Honorable William P. Hobby 

Lieutenant Governor of Texas 

State Capitol 

Austin, Texas 

Opinion No. H-1022 

Honorable Bill Clayton 

Speaker of the House Re: Valuation of property 

State Capitol for ad valorem taxation 

Austin, Texas purposes. 

Dear Governor Hobby and Speaker Clayton: 

You have asked our opinion on four questions relating to 

ad valorem taxation and the distribution of funds for public 

school purposes. 

Your first question is: 

Ray the' Legislature, in exercising its 

duty under Articl.e 8, Section 1, of the 

Texas Constitution, to provide by law how 

value is to be ascertained for ad valorem 

tax purposes, constitutionally provide that 

land used to produce agricultural products 

be valued for ad valorem tax purposes according to some standard of value other 

than market value, such as valuation on 

the basis of use or capability to produce 

agricultural products? 

We initially note that the first question is directed 

solely to article a, section 1 and does not involve article 

9, section l-d which is discussed in your second question 

and which involves valuation of certain agricultural land. 

Article a, section 1 of the Texas Constitution provides in 

part: 

Taxation shall be equal and uniform. All 

property in this State, whether owned by 

I’ . 4220 
. . 

Honorable William P. Hobby 

Honorable Bill Clayton - Page 2 (H-1022) 

natural persons or corporations, other 

than municipal, shall be taxed in proportion to its value, which shall be ascertained as may be provided by law. 

On several occasions Texas courts have specifically indicated that the term "value," as used in article 8, section 

1, means market value. Lively v. Missouri, K. & T. Ry. of 

Texas, 120 S.W. 852, 856 (Tex. 1909); Rowland v. City of Tyler, 

5.2d 756, 760 (Tex. Comm'n App. 1928, jdgmt adoptea) Harlingen Independent School Dist. v. DunlaE, 146 S.W.2d 235, m 

(Tex. Civ. App. -- San Antonio 1940, writ ref'd); Atlantic 

Richfield Co. v. Warren Independent School Dist., 453 S.W..2d 

190 19/ (Tex. Civ. App. -- Beaumont 1970 writ ref'd n.r.e.); 

Diekrich v. Phipps, 438 S.W.2d 900, 902 (&ex. Civ. App. -- 

Houston [lst Dist) 1969, no writ). See Whelan v. State, 282 - 

S.W.2d 378, 380 (Tex. 1955); State v. Whittenburq, 26 5 S.W.Zd 

569, 572 (Tex. 1954). While it can be argued that the portion 

of article a, section l,.which refers to a~scertainment of value 

"as provided by law" permits the Legislature to establish a 

standard of value for taxation purposes other than market value, 

the courts have clearly ruled otherwise. See also Tex. Const. 

art. 8, § 20. Accordingly, it is our opinion that article 8, 

section 1 of the Constitution does not permit the Legislature 

to provide for the taxation of property other than in proportion to its market value. 

Your second question is: 

If the answer to question #l is negative, 

could the Legislature constitutionally .provide for use of a standard of value other 

than market value for taxation of agricultural land if Article 8, section l(d), of the 

Texas Constitution were repealed? 

Article a, section l-d permits assessment of certain land 

at its agricultural use value. While this technique is based 

on market value principles, see King v. Real, ~466 S.W.Zd 1 

(Tcx. Civ. App. -- San Antonliol971, writ ref'd n.r.e.); Attorney General Opinion H-863 (1976). it will generally result 

in a lower value than assessment at full market value. 

If article 8, section l-d were repealed the standard of 

value would be determined by the requirements of article 8, 

section 1. In light of the judicial authority reviewed in 

P. 4221 
Honorable William P. Robby 

Honorable Bill Clayton - Page 3 (H-1022) 

discussion of your first question, it is apparent that the 

repeal of article a, section l-d, would leave the Legislature 

without authority to value agricultural land other than in 

proportion to its market value. 

Your third question is: 

May the Legislature, by statute, constitutionally provide that single-family residences be valued for tax purposes on the 

basis of a percentage of market value? 

We understand this question to involve the power of the 

Legislature to provide for the assessment of residential property at a different percentage of market value than other property. As noted above, article 8, section 1 of the Texas Constitution requires that taxation be equal and uniform. The 

courts have found schemes to tax one class of property at a 

percentage of its value and another class at a differentpercentage to be unconstitutional. Among the plans the courts 

have overturned include an omission of certain types of property from the tax rolls, City of Arlington v. C%Inon, 251 

S.W.2d 414, 416 (Tex. 1954); the assessment of railroad intangible property at full market value while all other property 

was assessed at 67 percent of value, <Lively v. !Iissouri,.K. 

& T. Ry. of Texas, supra at 856; and the assessment of land 

at 70 percent of full value, improv~ements at 25 percent, stocks 

of merchandise at 5Q percent and omission of money, stocks, 

bonds, notes and mortgages from the tax rolls. City of Houston 

v. Baker, 176 S.W. 820, 623 (Tex. Civ. App. -- Galveston 1915, 

writ ref'd). See Yudof, - The Property Tax in Texas under State 

and Federal Law, 51 Tex. L. Rev. 885,' 899-900 (1973). Accordingly, it is well established that-any plan to value or assess 

one class of property at a smaller percentage of market value 

than other property is prohibited by the Constitution. 

Your final question is: 

In calculating the local share of financing the Minimum Foundation Program in 

public education, may the Legislature, by 

statute, set local fund assignments based 

on property values estimated at less than 

market value? 

P. 4222 
Honorable William P. Hobby 

Honorable Bill Clayton - Page 4 (H-1022) 

While your first three questions relate to assessment 

and taxation of property, the final question involves distribution of State funds to local school districts. We note 

that the current formulas for distributing state funds for 

education are under attack in the United States District Court 

for the Western District of Texas in Wilson v. Brockette 

(Civil Action No. A-76-CA-2231 and Bennett v. Brockette (Civil 

Action No. A-77-CA-21). Plaintiffs ins thes e cases allege that 

the current formula for distribution of state funds is invalid 

since it is alleged to entirely omit the value of substantial 

amounts of property which are required by law to be taxed. 

See also Sheffield v. Driscoc (No. --- 

Tcxasiipi%iiieCourt. 'l'hczadings 

B-6829) now pending in the 

in these suits do not precisely raise the issues involved in your more general inquiry, 

but the issues are similar and we call your attention to the 

litigation. 

In determining how to allocate state funds for public 

education, the Legislature has broad authority. Efunnne v. 

Marrs, 40 S.W.2d 31 (Tex. 1931). In fact, the Texas Constitution even provides a method other than property valuation 

for the distribution of certain school funds. Tex. Const. 

art. 7, § 5. It also requires the Legislature to 'make suitable provision for the'support and maintenance of an efficient system of public free schools." Tex. Const., art. 7, 

§I. The federal constitutional requirement that will have 

to be satisfied by any school finance plan is that it must 

bear some rational relationshio to a leaitimate state DurDose. 

San Antonio Independent School*Dist. v.-Rodriguez, 411-U.S. 1 

(1973). For example, WC have already indicated that assessments determined pursuant to article 8, section l-d of the 

Texas Constitution, which permits certain land to be assessed 

on the basis of agricultural use factors, could constitutionally 

be utilized in the formula by which school aid was apportioned 

among districts. Letter Advisory No. 109 (1975). 

Whether a particular proposal will meet the constitutional 

test will depend on the details of the proposal and its relationship to the overall statutory scheme of which it is a part. 

your question is broadly phrased, and no specific legislative 

proposal is before us. Unless and until a specific proposal 

is presented, we have no basis on which to say that any and all 

proposals which might fall within the scope of your inquiry 

would meet the constitutional test we have outlined. We believe that any proposal the Legislature adopts should specific;I~~L~ indicate the legitimate state purpose which is being 

served by the formula and should clearly reflect the rational 

relationship between the legitimate state purpose and the formula. 

P. 4223 
,.._ . . 

* (. ” 

Honorable William P. Hobby 

Honorable Bill Clayton - Page S (H-1022) 

SUMMARY 

The Texas Constitution requires that property be assessed for taxation purposes in 

proportion to its market value. The Legislature may not provide that one type of 

property be assessed at a smaller percentage of its market value than other types 

of property. 

The Legislature has a constitutional obligation to provide for the support and 

maintenance of an efficient system of public 

free schools. It has broad authority to 

devise a plan to distribute state funds 

for public education. Any proposal the Legislature adopts should specifically indicate 

the legitimate state purpose which is being 

served by the formula and should clearly reflect t,he rational relationship between the 

legitimate state purpose and the formula. 

Very truly yours, 

JOHN L. HILL 

Attorney General of Texas 

APPROVED: 

DAVID M. KENDALL, First Assistant 

Opinion Committee 

klw 

p- 4224