Court Opinion

ID: 4129104
Source: CourtListenerOpinion
Date Created: 2017-02-18 00:47:22.721939+00
Date Added: 2024-06-11T14:37:34.183494
License: Public Domain

OFFICE OF THE ATTORNEY GENER~~L . STATE OF TEXAS

    JOHN     CORNYN

                                              November      19,2002

The Honorable Frank Madla                                 Opinion No. JC-0576
Chair, Intergovernmental Relations Committee
Texas State Senate                                        Re: Whether a particular community housing
P.O. Box 12068                                            development    organization   is entitled to an
Austin, Texas 787 1 l-2068                                exemption from taxation of its real property under
                                                          section 11.182 of the Tax Code (RQ-056 1-JC)

Dear Senator Madla:

         You ask whether a particular organization that qualifies as a community housing
development organization under section 11.182 of the Tax Code “and is 100% owner of the general
partner in a limited partnership that owns improved real estate for the direct purpose of renting low
income housing units within the county” is entitled to exemption from taxation of its real property.’
Because we have been provided with limited information regarding the particular organization and
the issue in controversy, we answer your question in general terms. To qualify for an exemption
from taxation of its real property under section 11.182 of the Tax Code, an organization must first
satisfy the requirements of article VIII, section 2(a) of the Texas Constitution. Then it must satisfy
all the requirements of section 11.182 of the Tax Code: The organization must qualify as a
community housing development organization under section 11.182 (b) of the Tax Code and
“control 100 percent of the interest in the general partner if the project is owned by a limited
partnership” assuming section 11.182(e) of the Tax Code (which sets out particular requirements for
a housing project constructed after December 31, 2001 with the proceeds of certain tax-exempt
bonds) applies; and it must satisfy the other requirements of section 11.182 that apply to the
organization and its property. We cannot and do not determine whether the organization you ask
about is in fact entitled to an exemption from taxation of real property under article VIII,
section 2(a) and section 11.182. The chief appraiser for the appraisal district in which the particular
organization’s property is located is authorized to determine in the first instance whether the property
is tax exempt. The burden is on the organization seeking an exemption to show that it is entitled to
the exemption under article VIII, section 2(a) of the constitution and section 11.182 of the Tax Code.

         We briefly review the constitutional provision pursuant to which the legislature adopted
section 11.182 of the Tax Code. Article VIII, section 1 mandates that all real and tangible personal
property, unless exempt as required or permitted by the constitution, shall be taxed in proportion to

          ‘Letter from the Honorable Frank Madla, Chair, Intergovernmental Relations Committee, Texas State Senate,
to the Honorable John Comyn, Texas Attorney General (June 13,2002) ( on f 11e with Opinion Committee) [hereinafter
Request Letter].
The Honorable Frank Madla - Page 2              (JC-0576)

its value. See TEX. CONST. art. VIII, 5 l(a). Article VIII, section 2(a) provides that the legislature
“may, by general laws, exempt from taxation . . . all buildings used exclusively and owned by . . .
institutions engaged primarily in public charitable functions, which may conduct auxiliary
activities to support those charitable functions; and all laws exempting property from taxation
other than the property mentioned in this Section shall be null and void.” Id. art. VIII, 8 2(a)
(emphasis added). Thus, under article VIII, section 2(a), to qualify for tax exempt status, an
organization must be (1) a charitable institution and (2) the real property must be used exclusively
and owned by the charitable organization. See A? Alamo Water Supply Corp. v. Willacy County
Appraisal Dist., 804 S.W.2d 894, 899 (Tex. 1991); Baptist A4em’ls Geriatric Ctr. v. Tom Green
County Appraisal Dist., 851 S.W.2d 938, 941 (Tex. App.-Austin 1993, writ denied) (and cases
cited). Before an institution can qualify for tax exempt status under a statutory scheme, the
institution must first satisfy the constitutional requirements.  See iV Alamo Water Supply Corp.,
804 S.W.2d at 899; Baptist Mem ‘Is Geriatric Ctr., 851 S.W.2d at 941.

        Under section 11 .182 of the Tax Code, a qualified community housing development
organization is entitled to an exemption from ad valorem taxation of its improved or unimproved
real property owned for the purpose of providing low-income or moderate-income        housing if
it meets the requirements of subsection (b) of the Tax Code and the other provisions of section
11.182 that apply to the particular organization and its property.

        Section 11.182(b) of the Tax Code provides that a community housing development
organization within the meaning of section 12704 of the United States Code “is entitled to an
exemption from taxation of improved or unimproved real property it owns if’ it

                       (1) is organized     as a community     housing   development
               organization;

                          (2) meets the requirements of a charitable organization
               provided      in Sections 11.18(e) and (f) [regarding operations and
               assets];

                         (3) owns the property for the purpose of building or repairing
               housing on the property to sell without profit to a low-income or
               moderate-income      individual or family satisfying the organization’s
               eligibility requirements or to rent without profit to such an individual
               or family; and

                         (4) engages exclusively in the building, repair, and sale or
               rental of housing as described by Subdivision (3) and related
               activities.

TEX. TAX CODEANN. 5 11.182(b) (Vernon 2001); see also 42 U.K.          8 12704 (West 1995) (defining
“community   housing development      organization” as a nonprofit organization that has as one of its
The Honorable Frank Madla - Page 3                    (JC-0576)

purposes the provision of housing to low-income and moderate-income                          persons).     That an
organization qualifies under this provision does not end the inquiry.

         To qualify for the tax exemption provided in subsection (b), an eligible community housing
development organization must satisfy the specific requirements or restrictions of subsections (c)
through (g) of section 11 .182, to the extent those provisions apply in the particular situation.
We summarize those provisions in general terms. Under subsection (c), a community housing
development organization’s real property may not be exempted from taxation after the third
anniversary of the date of the property’s acquisition unless the property is offered for rent or is rented
to low-income or moderate-income individuals or families. See TEX. TAX CODE ANN. tj 11.182(c)
(Vernon 2001). Pursuant to subsection (d), a multifamily rental property consisting of thirty-six or
more dwelling units may not be exempted in a subsequent year unless in the preceding year the
organization expended at least forty percent of taxes saved as a result of the exemption in that year
on social, educational,      or economic development        services, capital improvements       projects,
or rent reduction.     See id. $ 11.182(d); see also id. 5 11.182(h) (property exempted from this
requirement).     This requirement, however, does not apply to property financed with tax-exempt
bonds between January 1,1997 and December 3 1,200l. See id. 9 11.182(d). But under subsection
(e), an organization seeking tax exemption for improved real property that includes a housing project
acquired after December 3 1, 2001 with the proceeds of certain tax-exempt bonds, must “control
100 percent of the interest in the general partner if the project is owned by a limited partnership[,]”
see id. 8 11.182(e)(1);2 comply with the community housing development                  rules and laws
administered by the Texas Department of Housing and Community Affairs (the “Department”), see
id. 8 11.182(e)(2); and file annually with the Department and each taxing unit from which a project
receives an exemption evidence that the organization spent more than ninety percent of the project’s
cash flow for eligible individuals or on social, educational, or economic development services,
capital improvement projects, or on rent reduction, see id. 8 11.182(e)(3); see also id. fj 11.182(h)
(property exempted from this requirement). Finally, to receive an exemption, under subsection (b)
an organization must annually have an audit prepared by an independent auditor and deliver a copy
of the audit to the Department and to the chief appraiser of the appraisal district in which the
property sought to be exempted is located. See id. tj 11.182(g).

         In short, to qualify for an exemption from taxation of its real property under section 11.182
of the Tax Code, an organization must not only meet the requirements of section 11.182(b), but it
must also satisfy the other requirements and restrictions of section 11.182 to the extent they apply
in a particular situation.

         We have not been provided with any information regarding the particular organization or
property at issue other than that the organization is a qualified community housing development
corporation and “is 100% owner of the general partner in a limited partnership that owns [the]
improved real estate [ .I” Request Letter, supra note 1, at 1. We do not know the provision of

           *Compare TEX. TAX CODE ANN.$ 11.182(e)(l), with TEX. CONST. art. VIII, 0 2(a) (authorizing legislature to
 exempt only “all buildings used ex&siveZy and owned by . . . institutions engaged primarily in public charitable
functions”) (emphasis added).
The Honorable Frank Madla - Page 4                      (JC-0576)

section 11.182 in controversy or requiring clarification. See id. Furthermore, we do not know
whether as “100% owner of the general partner in a limited partnership that owns [the] improved
real estate,” the particular organization seeking the tax exemption is the exclusive user and owner
of the property as required by article VIII, section 2(a). Id. Accordingly, we answer your question
only in general terms. To qualify for an exemption from taxation of its real property under section
11.182, an organization must first satisfy the requirements of article VIII, section 2(a) of the Texas
Constitution. Then it must satisfy all the requirements of section 11.182 of the Tax Code: it must
qualify as a community housing development organization under section 11.182(b) and “control 100
percent of the interest in the general partner if the project is owned by a limited partnership”
assuming section 11.182(e) applies; and it must satisfy the other requirements of section 11.182 that
apply to the organization and its real property. Because we have been provided with limited
information and because this office does not make finding of fact in the opinion process,3 we cannot
and do not determine whether the organization you ask about is in fact entitled to an exemption from
taxation of real property under section 11.182 of the Tax Code.4

         The chief appraiser for the appraisal district in which the particular organization’s real
property is located is authorized to determine in the first instance whether the property is exempt.
In general, to receive a tax exemption, a person must apply for the exemption by filing an application
with the chief appraiser for the appraisal district in which the property claimed exempt is located.
See TEX. TAX CODE ANN. 0 11.43(a) (Vernon 2001). The chief appraiser determines an applicant’s
right to an exemption.      See id. 8 11.45(a). After considering the application and the relevant
information, the chief appraiser must, “as the law and facts warrant,” (1) approve the application
and allow the exemption; (2) modify the exemption applied for and allow the exemption as
modified; (3) disapprove the application and request additional information from the applicant
supporting the exemption; or (4) deny the application. Id.

         The burden is on the organization seeking an exemption to show that the organization is
entitled to the exemption under article VIII, section 2(a) of the constitution and section 11.182
of the Tax Code. Exemptions from taxation are not favored by the law and are not favorably
construed. See N. Alamo Water Supply Corp., 804 S.W.2d at 898. “Statutory exemptions from
taxation are subject to strict construction because they undermine equality and uniformity by placing
a greater burden on some taxpaying businesses and individuals rather than placing the burden on all
taxpayers equally.” Id. Thus, the burden of proof clearly showing that the organization falls within
the statutory exemption is on the claimant. See id.

          3See, e.g., Tex. Att’y Gen. Op. Nos. JC-0032 (1999) at 4 (stating that question of fact is beyond purview of this
office); JC-0027 (1999) at 3 (stating that questions of fact cannot be addressed in attorney general opinion); JC-0020
(1999) at 2 (stating that investigation and resolution of fact questions cannot be done in opinion process).

           4See, e.g., BaptistMem ‘Is Geriatric Ctr. v. Tom Green County AppraisalDist., 85 1 S.W.2d 938,945 (Tex. App.
-Austin 1993, writ denied) (“Whether an organization is a purely public charity is a question of fact . . . Similarly,
whether the property in dispute is used in furtherance of the organization’s charitable purposes is a fact issue.“); Tex.
Att’y Gen. Op. Nos. DM-402 (1996) at 4-5 (whether particular resource conservation and development council
exclusively serves charitable purpose or exclusively promotes social welfare is question of fact inappropriate for opinion
process); JM-1257 (1990) (d ecision that particular entity is charitable organization within act ordinarily involves
investigation and resolution of fact questions, which cannot be undertaken in opinion process).
The Honorable Frank Madla - Page 5             (JC-0576)

                                        SUMMARY

                         To qualify for an exemption from taxation of its real property
               under section 11 .182 of the Tax Code, a particular community
               housing development organization must first satisfy the requirements
               of article VIII, section 2(a) of the Texas Constitution. Then it must
               satisfy all the requirements of section 11.182 of the Tax Code: The
               organization must qualify as a community housing development
               organization under section 11.182 (b) of the Tax Code and “control
               100 percent of the interest in the general partner if the project is
               owned by a limited partnership” assuming section 11.182(e) of the
               Tax Code (which sets out particular requirements for a housing
               project constructed after December 3 1, 2001 with the proceeds of
               certain tax-exempt bonds) applies; and it must satisfy the other
               requirements     of section 11.182 that apply to the organization
               and its property. Whether a particular organization is entitled to an
               exemption from taxation of real property is a question of fact that
               cannot be determined in an attorney general opinion. The chief
               appraiser for the appraisal district in which the particular
               organization’s property is located is authorized to determine in the
               first instance whether the property is exempt. The burden is on the
               organization seeking an exemption to show that it is entitled to the
               exemption under article VIII, section 2(a) of the constitution and
               section 11.182 of the Tax Code.

                                              Attorney General of Texas

HOWARD G. BALDWIN, JR.
First Assistant Attorney General

NANCY FULLER
Deputy Attorney General - General Counsel

SUSAN DENMON GUSKY
Chair, Opinion Committee

Sheela Rai
Assistant Attorney General, Opinion Committee