Court Opinion

ID: 4136009
Source: CourtListenerOpinion
Date Created: 2017-02-18 02:08:50.390835+00
Date Added: 2024-06-11T14:37:43.105047
License: Public Domain

THEA'ITORNEY      GENERAL
                      OF TEXAS

                                                              .,.

                             Deoember 2,   1960

Honorable Joe Resweber              Opinion No. WW-970
County Attorney
Harris County                       Re:    Is the royalty int,erest
Houston, Texas                             of a ohuroh exemp$ from
                                           ad valorem taxation ‘where
                                           such interest  is In a
                                           pooling utit of which ‘i..‘.
                                           the church site is a
Dear Mr. ,Reeweber:                        pa&t?
            Your letter  requesting our opinion      upon the referenced
question   sets.out  the following  facts:
                  “(The First Methodist Church of Tomball)
           owns six small lots located in the Tomball 011
           Addition,      composing an area of 250 feet by 140
           feet; that the Church and Sunday School
           buildings      occupy:,;most of the surface; that many
           years ago the Humble 011 and Refining Company
           pooled some sixty to seventy of these oil
           lots,     Including those owned by the Church.
           The Company brought in a well on the pooled
           unit, but not on the Church property.         The
           Church receivea approxlmately,,.elghteen       ($18?00)
           f;E;:;,     royalty per annum as its pro-rata

           Your question    is phrased as follows:
                 "Are royalty paymenta from an oil and gas
            lease on lots owned by the First Methodist
            Church of Tomball, Texas, which are used solely
            for Church and Sunday School purposes, exempt
            from ad valorem taxes?”
           tie are   uncertain whether you wish to determine the
taxable status of     the actual royalty interest   OS the Church,
or of the actual     payments received by it.    We therefore answer
yoMr que8tlon as     follows:
            (a)   The royalty Interest of the Church In the
                  minerals In place is exempt from ad valorem
                  taxation.
Honorable   Joe Resweber,   Page 2      (Opinion     No. WW-970)

            (b)   The royalty payments themselves are subject
                  to ad valorem taxation IS the money, so
                  received was owned by the Church on
                  January 1 of the taxable year.
            Under the authority granted to the Legislature  by
Article   8, Sec. 2 of the Constitution of Texas, certain
classes of property were provided exemptions Srom taxation
by Article   7150, R.C.S.   Section 1 of this Article exempts
certain   shcool and church property and reads in part as
sollows:
                 “The Sollowlng   property   shall    be exempt from
            taxation,  to-wltr
                  “1.   .actual places of religious   worship,
            also any’property    owned by a church or by a
            strictly  religious   sooiety;the   books and
            furniture  therein and the grounds attached to
            such buildings necessary for the properocou-
            panoy, use and enjoyment of the same, and which
            yields no revenue whatever to suoh church or
            religious  society ;. 0 . 11(Emphasis added)
            Attorney Qeneralts Opinion No. V-1568 (1952) held
that a retained royalty interest      In land comprising the campus
of Jarvls Christian College was exempt from ad valorem taxation
under that portion of Article     7150, Sec. 1, which deals with
exemptions to educational    Institutions   and-which reads in part
as follows:
                IID e .A11 public colleges,    public academies,
            and all endowment funds of institutions     of learning
            and religion    not used with a view to profit,   and
            when the same are invested in bonds or mortgages,
            and all such buildings used exclusively     and owned
            by persons or associations    of persons for school
            purposes;    . q .‘I
           Opinion No. v-1568 correctly     concludes that (a) the
surface of the producing property there in question was owned
by persons or an association    of ‘persons (b) “exclusively   for
school purposes” and (c) “not used with a view to profit .‘I
(This final quallflcatlon    has been determined to require that
the orooerts-not   be used with a view to private gain or profit.
Harris v. City of Fort Worth, 142 Tex. 6bO. 180 S.W.2d. 131
?1944) 1. The theorv of ‘the-opinion      was that the lease under
k&h production was-obtained was actually         a conveyance of a
determinable See in seven-eighths     of the minerals In place, but
did not constitute   a severance of the remaining one-eighth
Honorable   Joe Resweber,   Page   3    (Opinion   No. WW-970)

from the surface of the estate.   Since the lessor continued
his ownership in both the surface and one-eighth   of the
minerals, the quoted exemption extended to the retained one-
eighth royalty Interest.
            ‘Although that opinion dealt with the exemption
provided educational      lnstltutlbns   under Article   7150, last
quoted above, which is separate and distinct          from that provided
for churches, the rule Is equally applicable          to the present
situation.      The royalty Interest   itself,  being an Interest    in
the minerals In place, is a part of the realty and hence not
taxable.     A sale of a part of these minerals would simply be
a sale of a portion of the church’s realty and hence would not
constdtute    “revenue” from the property within the meaning of
Article    7150.   Such payments would be taxable just as any other
personal propety, if possessed by the church on January ist of
the taxable year.

                            SUMMARY
                 The royalty Interest retained by a Church In
            a pooling unit of which the church site is a
            part is exempt from ad valorem taxation.   Actual
            payments received by the Church as consideration
            for minerals produced from this interest  are
            taxable,  if the money so received was owned by
            the Churqh on January 1 of the taxable year.
                                       Yours very truly,
                                       WILL WILSON
                                       Attorney General    of Texas

JRI:,jp
APPROVED:
    :
OPINION COMMITTE
W. V. Geppert, Chairman
W. ‘Ray Scruggs
Harris To1e.r.
Linward, Shiv&s :
B. H. Timmins, Jr.
REVIEWED  P&HTHE ATTORNRY
                        GENERAL
By:, Leonard Passmore