                                              KEN PAXTON
                                         ATTORNEY GENERAL OF TEXAS



                                              February 16, 2016



The Honorable Rodney W. Anderson                             Opinion No. KP-0066
Brazos County Attorney
300 East 26th Street, Suite 1300                             Re: Ad valorem taxation of real property
Bryan, Texas 77803-5359                                      owned by the Texas A&M University System
                                                             (RQ-0049-KP)

Dear Mr. Anderson:

         You ask about ad valorem taxation ofreal property owned by the Texas A&M University
System (the "System"). 1 Your questions concern two collegiate housing projects. The first is a
student housing project built on land owned by the System. Request Letter at 1. You inform us
that the System has entered into a ground lease agreement with CHF-Collegiate Housing College
Station I, L.L.C. ("Lessee"). Id. at 1-2. You state that, pertinent to your question, the agreement
requires the Lessee -to construct and operate a student housing facility to be managed by Texas
A&M University ("Texas A&M"); vests title to improvements on the property in the Lessee for
the life of the lease; provides for all improvements to become the property of the System upon
expiration or termination of the_ lease; and provides the System an option to purchase the Lessee's
right, title, and interest during the term of the lease. Id. at 2-3.

        As you note, section 11.11 o~ the Tax Code generally requires that property be publicly-
owned and used for public purposes to be exempt from ad valorem taxes. Id. at 3; TEX. TAX CODE
§ 11.11; see generally Tex. Dep 't of Corr. v. Anderson Cty. Appraisal Dist., 834 S.W.2d 130, 13 I
(Tex. App.-Tyler 1992, writ denied) (recognizing that the Legislature has authorized the
exe:rµption of public property used for public .purposes in section 11.11 of the Tax Code). Because
the project will provide housing only for students, faculty, and others "whose presence is desirable
or necessary in relation to events of Tex.as A&M," you do not question that the property will be
used for a public purpose'. Request Letter at 3. But because the Lessee will own the improvements
during the term of the lease, you ask about the concept of equitable title and under what
circumstances equitable title constitutes public ownership for tax-exemption purposes. Id. at 4.
You also ask whether, under the ground lease agreement, the System holds equitable title to the
property and improvement. Id. As a preliminary matter, it is beyond the purview of an attorney
general opinion to construe particular agreements or determine whether particular property is tax
exempt. See Tex. Att'y Gen. Op. Nos. GA-0485 (2006) at 2 (declining to determine whether
specific property is tax exempt); GA-0725 (2009) at 1 (declining to express an opinion about a
specific contract). Accordingly, while we can provide general legal advice applicable to your

          1
          Letter from Honorable Rodney W. Anderson, Brazos Cty. Att'y, to Honorable Ken Paxton, Tex. Att'y Gen.
 at 5-6 (Aug. 26, 20 I 5), https://www.texasattomeygeneral.gov/opinion/requests-for-opinion-rqs ("Request Letter").
The Honorable Rodney W. Anderson - Page 2                    (KP-0066)



questions, we cannot provide a definitive answer as to whether the property in question is exempt
from ad valorem taxation.

         Even when a public entity does not possess legal title to property, if it holds equitable title
and the property is used for public purposes, the property is exempt from taxation. See Harris Cty.
Appraisal Dist. v. Se. Tex. Haus. Fin. Corp., 991 S.W.2d 18, 23 (Tex. App.-Amarillo 1998, no
pet.). "[E]quitable title is defined a~ the present right to compel legal title." Travis Cent. Appraisal
Dist. v. Signature Flight Support Corp., 140 S.W.3d 833, 840 (Tex. App.-Austin 2004, no pet.);
see also AHF-Arbors at Huntsville L LLC v. Walker Cty. Appraisal Dist., 410 S.W.3d 831, 837
(Tex. 2012). An entity that possesses a right to compel legal title generally holds equitable title.
See TRQ Captain's Landing L.P. v. Galveston Cent. Appraisal Dist., 212 S.W.3d 726, 737 (Tex.
App.-Houston [1st Dist.] 2006), aff'd, 423 S.W.3d 374 (Tex. 2014); Harris Cty. Appraisal Dist,
991 S.W.2d at 23. Whether a public entity has a present right to compel legal title and therefore
holds equitable title for ad valorem tax purposes will depend on the particular facts. Compare
Harris Cty. Appraisal Dist., 991 S. W .2d at 23 (determining that a housing finance corporation held
equitable title to property in a lease-purchase agreement) and Anderson Cty. Appraisal Dist., 834
S.W.2d at 131 (determining that public entity held equitable title to property in lease-purchase
agreement), with Hays Cty. Appraisal Dist. v. Sw. Tex. State Univ., 973 S.W.2d 419, 422 (Tex.
App.-Austin 1998, no pet.) (determining that university did not hold equitable title to property
because it did not have the right to compel transfer of legal title).

        You also ask about a different collegiate housing project concerning real property owned
by the System and leased for a 40-year term to a different lessee for the purpose of developing,
constructing, and operating student housing facilities. Request Letter at 4-6. You are particularly
concerned that the lease agreement allows leasing of residential housing not only to students and
faculty of Texas A&M, but also to students and faculty of Blinn College. Id. at 5. Moreover, you
assert that the agreement "appears to permit [leases of residential housing] to persons who are not
faculty, staff or students of Texas A&M or Blinn College." Id. 2 You ask whether, for an
exemption under section 11.11 to apply, the use of the property must be limited to faculty, staff,
and students of Texas A&M. Id. at 5-6. Although you ask specifically about subsection 11.1 l(d)
of the Tax Code, a statutory provision is not construed in isolation, but in the context of the statute
as a whole. Thus, your question requires consideration of section 11.11 as a whole, in particular
subsection (a), which states a general rule about the tax status of eligible public property;
subsection (d), which specifies state property that is taxable; and subsection (e), which specifies
certain property that is exempt.

       Subsection (a) states that, with exceptions not pertinent here, "property owned by this state
or a political subdivision of this state is exempt from taxation if the property is used for public
purposes." TEX. TAX CODE § 11.11 (a). Subsection 11.11 (d) provides that "[p ]roperty owned by




         2
           A brief from the System asserts that the lease allows leasing ofresidential housing to persons who are not
student, faculty, or staff of Texas A&M University or Blinn College only in the unlikely event that the System "ceases
operation of an institution for higher education" on the Texas A&M campus. See Brief from Mr. Ray Bonilla, Gen.
Counsel, Tex. A&M Univ. Sys. at 9 (Oct. 2, 2015) (on file with the Op. Comm.).
The Honorable Rodney W. Anderson - Page 3            (KP-0066)



the state that is not used for public purposes is taxable." Id.§ 11.ll(d). The subsection further
explains that such property

               is not used for public purposes if the property is rented or leased for
               compensation to a private business enterprise to be used by it for a
               purpose not related to the performance of the duties and functions
               of the state agency or institution or used to provide private
               residential housing for compensation to members of the public other
               than st14dents and employees of the state agency or institution
               owning the property, unless the residential use is secondary to its
               use by an educational institution primarily for instructional
               purposes.

Id. (emphasis added). The italicized language suggests that property leased as residential housing
to persons other than the students and employees of the owner of the property is taxable, even if
those persons are students and employees of another state agency or institution.

         Subsection (e) provides a tax exemption for certain property "held or dedicated for the
support, maintenance, or benefit of an institution of higher education." Id. § 11.11 (e). Subsection
(e) states that property that

               is not rented or leased for compensation to a private business
               enterprise to be used by it for a purpose not related to the
               performance of the duties and functions of the state or institution or
               is not rented or leased to provide private residential housing to
               members ofthe public other than students and employees ofthe state
               or institution is not taxable. If a portion of property of an institution
               of higher education is used for public purposes and a portion is not
               used for those purposes, the portion of the property used for public
               purposes is exempt under this subsection.

Id. While the language in subsections (d) and (e) is similar, the exemption in subsection (e) is not
limited to property owned by the state or institution. Rather, the exemption is for property "held
or dedicated for ... an institution of higher education." Id. Texas A&M and Blinn College are
both institutions of higher education. See TEX. EDUC. CODE§ 61.003(3), (4), (8); id § 130.168.
On particular facts, the property in question could be determined to be "held or dedicated for the
support, maintenance, or benefit of' Texas A&M, Blinn College, or both. See TEX. TAX. CODE
§ 11.ll(e).

       No judicial opinion of which we are aware has construed the quoted language from
subsections (d) and (e) or addressed how to determine which subsection will apply in particular
circumstances. Because subsection (d) concerns a "state agency or institution" while subsection
(e) specifically concerns an "institution of higher education," a court could conclude that
subsection (e) applies as the more specific statute. See Jackson v. State Office ofAdmin. Hearings,
351S.W.3d290, 297 (Tex. 2011) (stating the rule that "a specific statutory provision prevails as
an exception over a conflicting general provision"). Thus, a court is likely to determine that under
The Honorable Rodney W. Anderson - Page 4           (KP-0066)



subsection 11.11 (e), property held or dedicated for the support, maintenance, or benefit of an
institution or institutions of higher education leased to students or employees of such institution or
institutions is exempt from ad valorem taxation.

         Your final question is whether an "otherwise eligible exemption [would] be lost" if a "part
of the property is subleased to a person other than faculty, staff or students of Texas A&M or Blinn
College." Request Letter at 6. A tax exemption may be lost when circumstances change so that
the property no longer qualifies for the exemption. See TEX. TAX CODE § 25 .16 ("Property Losing
Exemption During Tax Year"); Tex. Att'y Gen. Op. No. JC-0236 (2000) at 1-2. Thus, in particular
circumstances, property that is held or dedicated for the support, maintenance, or benefit of an
institution or institutions of higher education that is leased to provide private residential housing
to members of the public other than students and employees of such institution or institutions may
lose its tax exemption, in whole or in part. See TEX. TAX CODE § 11.11 (e) (providing that "[i]f a
portion of property of an institution of higher education is used for public purposes and a portion
is not used for those purposes, the portion of the property used for public purposes is exempt under
this subsection"); Hays Cty. Appraisal Dist., 973 S.W.2d at 423 (determining that a building and
parking lot leased to a university and subleased in part to private attorneys and commercial tenants
was not entitled to tax exemption).
The Honorable Rodney W. Anderson - Page 5          (KP-0066)



                                      SUMMARY

                       Property is exempt under Tax Code section 11.11 if a public
              entity holds legal or equitable title to the property and the property
              is used for public purposes. An owner who has the present right to
              compel legal title holds equitable title. A court is likely to determine
              that under subsection 11.11 (e), property held or dedicated for the
              support, maintenance, or benefit of an institution or institutions of
              higher education that is leased to .students or employees of such
              institution or institutions is tax exempt. If such property is leased to
              provide private residential housing to members of the public other
              than students and employees of the institution or institutions, the
              property may lose its exemption under subsection 11.11 (e) of the
              Tax Code, in whole or in part.

                                             Very truly yours,



                                             ~?~
                                             KEN PAXTON
                                             Attorney General of Texas



CHARLES E. ROY
First Assistant Attorney General

BRANTLEY STARR
Deputy Attorney General for Legal Counsel

·vIRGINIA K. HOELSCHER
 Chair, Opinion Committee

WILLIAM A. HILL
Assistant Attorney General, Opinion Committee
