May 23, 1989 

Honorable Garry Mauro Opinion No. JM-1049 

Commissioner 

General Land Office Re: Whether real property 

Stephen F. Austin Building belonging to the Permanent 

1700 North Congress Avenue School Fund is exempt from 

Austin, Texas 78701 property taxes when it is 

leased to a private business 

(RQ-1408) 

Dear Mr. Mauro: 

You ask five questions regarding the taxability of 

certain interests in real property comprising part of the 

permanent school fund, specifically, the interest retained 

by the state when it has leased land to private businesses. 

Your request is prompted by the following two fact 

situations. First, in September 1986, the state acquired 

title in fee simple absolute to two tracts of land in 

Tarrant County for the use and benefit of the permanent 

school fund. At the time that the state acquired title, you 

leased both tracts on behalf of the permanent school fund to 

a Texas corporation. A commercial strip shopping center is 

located on one tract: no improvements are located on the 

second tract. The permanent school fund owns only the real 

property; it owns none of the improvements located thereon. 

The Texas corporation to which you leased the first tract 

owns the improvements and, in turn, has subleased the tract 

to the occupants of the stores. In October of 1987, Tarrant 

County and an independent school district located in Tarrant 

County sent tax statements to the General Land Office, 

imposing ad valorem taxes on the real property but not on 

the improvements. 

The second situation you ask'about involves the taxability of coastal and upland lands that are dedicated by 

statute to the permanent school fund. Pursuant to chapter 

33 of the Natural Resources Code, the School Land Board, of 

which you are a member, has the authority to grant easements 

for private use of coastal and upland public land and 

leases for use by public entities. It is your understanding 

P. 5442 
Honorable Garry Mauro - Page 2 (JM-1049) 

that local taxing units intend to impose ad valorem taxes 

against easement holders that engage in private businesses 

(such as oil and gas pipelines and commercial marina 

operations) based upon the property values of the permanent 

school fund property encumbered by the easements. 

You contend that both the permanent school fund land 

leased to a private business enterprise, as well as any 

leasehold interest encumbering it, is exempt from property 

taxation. In other words, you contend that both the real 

property in the hands of the state and the leasehold 

interest in the hands of the private lessee are exempt from 

property taxation. In the alternative, you contend that, if 

the permanent school fund land that is leased to a private 

business enterprise is taxable, then only the leasehold 

estate is taxable to the private business enterprise: YOU 

contend that the real property itself is not taxable to the 

state. 

You first ask: 

Does TEX. CONST. art. VIII, 52 and art. VII, 

~$5, in conjunction with Tex. Tax Code Ann. 

§ll.ll(a) (Vernon 1982), exempt Permanent 

School Fund property from ad valorem,property 

taxes even though leased to a private business enterprise? 

We conclude that the state's interest in land that is part 

of the permanent school fund is exempt from ad valorem 

taxation, even if the state has leased the land to a private 

concern to be used for a private purpose. 

Article VIII, section 1, of the Texas Constitution 

provides in relevant part: "All real property and tangible 

personal property in this State . . . shall be taxed in 

proportion to its value, which shall be ascertained as may 

be provided by law." Article VIII, section 2, provides in 

relevant part that "the legislature may, by general laws, 

exempt from taxation public property used for 

purposes."1 

public 

Pursuant to article VIII, section 2, the 

1. Article XI, section 9, of the Texas Constitution, 

by its terms, exempts "property of counties, cities and 

towns, owned and held only for public purposes, . . . and 

(Footnote Continued) 

P. 5443 
Honorable Garry Mauro - Page 3 (JM-1049) 

legislature enacted section 11.11 of the Tax Code, governing 

the taxation of public property: 

(a) Except as provided by Subsections (b) 

and (c) of this section, property owned by 

this state or a political subdivision of this 

state is exempt from taxation if the orouerty 

is used for DubliC oUrIJOSeS.2 

(b) Land owned by the Permanent University Fund is taxable for county purposes. 

Any notice required by Section 25.19 of this 

code [Notice of Appraised Value] shall be 

sent to the State Property Tax Board, and the 

board shall appear in behalf of the state in 

any protest or appeal relating to taxation of 

Permanent University Fund land. 

(c) Agricultural land or grazing land 

owned by a county for the benefit of public 

schools under Article VII, section 6, of the 

Texas Constitution is taxable for all purposes. The county shall pay the taxes on the 

land from the revenue derived from the land. 

If revenue from the land is insufficient to 

pay the taxes, the county shall pay the balance from the county general fund. 

(d) Pronertv owned bv the state that is 

not used for wublic nurnoses is taxable. 

Prowertv owned bv a state aaencv or institution is not used for DUbliC ourooses if the 

(Footnote Continued) 

all other property devoted exclusively to the use and 

benefit of the public . . . from taxation . . . ;'I This 

section is self-executing. Because the last clause has 

never been construed to apply to property owned by the 

state, we need not discuss the cases involving counties and 

cities that rely upon this provision. 

2. The Texas Supreme Court has construed the relevant 

language of article VIII, section 2, of the Texas 

Constitution to require exclusive use by the political 

subdivision in order that it receive exempt status. Leander 

IndeD. School Dist. v. Cedar Park Water SUDD~V Corp., 479 

S.W.2d 908 (Tex. 1972). 

p. 5444 
Honorable Garry Mauro - Page 4 (JM-1049) 

prowertv is rented or leased for comoensation 

to a orivate business enternrise to be used 

by it for a wurwose not related to the 

performance of the duties and functions of 

the state aaencv or institution or used to 

provide private residential housing for 

compensation to members of the public other 

than students and employees of the state 

agency or institution owning the property, 

unless the residential use is secondary to 

its use by an educational institution 

primarily for instructional purposes. Any 

notice required by Section 25.19 of this code 

shall be sent to the agency or institution 

that owns the property, and it shall appear 

in behalf of the state in any protest or 

appeal related to taxation of the property. 

(e) It is provided, however, that property that is held or dedicated for the 

support, maintenance, or benefit of an 

institution of higher education as defined by 

Section 61.003(7), Texas Education Code, but 

is not rented or leased for compensation to a 

private business enterprise to be used by it 

for a purpose not related to the performance 

of the duties and functions of the state or 

is not rented or leased to provide private 

residential housing to members of the public 

other than students and employees of the 

state is not taxable. (Emphasis added.) 

By the terms of subsection (d), it might appear that the 

state's interest in the Tarrant County lands you ask about 

are taxable to the state, since both are leased for 

compensation to a private business enterprise to be used by 

it for a purpose not related to the performance of the 

duties of the School Land Board. You contend, however, that 

leasing such property for compensation that will inure to 

the benefit of the permanent school fund is precisely the 

public purpose for which the permanent school fund was 

created and that, therefore, the state is exempt from ad 

valorem taxation on such property. We agree with your 

assertion. Before we discuss specifically the questions you 

submit, we first will present some background information 

regarding the taxation of the various constitutional school 

funds in Texas. 

P- 5445 
Honorable Garry Mauro - Page 5 (JM-1049) 

Article VII of the~Texas Constitution governs public 

education on both the ublic elementary and secondary school 

and university levels. I: Sections 10 through 18 of article 

VII set forth the provisions regarding university level 

education: sections 1 through 8 of article VII set forth the 

provisions regarding public elementary and secondary school 

education. Article VII, section 11, creates a permanent 

university fund, comprising, inter alia, certain lands 

dedicated for such purposes, as well as the proceeds derived 

from the sale thereof: interest derived from the investment 

of the proceeds of the sale of such lands is usually 

referred to as the "available university fund." Article VII 

was amended in 1930 by the addition of section 16(a), which 

provides that all land mentioned in sections 11, 12, and 15 

of article VII, then belonging to the University of Texas, 

shall be subject to taxation for county purposes to the same 

extent as lands privately owned.4 See also Tax Code, 

§ 11.11(b). 

Sections 2 and 6 of article VII create two distinct 

types of trust funds in what has been termed a dual system 

for public elementary and secondary education; section 2 

dedicates state-owned land to a state "perpetual school 

3. Additionally, article VII, section 9, of the Texas 

Constitution dedicates all lands then granted for the 

benefit of the "Lunatic, Blind, Deaf and Dumb, and Orphan 

Asylums" to create a permanent fund for their support, 

maintenance and improvement. 

4. The "Interpretive Commentary" to article VII, 

section 16(a), declares the purpose behind the adoption of 

the 1930 amendment: 

Due ~to the policy of the Board of Regents 

withholding the university lands from sale in 

spite of Art. 7, § 12 of the constitution, 

some of the poorer counties contained large 

areas of untaxable land. In order to assist 

these counties this amendment was adopted in 

1930. 

See also 2 Braden, The Constitution of the State of Texas: 

An Annotated and Comparative Analysis, at 551-52 (1977). 

p. 5446 
Honorable Garry Mauro - Page 6 (JM-1049) 

fund,l15 while section 6 grants certain lands to counties 

also for the benefit of the public schools. -2 Braden, 

suwra, at 530-31. Income derived from the state "permanent 

school fund" is designated by article VII, section 5, as the 

"available school fund." Section 6 creates what is, in 

effect, a system of permanent school funds for the various 

counties, with the income derived from permanent county 

school fund investments dedicated to each county's 

"available school fund." Article VII was amended in 1927 by 

the addition of section 6a (and, subsequently, in 1972 by 

the addition of 6b), which specifically makes taxable for 

all except state purposes those lands set aside for the 

county permanent school funds.6 See Tax Code, 4 11.11(c). 

5. The terminology used to designate the fund is 

confusing: section 2 refers to it as the "perpetual school 

fund".and "perpetual public school fund:" section 4 refers 

to it as the "public free school fund;" and section 5 labels 

it the "permanent school fund." The Texas Supreme Court 

long ago opted for the appellation of section 4, stating 

that sections 2 and 5 provided that certain funds and 

property constituted a "public free school fund." y&r& 

County v. Board of School Trustees, 65 S.W. 878 (Tex. 1901). 

The endowment has been enlarged from time to time by 

statute, which designates it the "permanent school fund." 

Educ. Code 5 15.01. By your use of the phrase "Permanent 

School Fund land," we understand you to mean that real 

property dedicated by section 2 of article VII, whose 

components have been added to by amendment to section 15.01 

of the Education Code. 

6. The "Interpretive Commentary" to article VII, 

section 6a, sets forth the reason for the amendment: 

Article 11, Section 9 of the Texas 

Constitution exempts from taxation 'property 

of counties, cities, and towns owned and held 

for public purposes.' In 1888, the Texas 

Supreme Court held that no tax could be 

levied on a lease-holder of school lands: 

t*County school lands, when leased to raise an 

available school fund, are as exclusively 

devoted to the use and benefit of the public 

as they would be if covered with school- 

(Footnote Continued) 

P. 5447 
Honorable Garry Mauro - Page 7 (JM-1049) 

Therefore, land comprising the state permanent 

university fund is taxable for county purposes only. Land 

comprising the permanent school funds of the various 

counties is taxable for all, except state, purposes. YOU 

ask about the taxability of lands comprising neither the 

permanent university fund nor the various county permanent 

school funds, but rather those comprising the state 

permanent school fund: Neither the Texas Constitution nor 

the Tax Code specifically addresses the issue of the 

taxability of such lands. Nor has any Texas court case or 

attorney general opinion addressed the issue. 

For two reasons we conclude that, under the provisions 

of section 11.11 of the Tax Code, those lands set aside by 

article VII, section 2, of the Texas Constitution for the 

benefit of the public free schools are exempt from ad 

valorem taxation, even in the event that they are leased for 

compensation to private business enterprises to be used for 

purposes not related to the performance of the duties and 

functions of the School Land Board. Moreover, even if 

section 11.11 of the Tax Code fairly could be construed as 

requiring the taxation of permanent school fund land, we 

construe article VII, section 5, of the Texas Constitution 

as forbidding it. 

First, we do not construe section 11.11 of the Tax Code 

to require the taxation of permanent school fund land. By 

the very terms of subsection 11.11(a) of the Tax Code, 

subsections (b) and (c) of section 11.11, which require the 

taxation in certain instances of permanent university fund 

(Footnote Continued) 

houses; and the constitution forbids the 

taxation of the means through which such 

lands may be made to yield a revenue, without 

sale, as fully as does it forbid the taxation 

of the lands. Forbidding the taxation of the 

lands, it forbids the taxation of an estate 

less than fee, whether imposed on the county 

or its lessee." (Daugherty v. Thompson, 71 

T. 192, 9 S.W. 99) 

In order to permit such taxation, except 

for state purposes, Sec. 6a was added to the 

Constitution in 1927. 

See also 2 Braden, m, at 533-34. 

P- 5448 
Honorable Garry Mauro - Page 8 (JM-1049) 

land and land comprising the various county permanent school 

funds, serve as exceptions to the general principles set 

forth in subsections (a) and (d). The express mention or 

enumeration of one person, thing, consequence, or class is 

tantamount to an express exclusion of all others. State v. 

Mauritz-Wells Co., 175 S.W.2d 238 (Tex. 1943); Ex carte 

McIver, 586 S.W.Zd 851 (Tex. Crim. App. 1979). We conclude 

that the express inclusion of subsections (b) and (c), which 

indicates the intention of the legislature to require the 

taxation of certain specified state-owned land as provided 

by the Texas Constitution, likewise indicates the intention 

of the legislature not to require the taxation of permanent 

school fund land. 

Second, we agree with your assertion that the sale or 

lease of land dedicated by article VII, section 2, of the 

Texas Constitution, with the proceeds from such sale or 

lease becoming part of the permanent school fund, is the 

precise public purpose for which such land was dedicated in 

the first instance. Even a cursory reading of the relevant 

provisions of article VII of the constitution makes it clear 

that the legislature that proposed those sections and the 

voters who adopted them did not intend, not that the land 

itself would be used for educational purposes, but rather 

that the income derived from its sale or lease would be so 

used. The establishment of such a fund in the Texas 

Constitution impresses upon the fund the nature of a public 

purpose. Absent specific constitutional language requiring 

taxation, the state's interest in such dedicated lands is 

tax exempt. 

Subsections (a) and (d) of section 11.11 of the code, 

taken together, provide the following: (1) that all 

property owned by the state or a political subdivision is 

exempt from taxation if the property is used for a public 

purpose; (2) that property so owned that is not used for a 

public purpose is taxable: and, (3) that property so owned 

that is rented or leased for compensation to a private 

business enterprise to be used by it for a purpose not 

related to the performance of the duties and functions of' 

the political subdivision, except under certain specified 

exceptions, is not used for a public purpose and therefore 

is taxable. 

If the legislature had intended that land owned by 

either the permanent university fund, the various county 

permanent school funds, or the permanent school fund fall 

within the ambit of (3) above (or, more specifically, 

subsection (d) of section ll.ll), it would have been 

P. 5449 
Honorable Garry Mauro - Page 9 (JM-1049) 

unnecessary to include subsections (b) and (c) in section 

11.11, making land owned by the permanent university fund 

and by the various county permanent school funds taxable. 

The very terms of subsection (d) ordinarily would require 

the taxation of such dedicated lands. If the legislature 

had assumed that such dedicated lands would be taxable, 

subsections (b) and (c) would be mere 

earlier amendments adding section 6a and 

suf;;z;a;z and the 

article 

VII would have been unnecessary. The legislature is never 

presumed to do a useless act. H unter v. 

corr,. , 620 S.W.2d 547 (Tex. 1981): State v. Citv of Dallas, 

319 S.W.Zd 767 (Tex. Civ. App. - Austin 1958), aff'd, State 

v. Citv of Austin, 331 S.W.Zd 737 (Tex. 1960). Had the 

legislature intended that permanent school fund lands be 

taxable, it is reasonable to assume that it would have so 

provided. 

Finally, when construing section 11.11 of the Tax Code, 

we must presume that the legislature intended compliance 

with the Texas Constitution. Gov't Code, g 311.021(l). The 

legislature could not have intended that section 11.11 of 

the Tax Code be construed to require the state's interest in 

permanent school fund land that is leased to a private 

business enterprise be taxed, because to do so would violate 

subsection (a) of section 5 of article VII. That subsection 

provides in relevant part: "Except as provided by this 

section, no law shall ever be enacted appropriating any part 

of the permanent or available school' fund to any other 

purpose whatever . . . .@I This subsection has been construed to prevent the use of any proceeds for any purpose 

not specifically authorized. gg, e.q., Greene v. Robison, 

8 S.W.2d 655 (Tex. 1928) and companion cases: Jerniaan v. 

Finlev, 38 S.W. 24 (Tex. 1896); Attorney General Opinions 

H-881, H-878 (1976); V-147 (1947). We have found no 

authorization permitting proceeds to be expended for ad 

valorem taxation, either in the Texas Constitution or in the 

Tax,~ Education, or Natural Resources Codes. 

We deem it significant that those constitutional 

provisions that govern both the permanent university fund 

and the various county permanent school funds do not contain 

restrictive language comparable to that found in section 5 

governing the permanent school fund. Moreover, we deem it 

significant that sections 6a, 6b and 16(a) of article VII 

had to be added before permanent university land and the 

lands comprising the various county permanent school funds 

were taxed. 

P- 5450 
Honorable Garry Mauro - Page 10 (JM-1049) 

Accordingly, we answer your first question in the 

affirmative; the state's interest in lands owned by the 

permanent school fund that are rented or leased to private 

business enterprises is exempt from ad valorem taxation. 

You next 'ask: 

If any of the tracts mentioned above are not 

fully exempt, are the leasehold estates taxed 

according to Tex. Tax Code Ann. 523.13 and if 

so, to what extent, if any, is the Permanent 

School Fund liable for any taxes that may be 

assessed? 

Section 25.07 of the Tax Code requires that certain 

leasehold and other possessory interests in exempt property 

be listed in the appraisal rolls in the name of the owner of 

the possessory interest. Section 25.07 of the Tax Code 

provides in part: 

(a) Except as provided by Subsection (b) 

of this section, a leasehold or other 

possessory interest in property that is 

exempt from taxation to the owner of the 

estate or interest encumbered by the 

possessory interest shall be listed in the 

name of the owner of the possessory interest 

if the duration of the interest may be at 

least one year. 

(b) Except as provided by Subsections (b) 

and (c) of Section 11.11 of this code, a 

leasehold or other possessory interest in 

exempt property may not be listed if: 

(1) the property is permanent 

university fund land; 

(2) the property is county public 

school fund agricultural land. 

Section 23.13 of the Tax Code governs the appraisal of 

such taxable leaseholds and provides: 

A taxable leasehold or other possessory 

interest in real property that is exempt from 

taxation to the owner of the estate or 

interest encumbered by the possessory 

interest is appraised at the market value of 

P. 5451 
Honorable Garry Mauro - Page 11 (JM-1049) 

the leasehold or other possessory interest. 

However, the appraised value may not be less 

than the total rental paid for the interest 

for the current tax year. 

Sections 25.07 and 23.13 of the code and their 

predecessor statutes have been construed to provide for the 

taxation of a leasehold interest in real property, even in 

an instance in which the real property is exempt from 

taxation to the owner. See, e.a., Martin v. Citv of 

Mesouite, 590 S.W.Zd 793 (Tex. Civ. App. - Dallas 1979, Writ 

ref'd n.r.e.); Irvina Indew. School Dist. v. Delta Airlines, 

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

ref'd n.r.e.) (predecessor statute to section 23.13 of the 

Tax Code specifically held to be constitutional): Attorney 

General Opinions WW-281, WW-270 (1957); O-4661 (1942). We 

conclude that, by the clear terms of sections 11.11, 25.07 

and 23.13 of the Tax Code, the leasehold interests in land 

comprising part of the permanent school fund are taxable to 

the owners of those interests. The permanent school fund 

itself is not liable for such taxes. 

We have already concluded that permanent school fund 

land is not taxable to the state; we know of no reason why 

section 23.13 of the Tax Code does not require the taxation 

of the leasehold estate. Id.7 In such an instance, the 

permanent school fund would not be liable in the event that 

the owner of the leasehold estate fails to tender properly 

any taxes imposed. 

You next ask: 

7. You rely principally upon Dauahertv v. Thomwson, 9 

S.W. 99 (Tex. 1888) and two cases which rely upon Dauahertv, 

Davis v. Burnett, 13 S.W. 613 (Tex. 1890), and Montaomerv v. 

Peach River Lumber Co., 117 S.W. 1061 (Tex. Civ. App. 1909), 

in suwoort of the nrooosition that a leasehold interest in 

exempt-land is aiso- exempt. In a case discussing the 

history of the predecessor statutes to section 23.13 of the 

Tax Code, the Supreme Court of Texas declared, inter alia, 

that Dauaherty is no longer controlling on the issue. 

Philliws Chemical co. v. Dumas Indew. School Dist., 316 

S.W.2d 382 (Tex. 1958), rev/d on other arounds, 361 U.S. 376 

(1959). 

p- 5452 
Honorable Garry Mauro - Page 12 (JM-1049) 

If a leasehold estate is subject to taxation, 

and the lease is terminated or forfeited for 

failure to comply with the lease agreement, 

what party remains liable for the payment of 

taxes? If the tract of land is subsequently 

leased to another entity, does the tax 

liability continue to encumber the property 

or does it remain a personal liability of the 

previous lessee? 

The person owning the possessory interest when the 

assessment is imposed is the person who remains liable for 

any unpaid taxes. Section 32.01 of the Tax Code governs the 

creation of tax liens and provides: 

On January 1 of each year, a tax lien 

attaches to property to secure the payment of 

all taxes, penalties, and interest ultimately 

imposed for the year on the property, whether 

or not the taxes are imposed in the year the 

lien attaches. The lien exists in favor of 

each taxing unit having power to tax the 

property. 

Section 32.07 of the Tax Code governs in an instance in 

which the person who owned a taxable interest in property 

when the tax liability was imposed no longer owns such an 

interest: 

(a) Except as provided by Subsection (b) 

of this section, property taxes are the 

personal obligation of the person who owns or 

acquires the property on January 1 of the 

year for which the tax is imposed. A nerson 

is not relieved of the obliaation because he 

no lonaer owns the wroaertv. (Emphasis 

added.) 

Section 32.07 of the code and its predecessor statutes 

have been construed to preclude the imposition on a 

purchaser of land that was subject to a lien for taxes and 

penalties of personal liability for those taxes and 

penalties. Citv of San Antonio v. Toewwerwein, 133 S.W. 416 

(Tex. 1911): Attorney General Opinions V-441 (1947): O-6293 

(1944); O-5062 (1943). By the clear terms of section 32.07 

of the Tax Code, the person in whose name the possessory 

interest is listed remains personally liable for any unpaid 

taxes, penalty, and interest. We note, however, that the 

taxable interest in the property is itself subject to sale 

P* 5453 
Honorable Garry Mauro - Page 13 (JM-1049) 

for the satisfaction of unpaid taxes validly assessed 

against it, whoever might have been its owner when the taxes 

originally accrued. Tax Code 5 32.01; Attorney General 

Opinions MN-523 (1982); H-1108 (1977). 

You next ask: 

If leasehold estates are subject to taxation 

by the authority of Tex.' Tax Code Ann. 

511.11(d) and 925.07(a), are easements 

granted by the School Land Board also taxable 

to the holder of the easement? If so, what 

is the value of the taxable interest? Is the 

value equal to the consideration paid for the 

easement or the value of the property encumbered or some other measure? 

Section 33.103 of the Natural Resources Code specifies 

those interests that may be granted by the School Land 

Board: 

The board may grant the following 

interests in coastal public land for the 

indicated purposes: 

(1) leases for public purposes; 

(2) easements for purposes connected 

with: 

(A) ownership of littoral property; 

or 

(B) the operation of a facility 

operated by an existing channel and dock 

corporation that was issued articles of 

incorporation under Chapters 13 and 14, 

Title 32, Revised Statutes: 

(3) permits authorizing limited continued 

use of previously unauthorized structures on 

coastal public land not connected with 

ownership of littoral property: and 

(4) channel easements to the holder of 

any surface or mineral interests in coastal 

public land for purposes necessary or 

appropriate to the use of the interests. 

P- 5454 
Honorable Garry Mauro - Page 14 (JM-1049) 

Section 33.111 of the Natural Resources Code governs 

the granting of easements by the board and provides: 

(a) The board may grant easement rights 

to the owner of adjacent littoral property 

authorizing-the placement or location of a 

structure~on coastal public land for purposes 

connected with the, ownership of littoral 

property. 

(b) The board may grant easement rights 

to construct channels, wharves, docks, and 

marinas to an existing corporation that was 

issued articles of incorporation under 

Chapters 13 and 14, Title 32, Revised Statutes. 

(c) Notwithstanding any provision in its 

charter or articles of incorporation to the 

contrary, a corporation described in Subsection (b) of this section may only obtain 

the use of or acquire property from the state 

as provided by that subsection. 

We understand you to ask about the taxability of these 

easements granted by the board. 

As we stated in answer to your third question, sections 

23.13 and 25.07 of the Tax Code impose tax liability on 

"leaseholds and other possessory interests in property that 

is exempt to the owner of the estate or interest encumbered 

by the possessory interest." In Attorney General Opinion 

JM-59 (1983), we construed section 23.13 of the Tax Code to 

require a two-step procedure: first, there had to be a 

determination that the real property in question was exempt 

in the hands of the owner; second, there had to be a 

determination that the rights conferred by the owner of the 

fee constitute a llpossessory interest in property." We have 

already concluded that the real property comprising the 

permanent school fund is exempt in the hands of the state. 

We held in Attorney General Opinion JM-59 that concession 

rights in a state park for the construction and operation of 

a golf course granted by the Department of Parks and 

Wildlife was a sufficient "possessory interest" for purposes 

of section 25.07 of the Tax Code. The issue is whether an 

easement granted by the board likewise constitutes such a 

"possessory interest." 

‘;) 

P. 5455 
Honorable Garry Mauro - Page 15 (JM-1049) 

Section 1.04(16) of the Tax Code defines ~~possessory 

interest" in the following way: 

\Possessory interest' means an interest 

that exists as a result of possession or 

exclusive use of a right to possession or 

exclusive use of a property and that is 

unaccompanied by ownership of a fee simple or 

life estate in the property. However, 

\possessory interest' does not include an 

interest, whether of limited or indeterminate 

duration, that involves a right to exhaust a 

portion of real property. 

Generally, an "easement" is a right one person has to 

use the land of another for a specific purpose. Maanolia 

Petroleum Co. v. Caswell 1 S.W.2d 597 (Tex. Comm'n App. 

1928, judgm't adopted); Biller v. Babb, 263 S.W. 253 (Tex. 

Comm'n App. 1924, judgm't adopted). Section 33.111 of the 

Natural Resources Code specifies the purpose for which the 

board can grant easements, i.e., "the placement or location 

of a structure on coastal public land for purposes connected 

with the ownership of littoral property." By the 

terms of section 33.111 of the Natural Resources Code, 

cl;;: 

interest or easement granted is clearly a tVpossessory 

interest" for purposes of the Tax Code. Therefore, we 

conclude that an easement granted by the board pursuant to 

section 33.103 of the Natural Resources Code falls within 

the ambit of sections 25.07 and 23.13 of the Tax Code and iS 

taxable. Any such easement granted must be appraised 

pursuant to section 25.07 of the Tax Code. 

Finally, you ask: 

If any interest held by the Permanent School 

Fund is not exempt from ad valorem taxation, 

and if the Permanent School Fund has cause to 

question the notice given by the taxing 

authority, the listing of the property in the 

name of the Permanent School Fund, or the 

valuation of the subject property, what is 

the appropriate procedure for the Permanent 

School Fund to protest such notice, listing, 

or valuation and to what extent would the 

Attorney General be required to represent the 

Permanent School Fund in such protest? 

In view of our answers to your previous questions, we 

need not answer your last question. 

P. 5456 
Honorable Garry Mauro - Page 16 (JM-1049) 

SUMMARY 

The state's interest in real property 

comprising the permanent school fund ' 

exempt from ad valorem taxation, even in ttz 

event that the property is leased to a 

private business enterprise. The leasehold 

estates in land comprising the permanent 

school fund are taxable to the lessees. If 

such a leasehold is terminated and taxes 

remain unpaid in the leasehold estate, the 

tax liability becomes a personal liability of 

the lessee who possessed the leasehold estate 

when the tax was imposed and the lien against 

the leasehold estate remains in force. 

Easements granted by the School Land Board in 

coastal and upland public lands that are 

dedicated to the permanent school fund are 

taxable pursuant to sections 11.11 and 23.13 

of the Tax Code; such easements must be 

appraised pursuant to the provisions of 

section 25.07 of the Tax Code. 

Very truly yo Ll L iii&L 

JIM MATTOX 

Attorney General of Texas 

MARY KELLER 

First Assistant Attorney General 

LOU MCCREARY 

Executive Assistant Attorney General 

JUDGE ZOLLIE STEAKLEY 

Special Assistant Attorney General 

RICK GILPIN 

Chairman, Opinion Committee 

Prepared by Jim Moellinger 

Assistant Attorney General 

P- 5457