    CmlCE   OF THE ATTORNE”   GrNrRAL.   STATE OF TEXAS

    JOHN     CORNYN




                                                September 7,200O




The Honorable Eddie Lucia, Jr.                                Opinion No. JC-0282
Chair, Special Committee on Border Affairs
Texas State Senate                                            Re: Whether a travel trailer may only be
P.O. Box 12068                                                considered an “improvement” under section
Austin, Texas 7871 l-2068                                     1.04(3) of the Tax Code if the same person
                                                              owns the land on which it is located, and
                                                              related questions (RQ-0223-JC)


Dear Senator Lucia:

         You ask two questions about ad valorem taxation. First, you ask whether a travel trailer may
only be considered an “improvement” under section 1.04(3) of the Tax Code if the same person
owns the land on which it is located. We conclude that section 1.04(3)(B) does not foreclose as a
matter of law the possibility that a travel trailer attached to someone else’s property is an
improvement within the meaning of section 1.04(3)(A). You also ask about the consequences of a
political subdivision’s failure to hold a public hearing regarding its intent to tax personal property
otherwise exempt under section 11.14 of the Tax Code. Although failure to comply with the
requirements of section 11.14 may void an assessment of personal property taxes, this office is
unable to determine whether a political subdivision substantially complied with those requirements.

         We begin with your question about the definition of “improvement” as it relates to travel
trailers. The Tax Code provides for the taxation of all real and tangible personal property over which
this state has jurisdiction unless the property is exempt by law. See TEX. TAX CODE ANN. 5 11.01
(Vernon Supp. 2000). Under the Tax Code, the term “real property” includes an improvement. See
id. $ 1.04(2)(b). Section 1.04(3) of the Tax Code defines the term “improvement” in pertinent part
as follows:

                      (A)     a building, structure, fixture, or fence erected on or affixed
                 to land;

                      (B) a transportable structure that is designed to be occupied for
                 residential or business purposes, whether or not it is affixed to land,
                 if the owner of the structure owns the land on which it is located,
                 unless the structure is unoccupied and held for sale or normally is
                 located at a particular place only temporarily.

See id. 5 1.04(3).
The Honorable Eddie Lucia         - Page 2             (JC-0282)




         This office recently addressed this definition as it relates to travel trailers in Attorney General
Opinion JC-0150, which concluded that a travel trailer attached to a leased lot will generally remain
the property of the person leasing the lot from the trailer park and will be taxable to the lessee of the
lot as personalty rather than realty. See Tex. Att’y Gen. Op. No. JC-0150 (1999). There, this office
opined that the section 1.04(3)(B) definition of “improvement,” including within the meaning of
the term transportable structures designed for residential use “if the owner ofthe structure owns the
land on which it is located,” was not relevant to the taxation of travel trailers installed in trailer park
lots owned by a person other than the trailer owner. See id. at 2. Rather, the opinion focused on the
section 1,04(3)(A) definition, including within the term a “structure               erected on or affixed to
land.” Id. It concluded that the question whether a structure has been affixed to land and has
become an improvement as defined by section 1.04(3)(A) is aquestion of fact, involving the owner’s
intent to make the attachment permanent, that cannot be resolved by this office as a matter of law.
See id. at 3. While the opinion suggested that in most cases it is “safe to presume that trailer owners
do not intend that, by hooking up their trailers, they will cede ownership of them to the trailer park
operators,” it also noted that, “[i]n the rare instance where such was the case, the improvement would
be taxable as real property to the trailer park operator.” Id.

          Stating that our construction of section 1.04(3) in Attorney General Opinion JC-0150 is
ambiguous, your first question asserts that the statute creates “two separate tests for improvements
-one      for structures which are non-transportable and one for transportable structures.“’ It appears
that you would like this oftice to conclude, as a matter of law, “that travel trailers, which are
transportable structures by nature, can only be considered improvements if the same person owns
the land and the transportable structure.” Request Letter, note 1, at 2. We do not believe that
Attorney General Opinion JC-0150’s construction of section 1.04(3) as it applies to travel trailers
is unclear or requires modification. We also disagree with the construction of section 1.04(3) urged
in your letter that subsection(B) is the only part ofthe definition of improvement applicable to travel
trailers.

        Your query contends, in essence, that subsection (B) of section 1.04(3) is intended to create
an exception to subsection (A) for travel trailers, mandating the taxation oftravel trailers as personal
property whenever they are located on land owned by another. The determination that property is
personal rather than real may have broad implications for its taxation, because personal property
benefits from a greater array of tax exemptions under the constitution and the Tax Code than does
real property. See, e.g., TEX. CONST. art. VIII, 5 l(d), (e); TEX. TAX CODE ANN. $ 11.14 (Vernon
Supp. 2000) (providing local option exemption for most personal property). Tax exemptions are not
favored in the law and must be express. See North Alamo Water Supply Corp. Y. Willacy County
Appraisal Dist., 804 S.W.2d 894, 899 (Tex. 1991) (“exemptions from taxation are not favored by
the law”); Swearingen Y. City of Texarkana, 596 S.W.2d 157,159 (Tex. Civ. App.-Texarkana            1979,
writ ref d n.r.e.) (“An exemption may not be raised by implication, but the intention to relieve from
taxation must affirmatively appear.“). Had the legislature intended subsection (B) of section 1.04(3)



         ‘Letter from Honorable Eddie Lucia, Jr., Chair, Special Committee on Border Affairs, Texas State Senate, to
Honorable John Corny& Texas Attorney General at l-2 (Apr. 19,200O) (on tile with Opinion Committee) [hereinafter
Request Letter].
The Honorable Eddie Lucia      - Page 3            (JC-0282)




to exclude from the definition of improvement all transportable structures designed for occupancy
except those located on land owned by the owner of the structure, we believe that the legislature
would have made this exclusion express. Rather, we believe it is clear from section 1.04(3) on its
face that, under subsection (A), a travel trailer that has been permanently affixed to land is an
improvement and is taxable as real property. Under subsection (B), a travel trailer is also an
improvement and taxable as real property if the owner of the trailer owns the land on which it is
located. It is not relevant under subsection (B) whether or not the travel trailer has been affixed to
land.

        In sum, we believe it is clear from the face of section 1.04(3) that subsection (B) is intended
to expand rather than restrict the universe of structures taxable as improvements.               As we
acknowledged in Attorney General Opinion JC-0150, it is highly unlikely as a matter of fact that the
owner of a travel trailer will intend to permanently affix his her trailer to the property of another,
creating an improvement to real property within the meaning of subsection (A). However, we cannot
conclude that subsection (B) as a matter of law forecloses the taxation of a travel trailer located on
land owned by another as an improvement under subsection (A).

          You also ask about “the consequences of the failure of a governing body of a political
subdivision to give proper notice [of its intent to tax personal property] if it then proceeds to collect
the tax.” Request Letter, supra note 1, at 2. Section 11.14 ofthe Tax Code provides that “[a] person
is entitled to an exemption from taxation of all tangible personal property, other than manufactured
homes, that the person owns and that is not held or used for production of income.” TEX. TAX CODE
ANN. 3 11.14(a) (Vernon Supp. 2000). However, section 11.14 gives political subdivisions the
option to tax personal property exempt from taxation under subsection (a) if it follows certain
procedures, which are set forth in subsections (c) and (e). Subsection (c) provides that:

                        The governing body of a taxing unit, by resolution or order,
                depending upon the method prescribed by law for official action by
                that governing body, may provide for taxation of tangible personal
                property exempted under Subsection (a). If a taxing unit provides for
                taxation of tangible personal property as provided by this subsection,
                the exemption prescribed by Subsection (a) does not apply to that
                unit.

Id. 3 11.14(c). In addition, subsection (e) provides that:

                         A political subdivision choosing to tax property otherwise
                made exempt by this section, pursuant to Article VIII, Section l(e),
                of the Texas Constitution, may not do so until the governing body of
                the political subdivision has held a public hearing on the matter, after
                having given notice of the hearing at the times and in the manner
                required by this subsection, and has found that the action will be in
                the public interest of all the residents ofthat political subdivision. At
                the hearing, all interested persons are entitled to speak and present
The Honorable Eddie Lucia             - Page 4              (JC-0282)




                     evidence for or against taxing the property. Not later than the 30th
                     day prior to the date of a hearing held under this subsection, notice of
                     the hearing must be [published three times in a newspaper of general
                     circulation in the ten-day period prior to the hearing].

Id. $ 11,14(e)

         Section 11.14 does not permit a political subdivision to tax personal property otherwise
exempt under subsection (a) unless it has held a public hearing according to the requirements of
subsection (e). We have not located any case addressing the consequences                   of a political
subdivision’s failure to adhere to these requirements. Cases addressing taxing units’ adherence to
the public hearing requirements of section 26.06 of the Tax Code, providing for a public hearing
prior to the adoption of a tax rate, generally state that “[flailure to comply with statutory directives
in assessing taxes voids the assessment,” Corpus Christi Taxpayer’s Ass ‘n v. City of Corpus Christi,
716 S.W.2d 578, 580 (Tex. App.-Corpus Christi 1986, writ ref d n.r.e.), but also suggest that
substantial compliance with a statutory directive is sufficient, see, e.g., id.; Houston Lighting &
Power Co. v. Dickinson Zndep. Sch. Dist., 641 S.W.2d 302,306 (Tex. App.-Houston [14th Dist.]
 1982, writ ref d n.r.e.); Lumberton Mm. Util. Dist. v. Cease, 596 S.W.2d 601, 604-05 (Tex. Civ.
App.-Beaumont      1980, no writ); FederalLandBankofHouston          v. State, 3 14 S.W.2d 621,630 (Tex.
Civ. App.-Amarillo       1958), rev’d on other grounds, 329 S.W.2d 847 (1959); Birdwell v. City of
Boyd, 233 S.W.2d 603,605 (Tex. Civ. App.-Fort Worth 1950, no writ). Whether a governmental
body has substantially complied with statutory notice requirements is generally a question of fact
beyond the purview of an attorney general opinion. See, e.g., Tex. Att’y Gen. Op. No. H-1081
(1977) at 2 (“When the substantial compliance standard is applicable, whether it has been met
depends upon the facts of each case.“). This office, which does not make fact findings, cannot make
that determination.2

         Finally, it is not clear whether you ask about section 11.14 with respect to taxation of travel
trailers as personal property. In the event that you are concerned about the taxation of travel trailers
as personal property, however, another consideration would come into play. Section Il. 14 provides
a tax exemption for “all tangible personal property, other than manufactured homes, that the person
owns and that is not held or used for production of income.” TEX. TAX CODE ANN. § 11.14(a)
(Vernon Supp. 2000) (emphasis added). Any statute authorizing a tax exemption for personal
property must be consistent with the terms ofthe constitutional provision authorizing the exemption.
See, e.g., TEX. CONST. art. VIII, 5 l(d) (requiring the legislature by general law to “exempt from ad
valorem taxation household goods not held or used for the production ofincome and personal effects
not held or used for the production of income” and providing that “the Legislature by general law
may exempt from ad valorem taxation: (1) ‘all or part of a personal property homestead” and (2)
“all other tangible personal property, except structures which are personal property and are used
or occupied as residential dwellings and except property held or used for the production of income”)



            *See, e.g., Tex. Att’y Gen. Op. Nos. K-0020 (1999) at 2 (stating that investigation and resolution      of fact
questions    cannOt be done in opinion process); M-l 87 (1968) at 3 (“[Tlhis oftice is without authority to make.   factual
determinations.“);    O-291 1 (1940) at 2 (“[Tlhis     presents a fact question which we are unable to answer.“).
The Honorable Eddie Lucia - Page 5               (X-0282)




(emphasis added). Thus, whether a travel trailer may be taxed as personal property will depend not
only on whether the governmental body has complied with the procedural requirements of section
11.14, but also whether the constitution permits its exemption from taxation.



                                       SUMMARY

                        Section 1.04(3)(B) of the Tax Code does not foreclose as a
               matter of law the possibility that a travel trailer attached to someone
               else’s property is an improvement within the meaning of section
                1.04(3)(A). Although apolitical subdivision’s failure to comply with
               the procedural requirements of section 11.14 of the Tax Code may
               void an assessment ofpersonal property taxes, this office is unable to
               determine whether a political subdivision substantially complied with
               those requirements.




                                              Attorney General of Texas



ANDY TAYLOR
First Assistant Attorney General

CLARK KENT ERVIN
Deputy Attorney General - General Counsel

SUSAN D. GUSKY
Chair, Opinion Committee

Mary R. Crouter
Assistant Attorney General - Opinion Committee
