                                 NEX    GENERAL
                                  BiDLASS




Mr. Jules Damiani, Jr.            Opinion No. M-12
Criminal District Attorney
Galveston, Texas                  Re:   Whether the Fraternities
                                        at the University of
                                        Texas Medical School at
                                        Galveston are exempt
                                        from ad valorem taxes on
Dear Mr. Damiani:                       their property.
        In a letter to the Attorney General you have asked
to be advised whether a fraternity organized under certain
articles of Incorporation Is liable for the payment of ad
valorem taxes  to the County and State. You enclosed a copy
of the Charter of Phi Rho Sigma Benefit Association of Texas
which states its purposes in seven numbered paragraphs, all
of which in general provide for the promotion of medical and
scientific education for students of the medical branch of
the University of Texas, to aid and assist graduates in se-
curing internships, to provide for annual courses of lec-
tures, to maintain a library complementing the school library,
and the last two paragraphs reading as follows:
            “6.   To support and maintain, on a cost
                  sharing plan, a dormitory providing
                  living quarters and facilities for
                  group study and group discussion.
            “7.   To purchase, own and control property
                  (real, personal and mixed) necessary
                  and incidental to the accomplishment
                  of the purposes for which the Associ-
                  ation is formed."
       You also enclosed a copy of a letter, not dated, from
the Deputy Commissioner of Internal Revenue advising that it
is his opinion that the above mentioned Fraternity is exempt
from Federal income tax under Section 101.14 of the Internal
Revenue Code.  (This apparently does not refer to the Revenue
Code of 1954 but probably was intended to refer to the prior
code now annotated in 26 U.S.C.A. 501(c) (7), which Is con-
strued to exempt College Greek Letter Fraternities from the
Federal income tax.)
                        - 37 -
Mr. Jules Damiani, Jr., Page 2 (M-12)


       Upon receipt of your letter, this office wrote you
that we had not been given sufficient facts as to the op-
eration of this organization for us to give you an opinion.
In response to our letter, you wrote as follows:
             1,     The Fraternity or association
       is organized as a non-profit, educational
       association. The Sealy-Smith Foundation
       loaned money to this association and others
       to construct  Fraternity Ihuses.    These
       buildings are used all year round to house
       and board students attending the University
       of Texas Medical Branch and who are nembers
       of the association. They pay a nominal
       amount of room rent, $20.00 per month. It
       is estimated that 97% of the students belong
       to one of these associations. The associa-
       tions underwrite the expenses to bring lec-
       tures to the medical school. Each Fraternity
       maintains a supervised study program and
       maintains a medical library.     The University
       of Texas Medical Branch has no dormitories
       for male medical student6 and while many of
       said students live in private residences,
       others maintain their residence at the
       Fraternity Houses."
       Still desiring to secure additional information as to
the operation of the Fraternity at Galveston, this office
called you over the telephone and you advised that most of
the Fraternities have a library in their Chapter Houses and
about once each year, some one,delivers a lecture to the
students belonging to the Fraternity, and you thought this
was the extent of their educational activities. You also
advised that the Fraternities carry on social activities
in their Chapter Houses.
       It appears that the particular Fraternity mentioned
by you owns the property and it is not owned by any other
organization. We also received a letter from the Secretary-
Treasurer of another organization, Nu Sigma Nu Foundation,
stating that It was organized in 1950 to support and maintain
benevolent, charitable and educational undertakings in the
field of medical education and research at medical schools
of Texas; that membership in the organization consists of
alumni of the Ku Sigma Nu Fraternity; that the Foundation
owns the Chapter House in Galveston which offers room,
board, and opportunities for professional assistance to

                       - 38 -
Mr. Jules Damiani, Jr., Page 3 (M-12)


those students who are members of the Fraternity. We have
also received a letter from an alumnus of the same Fraternity
enclosing a copy of the Constitution andl+laws of the
Foundation giving the same information as co the purpose
of the organization and in addition thereto, states that the
Foundation borrowed money and has been repaying the loan
by rent it is charging the local chapter of the Fraternity.
       It appears that some of the local chapters of the
Fraternities owned their homes while others rent them from
other organizations organized for the purpose of assisting
the local chapters. However, it is immaterial as to which
organization may own the property, since, as we shall later
see, it Is the 'use" of the property that determines whether
it is exempt from ad valorem taxes. We also call attention
to the fact that the mere fact that the Internal Revenue
Service has ruled that the Fraternity is exempt from the
Federal income tax does not create an exemption from the
State and County ad valorem taxes.
       If the Fraternities mentioned are exempt from the
ad valorem taxes, such exemption must be authorized by
Article VIII, Section  2 of the Constitution of Texas which
provides that the Legislature  may exempt "all buildings used
exclusively and owned by persons or associations of persons
for school purposes" and Article 7150, subdivision 1, Vernon's
Civil Statutes, which provides, among others, for exemption
of "buildings used exclusively and owned bx persons or as-
sociations of persons for school purposes.   It does not
seem to be claimed by any of the Fraternities that they are
religious or charitable organizations exempt under the pro-
visions of the Constitution and Statutes.
       The question, then, to be decided is whether the pro-
perty owned or occupied by the Fraternities mentioned fall
within the above provisions of the Constitution and Statute
exempting property used exclusively for school purposes.
In our opinion, they do not, and therefore, such property
is not exempt from ad valorem taxes.
       Even if we should hold, which we do not, that the
local chafters of Fraternities qualified $a using the
property exclusively for school purposes such property
which is rented from another person or corporation is not
         Under the decision of Smith v. Feather, 149 Tex.
gzz$    S.W.2d 418 (1950), a rented building used exclusively


                        - 39 -
Mr. Jules Damiani, Jr., Page 4 (M-12)


for school purposes is not exempt. In order to be exempt
the buildings must be owned by those who use it exclusively
for school purposes. Even as to those local chapters of the
Fraternities that own their property, we do not believe from
the facts stated, and the facts generally known, as to the
operation of College Greek Letter Fraternities, that the
property,is used "exclusively for school,purposes' as pro-
vided by the Constitution and Statutes.
       We do not find any appellate court decisions in Texas
or Attorney General Opinions pertaining to the taxation of
fraternities. However, we do find a judgment of a trial
court, being No. 117,411, Si a Wu Home Association of Texas
v. City of Austin, Texas, 12r th District Court, Travis County,
Texas,-in which a~judgment was rendered on the 28th day of
September 1965, and no appeal was taken from said judgment.
In this case, the Fraternity claimed an exemption from the
City taxes on the Chapter House located in Austin. Several
issues were submitted to the jury as to whether the local
chapter of Sigma Wu Fraternity had been engaged in- promoting
religious, educational and physical development of young men
who attend the University of Texas. All questions pertain-
ing to the claimed exemption were answered against the
Fraternity and judgment was entered that the property was
not exempt from taxation and that the Plaintiff take nothing.
       An exemption from taxation cannot arise through infer-
ence or implication, but must be established by terms too
clear and plain to be mistaken. Memorial Hospital v. State,
253 S.W.2d 1012 (Tex.Civ.App. 1952, error ref., n.r.e.).
The exemption cannot be enlarged by either the Legislature
or the courts. Wichita Falls v. Cooper, 170 S.W.2d 777
(Tex.Civ.App., 1943, error ref.).
       The exemption for schools originally contained the
same wording in the Constitution and the Statute, but in
the 1925 Code, the word "such" was added before the term
buildings in that portion of Article 7150, subdivision 1,
hereinabove quoted, but the Supreme Court in Smith v.
Feather supra, held that the word "such" did not limit the
z?czipf on of school property to public buildings.
       In Theta Xi Bldg. Ass'n of Iowa City v. Board of
Review, 255
mAssIn      ci%med th%*its'p~ope~!~'w~?3ex&mptefr%t~~~-
tion since the objectives of the corporation were defined


                        - 40 -
Mr. Jules Damiani, Jr., Page 5 (M-12)


In its articles to be "'To promote the general moral, social,
educational and literary welfare of the members * * * and to
acquire, maintain and operate a Chapter House, home and
dormitory, and a place for study and education for the mem-
bers etc.'" In holding that the Fraternity was not exempt
from taxation, the Court said;
           "The appellant claims it is a literary,
      scientific, charitable, and religious insti-
      tution or society within the meaning of the
      foregoing statutory provisions, and claims
      that the character or nature of the appellant
      is to be determined by its declared purposes
      and nature as set forth in its articles of
      incorporation. With the latter claim we
      cannot agree. It is the use of the property,
      rather than the declaration made in the
      charter of the appellant, which determines
      the question as to its exemption from taxa-
      tion. Delta Kappa Epsilon Sot. v. Lawler,
      179 N.Y. 535, 71 N.E. 1136. Property used
      with a view to pecuniary profit is not
      exempt from taxation under the provisions
      of the statute quoted, even though the funds
      received are used for paying the unkeep of
      the property and the discharge of the debt
      thereon. . . . We must keep in mind that
      taxation is the rule, exemption is the
      exception, and that statutes under which
      exemptions are claimed should be strictly
      construed, and that those claiming exemp-
      tions,,mustshow themselves entitled thereto.
      . 0 0
      The Court also said:
           "Only two jurisdictions Indiana and
      Oklahoma, so far as we have been able to
      discover, have held fraternity properties
      exempt from taxation."
       The Court distinguished the Indiana case by saying
that the Statute expressly exempted Greek Letter Fraternities
from taxation and that the Oklahoma case provided for exemp-
tion under a Statute authorizing exemptions of certain libra-
ries, scientific, educational and religious institutions, etc.


                       - 41 I
Mr. Jules Damiani, Jr., Page 6 (M-12)


       In conclusion, the Court said:
            "In the instant case the evidence dis-
       closes that the dominant use of the property
       of the appellant was that of a dormitory,
       boarding house, and place of social and
       fraternal intercourse, and home for its
       members during the college school year; and
       that any literary or scientific purposes
       for which it might occasionally have been
       used were merely incidental. Even though
       it were found that the property of the
       fraternity might be included in some one
       or more of the classifications of property
       exempt under the provisions of the statute,
       there still would be a serious doubt as to
       whether the property was used solely and ex-
       clusively for such particular purposes.
       However, it is not necessary to base our
       ruling upon such contingencies. If the
       Legislature had intended to exempt prop-
       erty of the kind here involved, owned by
       fraternities such as the appellant, it
       should and certainly would have named such
       societies or organizations in the exemption
       statute under ,consideration. Having failed
       to do so, we should not extend the provisions
       of the statute by construction and include
       property therein without legislative authority.
       We hold, therefore, that the property of the
       appellant was not, and is not, exempt from
       taxation, and that the trial court was right
       in so holding. . . .'I
       In Alpha Tau Omega Fraternity v. Board of County
comlrs,18 P 26 573 (s    ct   fK     1933)      it
brought by the AT0 Fr%rni~y"cla?%ng    an :x~m~~ionw~~orn
taxation of its property and the suit was also brought in
behalf of fifty-two other fraternities similarly situated.
Exemption was claimed under a provision of the Constitution
of Kansas which provided for an exemption on:
             II
              . . .t. . . All property used exclu-
       sively for . . . literary, educational,
       scientf;fic. . . and charitable purposes,
        . . .


                       - 42 -
Mr. Jules Damiani, Jr., Page 7 (M-12)


       The Court made findings of fact which describe the
operation and conduct of the fraternities. We believe that
the description given by the Court is representative of fra-
ternities as generally known by college students and adminis-
trators as well as the public.
       The Court in holding that the property was not exempt
from taxation said:
            "The commissioner made extensive findings
       of fact and conclusions of law. The facts
       necessary for our consideration are that the
       real estate in question was owned by a corpora-
       tion organized for the purpose of holding the
       title; that this corporation is formed by
       alumni members of the society, the property
       is occupied by the members who are in school,
       and these members pay a certain amount to the
       holding company each year to be used in pay-
       ing part of the principal and the interest
       on the mortgages which are on the property.
            "The funds necessary to operate the house
       are raised by dues from the active members or
       by donations. The house consists of nine study
       rooms, two libraries, a dining room, a ki;c,h;;,
       music room, living room, and dormitory.
       used by the members about as their homes would
       be used if their parents lived in Lawrence.
       There is a committee of upper classmen who
       supervise the study of lower classmen and take
       disciplinary measures when deemed necessary.
       The dormitory is on the third floor. Sleeping
       quarters are available for about fifty people,
       and from time to time visiting fraternity
       brothers and athletes are entertained. The
       society owns and maintains a library for use
       of the members in their school work,
            "The house is presided over by a
       house mother who assists in giving the
       members training in etiquette, culture,
       and social decorum. During the school
       years 1929 and 1930, three arties were
       given in the house. About ! 1,000 was
       spent for these parties. The living room,


                     - 43 -
Mr. Jules Damiani, Jr., Page 8 (M-12)


       lounging room, and dining room are large
       and commodious. During the school year,
       card parties, social dances, and other
       functions are given in the house.
           'No part of the building or the
      grounds was rented or used for profit
      during the years 1929 and 1930 except that,
      when the full purchase price of the pro-
      perty has been paid, future members of the
      fraternity will probably reap the benefits
      through a reduced expense of living during
      their school life.
           11. . . .

           "'The fraternity is a secret and
      fraternal organization and maintains in the
      house what is known as a chapter room in
      which is kept its ritualistic paraphernalia
      and in which its ritualistic work is conducted.
      Alumni members continue honorary members of
      the fraternal side of the organization and
      are privileged to attend the secret and
      ritualistic meetings of the chapter.'
            "The further findings were that all
       the plaintiffs were substantially the same
       as the one named; that in the year 1930 the
       assessed valuation of all the real property
       owned by college fraternities in Douglas
       county was $899,830, and that the assessed
       valuation of the personal property was
       $50,000; that the aggregate tax levied
       against the real property was $x1,044.06
       and the total tax levied against the personal
       property was $1,765.10."
       In Iota Benefit Asso. v. County of Douglas, 165 Neb.
330, 85 N.JJ.2d72b  bb A L R 26 69u (193'0 th Court held
that property owned by a'nonprofit corporaiioneis not exempt
from taxation under the Nebraska Constitution and statutory
provisions providing for an exemption of property "owned and
used exclusively for educational purposes where it is used
by members of a National Fraternity limited to medical students
for the primary purpose of providing living quarters while


                        - 44 -
Mr. Jules Damiani, Jr., Page 9 (M-12)


attending college and the educational activities conducted
therein are merely incidental thereto. This decision is
annotated in 66 A.L.R.2d at page 904, et seq. where it is
said:
           "With few exceptions the courts have
      held that college fraternities and sororities
      are not exempt from taxation, because they
      exist primarily for the convenience of their
      members, and are mainly concerned with pro-
      viding them with board, lodging, and recrea-
      tion, while any educational, charitable, and
      benevolent purposes are of secondary impor-
      tance. . . .'
       The above annotation cites cases supporting it from
the states of Georgia, Illinois, Iowa, Kansas, Louisiana,
Maine, Massachusetts, Nebraska, New Jersey, New Mexico,
New York, Oregon, Rhode Island, and South Dakota. At page
908 of the same annotation, it is said:
            "The arguments have been unsuccessfully
       advanced that the property of a fraternity
       should enjoy the same exemption from taxa-
       tion as accorded to regular college dormi-
       tories, where student housing was inadequate
       at the college, or where the fraternity
       chapter house was built on college grounds.
            "Even where the fraternity supplies
       a necessary accommodation for students
       which has not been provided by the educa-
       tional institution itself, and but for
       sorority houses, the state would be put
       to the expense of building and maintain-
       ing additional dormitories, it was never-
       theless held in Albuquerque Alumnae Asso.
       v. Tierney (1933) 37 NM 156, 20 P2d 267,
       that a sorority would not be tax exempt9
       the court saying that it did not
       necessarily follow that where the edu-
       cational institution itself had failed
       to furnish necessary facilities and ad-
       juncts to education, or had inadequately
       furnished them, the same exemption would
       attach to property devoted to the same
       purposes by the students themselves, or
       by some independent agency such as a
       fraternity or sorority."
                        - 45 -
                                                      .




Mr. Jules Damiani, Jr., Page 10 (W-12)


       In 84 C.J.S. Sec. 294, page 602, it is said:
           "College fraternities and sororities
      may be exempt from taxation under statutes
      expressly relating to Greek letter frater-
      nities, or under statutes exempting pro-
      perty of fraternal orders or societies
      generally, or under statutes exempting a
      building used by a college as a literary
      hall or dormitory. Since the dominant pur-
      pose of a college fraternity is generally
      domestic or residential, under the great
      weight of authority tax exemptions have
      not been granted to college Greek letter
      fraternities except under express statu-
      tory authority.
           'A fraternity or sorority will ordi-
      narily be denied exemption as a benevolent,
      charitable, educational, library, literary,
      religious, or scientific institution, and
      cannot secure exemption as a corporation
      organized for the moral and mental improve-
      ment of men.
           "No blanket rule can be laid down and
      made applicable to all fraternities. Whether
      or not the property of a fraternity is exempt
      from taxation is dependent, as in all other
      cases, on the use made of the property. Each
      case must be determined on its own facts, and
      the property may be exempt as such if under
      the facts of the particular case it appears
      that it is used exclusively for educational
      purposes, or for the promotion of educa-
      tional, moral, charitable, and public
      welfare. Under a statute providing for
      exemption of the real property of a corpora-
      tion organized exclusively for educational
      purposes, and usedexclusively for carrying
      out such purposes, fraternity houses owned
      by a college are not exempt.
           "A corporation existing for the pur-
      pose of owning and operating a house for
      use as a residence by the members of a
      fraternity chapter can claim no credit for
      the purposes and activities of the chapter
                        - 46 -
Mr. Jules Damiani, Jr., Page 11 (M-12)


            as a ground for exemption from taxation
            as a charitable or benevolent corporation,
            and where it levies on the chapter annual
            charges equivalent to the amount of rent a
            corporation would have exacted, such corpora-
            tion is neither a benevolent nor a charitable
            society entitled to exemption, even though
            classified as such for purposes of incorporation."
       There are many other cases annotated in 66 A.L.R.2d,
904 et seq., and we will not lengthen this opinion by die-
cussing any others, as we are convinced that under the
Constitution and the Statutes of Texas, the properties of
the Fraternities mentioned by you are not exempt from ad
valorem taxation since they are not US&  excluelvely for
school purposes.
                        SUMMARY
                     The properties of the frater-
                nities at the University of Texas
                Medical School at Galveston are
                not exempt from ad valorem taxes.
                                    Yours very truly,

                                             o-+=
                                             C. MARTIN
                                             General of Texas
Prepared by W. E. Allen
ASSiStant Attorney General
APPROVED:
OPINION COMMITTEE
Rauthorne Phillips, Chairman
W. V. Geppert, Co-chairriian
Marietta Payne
Mario Obledo
John Reeves
Rob Towery
Staff Legal Assistant
A. J. Carubbi, Jr.


                           - 47 -
