Theproperty was purchased on the 8 2 th day of November payable 5 1969 from the Erby Wolfe Estate for $25,OOO.OO,

5,OOO.OOdown and $5,000.00per year. Because of the lack of funds to pay the next payment of $5,000.00

2 The membership list, as furnished us, shows that there are a total of 72 contributingmembers. 51 members are votingmembers. Of these 51, only five contributorshave as many as five votes, the two largest of these contributors being the Cove State Bank which contributed $2,000.00, and an Individualwhomade a contribution In the amount of $1,650.00.

-4369-Honorable J. Albert mckle, page **3** (M-897)

It isnecessary to sell the city limit acreage as above indicated. At the present time there Is a balance of $15,000.00 owing on the property. No individualmember may purchase any of the assetsof the corporation except upon competitive bids. There are no options to purchaseor sell or purchase contracts existing at the present time. The corporation is attempting to attract investors,and does Intend to sell small tracts for the purpose of attracting business ventures. One such instanceand apparently the only one that continuedany length of timewas a garment factory that apparentlywas not located on the above referred to acreage, but was housed at another location. The corporation paid approximately **6**months rent for this venture before It turned sour. The nature of the activities of the corporation Is contracting and carrying on correspondence with prospective businesses,and attending industrial and business seminars. No expense Is paid to individuals for attending these seminarsnor is anyone In the corporation receiving expense money or a 3alary and this includes the attorney for the corporation.

3 The above described corporateactivities are well within the powers conferred by Section 10 of the,By-Lawswhich read, in par as follows: 1,

. . .Without prejudice to such general powers and the otherpowers conferred by statute,by the charter and by these by-laws, it Is hereby expressly declared the board of directors shall have the following powers, that is to say: (1) To purchase, or otherwise acquire for the corporation, any property, rights, or privileges which the corporation Is authorized to acquire, at such price or consideration and generally on such terms and conditions as they think fit; and at their discretion to pay therefor eitherwholly or partly Inmoney, stock, bonds, debentures, or.other securitiesof the Corporation; (2) To create,make and Issue notes,mortgages, bonds, deeds of trust, trust agreements and negotiable or transferrable Instrumentsand securities, secured by mortgage or deed

-4370-Honorable J. Albert Dickle, page 4 (M-897)

. . . . "There seem to be adequateprovisions to prevent lndlvidualmembers from profitingby being members of the corporationand when taking Into consideration the broad base of membership and the general small amounts of contribution and considering the corporation from all pertinent data it appears that the assets have been accumulated from contributionsmade for the development of the business of Copperas Cove as distinguished from contributionsmade by Investing in capital stock of a corporation." Three provisions of the Texas Constitutionwill be considered here.ArticleVIII, Section 1 provides, In part, as follows:

. . .All property in this state,whether owned by natural persons or corporations,other thanmunicipal, shall be taxed inproportion to Its value, which shall be ascertainedas may be provided by law

. . .It Article XI, Section 9 provides, in part, as follows: "Theproperty of counties, cities,and towns, owned and held only for publicpurposes, . . .and all

(3 cont'd) of trust on any real property of the corporation or otherwise, and to do every other act and thing necessary to effect the same; **(3)** To sell or lease the real or personal property of the corporation on such terms as the boa~rd may see fit and to execute all deeds, leases and other conveyancesor contracts that may be necessary for carrying out the purposes of this corporation and (4)To delegate any of the powers of the board in the course of the"currentbusiness of the corporation to any standing or special committees or to any officer or agent, and to appoint anypersons the agents of the corporations,with such powers (Includingthe power to subdelegateand upon such terms as they think flt.)N

-4371-Honorable J. Albert Dlckie, page 5 **(~-897)**

otherproperty devoted exclusively to the use and benefit of the public shall be exempt
. . . from taxation

. . .' ArticleXI, Section 9 Is self-executing. 4
ArticleVIII, Section 2 provides, in part, as follows: 1,

. . .The legislaturemay, by general laws, exempt from taxationpublic property used for public purposes . . .and Institutionsof purely public charity

. . ." ArticleVIII, Section 2 Is permissive In nature rather than selfexecuting,and Is dependent for Its effectiveness upon the statutes enacted In pursu nce 8 to Its authorizationsand In compliance with its llmltations. Even though it Is our opinion that Article VIII, Section 2 and the valid statutes thereunderare determinative of exemption in this case, we have set out the above quoted portions of ArticleVIII, Section 1 and ArticleXI, Section 9 because these provisions are so frequently Inexorably Intertwined in court decisionsdetermining questions of taxability for ad valorem tax purposes. We are aware of the ever-expanding scope of the terms "public"and "charitable"under applicable constitutionaland statutoryprovisions effectuating exemption from ad valorem taxes. Although the progressionhas been largely legislative, it has embraced both public and private property. The judicial branch has recently carefullypreserved exemption for municipal property in the absence of legislativeaction subjecting It to

4 A & M Consolidated Independent School Dist. v. 143 T City of Bryan,

348 184 s W2d 914 (1945). l lty v?6hemlial Bank i Trust Co., Lower Colorado Ri ver Author164 Fex. 32b, 190 S W 2d 48

. . (194

5). 5 City of Wichita Falls v. Cooper, 170 S.W.2d 777 (Tex.Civ. App. 1943, error ref.); Dlcklson v. Woodmen of the World Life Insurance co.. 280 S.W.2d 315 (Tex. Clv. App. 1955, error ref.).

-4372-.

Honorable J. Albert Dlckle, page 6 (~-897)

t=, 6 and evenmore recently, upheld the constitutionalityof legislation expresslyrecognl3t ed as broadening prior statutory concepts of exempt charities. Since Copperas Is a private corporation, exemptioncannot be obtalne Section 9;8 under the self-executingprovisions of ArticleXI,

but it is possible that properties belongingto Copperasmight be exempt by statuteswithin the constitutional authorizations of Article VIII, Section 2 for “publicproperty used for publicpurposes” or for charity.” “institutionsofpurelypublic

We will first consider that constitutionalauthorization for exemption of “publicproperty used forpublicpurposes”.
In the early case of Daugherty v. Thompson, 71 Tex. 192, 9 S.W. 99 (1888), the Supreme Court declared at page 101:

I, that section of the constitution seems to apply t; i&perty owned by persons or corporations in private

6 In City of Beaumont v. Fertltta, 415 S.W.2d go2 (Tex.s~p.~;z67), the court h Id th t sincemunicipalities are exceptedfrom constitutioEa1re:ulrement of Article VIII, Section1 that all property belonging to natural persons or corporationsbe taxed, the legislature could authorize taxation or not as it saw fits; and since the legislature had not seen fit to authorize the taxation of suchproperties but had provided for the taxation of long-term leaseholds on municipal property whereby taxes are paid by the lessors,municipal property, regardless of the use to which it Is being put, is exempt from taxation.
7 San AntonioConservation Society, Inc. 455 S.W.2d 743 v. City of San Antonio,

(T ex. Sup. 1970)

. 

## c 11 is the property ‘publiclyowned’ so as to be exempt from taxis’u:derArticleXI, Section 9 of the Constitution? Public ownership, for tax exemption purposes, must grow out of the facts: It Is a legal statusbased on facts, that may notbe created or conferredby mere legislative, or even contractual declaration.”

Company v. Dallas County, 153 Tex. 474, 271 S.W.2d

.

-4373- ‘,Honorable J. Albert Dlckle,page 7 (m-897)

right, but which, from the use to which it Is applied, is, in a quallfld property." (Einphasls our:.) sense, deemedpublic

This original interpretationwas affirmed In Lower Colorado River Authority v. ChemicalBank & Trust Co., 144 Tex. 326, 190

. . 46 (1943)at page 49:
"Norare we under any obligation,under the facts of this case, to harmonizeArt. XI, Sec. 9, supra, with Art. VIII, Sec. 2, of the Constitution of Texas,which declares that the legislature 'may,by general laws, exempt from taxationpublic property used for public purposes.' That duty likewise was performed for us a long time ago by Chief Justice Staytonwhen he said, in Daugherty v. Thompson, 71 Tex. 192, 9 S.W. 99, 102: 'Asbefore said,_section 2, art. 8 of the constitution, gave to the legislaturepower to exempt propertyheld In private ownership, but used for purposes which give to it a public character.' (Italicsours.)

. , .I' And In 1963, the Supreme Court quoted with approval the above set out portions of the above two opinions at page 910 of City of Beaumont v. Fertitta, 415 S.W.2d 902, supra, footnote 6, page 6. This being the extent of the constitutionalauthorization for exemption for "publicproperty used for public purposes', do any of the legislative enactments contained in Artic?e 7150, 20 Vernon's Civil Statutes,provide an exemptionwhich may be deemed applicable to Copperasunder the submitted facts? We think not.
We will next consider the c~onstitutlonal authorization for exemption of "Institutionsof purely public charity". Many court decisions have been concernedwith themeaning of this provision. However, we think an analysis of the recent decision of our Supreme Court In SanAntonio Conserv. Sot. Inc.v. City of San Antonio, 455 S.W.!?d 743 (1970)will resolve the question under consideration.
In the Conservation Society case, the court was concerned with the following facts. The Society was a non-profit corporation chartered for the purpose of preservinghistorical buildings

-4374-Honorable J. Albert Mckie, page 8 (~-897)

and sites, and, in fact, so operated. The specificpiece of property Involved was NavarroHouse1 named for a native Texas hero of the Texas Revolution, "who,'said the court, "served Texas as one of Its great public figures for many years." The House was used as a museum for the benefit of all the public.
At the outset of the opinion, the court quoted that portion of Section 2 of ArticleVIII exempting "institutionsof purely public charity", and pointed out that it was not until 1905 that the legislature undertook todefine that phrase more fully. Acts 29th Leg., Ch. 127, pp. 314-315 (presentlySection 7, Article 7150, V.C.S.). The courtnoted the subsequentamendments to Section 7, as well as the additional sectionswhich have been added to Article 7150. Specifically, the section under consldeKatlon was Section 20, the pertinent portions of which exempt

.any non-profit organization chartered or incorporated &d& the Texas Statutes for the purpose of preserving historical buildings, sites and landmarks,not leased or otherwise used with a view to profit,

. . .'I.The court stated that Section 79 was concernedwith charity in the sense of almsgiving, but that Section 7 was not the exclusivebasis

9 Section.7 reads as follows: "7. Public Charities. All buildings and personal property belonging to Institutions of purely public charity, together with the lands belonging to and occupied by such institutions * * * not leased or otherwise used with a view to profit, unless such rents and profits and all moneys and credits are appropriated by such Institutions solely to sustain such Institutions and for the benefit of the sick and disabled members and their families and the burial of the same, or for themaintenance of persons when unable to provide for themselves, whether such persons are members of such institutions or not. An institution of purely public charity under this article Is one which dispenses its aid to its members and others In sickness or distress, or at death, without regard to poverty or riches of the recipient, alsowhen funds, property and assets of such institutionsareplaced and bound

-4375-Honorable J. Albert Dlckle,page 9 (~-897)

for a claim that an institutionwas one of purely public charity, and that the legislature In enactingSection 20 intended to add to the existing-law and to change it. After havinn thus ascertained the Intent of the legislature, the court Fe-announced the rule stated In River Oaks Garden Clubv. City of Houston, 370 S.W.2d 851 ('Pex. Sup. 1963): t /charity/ is public when ft affectsall the people of a communlry or sFateby assuming, to a material extent, ihat which otherwisemight become the obligationor duty of the community or the state." It was conceded that thewholepublic received benefits from the preservation of theHouse; therefore, the remaining question, said the court; waswhether the Society In preserving It had assumed to a material extent an obligation or duty of the community or state. The court concluded that it had. In soholding, the court traced,at some length,at pages 746, 747, various constitutional and statutoryprovisions expressing thegovernmental obligationto preserve evidence of Texas'historicalheritage from the time of the first Texas Constitutionuntil the time of the decision. See also Cedar Pa;k iJa;er Su$r;yozi. vnp;;";eru;;S.Di ($:)yet report.

There Is no constitutionalprovisionexpressinggovernmental obligation to promote Industrialdevelopment for cities or areas or even the state Itself. There are statutory evidences of legislative concern about industrialdevelopment. A good example is Article 12.03, Title 28, Taxation-General,Vernon's Civil Statutes,exempting from franchise taxes "corporations having no capital stock and organizedfor the exclusivepurpose of promoting-thepublic interest of any county, city or town or other area within the state
. .'.' We are also aware of the fact that numerous non-profit corporationshaving corporate purposes similar to those of Copperashave been formed.

tg cont'd)by its law to relieve, aid and administer In any way to the relief of Its memberswhen in want, slckness and distress, and providehomes for its helpless and dependentmembers and to educateand malntaln the orphans of its deceasedmembers or other persons; * * *.‘I

-4376-Honorable J. Albert Mckle, page 10 (~-897)

In the instant case, we do not question thebona fldes of the incorporators of Copperas or Its contributors. Their declared purposes are In the public Interest and, Insofar as Is apparent, are entirelydivorced fromany direct personal gain. Nevertheless, In the absence of any legislation specifically exempting from ad valorem taxesproperty belonging to such corporations,we must assume that the legislaturedid not intend to accord them exemption. Finally, we are bound by the well settled fundamentalprinciples that exemptionsfrom taxation are never favored and thatall taxing provisionswill be strictly construed In favor of the taxing authoritiesand the state. We are therefore of the opinion that Copperas cannot obtain exemption from ad valorem taxes undoer any of the presently existing constitutionalor statutoryprovisions.
SUMMARY Propertiesbelonging to CopperasCove Industrial Foundation, Inc.#a non-profit corporationorganized for the purpose of promoting Industrialdevelopment In Copperas Cove, Texas, and contiguous trade areas, are not exempt from ad valorem taxes underany constltutlonal or statutory of this State. 

# ciIzk$.C2*

Attor y General of Texas Prepared by Marietta McGregor Payne Assistant Attorney General

-4377 -Honorable J. Albert Dlckle,page 11

APPROVED: OPINION COMMITTEE
Kerns Taylor, Chairman W. E. Allen, Co-Chairman
James Broadhurst Houghton Brownlee ,S.J. Aronson Jim Swearingen
MEADE F. GRIFFIN Staff Legal Assistant
ALFREDWALKER Executive Assistant
NOLA WHITE First Assistant .

(~-897)

-4378-