# IN THE SUPREME COURT O F TEX AS

N O S



## . 10-0683, 10-0714



# A H F

- A R B O R S A T 

# H U N T S V IL L E 

# I , L L C , P E T IT IO N E R 

# , A H F

- A R B O R S A T 

# H U N T S V IL L E 

# I I , L L C , P E T IT IO N E R 

# ,

v
. 

# W A L K E R 

# C O U N T Y 

# A P P R A IS A L 

# D IS T R IC T 

# , R E S P O N D E N T

4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4



## O N 

## P E T I T I O N F O R 

## R E V I E W F R O M T H E 

## C O U R T O F 

## A P P E A L S F O R T H E 

## T E N T H 

## D I S T R I C T O F 

## T E X A S



### 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4



## Argued Dec em ber 6, 2011
J U S T I C E 

## H E C H T 

## delivere d the opinion of the Court, in which C H I E F 

## J U S T I C E 

## J E F F E R S O N 

## , J U S T I C E 

## W A I N W R I G H T 

## , J U S T I C E 

## M E D I N A 

## , J U S T I C E 

## G R E E N 

## , J U S T I C E 

## J O H N S O N 

## , J U S T I C E 

## G U Z M A N 

## and J U S T I C E 

## L E H R M A N N 

## joined.

J U S T I C E 

## W I L L E T T 

## filed a dissenting opinion.

A community housing development org anization (“CHDO ”) that meets cer tain statutory require ments is exempt from ad valor em taxation on proper ty it “owns”

. The principal issue in

1


## these two consolidated case s is whether a CHDO must have leg al title to proper ty to qualify for the exemption. We hold that equitable title is s u ff i ci en t and acc ording ly reve rse the judgme nt of the
court of a ppeals and re mand the ca ses to that court.

2

T E X

. T A X C O D E § 1 1

. 1 8 2 ( b )

. 1

_ _ _ S

. W

. 3 d

_ _ _ ( T e x
. A p p
. – W a c o 2 0 1 0 ) ( m e m
. o p
. )

. 2

## I
A
CHDOs are a cre ation of the Cranston-Gonzalez National Affor dable Housing Act of 1990,

as amende d (“N AHA” or “the Act”)

. NAHA authorized the United States Depa rtment of Housing 3


## and Urba n Deve lopment’s HOME I nvestment Partners h i p s P ro g ram, which uses block g rants to
lever ag e local g overnme nt and privat e fu n d s t o provide dece nt and aff ordable housing for lowincome families. A p o rt i o n of the g rants must be set aside for CHDOs. As define d by Section 4 5


## 12704 of the Ac t, a CHDO is a nonpr ofit corpor ation that 6 

## (A) has among its purposes the provision of dece nt housing that is aff ordable to low-income a

nd modera te-income persons; (B ) maintains, throug h signific ant repr esenta tion on the o rga nization’s g overning board and otherwise, acc ountability to low-income community residents

4 2 U

. S

. C

. § § 1 2 7 0 1

- 1 2 8 9 9 i ( 2 0 1 2 )

. 3

I d

. § 1 2 7 2 2 ( “ T h e p u r p o s e s o f t h i s s u b c h a p t e r a r e

— ( 1 ) t o e x p a n d t h e s u p p l y o f d e c e n t , s a f e , s a n i t a r y , a n d 4

a f f o r d a b l e h o u s i n g , w i t h p r i m a r y a t t e n t i o n t o r e n t a l h o u s i n g , f o r v e r y l o w - i n c o m e a n d l o w - i n c o m e A m e r i c a n s ;
. . . ( 3 )

. . . ( C ) t o p r o m o t e t h e d e v e l o p m e n t o f p a r t n e r s h i p s a m o n g t h e F e d e r a l G o v e r n m e n t , S t a t e s a n d u n i t s o f g e n e r a l l o c a l g o v e r n m e n t , p r i v a t e i n d u s t r y , a n d n o n p r o f i t o r g a n i z a t i o n s a b l e t o u t i l i z e e f f e c t i v e l y a l l a v a i l a b l e r e s o u r c e s t o p r o v i d e m o r e o f s u c h h o u s i n g ;
. . . ( 6 ) t o e x p a n d t h e c a p a c i t y o f n o n p r o f i t c o m m u n i t y h o u s i n g d e v e l o p m e n t o r g a n i z a t i o n s t o d e v e l o p a n d m a n a g e d e c e n t , s a f e , s a n i t a r y , a n d a f

f o r d a b l e h o u s i n g
. . . . ” ) ; 2 4 C

. F

. R

. § 9 2

. 1 ( “ I n g e n e r a l , u n d e r t h e H O M E I n v e s t m e n t P a r t n e r s h i p s P r o g r a m , H U D a l l o c a t e s f u n d s b y f o r m u l a a m o n g e l i g i b l e S t a t e a n d l o c a l g o v e r n m e n t s t o s t r e n g t h e n p u b l i c - p r i v a t e p a r t n e r s h i p s a n d t o e x p a n d t h e s u p p l y o f d e c e n t , s a f e , s a n i t a r y , a n d a f

f o r d a b l e h o u s i n g , w i t h p r i m a r y a t t e n t i o n t o r e n t a l h o u s i n g , f o r v e r y l o w - i n c o m e a n d l o w - i n c o m e f a m i l i e s
. ” )

. T h e p r o g r a m i s e x p l a i n e d o n H U D ’ s w e b p a g e a t h t t p : / / w w w
. h u d

. g o v / o f f i c e s / c p d / a f

f o r d a b l e h o u s i n g / p r o g r a m s / h o m e /

.
4 2 U

. S

. C

. § 1 2 7 7 1 ( a ) ( 2 0 1 2 )

. 5

T h e A c t d e f

i n e s a “ n o n p r o f

i t c o r p o r a t i o n ” a s “ a n y p r i v a t e , n o n p r o f i t o r g a n i z a t i o n ( i n c l u d i n g a S t a t e o r l o c a l l y 6

c h a r t e r e d , n o n p r o f

i t o r g a n i z a t i o n ) t h a t

— ( A ) i s o r g a n i z e d u n d e r S t a t e o r l o c a l l a w s , ( B ) h a s n o p a r t o f i t s n e t e a r n i n g s i n u r i n g t o t h e b e n e f

i t o f a n y m e m b e r , f

o u n d e r , c o n t r i b u t o r , o r i n d i v i d u a l , ( C ) c o m p l i e s w i t h s t a n d a r d s o f f i n a n c i a l
a c c o u n t a b i l i t y a c c e p t a b l e t o t h e S e c r e t a r y , a n d ( D ) h a s a m o n g i t s p u r p o s e s s i g n i f i c a n t a c t i v i t i e s r e l a t e d t o t h e p r o v i s i o n o f d e c e n t h o u s i n g t h a t i s a f f o r d a b l e t o l o w - i n c o m e a n d m o d e r a t e - i n c o m e p e r s o n s
. ” I d

. § 1 2 7 0 4 ( 5 )

. 

### 2

## and, to the extent prac ticable, low-income benef iciarie s with reg ard to de cisions on the desig n, siting, deve lopment, and manag ement of a ffor dable housing ; (C) has a demonstrated capa city for car ry ing out activities assisted under this Act; and (D) has a history of serving the local c ommunity or communities within which housing to be assisted under this Act is to be located. 7


## Secti o n 1 1.182 of the Texas Tax Code exempts a CHDO’s proper ty from ad valorem taxation. The basic exemption is set out in Subsection (b), which state s:

An org anization is entitled to an ex em p t i o n from taxation of improved or unimproved re al prope rty it owns if the org anization: (1) is org anized as a c ommunity housing de velopment org anization; (2) meets the require ments of a char itable org anization provided by Sections 11.18(e) and (f

); (3) owns the proper

ty for the purpose of building or repa iring housing on the proper

ty to sell without profit to a low-income or modera te-income individual or family satisfy ing the org anization’s elig ibilit y require ments or to rent without profit to such an individual or fa mily ; and (4) eng ag es exclusively in the building, repa ir , and sale or renta l of housing a s descr ibed by

Subdivis ion (3) and r elated a ctivities. 8


## Section 11.182 imposes additional require ments and restric tions on the exemption. Subsection (c) require s t h at a CHDO’s proper ty must be rente d or offe red for rent without profit to low- or

I d

. § 1 2 7 0 4 ( 6 )

. T h e o p e r a t i o n o f C H D O s i s d e s c r i b e d m o r e f u l l y i n U

. S

. D E P ’ T O F H O U S

. & U R B A N D E V

. , 7 C O M M U N IT Y P L A N N IN G A N D D E V E L O P M E N T , N O T IC E C P D

- 9 7

- 1 1 ( O c t

. 8 , 1 9 9 7 ) , a v a i l a b l e a t h t t p : / / w w w
. h u d

. g o v / o f f i c e s /
c p d / a f f o r d a b l e h o u s i n g / p r o g r a m s / h o m e / t o p i c a l / c h d o
. c f m
.
T E X

. T A X C O D E § 1 1

. 1 8 2 ( b )

. 8


### 3

## modera te-income individuals within three y ear s of its acquisition, and Subsection (d) require s some 9



## CHDOs to spend forty perc ent of the taxes they would pay if not exempt for elig ible persons in the
county

. Subsection (g) i m p oses an annual audit require ment. Subsection (j) restric ts an

1 0 1 1 

## exemption t o proper

ty that was e x empt for pa

rt of 2003. 1 2



## B
AHF -Arbor s at Huntsville I , L L C, and AHF -Arbor s at Huntsville I I , L L C (collec tively , “the
Arbors” ), eac h owns as its sole asset an apar tment complex in Huntsville. The sole member of eac h
limit ed l i ab i lity company is Atlantic Housing Founda tion, I nc., a South Carolina nonprofit

corpor ation exempt from fede ral income taxation under Section 501(c) (3) of the Un i t ed States

I nterna l Revenue Code an d ce rt ified as a CHDO by the Texas Depa rtment of Housing and
C ommunity Affa irs (“TD HCA”). For fede ral income tax purposes, Atlantic and the Arbors ar e

I d

. § 1 1

. 1 8 2 ( c ) ( “ P r o p e r t y o w n e d b y t h e o r g a n i z a t i o n m a y n o t b e e x e m p t e d u n d e r S u b s e c t i o n ( b ) a f t e r t h e t h i r d 9

a n n i v e r s a r y o f t h e d a t e t h e o r g a n i z a t i o n a c q u i r e s t h e p r o p e r t y u n l e s s t h e o r g a n i z a t i o n i s o f f e r i n g t o r e n t o r i s r e n t i n g t h e p r o p e r t y w i t h o u t p r o f

i t t o a l o w - i n c o m e o r m o d e r a t e - i n c o m e i n d i v i d u a l o r f a m i l y s a t i s f

y i n g t h e o r g a n i z a t i o n 's e l i g i b i l i t y r e q u i r e m e n t s
. ” )

.

I d

. § 1 1

. 1 8 2 ( d ) ( “ A m u l t i f a m i l y r e n t a l p r o p e r t y c o n s i s t i n g o f 3 6 o r m o r e d w e l l i n g u n i t s o w n e d b y t h e 10

o r g a n i z a t i o n t h a t i s e x e m p t e d u n d e r S u b s e c t i o n ( b ) m a y n o t b e e x e m p t e d i n a s u b s e q u e n t t a x y e a r u n l e s s i n t h e p r e c e d i n g t a x y e a r t h e o r g a n i z a t i o n s p e n t , f o r e l i g i b l e p e r s o n s i n t h e c o u n t y i n w h i c h t h e p r o p e r t y i s l o c a t e d , a n a m o u n t e q u a l t o a t l e a s t 4 0 p e r c e n t o f t h e t o t a l a m o u n t o f t a x e s t h a t w o u l d h a v e b e e n i m p o s e d o n t h e p r o p e r t y i n t h a t y e a r w i t h o u t t h e e x e m p t i o n o n s o c i a l , e d u c a t i o n a l , o r e c o n o m i c d e v e l o p m e n t s e r v i c e s , c a p i t a l i m p r o v e m e n t p r o j e c t s , o r r e n t r e d u c t i o n
. T h i s s u b s e c t i o n d o e s n o t a p p l y t o p r o p e r t y a c q u i r e d b y t h e o r g a n i z a t i o n u s i n g t a x - e x e m p t b o n d f i n a n c i n g a f

t e r J a n u a r y 1 , 1 9 9 7 , a n d b e f

o r e D e c e m b e r 3 1 , 2 0 0 1

. ” )

.
I d

. § 1 1

. 1 8 2 ( g ) ( “ T o r e c e i v e a n e x e m p t i o n u n d e r S u b s e c t i o n ( b ) o r ( f ) , a n o r g a n i z a t i o n m u s t a n n u a l l y h a v e 11

a n a u d i t p r e p a r e d b y a n i n d e p e n d e n t a u d i t o r
. T h e a u d i t m u s t i n c l u d e a d e t a i l e d r e p o r t o n t h e o r g a n i z a t i o n ’ s s o u r c e s a n d
u s e s o f f u n d s
. A c o p y o f t h e a u d i t m u s t b e d e l i v e r e d t o t h e T e x a s D e p a r t m e n t o f H o u s i n g a n d C o m m u n i t y A f f a i r s a n d t o t h e c h i e f a p p r a i s e r o f t h e a p p r a i s a l d i s t r i c t i n w h i c h t h e p r o p e r t y s u b j e c t t o t h e e x e m p t i o n i s l o c a t e d

. ” )

.

T h e L e g i s l a t u r e i m p o s e d t h i s r e s t r i c t i o n i n 2 0 0 3 a n d c r e a t e d a n e w e x e m p t i o n f o r o r g a n i z a t i o n s c o n s t r u c t i n g 12

o r r e h a b i l i t a t i n g l o w - i n c o m e h o u s i n g
. A c t o f J u n e 1 , 2 0 0 3 , 7 8 t h L e g
. , R

. S

. , c h

. 1 1 5 6 , § § 1

- 3 , 2 0 0 3 T e x G e n
. L a w s 3 2 5 6 , a d o p t i n g T E X

. T A X C O D E § § 1 1

. 1 8 2 ( j ) , 1 1

. 1 8 2 5 , a n d 1 1

. 1 8 2 6

.



### 4

## trea ted as a s i n gl e en tity

. The Arbors applied to the Walker County Appra isal District for a tax 1 3 

## exemption for their proper ty for 2003 and subsequent y ear s. The District denied their applications, and they sued. 1 4


## The Arbors moved for summary judgme nt based on the aff idavits of Atlantic’s secr etar y and controller, Carol M c B r id e , a n d a me mb e r o f th e a

p a r tm e n ts ’ ma

n a g e me n t b oards, Patricia Wuensche.
Attache d to McB ride’s aff idavit wer e copies of: a letter from the I nterna l Revenue Service notify ing
Atlantic that it had been deter mine d t o b e exempt from fede ral income taxation as a 501(c) (3)

org anization; cer

tifications of Atlantic as a CHDO by the Texas Depa rtment of Housing and Urba n
Deve lopment and as exempt fr o m fra nchise taxes by the Texas Comptroller of Public Acc ounts;
article s cre ating Atlantic and documents showing its authority to do business in Texas; and article s

cre ating the Arbors and reg ulations g overning their aff airs. Although the Arbors are not TDHCAcer tified CHDOs as Atlantic is, they arg ued that they are indisti nct from Atlantic, which opera tes the

apar tments through the m in compliance with all re quirements of Sec tion 11.182.
The District objected to both aff idavits as conclusory , and to McB ride’s aff idavit as hear say
and bey ond McB ride’s persona l knowledg e. T h e District responde d to the Arbors’ motion and
moved fo r summary judgme nt itself. The District contende d that the Arbors had failed to adduce

any evidenc e t h at t hey wer e org anized and opera ted as char itable org anizations, that they wer e
org anized as CHDOs under NAHA Section 12704, or that they met the require ments of Section

W i t h e x c e p t i o n s n o t r e l e v a n t h e r e , “ a d o m e s t i c e l i g i b l e e n t i t y i s
. . . [ d ] i s r e g a r d e d a s a n e n t i t y s e p a r a t e f r o m 13 i t s o w n e r i f i t h a s a s i n g l e o w n e r
. ” 2 6 C

. F

. R

. § 3 0 1

. 7 7 0 1

- 3 ( b ) ( 2 0 1 2 )

.

T h o u g h e a c h o f t h e A r b o r s f i l e d i t s o w n l a w s u i t , t h e t w o a c t i o n s w e r e p r o s e c u t e d i d e n t i c a l l y , a n d t h e r e f o r e 14

w e r e f e r t o t h e p r o c e e d i n g s a s i f t h e y w e r e o n e
. T h e c o u r t o f a p p e a l s i s s u e d o n e o p i n i o n f o r b o t h c a s e s
. 

### 5

## 11.182(b), (c) , (d), (g ), and (j). The trial court denied the Arbors’ motion, struck their evidenc e, and

g rante d the District’s motion.
The court of appea ls aff

irmed, holding only that th e Ar b o rs h ad produce d no evidenc e showing that they had complied with one portion of Section 11.182(g ). This, the court conclude d, 1 5


## was sufficient t o entitle the Dis trict to s u m m ar y j u dg ment without considering whether there was
evidenc e that the Ar

bors met the other

require ments for a

n exemption for the apar

tments. We g rante d both of

the Arbor s’ petitions for re view. We c onsider first whether the court 1 6


## of appea ls’ holding was corr ect. Concluding t h at i t wa s n ot, we then turn to the principal issue disputed by the parties though not addre ssed by the court of appea ls: whether Atlantic’s owner ship
of the Arbors qualifies their proper ty for a tax exemption under Section 11.182(b). We rema nd the

case to the court of a

ppeals for consideration of the rema ining issues.

II Section 11.182(g ) states:

To rec eive an exemption under Subsection (b) or (f) , an org anization must annually have an audit prepa red by an independe nt auditor. The audit must include
a detailed repor

t on the org anization’s source s and uses of funds. A copy of the audit must be delivere d to the Texas Depa rtment of Housing and Communi ty Affa irs and t o t h e chief appra iser of the appra isal district in which the proper ty subject t o t h e exemption i s located.

_ _ _ S

. W

. 3 d

_ _ _ ( T e x
. A p p
. – W a c o 2 0 1 0 )

. 15

5 4 T e x
. S u p
. C t

. J

. 1 5 5 4 ( A u g
. 2 2 , 2 0 1 1 )

. T h e A r b o r s e a c h f i l e d a s e p a r a t e p e t i t i o n f o r r e v i e w , b u t b e c a u s e 16 t h e p e t i t i o n s a n d t h e D i s t r i c t ’ s r e s p o n s e s a r e e s s e n t i a l l y i d e n t i c a l i n b o t h c a s e s , w e h a v e c o n s o l i d a t e d t h e c a s e s f o r d e c i s i o n
. 

### 6

## The court of appea ls held that beca use the Arbors offe red no evidenc e that they delivere d a copy of
their annual audit to TDHCA, they failed to show that they qualified for an exemption. But Section 11.182(g ) plainly conditions an exemption only on the prepa ration of an audit — something that

must be done “[t] o rec eive an exemption”. The statute does not state that a failure to meet its other require ments — that the audit be detailed, that it ref lect both the source s and uses of funds, and that
it be delivere d b o t h to TDHCA and the chief appra iser — likewise results in the denial of an exemption.

We c onfronted a

simil ar situation in Flores v. Millenium I nterests, Ltd. Section 5.077(a)

1 7


## of the Texas Property Code require s that a p erson who sells a residenc e by executory contra ct (sometimes called a contra ct for deed) must provide the purcha ser with a statement ever y J anuar y
. 1 8


## Subsections (c) and (d) impose liquidated damag es on sellers who “fa il[ ] to comply with Subsection (a) ”. S u bsection (b) provides that an annual statement “must include” specific information 1 9



## reg arding amounts paid and rema ining due under the contra ct. The purcha sers in Flores rec eived 2 0


## annual statements but claimed liquidated damag es beca use some o f t he information require d by
Subsection (b) was omitted. The omissions wer e minor, and the purcha sers did not claim to have 2 1


## been prejudice d in any way
. We held that the statute tied the rig ht to liquidated damag es “to timely

1 8 5 S

. W

. 3 d 4 2 7 ( T e x
. 2 0 0 5 )

. 17

T E X

. P R O P

. C O D E § 5

. 0 7 7 ( a )

. 18

I d

. § 5

. 0 7 7 ( c )

- ( d )

. 19

I d

. § 5

. 0 7 7 ( b )

. 20

F l o r e s , 1 8 5 S

. W

. 3 d a t 4 3 0

- 4 3 1

. 21


### 7

## delivery of t he annual statement, but not its contents.” Only a st atement so defic ient as t o be no 2 2



## statement at a ll would fail to comply with Section 5.077(a). 2 3


## Under Section 11.182(g ), t he failure to conduct an audit is unders t an d ably fata l to a claim
for exemption, but defic iencies in the contents o r d el i v ery are matters that presumably may be

co rr ected. Which is not to say that the require ments are unimportant. Acc ording to the Di s t ri ct , delivery of an applicant’ s audit to TDHCA is critica l beca use that ag ency administers NAHA funds
and has the ability to analy ze whether an org anization is comply ing with fede ral require ments as well

as the require ments for a state tax exemption. We do not disag ree
. I ndeed, Section 11.182(g ) makes delivery of the audit to TDH C A mandatory

. But wher e, as here , the statute “does not specify the

conseque nces f

or noncomplianc e[,] . . . we ha ve looked to its purpose for g uidance .” 2 4


## The District arg ues, and we ag ree , that the statute require s applicants’ audits to be delivere d

to TDHCA so that chie f appra isers will have the benef it of that ag ency ’s revie w. I f an appra isal
district did not believe that revie w nece ssary in a particula r case , it could g rant an exemption based

on its own revie w. I f it neede d the revie w, the district could delay action on the application until the require ment has been met. But the statute does not authorize a district to deny an exemption for nondelivery of an audity to TDHCA. The pu rp o s e o f t h e statute is to provide a chief appra iser

I d

. a t 4 3 3

. 22

I d

. 23

H i n e s v

. H a s h , 8 4 3 S

. W

. 2 d 4 6 4 , 4 6 8 ( T e x
. 1 9 9 2 ) ; a c c o r d I n r e F r a n c i s , 1 8 6 S

. W

. 3 d 5 3 4 , 5 4 0 ( T e x
. 2 0 0 6 ) ; 24 H u b e n a k v

. S a n J

a c i n t o G a s T

r a n s m i s s i o n C o

. , 1 4 1 S

. W

. 3 d 1 7 2 , 1 8 4 ( T e x
. 2 0 0 4 ) ; H e l e n a C h e m

. C o

. v

. W i l k i n s , 4 7 S

. W

. 3 d 4 8 6 , 4 9 4 ( T e x
. 2 0 0 1 )

. 

### 8

## substantive information to use in proce ssing an application fo r ex empt ion. Wit hholding a ruling

pending delivery of an audit to TDHCA serve s the statute’s purpose; deny ing an exemption does not.
I n the District’s view, noncompliance with any require ment of Section 11.182(g ) results in
the denial of an exemption. Thus, an appra isal district could deny an exemption on the basis that an
audit repor

t was insufficiently detailed, i f o n l y i n minor, even irrele vant, respe cts. This was essentially the same arg ument that we reje cted in Flores beca use it serve d to impede rather than
further the statute’s purpose . We apply the same r easoning here

. Acc ording ly , we conclude that the District is not entitled to summary judgme nt deny ing the
Arbors’ reque sted tax exemption for lack of evidenc e of complian ce with the audit delivery require ment of Section 11.182(g ).

III
The Arbors’ centr al arg ument was not addre ssed by the court of appea ls. Section 11.182(b),

as noted above, allows “[a]n org anization” a tax exemption on “prope rty it owns” if, as rele vant here , it is “org anized as a [C HDO]” and “owns the proper ty for the purpose of” p rovi ding low- or
modera te-inc ome housing without profit. The Arbors contend that their apar tments are exempt 2 5



## proper ty beca use owner ship, within the meaning of the statu t e, includes equitable title, which Atlantic, a TDHCA-c ertified CHDO, holds by virtue of its complete contr o l o f the Arbors. The
District arg ues that owner ship means leg al title, and beca use there is no evidenc e that the Arbors are CHDOs themselves, they are not entitled to an exemption.

T E X

. T A X C O D E § 1 1

. 1 8 2 ( b )

. 25


### 9

## The text of Subsection (b) does not sug g est a re s o l u t i o n of the parties’ dispute. But

Subsection (e) provides that in cer tain instances, proper

ty “owne d by a limit ed partne rship” may be

tax-ex empt if 100 perc ent of its g ener al partne r is controlled by a CHDO meeting the require ments
of Subsection (b). The meaning of “owne d” is n o cl ea re r i n (e ) than in (b), but even assuming
“owne d” require s leg al title, Subsection (e) would still allow a CHDO an exemption for proper ty to
which it does not hold leg al title, and may not completely control, to the extent limit ed partne rs may participa te. We are unconvince d that limit ed partne rships are the one exception to Subsection (b)’ s

2 6 

## require ment of leg al owner ship by a CHDO and see no rea son to d i s t i ng uish betwee n a g ener al
partne r’s control of a limit ed par tnership and other

ty pes of c orpora te control over rela ted entities,
such as Atlantic’s complete owner ship of its subsidiaries in this case
. The strong er arg ument is that
Subsection (e) demonstrates that proper ty may be tax-ex empt even if a CHDO is only a participa nt
in tiered owner ship. The purpose of Subsection (e) is not to car ve out an exception for non-CHDO
limit ed par

tnerships but to limit exemptions for lim ited partne rships to those in which the g ener al
partne r is wholly

CHDO-owne d.
Subsection (e) informs our construction of Subsection (b), three sentenc es ear lier. Both provide a tax exemption for the CHDO-c ontrolled use of proper ty for low- and modera te-income housing without pr ofit. Equitable owner ship — the prese nt r ight to compel leg al title — assure s 2 7



## g rea ter CHDO c ontrol under Subsec tion (b) than re quired by Subsection (e)

.

S e e T E X

. B U S

. O R G S

. C O D E § 1 5 3

. 1 0 2 ( a ) ( “ A l i m i t e d p a r t n e r i s n o t l i a b l e f o r t h e o b l i g a t i o n s o f a l i m i t e d 26 p a r t n e r s h i p u n l e s s
. . . t h e l i m i t e d p a r t n e r p a r t i c i p a t e s i n t h e c o n t r o l o f t h e b u s i n e s s
. ” )

.

C a r m i c h a e l v

. D e l t a D r i l l i n g C o

. , 2 4 3 S

. W

. 2 d 4 5 8 , 4 6 0 ( T e x
. C i v
. A p p
. – T e x a r k a n a 1 9 5 1 , w r i t r e f ’ d ) ( “ A n 27

e q u i t a b l e t i t l e i s t h e p r e s e n t r i g h t t o t h e l e g a l t i t l e
. ” )

. 

### 1 0

## Moreove r, this const ruction, as the Arbors arg ue, acknow ledg es the rea lities of the

commerc ial h o u s i n g i n dustry

. We have observe d that in many instances, lender s require that

proper ty be purc hased by

a sing le-a sset entity

“so that in the event of defa ult, the collatera l can be

rec overe d more easily than from a debtor with multipl e assets and multipl e cre ditors.” Often, the 2 8 

## timing of proper

ty acquisition does not allow the acquir ing entity to obtain a fede ral tax exemption

or otherwise qualify as a CHDO. When the entity is wholly owned by a CHDO, use of the proper ty
for low-income housing is a ssured. Also, tiered owner ship a llows g rea ter flexibi lity for investors,

encour ag ing the involvement of private funds i n developing low-income housing, which was part
of NAHA’ s pu rp o s e i n cre ating the conce pt of CHDOs. And, of course , the ad valorem tax 2 9 

## exemption allows charitable or g anizations to operate with less re venue.
The District arg ues that this construction of Section 11.182(b) violates the rule that statutes
confe rring tax exemptions must be strictly construed. But strictly construing Subsection (b) does 3 0



## not require u s t o ignor e Subsection (e) or the purpose of the exemption. The District points to leg islative history surrounding the enac tment of Subsection (j), sug g esting that the L eg islature made
the ex empti on unavailable afte r 2003 beca use property was being removed from tax rolls with no

B a s i c C a p i t a l M g m t

. , I n c

. v

. D y n e x C o m m e r c i a l , I n c

. , 3 4 8 S

. W

. 3 d 8 9 4 , 8 9 7 ( T e x
. 2 0 1 1 )

. 28

4 2 U

. S

. C

. § 1 2 7 2 2 ( c ) ( 2 0 1 2 )

. 29

B u l l o c k v

. N

a t ’ l B a n c s h a r e s C o r

p

. , 5 8 4 S

. W

. 2 d 2 6 8 , 2 7 1

- 2 7 2 ( T e x
. 1 9 7 9 ) ( “ S t a t u t o r y e x e m p t i o n s f r o m 30 t a x a t i o n a r e s u b j e c t t o s t r i c t c o n s t r u c t i o n s i n c e t h e y a r e t h e a n t i t h e s i s o f e q u a l i t y a n d u n i f

o r m i t y a n d b e c a u s e t h e y p l a c e a g r e a t e r b u r d e n o n o t h e r t a x p a y i n g b u s i n e s s e s a n d i n d i v i d u a l s
. A n e x e m p t i o n c a n n o t b e r a i s e d b y i m p l i c a t i o n , b u t m u s t
a f f i r m a t i v e l y a p p e a r , a n d a l l d o u b t s a r e r e s o l v e d i n f a v o r o f t a x i n g a u t h o r i t y a n d a g a i n s t t h e c l a i m a n t

. S i m p l y s t a t e d , t h e b u r d e n o f p r o o f i s o n t h e c l a i m a n t t o c l e a r l y s h o w t h a t i t c o m e s w i t h i n t h e s t a t u t o r y e x e m p t i o n
. ” ( c i t a t i o n s o m i t t e d ) )

. 

### 1 1

## rea l benef

it to the community

. But any rese rvations the L eg islature may eventua lly have had about the wisdom of Section 11.182’s exemption do not alter the mea ning of the statutory

text

. The District arg ues that since taxation ordinarily falls only on leg al owner ship, exemptions 3 1 

## should benefit only

leg al owner s. Whi le the arg ument has the virtue of sy mmetry , the L eg islature
is not so const ra i n ed i n authorizing tax exemptions

. The District also arg ues t hat entit ies that are separate for purposes of i mposing li ability should not be treated as one for purposes of qualify ing
for tax exemptions

. But fede ral tax law disreg ards the separ ate identity of some entities, as it does 3 2


## with Atlantic and the Ar

bors, and ther e is no rea son why Section 11.182 should not do the same.

I n five case s, the courts of appea ls have differ ed in their construction of Section 11.182. I n
the first, Orange County Appraisal District v. Agape N ei ghborhood Improve ment, Inc. , the court
allowed an exemption for proper ty , title to which was held by a CHDO’s wholly -owne d subsidiary ,
not unlike the situation prese nted here

. The court’s analy sis appea rs to have been consistent with 3 3



## ours today

. But in the next case , American Housing Foundation v. Brazos County Appraisal

District , t he court denied an exemption for proper ty held by a limit ed partne rship with a CHDOowned g ener al partne r. Then in TRQ Captain’s Landing v. Galveston Central Appraisal District , 3 4


## the court upheld an exemption for a limit ed partne rship that was wholly owned by a limit ed liability

C h i l d r e s s C n t

y

. v

. S t a t e , 9 2 S

. W

. 2 d 1 0 1 1 , 1 0 1 5 ( T e x
. 1 9 3 6 ) ( “ T h e p e r s o n h a v i n g l e g a l t i t l e t o p r o p e r t y i s 31 g e n e r a l l y c o n s i d e r e d t o b e t h e o w n e r t h e r e o f f o r p u r p o s e s o f t a x a t i o n
. ” )

.
S e e s u p r a n o t e 1 3

. 32

5 7 S

. W

. 3 d 5 9 7 , 6 0 1

- 6 0 2 ( T e x
. A p p
. – B e a u m o n t 2 0 0 1 , p e t

. d e n i e d )

. 33

1 6 6 S

. W

. 3 d 8 8 5 , 8 8 9 ( T e x
. A p p
. – W a c o 2 0 0 5 , p e t

. d e n i e d )

. T h e c o u r t c o n c l u d e d t h a t S e c t i o n 1 1

. 1 8 2 ( e ) d i d 34

n o t a p p l y b e c a u s e t h e a p a r t m e n t s a t i s s u e w e r e c o n s t r u c t e d b e f o r e t h a t p r o v i s i o n ’ s e f

f e c t i v e d a t e
. I

d

. 

### 1 2

## corpor ation with a CHDO as its only member. The c ourt held that the CHDO had equitable title

3 5



## to the property of i ts subsidi ary ’s subsidiary , that such owne rship satisfied S ection 11.182(b), and
that the C HDO’ s exemption was im puted t o the l eg al owner, the t axpay er. T h e co u rt’s analy sis 3 6



## was e ssentially

the same a s ours here

. But the next y ear , the court in Jim W ells County Appraisal District v. Cameron Village, Ltd. disag ree d. There , a CHDO ow ned only the limited partnership’s g ener al par tner, not the limited 3 7


## partne r, too, as in TRQ Captain’s Landing , but the court did not base its decision on that distinction.

R at her, it conclude d that a “CHDO must be the rec ord owner of the proper ty to qualify fo r t h e exemption under section 11.182(b).” On simil ar fac ts, in Har ris County Appraisal District v. 3 8



## Primrose Houston 7 Housing L.P. , a differ ent panel of the same court that decide d TRQ Captain’s Landing denied an e xe mp ti o n to a limit ed partne rship beca use its CHDO-g ener al partne r owned only

a tiny fra ction of the limit ed partne rship interest. Unlike t h e court in Cameron Village , the 3 9



## Primrose cou rt agre ed with TRQ Captain’s Landing that “CHDO status, as a nece ssary condition

to rec eiving an exemption under section 11.182(b), can be imputed to non-CHDO subsidiaries that

are wholly owned and con t rolled by a CHDO”, but distinguished that case beca use there , the 4 0

2 1 2 S

. W

. 3 d 7 2 6 ( T e x
. A p p
. – H o u s t o n [ 1 s t D i s t

. ] 2 0 0 6 , p e t

. g r a n t e d )

. O u r c o n s i d e r a t i o n o f t h e p e t i t i o n i n T R Q 35 C a p t a i n ’ s L a n d i n g h a s b e e n a b a t e d d u e t o r e s p o n d e n t ’ s b a n k r u p t c y
.
I d

. a t 7 3 2

. 36

2 3 8 S

. W

. 3 d 7 6 9 ( T e x
. A p p
. – S a n A n t o n i o 2 0 0 7 , p e t

. d e n i e d )

. 37

I d

. a t 7 7 8

. 38

2 3 8 S

. W

. 3 d 7 8 2 ( T e x
. A p p
. – H o u s t o n [ 1 s t D i s t

. ] 2 0 0 7 , p e t

. d e n i e d )

. 39

I d

. a t 7 8 7

. 40


### 1 3

## CHDO also owned the limit ed partne r. Wit hout such control, the co u rt co n cluded, the CHDOg ener al par

tner did not have equitable title to the limited partnership’s pr operty

. 4 1



## We ag ree with the rea soning i n T R Q Captain’s Landing , which, as we have explained, is compelled by the text of Section 11.182 and consi s t en t with its purpose. The dissent in that case
arg ued that the majority would allow mere investors in an entity to benef it from a tax exemption on
proper ty the entit y can control. But thi s is true only when the investors are CHDOs. As long as 4 2



## a CHDO has equitable title to proper ty , we see no rea son to trea t investors with a CHDO differ ently
from investors in the CHDO. I ndeed, a s we ha ve obser

ved alr eady , CHDOs wer e cr eate d to draw private inve stments into publ ic housing

. Acc ording ly , we hold that a CHDO’s equitable owner ship of proper ty q u alifies for an exemption under Section 11.182(b).

IV
We apply this rule to the situation befor e us. Eac h of the Arbors i s a l i m i t ed liability

company with a single asset — the apar tments — and a single member — Atlantic, a CHDO. Eac h
of the Ar bors has manag ers, who, under Texas la w, are the g overning authority of the c ompany
. 4 3

I d

. T h e c o u r t d i d n o t e x p l a i n w h y t h e g e n e r a l p a r t n e r l a c k e d c o n t r o l o f t h e l i m i t e d p a r t n e r s h i p , n o r w h y 41 S e c t i o n 1 1

. 1 8 2 ( e ) w a s n o t c o n s i d e r e d

.

T R Q C a p t a i n ’ s L a n d i n g , 2 1 2 S

. W

. 3 d a t 7 4 0

- 7 4 1 ( B l a n d , J

. , d i s s e n t i n g )

. 42

T E X

. B U S

. O R G S

. C O D E § 1 0 1

. 2 5 1 ( “ T h e g o v e r n i n g a u t h o r i t y o f a l i m i t e d l i a b i l i t y c o m p a n y c o n s i s t s o f

. . . 43 t h e m a n a g e r s o f t h e c o m p a n y , i f t h e c o m p a n y ’ s c e r t i f i c a t e o f f o r m a t i o n s t a t e s t h a t t h e c o m p a n y w i l l h a v e o n e o r m o r e m a n a g e r s
. . . . ” )

. 

### 1 4

## But manag ers serve at the pleasure of the members. Thus, Atlantic has complete control over the 4 4


## Arbors and equitable title to their proper ty — the power to compel transfe r of leg al title. This

owner ship satisfies the require ment of Section 11.182(b) that exe m p t p ro p erty be owned by a
CHDO. For purposes of a fede ral income tax exemption, Atlantic and the Arbors are trea ted as one.
For the same r eason, the ad valorem exemption i s imputed to the Arbors.
The parties raise many other issues. The District contends that the Arbors are not char itable

org anizations, that their apar tment s ar e not used for low- and modera te-income housing, and that other requireme nts of Section 11.182 as we ll as fede ral lawhave not be en met. The Arbors arg ue
that the trial court err ed in striking their evidenc e and in concluding that no evidenc e supported their applications for exemptions

. We express no view on any of these issues. We reve rse the judgme nt
of the c ourt of appe als and re mand the ca se to that court f or fur ther c onsideration.

Nathan L . Hec ht J ustice
OP INION DELIVERED: J une 8, 2012

I d

. § 1 0 1

. 3 0 4 ( “ [ A ] m a n a g e r o f a l i m i t e d l i a b i l i t y c o m p a n y m a y b e r e m o v e d , w i t h o r w i t h o u t c a u s e , a t a 44

m e e t i n g o f t h e c o m p a n y 's m e m b e r s c a l l e d f o r t h a t p u r p o s e
. ” )

.



### 1 5