Court Opinion

ID: 9769755
Source: CourtListenerOpinion
Date Created: 2023-08-29 15:01:45.603081+00
Date Added: 2024-06-11T07:31:07.838705
License: Public Domain

POWERS, Justice,
dissenting.
I respectfully suggest the majority confuse the legislature’s undoubted power to prescribe a method for appraising market value with a power the legislature undoubtedly does not have — a power to authorize taxation of real property on a basis other than its actual market value. I believe Tax Code section 23.12(a) is unconstitutional on its face insofar as the statute applies to real property-
The constitution requires that all taxable real property “shall be taxed in’proportion to its value, which shall be ascertained as may be provided by law.” Tex. Const, art. VIII, § 1(b) (emphasis added). The word “value,” as used in this section of the constitution, means the actual cash market value of property. Whelan v. State 155 Tex. 14, 282 S.W.2d 378, 380 (1955). Unless authorized elsewhere in the constitution, the legislature is not free to provide for taxation of real property in proportion to any “value” except actual cash market value.
The term “market value” is used throughout the appraisal sections of the Tax Code with the same general meaning: “the price which a property would transfer for cash or its equivalent under prevailing market conditions ... if exposed for sale in the open market with a reasonable time for the seller to find a purchaser.” Tex. Tax.Code Ann. § 1.04(7) (West 1992) (emphasis added). It is easy to see that this statutory definition conforms to the constitutional measure of actual cash market value. Various provisions of the Tax Code effectuate this statutory definition of market value in particular circumstances where its exact application might otherwise be uncertain.1
The legislature has diverged in only four instances from the constitutional measure of actual market value and the Tax Code definition of “market value” set out in section 1.04(7). In three instances the divergence results from authority given the legislature in a constitutional amendment.2 The fourth instance is found in section 23.12(a) of the Tax Code, enacted by the legislature without an authorizing amendment to the constitution.
Section 23.12(a) applies to a limited class of real property — residential property that is new, vacant, producing no income, and “held for sale in the ordinary course of a trade or business.” For this class of real property alone the Code defines the term “market *736value” quite differently: “The market value ... is the price for which it would sell as a unit to a purchaser who would continue the business.” Tax Code § 23.12(a) (emphasis added).3 This is not an appraisal method. It doesn’t even purport to be. It purports to be a definition of market value (“The market value is ... ”) that is different from the definition of market value in section 1.04(7) of the Tax Code. And the new definition is conspicuously unconstitutional because it nakedly forbids an appraiser to consider any applicable market factor save a single, inflexible factor — the selling price to “a purchaser who would continue the”. seller’s business. See, e.g., State v. Federal Land Bank of Houston, 160 Tex. 282, 329 S.W.2d 847, 848-49 (1959) (mineral estates may not be valued at different amounts based solely on whether they have been severed from surface rights); Whelan, 282 S.W.2d at 380 (non-producing oil and gas leases may not be assessed at a flat rate of one dollar per acre irrespective of actual market value); Ogburn v. Ward County Irr. Dist. No. 1, 280 S.W. 169, 171 (Tex. Comm’n App.1928, judgm’t adopted) (real property may not be classified by zones and market value of properties determined by zone in which properties lie, and use to which properties are put, without reference to improvements affecting actual market value); Rowland v. City of Tyler, 5 S.W.2d 756, 760 (Tex. Comm’n App.1928, holding approved) (rent receipts may not be made controlling and decisive factor in determining market value); Hawthorne v. Hillin, 463 S.W.2d 266, 267 (Tex.Civ.App. — Waco 1971, no writ) (properties may not be classified as adjoining or not a black-top road, and valued based on whether residence abuts such road, irrespective of other factors); Richardson v. State, 53 S.W.2d 508, 510 (Tex.Civ.App. — Eastland 1932), aff'd, State v. Richardson, 126 Tex. 11, 84 S.W.2d 1076 (Comm’n App.1935) (market value of royalty interests may not be determined exclusively on a single factor of production for specified period without reference to other factors affecting market value). See also, William E. York, Equality in Taxation, 10 Houst. L.Rev. 656, 668-89 (1973) (use of one inflexible method to determine value for assessment purposes directly violates equal and uniform provision of state constitution); Jay D. Howell, Jr., 21 Texas Practice, Property Taxes § 416 (1988) (arbitrary and unconstitutional valuation results from basing value judgment on one or few factors rather than all applicable factors).
The result is this: Insofar as Tax Code section 23.12(a) applies to real property, it is unconstitutional on two grounds. Firstly, it violates article VIII, section 1(b), of the constitution requiring taxation of real property in proportion to its actual market value. Tax Code section 23.12(a) declares that “[t]hat the market value of’ the described real property “is the price for which it would sell ... to a purchaser who would continue the business.” This exclusion of all market factors save one prohibits an appraisal of actual or true market value. Secondly, section 23.12(a) violates article VIII, section 1(a) of the constitution requiring that taxation be equal and uniform. Tax Code section 23.12(a) restricts an appraisal of the real property described therein to the single market factor just mentioned while Tax Code section 1.04(7) requires that all other taxable real property4- in the state be appraised based upon all factors operating at the time in an open market. Because the taxation of real property depends upon its appraised value, Tax Code section 23.12(a) produces an unequal taxation of real property under the numerous authorities cited above.
*737The opinion in Enron Corp. v. Spring Independent School District, 922 S.W.2d 931 (Tex.1996) is not useful here. The statute involved in that decision did not purport to define the market value of real property, for tax purposes, in a manner different from the actual market value contemplated in the constitution or the market value defined in Tax Code section 1.04(7). The statute considered in Enron merely gave the taxpayer an election as to the date upon which the market value of his or her property might be made.
For the reasons given, I would hold Tax Code section 23.12(a) unconstitutional as applied to real property.

. See Tex. Tax Code Ann. § 23.13 (leaseholds appraised at market value as such); § 23.17 (minerals in place appraised at market value as such); § 23.18 (common facilities of homeowner’s organization appraised at nominal value where reflected in enhanced market value of homes); § 23.19 (incorporeal rights of exclusive occupancy and interest in common areas under Cooperative Association Act appraised at market value); § 23.83 (land restricted to recreational, park, or scenic use appraised at market value as restricted); § 23.93 (land restricted to airport use by public appraised at market value as restricted).

. See Tex. Const, art. VIII, § 1 — 2, l-d(a); Tax Code § 23.41 (land designated for agricultural use appraised according to agricultural capacity not to exceed market value); § 23.52 (agricultural land appraised by capitalization of income not to exceed market value); § 23.73 (timber land appraised by capitalization of income not to exceed market value).

. The inclusion of the real property as "inventory” in Tax Code section 23.12(a) results from a 1987 amendment of the section, which had previously applied only to personal property held as "inventory.” If it be argued that section 23.12(a) does in some circumstances allow for the valuation of the described real property at actual market value, then the amendment was unnecessary, purposeless, and meaningless because Tax Code section 1.04(7) has dictated appraisals at actual market value since 1978. I suggest that the transparent purpose of the 1987 amendment was to require appraisal of the described real property at something other than actual market value and that the words of the amendment were meant to be construed accordingly and in their literal meaning.

. Excepting, of course, the kinds of real property for which the Tax Code makes provisions for a different measure of appraisal under express authority given by constitutional amendment. See note 2, supra.