The Honorable      Tim Curry                                  Opinion   No.   H-   738
Criminal  District    Attorney
Tarrant  County Courthouse                                    Re:   Ad valorem     tax con-
Fort Worth,    Texas     76102                                sequences    of financing      arrange-
                                                              ments   for federal    facilities.

Dear   Mr.    Curry:

       You have asked us three questions        about state and county ad valorem
tax consequences     where   the United States,      pursuant      to 40 USC,    5 602a,  con-
tracted   with a private  builder   to build a parking      facility   for federal    employees
on federally   owned land leased      to the builder    for forty-five     years   at a total
consideration    of one dollar   for the term.

        The United States    agreed   to purchase    the building   with payment     of        the pur-
chase price      to be made in installments      over a thirty year period.       The          presently
outstanding     lease,  otherwise   for a forty-five    year term,will    terminate           upon full
payment,      and title to the leasehold   and the erected      improvements     will         automa-
tically   vest in the United States.

       The “lease”    specifies,      that the “leasehold       interest”     has been granted      solely
for the purpose     of securing      the government’s         obligations     and although    the
builder   is termed    by contemporaneous            instruments       as the holder    of the title to
the building    and the lease      until the purchase       price    is paid,   the builder    is given
no right to remove       the building     or to occupy      the premises.         The government       was
given the right to take possession            of the building      when it was ready for occupancy
and did so but the United States           is not obligated      to pay rent to the builder        and does
not do so        The builder     is forbidden     to demolish       or erect    improvements      on the
property    except as agreed        by the United States,         and is forbidden     to sublease      or
assign   the lease   without the consent         of the government.           The building   has been
completed,      and accepted      and occupied      by the government,          and the leasehold      in-
terest   and the right to receive        the installment       payments     have been assigned        by
the builder    to a third party with the consent           of the United States.

       You   pose   three   specific   questions:

                        (a)  Is the contractor’s        interest   in the building
                        real property?




                                            p.   3138
The   Honorable     Tim     Curry    - page     two      (H-738)




                       (b) Is the building           taxable   separately     from
                       the land?

                       (c) If the contractor’s     interest         in the building
                       is a separate    interest   in real         property,   is it
                       taxable   to the contractor?

       Every     instrument     that is given as security       for a debt is a mortgage        re-
gardless     of its form,     and the language      used or the form       imparted   to an in-
strument     is immaterial.         If it was intended     to secure   the payment     of money,
it must be construed         as a mortgage.        39 Tex.    Jur.   2d Mortgages     and Trust
Deeds,     $ 12.     A mortgage      is merely   a lien on the mortgaged        property    to secure
payment     of the sum owed by the mortgagor.                The mortgage      does not operate       as
a conveyance        of title to the property     affected    and the mortgagor      retains   the title,
even where        the transaction      takes the form     of a conveyance.      39 Tex.    Jur.    2d
Trust    Deeds,      $4.

       In our opinion    the “lease”     here is not a lease,       but is merely       a security
device    which conferred       upon the builder     no real property       interest    whatsoever      to
the site or to the improvements           erected    thereon.     It represented       a charge
against    the interest   purportedly     conveyed     by the lease     and not a bona fide trans-
fer of the leasehold      title or a property       interest.    36 Tex.      Jur.   2d Liens,     $ 1.
Its sole purpose      was to secure      payment     of the purchase      price    of thebuilding,
and its life is entirely       dependent   upon the existence        of the debt it secures.        Until
the debt is paid or forty-five         years   have    elapsed   the builder,       or the builder’s
assignee,     can prevent     the government      from    conveying     the full legal title to the
property     but the “lease”     accords    them no rights     in the premises.

      We   answer    your    first   question        in the negative.

       Article   7146,   V. T. C. S.,   defines   “real  property     for the purpose        of tax-
ation” as the land itself,       and all buildings,     structures      and improvements,          or
other fixtures     thereon,    and all rights    and privileges      appertaining      thereto.      Im-
provements       on leased   land can be taxed as personalty           if placed    there by the
lessee    under an agreement        that they are for the use of the lessee            and may be
removed      by him.     But here the improvements          are erected      for the benefit      of thefee
owner and the “lessee        ” has no right to remove         them.     See Mission      Ind. Sch.
Dist.   v. Armstrong        222 S. W. 201 (Tex. Comm’n           App.320,holding           approved),
reversing      Armstrong    v. Mission      Ind. Sch.   Dist.,    195 S. W. 895 (Tex. Civ.           App.
--San    Antonio    1917, ‘no tiFit) on question     of tax lien rights      i,n personalty.

     Unlike   such cases  as Reader  v. Christian,   234                    S. W. 155 (Tex. Civ. App. --
Beaum,ont   1921,  writ ref’d) and Sharkey  v. Hollums,                      400 S. W. 2d 353 (Tex. Civ.




                                                p.    3139
c
.       .




    -


            The     Honorable      Tim    Curry,       page     three    (H-738)




            APP.   --Amarillo      1966, writ ref’d n. r. e. ), .there is no indicia     here that
            the improvements        were intended     to represent    personalty   of the “lessee.  It
            In our opinion,     the building   is an inseparable     part of the realty    to which
            it is attached    and is not separately      taxable.    See   Attorney    General
            Opinions    M-319    (1968),  O-5059    (1943),   0-466m942).

                    We   answer   your    second      question      in the negative         also.

                    Your third question  was conditioned    upon affirmative                         answers   to the
            first    two questions,   and we, consequently,     do not reach                        it.

                                                SUMMARY

                              A “lease”     of federal    real property       which is a
                         mere    security     device   to secure   the purchase      price
                         of parking    facilities    erected   upon the “leased”       site
                         conveys    to the “lessee”       no separately      taxable  real
                         property    interest     in the erected    facilities.

                                                                  Very   truly     yours,




                                                                  Attorney       General      of    Texas

            APPROVED:




            DAVID        M.   KENDALL,        First     Assistant




            Opinion       Committee




                                                           p.    3140
