Honorable Garry Mauro Opinion No. JM-1085

Commissioner General Land Office Re: Whether taxes accrue Stephen F.Austin Building against real property held in 1700North Congress Avenue theVeterans' band Fund after Austin, Texas 78701 forfeiture in a contract of sale by the Veterans* Land Board (RQ-1697)

DearMr.Mauro:

You informus that theVeterans' Land Board. recently received tax bills from taxing units for current and delinquent advalorem taxes levied onreal property that had been conveyed by contract of sale toqualifying veterans but reverted to the board after forfeiture of such contracts. Consequently, you ask two questions regarding the taxation ofreal property comprising theVeterans' Land Fund:

1. Do taxes accrue against ~real property held in the Veterans band Fund after forfeiture of a contract of sale by the Veterans Land Board?

2. Do penalties and interest on preexisting tax liabilities continue to accrue against the real property after forfeiture reverts full title to theproperty in the State ofTexas?

We answer your first question in the negative. Taxes may not be imposed against real property held in the Veterans' Land Fund after there has been a forfeiture of a contract of sale and equitable and legal title to the property has reverted to the possession and control of the board. We answer your second question inthe affirmative. Penalties and interest continue toaccrue onpreexisting tax liabilities against real property after forfeiture vests full title to the property in the state. We also note, however, thatwhile the tax lien created by the previous

P. 5664Honorable Garry Mauro -Page 2 (JM-1085)

owner's failure toproperly tender his taxes remains in force during that period when the title to the real property reverts to the Veterans* Land Board, such a lien is unenforceable against the state. Such a lien would be enforceable against any subsequent purchaser, and the veteran-purchaser against whom the taxes were originally imposed, of course, remains personally liable.

TheVeterans* Land Board [hereinafter the board] was created by amendment to the Texas Constitution in 1946 in order to make low-interest loans available to eligible veterans who served in the armed forces of theUnited States during specified periods. Tex. Const. art. III, 549-b, inter-p.commentary (Vernon 1984): seeaenerallv Nat. Res. Code 5 161.001 et . public funds, purchzzes TheVeterans' Land Board, using
aparticular plot of land at the request of an eligible veteran. The land then isresold by the state to theveteran under acontract foradeed. The contract delivers equitable title and possession to the veteran: the state, through theboard, retains legal title until the fullpurchase price, interest, and feeshave been paid. m Venable v. Patti, 490 S.W.2d 194 (Tex.Civ. APP.

-Texarkana 1973, writ ref'd n.r.e.); Citv ofGarland v. Wentzel, 294 S.W.2d 145 (Tex.Civ.App. -Dallas 1956, writ ref'd n.r.e.); see also Attorney General Opinion JM-774 (1987).

Ifapurchaser defaults on acontract, then the board may declare a forfeiture and take possession of the property. Nat. Res. Code 55 161.311-161.324. Once forfeiture proceedings have been completed, both equitable and legal title arevested intheVeterans' Land Board, and the property belongs to the state. See Ma crick Countv Water Control & Imnroveme t Dist. No. 1v. St&e 456 S.W.2d 204 (Tex.Civ.App. -StnAntonio 1970,writ rei'd).

Article VIII, section 1,of the Texas Constitution provides inrelevant part: "All realproperty and tangible personal property inthis State . . . shall be taxed in proportion to itsvalue, which shall be ascertained as may beprovided by law." Article VIII, section 2,provides in relevant part that "[t]he legislature may, by general laws, exempt from taxation public property used for public

P. 5665Honorable Garry Mauro -Page 3 (JPr-1085)

purposes.111 Pursuant to article VIII, section 2, the legislature enacted section 11.11 of the Tax Code, governing the taxation ofpublic property, which provides inpertinent part:

(4 Except asprovided by Subsections (b)

and (c)of this section, property owned by this state orapolitical subdivision of this state isexempt from taxation if the orooertv isused forDub 'cDUrDOSeS.

11

. . . . (d) prooertv owned bv the state that is not used fr DUbliC ourooses is Prooertv owzed bv a state taxable.
aaencv or institution isnot used forDUbliC ournoses ifthe pronertv is
. . . used to DrOVide orivate residential housina for comuensation to members of the oublic other than students and emolovees ofthe state aaencv or institution ownina the orooertv. unless the residential
use is secondarv to itsuse bv an educational institution orimarilv for institutional purooses. Any notice required by Section 25.19 of this code shallbe sent to the agency or institution that owns the property, and it shall appear inbehalf of the state in anyprotest or appeal related to taxation of theproperty. (Emphasis added.)

It issuggested that the realproperty that comprises theVeterans' band Fund is taxable under subsection Cd) because such property appears tobe "used to provide private residential housing for compensation to members of 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 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, weneed notdiscuss the cases involving counties and cities that relyupon this provision.

p. 5666Honorable Garry Mauro -Page 4 (JM-1085)

public other than students and employees of the state agency or institution owning the property." It isalso suggested that such property is not used for apublic purpose, that theboard stands inno different legal position from that of any other mortgage company that isrequired topay ad valorem taxes onany real property onwhich its mortgagors default, and that real property comprising the fund falls squarely within subsection (d)of section 11.11 of the Tax Code.

The quoted language of subsection (d)of section 11.11 of the Tax Code does not require the taxation of real property comprising theVeterans'Land Fundwhen legal title to such real property rests with the state. The Veterans' Land Board does not provide "residential housing for compensation to members of the public
. . . .I1 Rather, it provides the financing needed topurchase private residential housing, and itoffers iton1 to qualifying veterans of theUnited States' armed forces.?i

Inaddition, the legislative history of subsection 11.11(d) does not indicate that the legislature intended to deviate fromthe long-accepted practice of exempting from ad valorem taxation the realproperty comprising the Veterans'

2. Abrief submitted tous argues that the fact that only qualifying veterans may participate inthe land program necessarily means that theprogram is not for a public purpose under article VIII of the Texas Constitution. We disagree. The test fordetermining whether public property istax exempt iswhether it isused primarily for the health, comfort, and welfare of the public. It is not essential that itbe used forgovernmental purposes; it is sufficient that it be used for "proprietary" purposes. A& M onsol. nde
. an, 184 S.W.Zd 914 (Tex. 1945). It is immaterial whether only residents of a taxing unit arebenefitted orwhether others benefit as well; the fact that property is owned by the public and is used primarily for thehealth, comfort, and welfare of the public of some portion of the state is sufficient to entitle such property to tax-exempt status. State v. Houston Liahtina &Power Co.,609 S.W.2d 263 (Tex. Civ. App. - Corpus Christi 1980, writ ref'd n.r.e.); see alsoAttorney General Opinions JW-405 (1985); MW-430 (1982);WW-391 (1981).

p. 5667Honorable Garry Mauro -Page 5 (JM-1085)

Land Fund. See Hearings on Tex. H.B. 30before the Senate Finance Committee, 67th Leg. 22-31 (August 5, 1981) (transcript available from Senate Staff Services). It appears that the legislature intended that property owned by a political subdivision but not used for the public purpose forwhich it was originally acquired should not be tax exempt. The real property at issuehere, however, is being used for thepurpose for which itwas acquired originally, namely the creation of a "land fund" to facilitate the purchase of real property byveterans through the granting of low-interest loans. Article III of the Texas Constitutionwas amended by the addition of section 49-b to permit the legislature todowhat the constitution otherwise would prevent it fromdoing, namely the "giving or lending, of the credit of the State inaid of, or to anyperson . . .'Ior the granting of "publicmoneys to any individual." See Tex. Const. art. III, 5550, 51. Thevery establishment of such
a fund in the Texas Constitution impresses upon it the nature of apublic purpose.

Moreover, the Texas Constitution exempts real property comprising theVeterans' Land Fund fromadvalorem taxation after the purchaser of suchproperty has defaulted on his payments and full title to the property reverts to the control of the state. Section 49-bof article III of the Texas Constitution provides inrelevant part:

Such landsheretofore orhereafter purchased and comprising apart of said Fund arehereby declared tobeheld foragovernmental purpose, although the individual purchasers thereof shallbe subject to taxation to the
same extent and in the same manner as are purchasers of lands dedicated to the Permanent Free Public School Fund.

We recently declared in Attorney General opinion JM-1049 (1989)that the interest inreal property comprising thepermanent school fund that isretained by the statewhen it leases such real property toprivate businesses isexempt from advalorem taxation, but the leasehold estates conveyed to the private businesses are themselves taxable. The reasoning that we employed in Attorney General Opinion J&l-1049,regarding theproper construction ofboth the Texas Constitution and the relevant Tax Code provisions, is equally applicable here. By its terms, section 49-b of article III likewise would exempt from advalorem taxation real property comprising theVeterans' Land Fund.

P. 5668Honorable Garry Mauro -Page 6 (JM-1085)

Finally, case law inthis area of law compels us to
answer your first question inthenegative. On the basis of M&j st&,C&, we conclude that real pzoperty compri:ing tit;? Veterans' band Fund, equitable title towhich has reverted back to the state after the default of thepurchaser, isnot subject to taxation while it is inthehands of the state.

InMaverick County the Veterans' Land Board sought a declaration that certai; real property owned by the board
was free of all claims for taxes or other charges made, levied, or assessed by awater control and improvement district, an independent school district, and acounty. A veteran had purchased real property comprising part of the Veterans' Land Fund in 1956;he failed tomake the required payments and the board declared his rights under the contract forfeited in 1962. After the forfeiture, the board held full legal and equitable title to theproperty. The trial court declared that the landwas free of all taxes and other charges levied by the taxing units after the rights of theveteran under the contract of sale were terminated, i.e., after the veteran had defaulted and the state reacquired both the equitable and legal title to the property. The court of appeals agreed. It held that where real property had been purchased by the board and sold to an eligible veteran but subsequently repossessed, the real property, thereafter, was subject neither to ad valorem taxation nor to special assessments levied during the veteran's possession.

Ithas been suggested that Maverick Countv isno longer controlling law inthis area. It iscontended, first, that section 11.11 of the Tax Codewas enacted after Mm Countv was handed down and constitutes the legislature's most recent statement regarding its intention to tax publicly-owned property that is not used for the public purpose forwhich theproperty was originally acquired. As we noted earlier, the 1981 amendment to section 11.11 does not compel us to conclude that real property comprising the Veterans' Land Fund istaxable. Neither the actual language used in the amendment nor the legislative history indicating the evident intention of the legislature in passing the amendment supports such's reading. And, aswe stated above,
we believe that the real property comprising the Veterans' band Fund isbeing used for theprecise public purpose for which the real property was acquired by the board in the firstplace.

P. 5669Honorable Garry Mauro -Page 7 (JM-1085)

It isalso contended that theMaverick County case is suspect because itappears tobe predicated upon aTexas Supreme Court case that is itself ofdoubtful precedential value. We agree that the court inWaverick Count!?did rely inpart on aTexas Supreme Court casewhose precedential value has been undermined by subsequent decisions, but we disagree that a court considering the matter again would reach adifferent result.

The case that theMaverick County court cited is City ofBeaumont v. Fertitta, 415 S.W.Zd 902 (Tex. 1967). In Fertitta, the court considered whether real property owned by a city, though leased toprivate persons for the purpose of carrying on a private commercial enterprise, was exempt fromadvalorem taxation regardless of the fact that the use towhich the property was putwas not public. The court in Fertittq departed from themethod of constitutional analysis that courts traditionally had invokedwhen the issue was whether property owned by a political subdivision was entitled to receive tax-exempt status. See Fertitta, m, (dissenting opinion).

Prior to Fertitta, courts had always looked to whether the property was both owned by apolitical subdivision and used orheld forapublic purpose, and assuming that it was not so used, it would be taxable under article VIII, sections 1,and 2,of the Texas Constitution. See A&M Consol. Indeo.~Schbol Dist.v. Citv ofBrvan 184 S.W.2d 914 (Tex.1945); Dauahertv v. Thomnson, 9S.W. 49 (Tex. 1888); City ofAbilene v. State. 1 -. 13 S.W.Zd 631 (Tex.Civ.App. - Eastland 1937,writ dism'd) (holdingdisapproved of on other grounds inFertitta). The court inFertitta departed from the traditional mode of constitutional analysis indeclaring that the constitution does not require that property owned by a municipality but not used for apublic purpose be taxed. It only requires that private property held by natural persons or private corporations be taxed. Therefore, since the constitution does not require municipal property to be taxed, the legislature needs no constitutional authority to exempt it. It chose to do so in the now-repealed article 7145, V.T.C.S. This statute required that allproperty, except thatwhich is expressly exempted, be taxed. The now-repealed article 7150, V.T.C.S., exempted "[a]11 property, whether real personal, belonging exclusively to this State, or a:; political subdivision thereof, or theUnited States . . . .'I Public ownership was enough; nopublic usewas required.

P. 5670Honorable Garry Mauro -Page 8 (JM-1085)

The dissent inpertittq correctly pointed out that this constitutional and statutory construction isnovel: indeed, earlier decisions, which went togreat length discussing the holding and using requirements of public property, make
sense only if one accepts the claim that the constitution requires u property tobe taxed unless it is specifically exempted pursuant to aconstitutional provision, i.e., that public property, inorder that itbedeemed tax-exempt, must fallwithin the limitations set forth in article VIII, section 2,or article XI, section 9,of the Texas Constitution. No subsequent case explicitly has employed such an analysis. Moreover, the Texas Supreme Court clearly narrowed the reach of Pertitta * leander Indeo. School Dist.v.CedarPark CzlJ 479 S.W.2d 908 (Tex. 1972) and in atte

2, eev. GU f 576 S.W.2d 773 (Tex.1978).

The leander case did not concern property owned by a political subdivision leased to aprivate person for the purpose of a private commercial enterprise; rather, it concerned-property owned by aprivate person but used for public purposes. In overturning a lower court judgment sustaining the tax-exempt status of such property, the court specifically held that property, tobe exempt, must be used forpublic purposes. The court inbander did not, however, explicitly reject the'mode of constitutional analysis employed inFertitta. InSatterlee the court reaffirmed the requirement that there be apubiic use before property owned by apolitical subdivision be declared tax-exempt.

If the traditional method ofanalysis were applied to the instant situation, namely that public property must be put to apublic usebefore itmay be exempt fromad valorem taxation, we think that acourt would hold that by virtue of the inclusion of section 49-b of article III of the Texas Constitution, the real property comprising the Veterans' band Board isexempt fromtaxation so long as full title to that property rests with the state. If the Fertitta test were adopted, on the other hand, acourt would disregard any necessity that such property be used forapublic purpose and look only to whether the property was owned and controlled by the state or a political subdivision of the state;~it would conclude, although fordifferent reasons, that theproperty described here is tax-exempt.

We note, moreover, that the argument undermining Maverick because of its reliance on Fertitta is refuted effectively by the fact that the Texas Supreme Court

Pm 5671Honorable Garry Mauro -Page 9 (JM-1085)

explicitly reaffirmed in a later case its approval of the the court concluded improvements located Waverick County case. In Satterlee, that certain real property and the thereon thatwere purportedly "owned" by local taxing units
were not exempt from taxes because the ownership interest of the taxing units was not exclusive. Indiscussing the public use andpublic ownership requirements fortax exemption, the court declared:

After Fertitta, we approved without qualification the opinion of the Court of Civil Appeals in Maverick Countv Water Control 8 Imorovement District # 1 v. State 456 S.W.2d 204 (Tex.Civ.App. 1970,writ rei'd). There the Court recognized Pertitta but cited State V. Bexar-Medina-Atascosa Counties Water Imorovement District, 310 S.W.2d 641 (Tex. Civ.App. 1958,writ ref'd), also approved by this Court,where it was held that land did notbelong exclusively to the State while the contract with the Veterans Land Board remained ineffect. As to this, the Court in maverick wrote that 'Whilethe contract was

the land was l'owned by the &e~~~;lO SW 2d at 643 with the State holding'only the' legal

### titie.’ The Court upheld the tax exemption inMaverick for the
reason as stated inthe opinion that the Veterans Land Board 'held full legal and equitable title to the land.' We approved the principles of lawdeclared inthe opinion by unqualified refusal ofwrit of error.

Our conclusion that theAuthority was not vested with the requisite exclusive ownership renders unnecessary a re-examination of the holding inFertitta thatArticle 7150, §4, provides for the exemption from taxation of municipal property regardless of the use to which it isput or thepurposes forwhich it isheld.

576 S.W.2d at 777-8.
Therefore, we answer your first question in the negative and conclude that real property comprising part of theVeterans' Land Fund is exempt fromad valorem taxation while legal and equitable title to such real property is

P* 5672Honorable Garry Mauro -Page 10 (JM-1085)

vested in the state. Such realproperty istaxable to the purchaser under the contract for sale so long as the contract is ineffect; after the purchaser defaults and legal title reverts to the control of the state, such real property is ex,empt fromtaxation. We now turn to your second question.

You next ask:

Dopenalties and interest on preexisting. tax liabilities continue to accrue against the real property after forfeiture reverts full title to the property in the State of Texas?

Section 33.01 of the Tax Code governs the imposition of penalties and interest ondelinquent taxes and provides the following:

(a) Adelinquent taxincurs apenalty of

sixpercent of the amount of the tax for the first calendar month it isdelinquent plus
one percent for each additional month or portion of amonth the tax remains unpaid prior to July 1of the year in which it becomes delinquent. However, a tax delinquent on July 1 incurs a total penalty of twelve percent of the amount of the delinquent tax without regard to the number of months the taxhas been delinquent.

(b) Ifaperson who exercises the splitpayment option provided by Section 31.03 of this code fails tomake the second payment before July 1,the second payment is delinquent and incurs apenalty of twelve percent of the amount ofunpaid tax.
(c) Adelinquent tax accrues interest at
a rate of one percent for each month or portion ofamonth the tax remains unpaid.

You assert that penalties and interest may not continue to accrue onpreexisting tax liabilities after the state again assumes both legal and equitable title to the real property against which delinquent taxes are due. YOU suggest two different arguments in support of your

P. 5673Honorable GarryMauro -Page 11 (JM-1085)

proposition. First, YOU claim that such a result is required by theMaverick County case. We disagree.

Aswe noted previously, Waverick Countv involved an action by the Veterans' band Board foradeclaration that real property whose title had reverted to theboard after' a veteran defaulted onhispayments was free ofall liens for taxes or other charges made, levied, or assessed on the property by awater control and improvement district, an independent school district, and acounty. Specifically at issuewere tax liens created when the veteran-purchaser failed topay both taxes properly levied onhis property by the school district and the county and assessments in the formof flat rate fees imposed by the water control and improvement district.

The court ofappeals described the trial court judgment in the following fashion: "The trial court's judgment declares the land free from taxes and other charges levied bydefendants after the rights of theveteran under the contract of salewere terminated." 456 S.W.Zd at 205. It isnot clear from the court ofappeals' decision whether the trial court distinguished between those taxes and flat rate assessments imposedwhile the veteran's contract was still in force and those that the taxing units sought to enforce after the full title had reverted to the state.

The court ofappeals inMaverick County held that taxes cannot be imposed on realproperty comprising the Veterans' Land Fund after the title to theproperty reverts to the state; theproperty inquestion was subject to taxation only during that period of time 'during which the veteran-purchaser owned the equitable title. Based upon an earlier case, the court also held that liens forpre-existing taxes, i.e., taxes levied on the property while the contract with theveteran was still in force,were still ineffect. The court, however, apparently didhold that no lien for the assessment of the flat rate taxes was created by the veteran's failure to tender such assessments.

You rely upon the language from theMaverick Countv
case declaring the property free from taxes "or other charges levied" by the taxing units to support the proposition that penalties and interest onthepreexisting taxes do not continue to accrue. You apparently construe this to mean that anypenalties and interest imposed for failing to pay the taxes levied ina timely fashionmay not continue to accrue after title reverts to the state. Inother words,

P. 5674Honorable Garry Mauro -Page 12 (JM-1085)

you assert that the phrase "or other charges" includes penalties and interest imposed when accrued taxes become delinquent. You state inyour request for an opinion:

The Court affirmed the determination of the trial court that theproperty itself is 'free of all liens and claims for taxes or other charges
. . .made, levied or assessed' by any taxing entities. L at 205.

Brief ofTexas Veterans Land Board at 8.

We disagree with this construction ofM-y The l'chargesl'referred to by the court do not include interest andpenalties. The "c~harges,~' when understood in the context ofMaverick CountY and the authorities itcites,
are special assessments made by the water district. See. Cit

v, 26 S.W.2d 910 (Tex.193;));eCountv 7 S.W. 713 (Tex.

Ha ris 1888): W'ch'ta 1 ount Wate Citv of Wichita, 323 S.W.Zd 298 (Tex.Civ.App. - Fort Worth 1959,writ ref'd n.r.e.); see alsoAttorney General Opinions JM-1035 (1989);JM-523 (1986). The Maverick court merely held that a special district could not impose flat rate fees against theproperty inthat instance while title to itwas held by the state. Maverick County does not stand for the proposition that penalties and interest for delinquent taxes may notbe imposed onreal property that has reverted to the state: it ~does not even mention penalties and interest.

Your second argument in support of the proposition that penalties and interest may not continue to accrue against real property whose title has reverted to theVeterans' Land Board is that permitting such accrual of penalties and interest is tantamount topermitting the taxation of such property, however indirectly. On the other hand, a brief submitted to us suggested that the lien created by the veteran's failure toproperly tender the taxes due extends also to the penalties and interest that accrue.

Both arguments rest on thepresupposition that penalties and interest are tobe treated as though they were taxes. On the onehand, ifaccrued penalties and interest
are the equivalent of taxes and iftaxes may not be imposed upon real property while title is inthe possession and control of theVeterans' Land Board, itcan be argued that penalties and interest likewise may not continue to accrue

P. 5675Honorable GarryMauro -Page 13 (JM-1085)

against such real property. On the other hand, if aCCNed penalties and interest are the equivalent of taxes and ifan enforceable lien iscreated by theveteran's failure to properly tender the taxes before they became delinquent, it canbe argued that any waiver of aCCNed penalties and interest violates the Texas constitutional prohibitions against releasing or extinguishing the indebtedness of any individual owed to the state or toanypolitical subdivision of the state, Tex. Const. art. III, 555, or against the release fromthepayment .oftaxes. Id. art.VIII, 5 10.

A surface reading ofarticle VIII, section 15, of the Texas Constitution lends support toyour presupposition that penalties and interest should be treated as though theywere taxes. That section provides:

The annual assessment made upon landed property shall be a special lien thereon; and allproperty, both real and personal, belonging to anydelinquent taxpayer shall be liable to seizure and sale forthe payment of all the taxes and penalties due by such delinquent: and such property may be sold for the payment 

### ofthe taxes andpenalties due by such delinquent, under such~ regulations as the Legislature may provide.

While section 15clearly does not create a lien on any property for failing topay anypenalties and interest that
are imposed along with delinquent taxes,3 itmight be argued that, at least as to summary seizure and sale and judicial sale and execution, penalties and interest are treated in the same manner as the delinquent taxes on which the calculation of such penalties and interest are based. However, the Texas Supreme Court has not construed section 15 to require that penalties and interest be treated as though theywere taxes thatwere levied.

3. While section 15of article VIII of the Texas Constitution does not create a lien for failing topay any penalties and interest imposed, section 32.01 of the Tax Code does. Of course, any lien that the legislature sees fit to create by statute can also be amended by the legislature by statute.

P. 5676Honorable Garry Mauro -Page 14 (JM-1085)

InJones v. Williams, 45 S.W.Zd 130 (Tex. 1931), the Texas Supreme Court upheld the constitutionality of a statute that provided:

That all interest andpenalties accrued and
asnow fixedby law, onall
. . .taxes . . . other than [taxesof] incorporated cities and towns, delinquent up to and including October 20, 1931, shall be, and the same are hereby released, provided said taxes arepaid on or before January 31, 1932.

Jones, m, at 131.

The court in Jones first rejected the assertion that the statute could be sustained by reference to section 10 of article VIII of the Texas Constitution. Section 10 provides:

The Legislature shall have no power to

release the inhabitants of, orproperty in; any county, city or town from thepayment of taxes levied for State or county purposes, unless incase ofgreat public calamity in any such county, city or town, when such release may bemade by avote of two-thirds of each House of the Legislature.

Ifthe exactions (FLn,penalty and interest) imposed upon taxpayers for failing to timely tender payment of accrued taxes are themselves "taxes" forpurposes ofarticle VIII, section 10, then the court, after concluding that the statute at issuewas not enacted pursuant to the "great public calamity" requirement, would perforce have struck down the statute. Because itdid not, it isclear that the court did not conclude that such exactions constitute lYaxes.U1

Nor did the court in Jones consider such exactions an instance ofan "indebtedness, liability, orobligation" for purposes of article III, section 55, of the Texas Constitution. Section 55provides:

The Legislature shall have no power to release or extinguish, 

### or toauthorize the releasing or extinguishing, in whole or in part, the indebtedness, liability or obligation of any corporation or individual, to

P. 5677Honorable Garry Mauro -Page 15 (JM-1085)

this State or to any county or defined subdivision thereof, or other municipal corporation therein, except delinquent taxes which have been due foraperiod ofat least tenyears.

Ifthe court inJones had concluded that such exactions were inreality interest e imposed by the state as compensation for thedetention of its money, rather than viewing such exactions asa form of "penal interest," the statute would have run afoul of sections 51 and 55 of article III. The court set forth thehistory surrounding attempts to enforce public revenue and tax collection procedures and declared:

On the whole, wehave concluded that~ the impositions made fordelinquency inrendering property for taxation, and for failure to pay taxes, whether these impositions are denominated 'penalties,' 'interest,! 'forfeitures,' or whether prescribed without definition or name, are all in reality penalties imposed fordelinquency or failure ofduty, and all enacted in aid of the state's revenue, rather than as charges made by the state forthe use ordetention of its money. In other words, the exactions are 8enalties' rather than \int.erest' in the commercial or statutory sense. (Emphasis in original.)

45 S.W.2d at 133. The court concluded:

We think the act isconstitutional for the
reason that the Legislature has thepower to release, cancel, annul, or suspend penalties previously accrued for delinquent taxes, so longas these penalties have notbeen reduced to final judgment.

Finally, inresponse to the claim that the statute at issue violated article III, section 56, of the Texas Constitution, which prohibits the legislature from passing certain local and special laws remitting penalties, the Jones court concluded that the legislature by implication could remit such penalties by aeneral law:

P. 5678Honorable Garry Mauro -Page 16 (JM-1085)

The only express limitation on the right of the Legislature to remit penalties isthat specified in section 56 of article 3, which prohibits the Legislature from 'remitting fines, penalties, and forfeitures by soecial
m. ' The necessary implication from the language used is that 'fines, penalties and forfeitures' may be remitted bygeneral laws, such as the one before us. . . . Nor do we think that the Legislature is prohibited, either expressly orby necessary implication, by the language of any other section of the Constitution. If it be said that the provisions of sections 51 and 55 apply to penalties imposed fortax delinquency, then, for the same reason, wewould be compelled to say they apply to &l classes of oenalties, and to fines and forfeitures aswell. Such a construction would render meaningless the power clearly reserved to the Legislature by the terms of section 56 of article 3, to release 'fines,penalties and forfeitures' by general law. (Citations omitted.) (Emphasis inoriginal.)

Id. at 137.
Clearly, ifthe Texas Supreme Court COnStNed article VIII, section 15, of the Texas Constitution to require that penalties and interest be accorded the same treatment as taxes are accorded, then the courtwould nothave concluded inJones that the statute then at issuewas constitutional. Therefore, we reject both your assertion and the suggestion by the law firm submitting abrief: it isnot the case that penalties and interest must bewaived, nor is itthe case that penalties and interest cannot bewaived.

It isclear that the legislature isempowered to enact a statute that effectively would waive the penalties and interest aCCNed onunpaid delinquent taxes levied on real property whose title has reverted to the possession and control of the Veterans' Land Board. See. e.a Attorney General Opinion WW-780 (1960) (upholding and"construAinz statute that permitted that state to tender unpaid delinquent taxes on Veterans' Land Fund land in order for the state to clear title thereto): see also Attorney General Opinion M-139 (1967) (distinction between *%ax't and "penalty" well established in law). It isequally clear

P. 5679Honorable GarryMauro -Page 17 (JM-1085)

that the legislature has not so acted. Section 33.011 of the Tax Code permits the governing body ofa taxing unit to waive penalty and interest under certain circumstances and provides:

The governing body 

### ofa taxing unit may

provide for the waiver of penalties and interest on adelinquent tax if an act or omission ofan officer, employee, or agent of the taxing unit caused the taxpayer's failure topay the taxbefore delinquency and if the tax ispaidwithin 21days after the taxpayer knows or should know of the delinquency.

No other provision of the Tax Code addresses thewaiver of penalty and interest.

Because the Texas Constitution does not require it and because the legislature has notprovided for it,we conclude that penalties and interest will continue to accrue on the unpaid delinquent taxes levied upon real property comprising theVeterans' Land Boardwhose title has reverted to the board due to thedefault of theveteran-purchaser.

We note, however, thatwhile the tax lien created by theprevious owner's failure toproperly, tender his taxes remains in force during that period when the title to the real property reverts to theVeterans' Land Board, such a lien isunenforceable against the state. See. e.a., State
**V.** itv of San Antonio, 209 S.W.Zd 756 (Tex. 1948); Childress County v. State, 92S:W.Zd 1011 (Tex. 1936); Lubbock Indeo. School Dist. v. Owens, 217 S.W.2d 186 (Tex. Civ.App. -Amarillo 1948, writ ref'd). Such a lien would be enforceable against any subsequent purchaser, and the veteran-purchaser against whom the taxes originally were imposed, of course, remains personally liable. Tax Code § 32.01;Attorney General Opinions JM-1049 (1989): NW-523 (1982);H-1108 (1977).

SUMMARY

Taxes may not be imposed upon real property comprising the Veterans' Land Fund after the contract of salehasbeen forfeited and full title to theproperty has reverted to the possession and control of the state. Penalties and interest onunpaid delinquent taxes imposed on real property whose title

P. 5680Honorable Garry Mauro -Page 18 (JM-1085)

has reverted to the state continue to accrue. While the tax lien created by the previous owner's failure toproperly tender his taxes remains in force during that period when the title to the real property reverts to the Veterans' Land Board, such a lien is unenforceable against the state. Case authority of long standing dictates that such a lien would be enforceable against any subsequent purchaser. The legislature could have, but has not, provided for waiver of such a lien against subsequent purchasers,, anduntil it acts, the land remains charged with the lien. Theveteran-purchaser against whom the taxes originally were imposed, of course, remains personally liable.

JIM MATTOX Attorney General of Texas

MARY KELLER First Assistant Attorney General

LouMCCREARY Executive Assistant Attorney General

JUDGE ZOLLIE STEAKLBY Special Assistant Attorney General

RICK GILPIN Chairman, Opinion Committee
Prepared byJim Moellinger Assistant Attorney General

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