Honorable Garry Mauro        Opinion No.   JM-1085
Commissioner
General Land Office          Re:   Whether     taxes   accrue
Stephen F. Austin Building   against real property held in
1700 North Congress Avenue   the Veterans'   band Fund after
Austin, Texas 78701          forfeiture   in a contract    of
                             sale by the Veterans*       Land
                             Board   (RQ-1697)

Dear Mr. Mauro:

     You inform us that the Veterans'   Land Board. recently
received tax bills from taxing units for current         and
delinquent ad valorem taxes levied on real property that had
been conveyed by contract of sale to qualifying veterans but
reverted to the board after forfeiture of such contracts.
Consequently, you ask two questions regarding the taxation
of real property comprising the Veterans' Land Fund:

           1. Do taxes accrue against ~real property
        held in    the Veterans   band Fund     after
        forfeiture of a contract of sale by the
        Veterans Land Board?

           2. Do penalties    and interest on pre-
        existing tax liabilities continue to accrue
        against the real property after forfeiture
        reverts full title to the property   in the
        State of Texas?

     We answer your first question in the negative.     Taxes
may not be imposed against real property held         in the
Veterans' Land Fund after there has been a forfeiture of a
contract of sale and equitable and legal title to the
property has reverted to the possession and control of the
board. We answer your second question in the affirmative.
Penalties and interest continue to accrue on preexisting tax
liabilities against real property after forfeiture      vests
full title to the property in the state.      We also note,
however, that while the tax lien created by the previous




                       P. 5664
Honorable Garry Mauro - Page 2   (JM-1085)




owner's failure to properly tender his taxes remains      in
force during that period when the title to the real property
reverts to the Veterans*     Land Board, such a lien is
unenforceable against the state.     Such a lien would be
enforceable   against any subsequent   purchaser,  and   the
veteran-purchaser against whom the taxes were originally
imposed, of course, remains personally liable.

     The Veterans* Land Board [hereinafter the board] was
created by amendment   to the Texas Constitution in 1946 in
order to make low-interest     loans available   to eligible
veterans who served in the armed forces of the United States
during specified periods. Tex. Const. art. III, 5 49-b,
inter-p. commentary  (Vernon 1984): see aenerallv Nat. Res.
Code 5 161.001 et      .   The Veterans'   Land Board, using
public funds, purchzzes   a particular   plot of land at the
request of an eligible veteran. The land then is resold by
the state to the veteran under a contract for a deed.    The
contract delivers equitable title and possession      to the
veteran: the state, through the board, retains legal title
until the full purchase price, interest, and fees have been
paid. m     Venable v. Patti, 490 S.W.2d 194 (Tex. Civ. APP.
- Texarkana 1973, writ ref'd n.r.e.); Citv of Garland     v.
Wentzel, 294 S.W.2d 145 (Tex. Civ. App. - Dallas 1956, writ
ref'd n.r.e.);    see also Attorney General Opinion JM-774
(1987).

     If a purchaser defaults on a contract, then the board
may declare a forfeiture and take possession        of  the
property.  Nat. Res. Code 55 161.311-161.324.     Once for-
feiture proceedings have been completed, both equitable and
legal title are vested in the Veterans' Land Board, and the
property belongs to the state. See Ma crick Countv Water
Control & Imnroveme t Dist. No. 1 v. St&e    456 S.W.2d 204
(Tex. Civ. App. - Stn Antonio 1970, writ rei'd).

     Article VIII, section 1, of the Texas Constitution
provides in relevant part: "All real property and tangible
personal property  in this State . . . shall be taxed in
proportion to its value, which shall be ascertained as may
be provided by law." Article VIII, section 2, provides    in
relevant part that "[t]he legislature may, by general  laws,
exempt from taxation public property used for         public




                            P. 5665
Honorable Garry Mauro - Page 3   (JPr-1085)




purposes.111  Pursuant to article VIII, section      2, the
legislature enacted section 11.11 of the Tax Code, governing
the taxation of public property, which provides in pertinent
part:

           (4   Except as provided by Subsections (b)
        and (c) of this section, property owned by
        this state or a political subdivision of this
        state is exempt from taxation if the orooertv
        is used for Dub 11'c DUrDOSeS.

           . . . .

           (d) prooertv owned bv the state that is
       not used f r DUbliC ourooses       is taxable.
       Prooertv owzed bv a state aaencv or insti-
       tution is not used for DUbliC ournoses if the
       pronertv is . . . used to DrOVide orivate
       residential   housina    for comuensation    to
       members of the oublic other than students and
       emolovees of the state aaencv or institution
       ownina the orooertv. unless the residential
       use is secondarv to its use bv an educational
       institution    orimarilv    for   institutional
       purooses.   Any notice required by Section
       25.19 of this code shall be sent to the
       agency or institution that owns the property,
       and it shall appear in behalf of the state in
       any protest or appeal related to taxation    of
       the property.   (Emphasis added.)

     It is suggested that the real property that comprises
the Veterans'  band Fund is taxable under subsection      Cd)
because such property appears to be "used to provide private
residential housing  for compensation   to members   of the



      1. Article XI, section 9, of the Texas Constitution
by its terms exempts    "property of counties,   cities and
towns, owned and held only for public purposes, . . . and
all other property devoted exclusively     to the use and
benefit of the public . . . from taxation . . . .'I, This
section is self-executing.    Because the last clause has
never been construed to apply to property owned by the
state, we need not discuss the cases involving counties and
cities that rely upon this provision.




                            p. 5666
Honorable Garry Mauro - Page 4    (JM-1085)




public other than students and employees of the state agency
or institution owning the property."   It is also suggested
that such property is not used for a public purpose,    that
the board stands in no different   legal position from that
of any other mortgage  company that is required   to pay ad
valorem taxes on any real property on which its mortgagors
default, and that real property comprising   the fund falls
squarely within subsection (d) of section 11.11 of the Tax
Code.

     The quoted language of subsection (d) of section   11.11
of the Tax Code does not require the taxation        of real
property comprising the Veterans ' Land Fund when legal title
to such real property rests with the state. The Veterans'
Land Board does not provide "residential housing for com-
pensation to members   of the public . . . .I1 Rather,      it
provides the financing needed to purchase private    residen-
tial housing, and it offers it on1 to qualifying     veterans
of the United States' armed forces. ?i

     In addition,  the legislative history    of subsection
11.11(d) does not indicate that the legislature intended to
deviate from the long-accepted practice of exempting from ad
valorem taxation the real property comprising the Veterans'



      2. A brief submitted to us argues that the fact that
only qualifying veterans may participate in the land program
necessarily means that the program     is not for a public
purpose under article VIII of the Texas Constitution.       We
disagree.  The test for determining whether public property
is tax exempt is whether    it is used primarily     for the
health, comfort, and welfare of the public.       It is not
essential that it be used for governmental purposes; it is
sufficient that it be used for "proprietary"        purposes.
A&
M      onsol.    nde .                               an, 184
S.W.Zd 914   (Tex. 1945).   It is immaterial whether      only
residents of a taxing unit are benefitted or whether    others
benefit as well; the fact that property is owned by the
public and is used primarily for the health, comfort,      and
welfare of the public of some portion of the state is
sufficient to entitle such property to tax-exempt      status.
State v. Houston Liahtina & Power Co ., 609 S.W.2d 263   (Tex.
Civ. App. - Corpus Christi      1980, writ ref'd n.r.e.);
see also Attorney   General Opinions JW-405   (1985); MW-430
(1982); WW-391 (1981).




                            p. 5667
Honorable Garry Mauro - Page 5    (JM-1085)




Land Fund. See Hearings on Tex. H.B. 30 before the Senate
Finance Committee, 67th Leg. 22-31 (August 5, 1981)   (trans-
cript available  from Senate Staff Services).    It appears
that the legislature   intended that property   owned by a
political subdivision but not used for the public purpose
for which it was originally    acquired should not be tax
exempt. The real property at issue here, however, is being
used for the purpose for which it was acquired originally,
namely the creation of a "land fund" to facilitate        the
purchase of real property by veterans through the granting
of low-interest loans. Article   III of the Texas Constitu-
tion was amended by the addition of section 49-b to permit
the legislature to do what the constitution otherwise   would
prevent it from doing, namely the "giving or lending, of the
credit of the State in aid of, or to any person . . .'I or
the granting of "public moneys to any individual."  See Tex.
Const. art. III, 55 50, 51. The very establishment of such
a fund in the Texas Constitution     impresses upon it the
nature of a public purpose.

     Moreover, the Texas Constitution exempts real property
comprising the Veterans' Land Fund from ad valorem  taxation
after the purchaser   of such property has defaulted on his
payments and full title to the property reverts to the
control of the state.    Section 49-b of article III of the
Texas Constitution provides in relevant part:

        Such lands heretofore or hereafter   purchased
        and comprising a part of said Fund are hereby
        declared to be held for a governmental    pur-
        pose,  although  the   individual   purchasers
        thereof shall be subject to taxation to the
        same extent and in the same manner as are
        purchasers  of   lands    dedicated   to   the
        Permanent Free Public School Fund.

     We recently declared     in Attorney General     opinion
JM-1049 (1989) that the interest in real property comprising
the permanent school fund that is retained by the state when
it leases such real property to private businesses is exempt
from ad valorem taxation, but the leasehold estates conveyed
to the private businesses      are themselves   taxable. The
reasoning that we employed     in Attorney   General Opinion
J&l-1049, regarding the proper construction of both the Texas
Constitution   and the relevant Tax Code provisions,       is
equally applicable here. By its terms, section 49-b of
article III likewise would exempt from ad valorem taxation
real property comprising the Veterans' Land Fund.




                            P. 5668
Honorable Garry Mauro - Page 6   (JM-1085)




     Finally, case law in this area of law compels us to
answer your first question in the negative.  On the basis of
M&j
st&,C&,       we conclude that real pzoperty compri:ing  tit;?
Veterans' band Fund, equitable title to which has reverted
back to the state after the default of the purchaser, is not
subject to taxation while it is in the hands of the state.

     In Maverick County the Veterans' Land Board sought a
declaration that certai; real property owned by the board
was free of all claims for taxes or other charges made,
levied, or assessed by a water control      and improvement
district, an independent school district, and a county.    A
veteran had purchased real property comprising part of the
Veterans' Land Fund in 1956; he failed to make the required
payments  and the board declared his rights under the
contract forfeited in 1962. After the forfeiture, the board
held full legal and equitable title to the property.     The
trial court declared that the land was free of all taxes and
other charges levied by the taxing units after the rights of
the veteran under the contract of sale were terminated,
i.e., after the veteran had defaulted   and the state reac-
quired both the equitable and legal title to the property.
The court of appeals agreed. It held that where real
property had been purchased   by the board and sold to an
eligible veteran but subsequently    repossessed,  the real
property, thereafter,  was subject neither to ad valorem
taxation nor to special assessments      levied during the
veteran's possession.

     It has been suggested that Maverick Countv is no longer
controlling law in this area. It is contended, first, that
section 11.11 of the Tax Code was enacted after Mm
Countv was handed down and constitutes    the legislature's
most recent statement    regarding  its intention   to   tax
publicly-owned property  that is not used for the public
purpose for which the property was originally acquired.   As
we noted earlier, the 1981 amendment to section 11.11 does
not compel us to conclude that real property comprising  the
Veterans' Land Fund is taxable. Neither the actual language
used in the amendment nor the legislative history indicating
the evident intention of the legislature in passing the
amendment supports such's reading. And, as we stated above,
we believe that the real property comprising the Veterans'
band Fund is being used for the precise public purpose   for
which the real property was acquired by the board in the
first place.




                           P. 5669
Honorable Garry Mauro - Page 7     (JM-1085)




     It is also contended that the Maverick County case is
suspect because  it appears to be predicated upon a Texas
Supreme Court case that is itself of doubtful precedential
value. We agree that the court in Waverick Count!? did rely
in part on a Texas Supreme Court case whose precedential
value has been undermined by subsequent decisions, but we
disagree that a court considering the matter again would
reach a different result.

     The case that the Maverick County court cited is City
of Beaumont v. Fertitta, 415 S.W.Zd 902     (Tex. 1967).    In
Fertitta, the court considered whether real property     owned
by a city, though leased to private persons for the purpose
of carrying on a private commercial enterprise, was exempt
from ad valorem taxation regardless of the fact that the use
to which the property was put was not public. The court in
Fertittq departed from the method of constitutional analysis
that courts traditionally had invoked when the issue was
whether property   owned by a political      subdivision   was
entitled to receive tax-exempt status. See Fertitta, m,
(dissenting opinion).

     Prior to Fertitta, courts had always looked to whether
the property was both owned by a political subdivision          and
used or held for a public purpose, and assuming that it was
not so used, it would be taxable under article VIII,
sections 1, and 2, of the Texas Constitution.           See A&M
Consol. Indeo.~Schbol Dist. v. Citv of Brvan 184 S.W.2d 914
(Tex. 1945); Dauahertv v. Thomn son, 9 S.W. 49 (Tex. 1888);
City of Abilene v. State.
                     -.      113 S.W.Zd 631 (Tex. Civ. App. -
Eastland 1937, writ dism'd) (holding disapproved of on other
grounds in Fertitta). The court in Fertitta departed           from
the traditional mode of constitutional analysis in declaring
that the constitution does not require that property          owned
by a municipality but not used for a public purpose be
taxed. It only requires that private property             held by
natural persons      or    private    corporations    be    taxed.
Therefore, since the constitution does not require municipal
property   to    be     taxed,   the    legislature     needs    no
constitutional authority to exempt it. It chose to do so in
the now-repealed     article 7145, V.T.C.S.        This    statute
required that all property,     except that which is expressly
exempted, be     taxed.     The    now-repealed   article     7150,
V.T.C.S.,   exempted     "[a]11 property,     whether    real
personal,  belonging     exclusively   to this State, or a:;
political subdivision thereof, or the United States . . . .'I
Public ownership was enough; no public use was required.




                              P. 5670
Honorable Garry Mauro - Page 8   (JM-1085)




     The dissent in pertittq correctly pointed out that this
constitutional and statutory construction is novel:   indeed,
earlier decisions, which went to great length discussing the
holding and using requirements of public property,       make
sense only if one accepts the claim that the     constitution
requires u    property to be taxed unless it is specifically
exempted pursuant to a constitutional provision, i.e., that
public property, in order that it be deemed tax-exempt, must
fall within the limitations     set forth in article VIII,
section 2, or article XI, section 9, of the Texas Constitu-
tion. No subsequent    case explicitly has employed such an
analysis.    Moreover,  the   Texas Supreme Court     clearly
narrowed the reach of Pertitta      * leander  Indeo. School
Dist.v.CedarPark                  CzlJ   479 S.W.2d 908 (Tex.
1972) and in 2,atte ee v. GU f
576 S.W.2d 773 (Tex. 1978).

     The leander case did not concern property owned by a
political subdivision   leased to a private person for the
purpose of a private commercial       enterprise;  rather,  it
concerned-property owned by a private person but used      for
public purposes.    In overturning a lower court judgment
sustaining the tax-exempt status of such property, the court
specifically held that property, to be exempt, must be used
for public purposes.   The court in bander did not, however,
explicitly   reject the' mode of constitutional       analysis
employed in Fertitta.    In Satterlee    the court reaffirmed
the requirement that there be a pubiic use before property
owned by a political subdivision be declared tax-exempt.

     If the traditional method of analysis were applied to
the instant situation, namely that public property must be
put to a public use before it may be exempt from ad valorem
taxation, we think that a court would hold that by virtue of
the inclusion of section 49-b of article III of the Texas
Constitution, the real property comprising    the Veterans'
band Board is exempt from taxation so long as full title to
that property rests with the state.    If the Fertitta test
were adopted, on the other hand, a court would disregard any
necessity that such property be used for a public purpose
and look only to whether the property was owned and
controlled by the state or a political subdivision of the
state;~it would conclude, although   for different  reasons,
that the property described here is tax-exempt.

     We note, moreover,    that the argument     undermining
Maverick         because of its reliance on Fertitta       is
refuted effectively by the fact that the Texas Supreme Court




                            Pm 5671
Honorable Garry Mauro - Page 9       (JM-1085)




explicitly reaffirmed in a later case its approval of the
Waverick County case. In Satterlee, the court concluded
that certain real property and the improvements       located
thereon that were purportedly "owned" by local taxing units
were not exempt from taxes because the ownership     interest
of the taxing units was not exclusive.     In discussing  the
public use and public ownership requirements for tax exemp-
tion, the court declared:

         After Fertitta, we approved without        qualifi-
         cation the opinion of the Court of Civil
         Appeals in Maverick Countv Water Control           8
         Imorovement District     # 1 v. State   456 S.W.2d
         204 (Tex. Civ. App. 1970, writ rei'd). There
         the Court recognized Pertitta but cited State
         V.   Bexar-Medina-Atascosa       Counties     Water
         Imorovement District, 310 S.W.2d 641           (Tex.
         Civ. App. 1958, writ ref'd), also approved by
         this Court, where it was held that land did
         not belong exclusively to the State while the
         contract with        the Veterans     Land    Board
         remained in effect. As to this, the Court in
         maverick wrote that 'While the contract was
                      the land was l'owned by             the
         &e~~~;lO       S W 2d at 643 with the State
         holding'only   the' legal titie.’       The Court
         upheld the tax exemption in Maverick for the
         reason as stated in the opinion that the
         Veterans Land Board 'held full legal and
         equitable title to the land.' We approved
         the principles of law declared in the opinion
         by unqualified refusal of writ of error.

            Our conclusion that the Authority was not
         vested with the requisite exclusive ownership
         renders unnecessary a re-examination of the
         holding in Fertitta that Article 7150, § 4,
         provides for the exemption from taxation   of
         municipal property regardless  of the use to
         which it is put or the purposes for which  it
         is held.

576   S.W.2d at 777-8.

     Therefore,  we answer your first question      in   the
negative and conclude that real property comprising part of
the Veterans' Land Fund is exempt from ad valorem   taxation
while legal and equitable title to such real property     is




                               P* 5672
Honorable Garry Mauro - Page 10   (JM-1085)




vested in the state. Such real property is taxable to the
purchaser under the contract   for sale so long as the
contract is in effect; after the purchaser    defaults and
legal title reverts to the control of the state, such real
property is ex,empt from taxation.   We now turn to your
second question.

     You next ask:

           Do penalties and interest on preexisting.
        tax liabilities  continue to accrue against
        the real property after forfeiture  reverts
        full title to the property in the State of
        Texas?

     Section 33.01 of the Tax Code governs the imposition of
penalties and interest on delinquent taxes and provides  the
following:

            (a) A delinquent tax incurs a penalty   of
        six percent of the amount of the tax for the
        first calendar month it is delinquent     plus
        one percent  for each additional month or
        portion of a month the tax remains unpaid
        prior to July 1 of the year in which        it
        becomes delinquent.   However, a tax delin-
        quent on July 1 incurs a total penalty      of
        twelve percent of the amount of the delin-
        quent tax without regard to the number of
        months the tax has been delinquent.

            (b) If a person who exercises the split-
        payment option provided by Section 31.03 of
        this code fails to make the second payment
        before July 1, the second payment is delin-
        quent and incurs a penalty of twelve percent
        of the amount of unpaid tax.

           (c) A delinquent tax accrues interest at
        a rate of one percent for each month or
        portion of a month the tax remains unpaid.

     You assert that penalties and interest may not continue
to accrue on preexisting   tax liabilities   after the state
again assumes both legal and equitable title to the real
property  against which delinquent    taxes are due.     YOU
suggest two different     arguments  in    support of   your




                            P. 5673
Honorable Garry Mauro - Page 11   (JM-1085)




proposition.   First, YOU claim that such a result          is
required by the Maverick County case. We disagree.

     As we noted previously, Waverick Countv involved an
action by the Veterans' band Board for a declaration     that
real property whose title had reverted to the board after' a
veteran defaulted on his payments was free of all liens for
taxes or other charges made, levied, or assessed on the
property by a water control and improvement district,      an
independent school district, and a county. Specifically    at
issue were tax liens created when the veteran-purchaser
failed to pay both taxes properly levied on his property   by
the school district and the county and assessments in the
form of flat rate fees imposed by the water control       and
improvement district.

     The court of appeals described the trial court judgment
in the following fashion: "The trial court's        judgment
declares the land free from taxes and other charges levied
by defendants  after the rights of the veteran    under the
contract of sale were terminated."   456 S.W.Zd at 205.   It
is not clear from the court of appeals' decision whether the
trial court distinguished between those taxes and flat rate
assessments imposed while the veteran's contract was still
in force and those that the taxing units sought to enforce
after the full title had reverted to the state.

     The court of appeals in Maverick County held that taxes
cannot be imposed on real property comprising the Veterans'
Land Fund after the title to the property     reverts to the
state; the property in question was subject to taxation only
during that period of time 'during which the veteran-pur-
chaser owned the equitable title. Based upon an earlier
case, the court also held that liens for pre-existing taxes,
i.e., taxes levied on the property while the contract with
the veteran was still in force, were still in effect.    The
court, however, apparently did hold that no lien for the
assessment of the flat rate taxes was created by the
veteran's failure to tender such assessments.

     You rely upon the language from the Maverick       Countv
case declaring  the property     free from taxes "or other
charges levied" by the taxing units to support the proposi-
tion that penalties and interest on the preexisting taxes do
not continue to accrue.     You apparently   construe this to
mean that any penalties and interest imposed for failing to
pay the taxes levied in a timely   fashion may not continue to
accrue after title reverts to the state. In other words,




                            P. 5674
Honorable Garry Mauro - Page 12    (JM-1085)




you assert that the phrase "or other charges"       includes
penalties and interest imposed when accrued taxes become
delinquent.  You state in your request for an opinion:

        The Court affirmed the determination of the
        trial court that the property itself is 'free
        of all liens and claims for taxes or other
        charges . . . made, levied or assessed'    by
        any taxing entities. L    at 205.

Brief of Texas Veterans Land Board at 8.

     We disagree with this construction of M-y
The l'chargesl' referred to by the court do not include
interest and penalties.    The "c~harges,~'when understood   in
the context of Maverick CountY and the authorities it cites,
are special assessments made         by the water     district.
See.       Cit
           v,                                    26 S.W.2d 910
              Ha ris
(Tex. 193;)); eCountv                  7 S.W. 713 (Tex. 1888):
W'ch'ta
1        ount    Wate                                  Citv of
Wichita,        323 S.W.Zd 298    (Tex. Civ. App. - Fort Worth
1959, writ ref'd n.r.e.); see also Attorney General Opinions
JM-1035 (1989); JM-523    (1986) . The Maverick           court
merely held that a special district could not impose flat
rate fees against the property in that instance while title
to it was held by the state. Maverick County does not stand
for the proposition     that    penalties   and interest    for
delinquent taxes may not be imposed on real property       that
has reverted to the state: it ~does not even mention
penalties and interest.

     Your second argument in support of the proposition that
penalties and interest may not continue to accrue against
real property whose title has reverted to the Veterans' Land
Board is that permitting    such accrual of penalties    and
interest is tantamount  to permitting the taxation of such
property, however indirectly.   On the other hand, a brief
submitted to us suggested that the lien created by the
veteran's failure to properly  tender the taxes due extends
also to the penalties and interest that accrue.

     Both arguments rest on the presupposition that penal-
ties and interest are to be treated as though they were
taxes. On the one hand, if accrued penalties and interest
are the equivalent of taxes and if taxes may not be imposed
upon real property while title is in the possession     and
control of the Veterans' Land Board, it can be argued that
penalties and interest likewise may not continue to accrue




                            P. 5675
Honorable Garry Mauro - Page 13   (JM-1085)




against such real property.   On the other hand, if aCCNed
penalties and interest are the equivalent of taxes and if an
enforceable lien is created by the veteran's     failure to
properly tender the taxes before they became delinquent,   it
can be argued that any waiver of aCCNed       penalties   and
interest violates   the Texas constitutional    prohibitions
against releasing or extinguishing  the indebtedness of any
individual owed to the state or to any political subdivision
of the state,   Tex. Const. art. III, 5 55, or against the
release from the payment .of taxes. Id. art. VIII, 5 10.

     A surface reading of article VIII, section 15, of the
Texas Constitution lends support to your presupposition that
penalties and interest should be treated as though they were
taxes. That section provides:

           The annual assessment made upon landed
        property shall be a special lien thereon;
        and all property, both real and personal,
        belonging to any delinquent taxpayer shall be
        liable to seizure and sale for the payment of
        all the taxes and penalties due by such
        delinquent: and such property may be sold for
        the payment of the taxes and penalties due by
        such delinquent,  under such~ regulations  as
        the Legislature may provide.

     While section 15 clearly does not create a lien on any
property for failing to pay any penalties and interest that
are imposed along with delinquent taxes,3 it might be argued
that, at least as to summary seizure and sale and judicial
sale and execution,  penalties and interest are treated   in
the same manner as the delinquent      taxes on which the
calculation  of such penalties    and interest are based.
However, the Texas Supreme Court has not construed   section
15 to require that penalties and interest be treated      as
though they were taxes that were levied.




      3. While section   15 of article VIII of the Texas
Constitution does not create a lien for failing to pay any
penalties and interest imposed, section 32.01 of the Tax
Code does. Of course, any lien that the legislature     sees
fit to create by statute can also be amended by the legisla-
ture by statute.




                           P. 5676
Honorable Garry Mauro - Page 14   (JM-1085)




     In Jones v. Williams, 45 S.W.Zd 130 (Tex. 1931), the
Texas Supreme Court upheld the constitutionality     of a
statute that provided:

        That all interest and penalties accrued   and
        as now fixed by law, on all . . . taxes . . .
        other than [taxes of] incorporated cities and
        towns, delinquent up to and including October
        20, 1931, shall be, and the same are hereby
        released, provided said taxes are paid on or
        before January 31, 1932.

Jones, m,     at 131.

     The court in Jones first rejected the assertion   that
the statute could be sustained by reference to section   10
of article VIII of the Texas Constitution. Section 10 pro-
vides:

           The Legislature  shall have no power to
        release the inhabitants of, or property   in;
        any county, city or town from the payment  of
        taxes levied for State or county purposes,
        unless in case of great public calamity    in
        any such county, city or town, when such
        release may be made by a vote of two-thirds
        of each House of the Legislature.

If the exactions   (FLn, penalty and interest) imposed upon
taxpayers for failing to timely tender payment of accrued
taxes are themselves "taxes" for purposes of article VIII,
section 10, then the court, after concluding       that the
statute at issue was not enacted pursuant to the "great
public calamity"  requirement,   would perforce have struck
down the statute. Because it did not, it is clear that the
court did not conclude that such exactions        constitute
lYaxes.U1

     Nor did the court in Jones consider such exactions  an
instance of an "indebtedness, liability, or obligation" for
purposes of article III, section 55, of the Texas Constitu-
tion. Section 55 provides:

           The Legislature  shall have no power to
        release or extinguish, or to authorize   the
        releasing or extinguishing, in whole or in
        part, the indebtedness, liability or obliga-
        tion of any corporation or individual,    to




                           P. 5677
Honorable Garry Mauro - Page 15   (JM-1085)




        this State or to any county or defined
        subdivision  thereof,   or other    municipal
        corporation therein, except delinquent  taxes
        which have been due for a period of at least
        ten years.

If the court in Jones had concluded that such exactions were
in reality interest e            imposed by the state as
compensation for the detention   of its money, rather than
viewing such exactions as a form of "penal interest," the
statute would have run afoul of     sections 51 and 55 of
article III. The court set forth the history     surrounding
attempts to enforce public revenue and tax collection
procedures and declared:

        On the whole, we have concluded that~ the
        impositions made for delinquency in rendering
        property for taxation, and for failure to
        pay taxes, whether these impositions        are
        denominated  'penalties,'   'interest,!   'for-
        feitures,' or whether prescribed        without
        definition  or name, are all in         reality
        penalties imposed for delinquency or failure
        of duty, and all enacted in aid of the
        state's revenue, rather than as charges made
        by the state for the use or detention of its
        money.  In other words, the exactions       are
        8 enalties' rather than   \int.erest' in the
        commercial or statutory sense.   (Emphasis in
        original.)

45 S.W.2d at 133.   The court concluded:

           We think the act is constitutional for the
        reason that the Legislature has the power to
        release, cancel, annul, or suspend penalties
        previously accrued for delinquent taxes, so
        long as these penalties have not been reduced
        to final judgment.



     Finally, in response to the claim that the statute at
issue violated   article III, section 56, of the Texas
Constitution, which prohibits  the legislature from passing
certain local and special laws remitting penalties,     the
Jones court concluded that the legislature by implication
could remit such penalties by aeneral law:




                            P. 5678
Honorable Garry Mauro - Page 16   (JM-1085)




           The only express limitation on the right
        of the Legislature to remit penalties is that
        specified in section 56 of article 3, which
        prohibits  the Legislature    from 'remitting
        fines, penalties, and forfeitures by soecial
        m.  ' The necessary     implication  from the
        language used is that 'fines, penalties    and
        forfeitures' may be remitted by general laws,
        such as the one before us. . . . Nor do we
        think that the Legislature     is prohibited,
        either expressly or by necessary implication,
        by the language of any other section of
        the Constitution.   If it be said that the
        provisions of   sections 51 and 55 apply to
        penalties imposed for tax delinquency,   then,
        for the same reason, we would be compelled to
        say they apply to &l classes of oenalties,
        and to fines and forfeitures as well. Such a
        construction  would render meaningless     the
        power clearly reserved to the Legislature   by
        the terms of section 56 of article      3, to
        release 'fines, penalties and forfeitures' by
        general law.   (Citations omitted.)  (Emphasis
        in original.)

Id. at 137.

     Clearly, if the Texas Supreme Court COnStNed    article
VIII, section 15, of the Texas Constitution to require that
penalties and interest be accorded the same treatment     as
taxes are accorded, then the court would not have concluded
in Jones that the statute then at issue was constitutional.
Therefore, we reject both your assertion and the suggestion
by the law firm submitting a brief: it is not the case that
penalties and interest must be waived, nor is it the case
that penalties and interest cannot be waived.

     It is clear that the legislature is empowered to enact
a statute that effectively    would waive the penalties   and
interest aCCNed  on unpaid delinquent taxes levied on real
property whose title has reverted to the possession       and
control of the Veterans' Land Board. See. e.a       Attorney
General Opinion WW-780    (1960) (upholding and"construAinz
statute that permitted   that state to tender unpaid
delinquent taxes on Veterans'     Land Fund land in order
for the state to clear title thereto):    see also Attorney
General Opinion M-139 (1967) (distinction between *%ax't and
"penalty" well established in law). It is equally       clear




                            P. 5679
Honorable Garry Mauro - Page 17   (JM-1085)




that the legislature has not so acted. Section 33.011 of
the Tax Code permits the governing body of a taxing unit to
waive penalty and interest under certain circumstances   and
provides:

           The governing body of a taxing unit may
        provide  for the waiver of penalties      and
        interest on a delinquent   tax if an act or
        omission of an officer, employee, or agent of
        the taxing unit caused the taxpayer's failure
        to pay the tax before delinquency and if the
        tax is paid within 21 days after the taxpayer
        knows or should know of the delinquency.

No other provision of the   Tax Code addresses the waiver   of
penalty and interest.

     Because the Texas Constitution does not require it and
because the legislature has not provided for it, we conclude
that penalties and interest will continue to accrue on the
unpaid delinquent taxes levied upon real property comprising
the Veterans' Land Board whose title has reverted to the
board due to the default of the veteran-purchaser.

      We note, however, that while the tax lien created by
the previous owner's failure to properly, tender his taxes
remains in force during that period when the title to the
real property reverts to the Veterans'    Land Board, such a
lien is unenforceable against the state. See. e.a., State
V.    itv of San Antonio,      209 S.W.Zd 756    (Tex. 1948);
Childress County v. State, 92 S:W.Zd      1011   (Tex. 1936);
Lubbock Indeo. School Dist. v. Owens, 217 S.W.2d 186     (Tex.
Civ. App. - Amarillo 1948, writ ref'd). Such a lien would
be enforceable    against any subsequent purchaser,   and the
veteran-purchaser against whom the taxes originally       were
imposed, of course, remains personally liable.       Tax Code
§ 32.01; Attorney    General Opinions JM-1049 (1989): NW-523
 (1982) ; H-1108 (1977).

                       SUMMARY

           Taxes may not     be imposed upon     real
        property comprising the Veterans' Land Fund
        after the contract of sale has been forfeited
        and full title to the property has reverted
        to the possession and control of the state.
        Penalties and interest on unpaid delinquent
        taxes imposed on real property whose title




                            P. 5680
Honorable Garry Mauro - Page 18    (JM-1085)




        has reverted to the state continue to accrue.
        While the tax lien created by the previous
        owner's failure to properly tender his taxes
        remains in force during that period when the
        title to the real property reverts to the
        Veterans' Land Board, such a lien is unen-
        forceable against the state. Case authority
        of long standing dictates that such a lien
        would be enforceable  against any subsequent
        purchaser.  The legislature   could have, but
        has not, provided for waiver of such a lien
        against subsequent purchasers,, and until  it
        acts, the land remains charged with the lien.
        The veteran-purchaser against whom the taxes
        originally were imposed, of course, remains
        personally liable.




                                        JIM     MATTOX
                                        Attorney General of Texas

MARY KELLER
First Assistant Attorney General

Lou MCCREARY
Executive Assistant Attorney General

JUDGE ZOLLIE STEAKLBY
Special Assistant Attorney General

RICK GILPIN
Chairman, Opinion Committee

Prepared by Jim Moellinger
Assistant Attorney General




                              p. 5681
