      . .




                                         The Attorney          General of Texas
                                                         December 31, 1982
MARK WHITE
Attorney General


                                        Honorable Mike Driscoll                Opinion No.MW-553
Supreme      Court Building             Harris County Attorney
P. 0. BOX 12548
Austin,    TX. 78711. 2548
                                        1001 Preston, Suite 634                Re: Tax exemption of property
51214752501                             Houston, Texas   77002                 used for religious purposes
Telex    9101874.1367
Telecopier     5121475.0266             Dear Mr. Driscoll:

1607 Main St., Suite 1400
                                             You ask two questions concerning ad valorem tax exemption of
Dallas. TX. 75201-4709                  property used for religious purposes. Your first question is:
2141742-8944
                                                     Is it the duty of the county tax assessor-
                                                  collector to collect delinquent taxes on land
4824 Alberta       Ave.. Suite    160
El Paso, TX.       79905.2793
                                                  owned in fee by a church with a reversionary
9151533-3484                                      interest in the grantor who has not claimed an
                                                  exemption when said property is claimed to be
                                                  exempt from taxation because it is used as a home
1220 Dallas Ave., Suite          202
                                                  for a needy family and said property yields rent
Houston,     TX. 77002.6986
7131650.0666
                                                  revenue to said church?

                                             The threshold question is whether property owned by this church
806 Broadway.        Suite 312          can be exempt from ad valorem taxation when it is used as a home for a
Lubbock,     TX.    79401.3479
                                        needy family and the property yields rent revenue to the church. Our
8061747-5238
                                        answer is limited to the particular circumstances considered. We
                                        conclude that the property here is not tax exempt because it fails to
4309 N. Tenth.     Suite S              qualify either as exempt property of a religious organization or as
McAllen,     TX. 78501-1685             property of a charitable organization exempt under present statutes.
5121682.4547                            Therefore, it is the duty of the county tax assessor-collector to
                                        collect delinquent ad valorem taxes on the property.
200 Main Plaza, suite 400
San Antonio,  TX. 78205-2797                 Article VIII, section 2 of the Texas Constitution provides the
5121225-4191                            following in pertinent part:

An Equal      Opportunity/                       [Tlhe legislature may, by general laws, exempt
Affirmative     Action     Employer              from taxation... actual places of religious
                                                 worship, also any property owned by a church or by
                                                 a strictly religious society for the exclusive use
                                                 as a dwelling place of the ministry of such church
                                                 or religious society, and which yields no revenue
                                                 whatever to such church or religious society;
                                                 provided that such exemption shall not extend to
                                                 more property than is reasonably necessary for a
                                                 dwelling place and in no event more than one acre



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Honorahle Mike Driscoll - Page 2       (Mw-553)




             of land; ... and institutions of purely public
             charity; and all laws exempting property from
             taxation other than the property mentioned in this
             Section shall be null and void.

     The foregoing constitutional provision is not self-executing; it
permits (but does not require) the legislature to exempt certain types
of property from taxation.       Pursuant to this authority, the
legislature enacted section 11.20, Property Tax Code, exempting
certain specified property of religious organizations, and section
11.18, Property Tax Code, exempting certain specified property of
organizations meeting listed criteria which qualify them as
"charitable organizations".

     In order to qualify for exemption from ad valorem taxation,
property must fall within either a self-executing constitutional
provision or a statute adopted pursuant to article VIII, section 2 of
the Texas Constitution. See River Oaks Garden Club V. City of
Houston, 370 S.W.Zd 851 (Tex.'1963). Moreover, though property falls
within a ournorted statutorv exemntion. it will be exemnt onlv if such
         .     .                                            .        I



an exemption is permitted by the constitution. Dickison V. Woodmen of
the World Life Insurance Society, 280 S.W.Zd 315, 317 (Tex. Civ. App.
- San Antonio 1955, err. ref'd); Santa Rosa Infirmary V. City of San
Antonio, 259 S.W. 926, 931 (Tex. 1924). In this instance, we need not
reach the constitutional issue because the subject property falls
within the ambit of neither section 11.18 nor section 11.20 of the
Property Tax Code. We will first address whether the property is
exempt under section 11.20, which pertains to religious organizations.

     Section 11.20 declares the following in pertinent part:

                (4   An organization that qualifies as a
             religious organization as provided by Subsection
             (c) of this section is entitled to an exemption
             from taxation of:

                        (1)   the real property that is owned by
                   the religious organization, is used primarily
                   8s a place of regular religious worship, and is
                   reasonably necessary for engaging in religious
                   worship;

                        (2)   the tangible personal property that
                   is owned by the religious organization and is
                   reasonably necessary for engaging in worship at
                   the place of worship specified in Subdivision
                   (1) of this subsection;

                       (3)   the real property that is owned by
                   the religious organization and is reasonably



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.


    Honorable Mike Driscoll - Page 3 (MW-553)




                necessary for use as a residence (but not more
                than one acre of land for each residence) if
                the property:

                           (A) is used     exclusively as     a
                     residence for those individuals whose
                     principal occupation is to serve in the
                     clergy of the religious organization; and

                           (B) produces no revenue     for   the
                     religious organization; and

                     (4) the tangible personal property that
                is owned by the religious organization and is
                reasonably necessary for use of the residence
                specified   by   Subdivision  (3)   of   this
                subsection.

                      . . ..

                (d) Use of property that qualifies for the
             exemption prescribed by Subdivision (1) or (2) of
             Subsection (a) of this section for occasional
             secular purposes other than religious worship does
             not result in loss of the exemption if the primary
             use of the property is for religious worship and
             all income from the other use is devoted
             exclusively to the maintenance and development of
             the property as a place of religious worship.

                 (e) For    the purposes of      this   section,
              'religious worship' means individual or group
              ceremony or meditation, education, and fellowship,
              the purpose of which is to manifest or develop
              reverence, homage, and commitment in behalf of a
              religious faith.

         Section 11.20 exempts real and tangible persons1 property if it
    is owned by a religious organization, used primarily as, or at, a
    place of regular religious worship, and is reasonably necessary for
    engaging in religious worship. In construing article VIII, section 2
    and the now repealed article 7150, V.T.C.S., (the predecessor statute
    to section 11.20) the Texas Supreme Court declared that "["Ihat
    constitutes an actual place of religious worship as those words are
    used in the Constitution and statutes is a fact issue which the
    claimant has the burden to prove." Davies V. Meyer, 541 S.W.Zd 827,
    829 (Tex. 1976). We do not resolve issues of fact in the opinion
    process, but we note that there is no allegation in the materials
    submitted to us that the subject property is used as an actual place
    of religious worship. Assuming this to be the case, it is clear that



                                      p. 2019
Honorable Mike Driscoll - Page 4 @fW-553)




the subject property does not fall within section 11.20(a)(l) and (2);
therefore, we need not consider by whom property subject to a
reversionary interest is "owned" within the meaning of the statute.
We turn to the second exemption permitted for religious organizations.

     Section 11.20(a)(3) exempts only real property owned by the
religious organization and reasonably necessary for use as a
residence. This exemption applies only if the property is used
exclusively as a residence for the clergy and produces no revenue for
the religious organization. Again, assuming the truth of the facts
presented to us. the subject property is not used exclusively as a
residence for the clergy and does produce revenue for the religious
organizations. Thus, the property is not exempt under section
11.20(a)(3).    (Such restrictions =PPlY only to the religious
organization's parsonage. Property Tax Code 911.20(a)(3)(A) and (B).
We note that neither the statute, section 11.20(s) and (b), Property
Tax Code, nor the constitution, require that the actual place of
religious worship be exclusively so used or that it produce no
revenue. Davis V. Congregation Agudas Achier, 456 S.W.2d 459, 461
(Tex. Civ. App. - San Antonio 1970, no writ).)

     Under the facts given us, clearly, the subject property is not
exempt under any of the provisions of section 11.20 exempting property
belonging to a religious organization.

     Section 11.18 of the Property Tax Code concerns exemptions for
charitable organizations. It provides the following in pertinent
part:

             (a) An organization that qualifies as a
          charitable organization as provided by Subsection
          (c) of this section is entitled to an exemption
          from taxation of the buf~ldings and tangible
          personal property that:

                     (1) are    owned   by   the   charitable
                  organization; and

                    (2)  except as permitted by Subsection
                 (b) of this section, are used exclusively
                 by qualified charitable organizations.

             (b) Use of exempt property by persons who are
          not charitable organizations qualified as provided
          by Subsection (c) of this section does not result
          in the loss of an exemption authorized by this
          section if the use is incidental to use by
          qualified charitable organizations and limited to
          activities that benefit the beneficiaries of the




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Honorable Mike Driscoll - Page 5 (m-555)




         charitable organizations that     own       or    use   the
         property.

            (c) To qualify as a charitable organization
         for the purposes of this section, an organization
         (whether operated by      an  individual, as a
         corporation, or as an association) must:

                    (1) b=    organized   exclusively    to
                 perform religious, charitable, scientific,
                 literary, or educational purposes and,
                 except as permitted by Subsection (d) of
                 this   section, engage exclusively in
                 performing one or more of the following
                 charitable functions:

                            (A) providing    medical   care
                         without     regard      t0     the
                         beneficiaries' ability to pay;

                            (B) providing     support     or
                         relief to orphans, delinquent,
                         dependent, or handicapped children
                         in need of residential care,
                         abused or battered spouses or
                         children in need of temporary
                         shelter, the impoverished, or
                         victims   of    natural    disaster
                         without      regard     t0      the
                         beneficiaries' ability to pay;

                            (C) providing     support    t0
                         elderly persons or the handicapped
                         without     regard      t0     the
                         beneficiaries' ability to pay;

                            (D) preserving       a        historical
                         landmark or site;

                            (E) promoting or operating a
                         museum, zoo, library, theater of
                         the dramatic arts, or symphony
                         orchestra or choir;

                            (F) promoting    or   providing
                         humane treatment of animals;

                            (G) acquiring, storing, trans-
                         porting, selling, or distributing
                         water for public use;



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Honorable Mike Driscoll - Page 6   (MN-553)




                            (H) answering fire alarms and
                         extinguishing   fires    with   no
                         compensation or     only   nominal
                         compensation to the members of the
                         organization;

                             (I) promoting    the   athletic
                          development of boys or girls under
                          the age of 18 years;

                            (.I) preserving or   conserving
                         wildlife;

                             (K) promoting       educational
                          development   through   loans   or
                          scholarships to students;

                             (L) providing halfway house
                          services pursuant to a certifica-
                          tion ss a halfway house by the
                          Board of Pardons and Paroles; or

                             (M) providing         permanent
                          housing and related social, health
                          care, and educational facilities
                          for persons who are 62 years of
                          age or older without regard to the
                          residents' ability to pay;

                     (2) be operated in a way that does not
                  result   in   accrual   of   distributable
                  profits, realization of private gain
                  resulting from payment of compensation in
                  excess of a reasonable allowance for
                  salary or other compensation for services
                  rendered, or realization of any other form
                  of private gain and, if the organization
                  performs one or more of the charitable
                  functions specified by Paragraph (C), (D),
                  (E), 093     (G), (J), (K), or CM) of
                  Subdivision (1) of this subsection, be
                  organized as a nonprofit corporation as
                  defined    by    the   Texas    Non-Profit
                  Corporation Act; and

                     (3) by    charter, bylaw,   or   other
                  regulation adopted by the organization to
                  govern its affairs:




                           p. 2022
1   .




        Honorable Mike Driscoll - Page 7 (MW-553)




                               (A) pledge its assets for use in
                            performing the organization’s charit-
                            able functions; and

                               (B) direct that on discontinuance
                            of the organization by dissolution or
                            otherwise   the  assets are     to   be
                            transferred to this state or to an
                            educational, religious, charitable, or
                            other similar organization that is
                            qualified as a charitable organization
                            under   Section   501(c)(3),   Internal
                            Revenue Code of 1954, as amended.

                     (d) Performance of noncharitable functions by
                  a charitable organization that owns or uses exempt
                  property does not result in loss of an exemption
                  authorized by this section if those other
                  functions are incidental to the organizations’s
                  charitable functions.

                     (e) In this section, ‘building’ includes the
                  land that is reasonably necessary for use of,
                  access to, and ornamentation of the building.

                     (f) An exemption authorized by Paragraph (J)
                  of Subdivision (1) of Subsection (c) of this
                  section is limited to land and improvements and
                  may not exceed 1,000 acres in any one county.

             Based on the information which we have received, we conclude that
        the subject matter is not exempt as a charitable institution from ad
        valorem taxes for two reasons. First, we have been presented with no
        charter or bylaw indicating that the church is “organized exclusively
        to perform religious... purposes and... engage exclusively in
        performing one or more of [a list ofthirteen specified] charitable
        functions.” (Emphasis added). Section 11.18(c)(l)(A)-(~), Property
        Tax Code. Indeed, no charter or bylaws may exist at all. As we noted
        in Attorney General Opinion MW-288 (1980), section 11.18 “establishes
        new criteria for deter-raining
                                     whether property owners are eligible for
        charitable tax exemptions.”

                  In our opinion, the definition of ‘charitable
                  functions’ in section 11.18(c)(l) clearly serves
                  not to enlarge the meaning of ‘purely public
                  charity’ but to deny tax exemptions to property
                  owned by institutions of purely public charity
                  that are not organized to perform the charitable
                  functions defined. Where section 11.18 has the
                  effect of denying tax exemptions to organizations




                                          p. 2023
                                                                         .   .


Honorable Mike Driscoll - Page 8   0%553)




          that might otherwise have been properly allowed
          them, it will be enforced. (Emphasis added).

Id. The organization which owns the subject property is apparently a
religious organization organized, however informally, for primsrily
religious purposes. It is not a charitable organization incidently
engaging in religious activities. While the organization is organized
to perform religious purposes, it does not in addition engage
"exclusively" (or even primarily) in one or more of the enumerated
charitable purposes set out in the statute. The fact that a claimant
performs some charitable activity has not been sufficient to qualify
the organization for tax exemption as a charitable organization. City
of Amarillo V. Amarillo Lodge No. 731, A.F. a A.M., 488 S.W.Zd 69, 72
(Tex. 1972). In order to determine whether an ornanization aualifies.
one must look to the principal activity of the claimant. --   See Most
Worshipful Prince Hall Grand Lodge, F. 8 A.M. of Texas V. City of Fort
Worth, 435 S.W.2d 274 (Tex. Civ. App. - Fort Worth 1968, writ ref'd
n.r.e.). The principal activity of the church is religious, not
charitable. The organization does not meet the requirements of
section 11.18(c)(l)(A)-(M), Property Tax Code.

     We are not unmindful of the holding in City of McAllen V.
Evangelical Lutheran Good Samaritan Society, 530 S.W.2d 806 (Tex.
1975), wherein the supreme court, in construing article VIII, section
2 of the Texas Constitution together with the now repealed article
7150, V.T.C.S. (the predecessor to section 11.18, Property Tax Code)
stated that although charitable institutions are entitled to an
exemption of only that property which is used by the institution
exclusively for the purposes of a purely public charity, it does not
follow:

         that every use      of   the property must be
         gratuitous.... Nor does it follow that all
         religious or other benevolent activities must be
         excluded in the operations of the hospital or
         home. It is no fatal defect to join charitable
         and religious purposes; the exemption will not be
         withdrawn so long ss the charitable requirements
         are met.

530 S.W.Zd at 810-11. As we declared in Attorney General Opinion
MW-288 (1980), "[tlhe key is the emphasized language 'so long as the
charitable requirements are met.' Former article 7150, section 7,
V.T.C.S., did not require that the institution claiming an exemption
be organized exclusively for certain charitable purposes and no other.
The present statute does." (Emphasis added). As we stated above, the
claimant organization is not so organized.

     Second, section 11.18(c)(3) requires that the charter, bylaws, or
regulations adopted by the organization to govern its affairs:



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Honorable Mike Driscoll - Page 9   (MW-553)




         (A) pledge its assets for use in performing the
         organization's charitable functions; and      (B)
         direct that on discontinuance of the organization
         by dissolution or otherwise the assets are to be
         transferred to this state or to an educational,
         religious, charitable, or other similar organiza-
         tion that is qualified under Section 501(c)(3),
         Internal Revenue Code of 1954, as amended.
         (Emphasis added).

The organization's governing document makes no such provision. Again,
under the facts submitted, the organization fails to satisfy the
"charitable" requirements of section 11.18; the property is therefore
taxable in the absence of another applicable exemption. See City of
McAllen V. Evangelical Lutheran Good Samaritan Society, supra; Hilltop
Village V. Kerrville Independent School District, 426 S.W.Zd 943 (Tex.
1968); City of Waco V. Texas Retired Teacher Residence Corporation,
464 S.W.Zd 346 (Tex. 1971). Because we are aware of no other
applicable exemption, we advise in answer to your first question that
it is clearly the duty of a county tax assessor-collector to collect
delinquent taxes on property not exempt from ad valorem taxes.

    Your second question is:

         Is  it  the  duty of the County Tax Assessor-
         Collector to collect delinquent taxes on land
         presently owned in fee by a          church with
         reversionary interest in the grantor if the taxes
         were imposed on a non-exempt owner for tax years
         prior to the donation of the building to the
         church?

     From your question, we understand the following to be the case.
Ad valorem taxes were assessed against the property while it was owned
in fee simple absolute by a person who later conveyed the property,
subject to a reverter clause, to the church. The taxes were not paid
and are presently delinquent. We understand you to be asking upon
whom the liability for the delinquent ad valorem taxes should rest,
the present or former owner. We conclude that the grantor, who, we
understand, was the owner of the property when the delinquent taxes
were imposed, is personally liable.

     Section 32.07, Property Tax Code, provides in pertinent part:

          (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 person is not relieved of the




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Honorable Mike Driscoll - Page 10    (MW-553)




          obligation because he no longer owns the property.
          (Emphasis added).

We therefore conclude that the person who owned the property on
January 1 of the year for which the unpaid tax was imposed is
personably liable for the tax. Of course, the taxable interest in the
property is itself subject to sale for the satisfaction of unpaid
taxes validly assessed against it, whoever might have been its owner
when the taxes accrued. Tax Code 032.01. See Attorney General
Opinion H-1108 (1977). But see Tax Code 933.06 (Residence homesteads
of aged -- deferred collection).

                              SUMMARY

            It   is   the   duty    of   the   county   tax
         assessor-collector to collect delinquent taxes on
         church-owned property in the fact situation
         presented. The person who owned the property on
         January 1 of the year for which the unpaid tax was
         imposed is personally liable for the delinquent ad
         valorem taxes, but the taxable interest in the
         proprety is subject to sale for the satisfaction
         of unpaid taxes validly assessed, whoever might be
         personally liable for the taxes.




                                        M A R-K   WHITE
                                        Attorney General of Texas

JOHN W. FAINTER, JR.
First Assistant Attorney General

RICHARD E. GRAY III
Executive Assistant Attorney General

Prepared by Jim Moellinger
Assistant Attorney General

APPROVED:
OPINION COMMITTEE

Susan L. Garrison, Chairman
Jon Bible
Rick Gilpin
Bob Lattimore
Jim Moellinger




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