                        May 23, 1989



Honorable Garry Mauro          Opinion No.   JM-1049
Commissioner
General Land Office            Re: Whether real     property
Stephen F. Austin Building     belonging to the    Permanent
1700 North Congress Avenue     School Fund is exempt    from
Austin, Texas 78701            property taxes when it is
                               leased to a private business
                               (RQ-1408)


Dear Mr. Mauro:

     You ask five questions regarding the taxability      of
certain interests in real property comprising   part of the
permanent school fund, specifically, the interest retained
by the state when it has leased land to private businesses.
Your request is prompted      by the following two      fact
situations.  First, in September 1986, the state acquired
title in fee simple absolute to two tracts of land in
Tarrant County for the use and benefit of the permanent
school fund. At the time that the state acquired title, you
leased both tracts on behalf of the permanent school fund to
a Texas corporation.  A commercial strip shopping center is
located on one tract: no improvements are located on the
second tract. The permanent school fund owns only the real
property; it owns none of the improvements located thereon.
The Texas corporation  to which you leased the first tract
owns the improvements and, in turn, has subleased the tract
to the occupants of the stores. In October of 1987, Tarrant
County and an independent school district located in Tarrant
County sent tax statements    to the General Land Office,
imposing ad valorem taxes on the real property but not on
the improvements.

     The second situation you ask'about   involves the tax-
ability of coastal and upland lands that are dedicated     by
statute to the permanent  school fund. Pursuant to chapter
33 of the Natural Resources Code, the School Land Board, of
which you are a member, has the authority to grant easements
for private use of coastal and upland public      land and
leases for use by public entities.  It is your understanding



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that local taxing units intend to impose ad valorem   taxes
against easement holders that engage in private businesses
(such as oil and gas pipelines       and commercial  marina
operations) based upon the property values of the permanent
school fund property encumbered by the easements.

     You contend that both the permanent   school fund land
leased to a private business enterprise,    as well as any
leasehold interest encumbering it, is exempt from property
taxation.  In other words, you contend that both the real
property in the hands of the state and the leasehold
interest in the hands of the private lessee are exempt  from
property taxation.  In the alternative, you contend that, if
the permanent school fund land that is leased to a private
business enterprise  is taxable, then only the leasehold
estate is taxable to the private business enterprise:    YOU
contend that the real property itself is not taxable to the
state.

     You first ask:

        Does TEX. CONST. art. VIII, 52 and art. VII,
        ~$5, in conjunction with Tex. Tax Code Ann.
        §ll.ll(a)   (Vernon 1982), exempt Permanent
        School Fund property from ad valorem,property
        taxes even though leased to a private busi-
        ness enterprise?

We conclude that the state's interest in land that is part
of the permanent   school fund is exempt from ad valorem
taxation, even if the state has leased the land to a private
concern to be used for a private purpose.

     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 "the legislature may, by general   laws,
exempt from taxation public property used for        public
purposes."1   Pursuant to article VIII, section     2, 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
                                       (Footnote Continued)




                                 P. 5443
Honorable Garry Mauro - Page 3        (JM-1049)




legislature enacted section 11.11 of the Tax Code, governing
the taxation of public property:

            (a) 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 orouerty
        is used for DubliC oUrIJOSeS.2

           (b) Land owned by the Permanent Univer-
        sity Fund is taxable for county purposes.
        Any notice required by Section 25.19 of this
        code [Notice of Appraised Value]    shall be
        sent to the State Property Tax Board, and the
        board shall appear in behalf of the state in
        any protest or appeal relating to taxation of
        Permanent University Fund land.

            (c) Agricultural   land or grazing land
        owned by a county for the benefit of public
        schools under Article VII, section 6, of the
        Texas Constitution   is taxable for all pur-
        poses. The county shall pay the taxes on the
        land from the revenue derived from the land.
        If revenue from the land is insufficient  to
        pay the taxes, the county shall pay the bal-
        ance from the county general fund.

           (d) Pronertv owned bv the state that is
        not used for wublic nurnoses     is taxable.
        Prowertv owned bv a state aaencv or institu-
        tion is not used for DUbliC ourooses if the


(Footnote Continued)
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.

      2.  The Texas Supreme Court has construed the relevant
language of article     VIII, section 2,     of the    Texas
Constitution to require exclusive use by the political
subdivision in order that it receive exempt status. Leander
IndeD. School Dist.  v. Cedar Park Water SUDD~V Corp., 479
S.W.2d 908 (Tex. 1972).




                                 p.    5444
Honorable Garry Mauro - Page 4    (JM-1049)




        prowertv is rented or leased for comoensation
        to a orivate business   enternrise to be used
        by it   for a wurwose not related to the
        performance of the duties and functions of
        the state aaencv or institution    or used to
        provide private    residential housing     for
        compensation to members of the public    other
        than students 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.      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.

           (e) It is provided, however, that pro-
        perty that is held or dedicated       for the
        support, maintenance,    or   benefit of   an
        institution of higher education as defined by
        Section 61.003(7), Texas Education Code, but
        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
        is not rented or leased to provide private
        residential housing to members of the public
        other than students and employees      of the
        state is not taxable.   (Emphasis added.)

By the terms of subsection    (d), it might appear that the
state's interest in the Tarrant County lands you ask about
are taxable to the state, since both are leased for
compensation to a private business enterprise to be used by
it for a purpose not related to the performance        of the
duties of the School Land Board. You contend, however, that
leasing such property  for compensation that will inure to
the benefit of the permanent school fund is precisely      the
public purpose  for which the permanent     school   fund was
created and that, therefore, the state is exempt from ad
valorem taxation on such property. We agree with your
assertion.  Before we discuss specifically the questions you
submit, we first will present some background      information
regarding the taxation of the various constitutional    school
funds in Texas.




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Honorable Garry Mauro - Page 5    (JM-1049)




     Article VII of the~Texas Constitution governs public
education on both the ublic elementary and secondary school
and university levels. I: Sections 10 through 18 of article
VII set forth the provisions     regarding university  level
education: sections 1 through 8 of article VII set forth the
provisions regarding public elementary and secondary  school
education. Article VII, section 11, creates a permanent
university  fund, comprising,    inter alia, certain   lands
dedicated for such purposes, as well as the proceeds derived
from the sale thereof: interest derived from the investment
of the proceeds   of the sale of such lands is usually
referred to as the "available university fund." Article VII
was amended in 1930 by the addition of section 16(a), which
provides that all land mentioned in sections 11, 12, and 15
of article VII, then belonging   to the University of Texas,
shall be subject to taxation for county purposes to the same
extent as lands privately     owned.4    See also Tax Code,
§ 11.11(b).

     Sections 2 and 6 of article VII create two distinct
types of trust funds in what has been termed a dual system
for public elementary and secondary education;   section 2
dedicates state-owned  land to a state "perpetual    school




      3. Additionally, article VII, section 9, of the Texas
Constitution  dedicates  all lands then granted    for the
benefit of the "Lunatic, Blind, Deaf and Dumb, and Orphan
Asylums" to create a permanent fund for their support,
maintenance and improvement.

      4. The "Interpretive Commentary"    to article VII,
section 16(a), declares the purpose behind the adoption of
the 1930 amendment:

           Due ~to the policy of the Board of Regents
        withholding the university lands from sale in
        spite of Art. 7, § 12 of the constitution,
        some of the   poorer counties contained large
        areas of untaxable land. In order to assist
        these counties this amendment was adopted  in
        1930.

See also 2 Braden, The Constitution  of the State of Texas:
An Annotated and Comparative Analysis, at 551-52 (1977).




                                 p. 5446
Honorable Garry Mauro - Page 6    (JM-1049)




fund,l15 while section 6 grants certain lands to counties
also for the benefit of the public schools. -2        Braden,
suwra, at 530-31. Income derived from the state "permanent
school fund" is designated by article VII, section 5, as the
"available school fund." Section 6 creates what is, in
effect, a system of permanent   school funds for the various
counties, with the income derived from permanent       county
school fund    investments    dedicated  to   each   county's
"available school fund." Article VII was amended in 1927 by
the addition of section 6a (and, subsequently, in 1972 by
the addition of 6b), which specifically makes taxable     for
all except state purposes those lands set aside for the
county permanent school funds.6 See Tax Code, 4 11.11(c).



      5. The terminology    used to designate  the fund is
confusing:  section 2 refers to it as the "perpetual  school
fund".and "perpetual public school fund:" section 4 refers
to it as the "public free school fund;" and section 5 labels
it the "permanent school fund." The Texas Supreme      Court
long ago opted for the appellation of section 4, stating
that sections 2 and 5 provided that certain       funds and
property constituted   a "public free school fund."     y&r&
County v. Board of School Trustees, 65 S.W. 878 (Tex. 1901).
The endowment  has been enlarged    from time to time by
statute, which designates   it the "permanent school  fund."
Educ. Code 5 15.01.    By your use of the phrase  "Permanent
School Fund land," we understand    you to mean that real
property dedicated   by section 2 of article VII, whose
components have been added to by amendment to section  15.01
of the Education Code.

      6. The "Interpretive    Commentary"  to article    VII,
section 6a, sets forth the reason for the amendment:

           Article  11, Section    9 of the     Texas
        Constitution exempts from taxation  'property
        of counties, cities, and towns owned and held
        for public purposes.'    In 1888, the Texas
        Supreme Court held that no tax could be
        levied on a lease-holder of school lands:

        t*County school lands, when leased to raise an
        available school fund, are as exclusively
        devoted to the use and benefit of the public
        as they would be if covered with school-
                                         (Footnote Continued)




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Honorable Garry Mauro - Page 7    (JM-1049)




     Therefore,  land    comprising   the  state   permanent
university fund is taxable for county purposes only.    Land
comprising  the permanent    school funds of the     various
counties is taxable   for all, except state, purposes.   YOU
ask about the taxability    of lands comprising neither the
permanent university fund nor the various county permanent
school funds, but rather       those comprising  the   state
permanent school fund: Neither the Texas Constitution    nor
the Tax Code specifically      addresses the issue of the
taxability of such lands. Nor has any Texas court case or
attorney general opinion addressed the issue.

     For two reasons we conclude that, under the provisions
of section 11.11 of the Tax Code, those lands set aside by
article VII, section 2, of the Texas Constitution for the
benefit of the public free schools are exempt       from ad
valorem taxation, even in the event that they are leased for
compensation to private business enterprises to be used for
purposes not related to the performance   of the duties and
functions of the School Land Board.      Moreover,  even if
section 11.11 of the Tax Code fairly could be construed   as
requiring the taxation of permanent school fund land, we
construe article VII, section 5, of the Texas Constitution
as forbidding it.

     First, we do not construe section 11.11 of the Tax Code
to require the taxation of permanent school fund land.    By
the very terms of subsection    11.11(a) of the Tax Code,
subsections (b) and (c) of section 11.11, which require the
taxation in certain instances of permanent university   fund


(Footnote Continued)
        houses; and the constitution      forbids the
        taxation of the means through which such
        lands may be made to yield a revenue, without
        sale, as fully as does it forbid the taxation
        of the lands. Forbidding the taxation of the
        lands, it forbids the taxation of an estate
        less than fee, whether imposed on the county
        or its lessee."    (Daugherty v. Thompson, 71
        T. 192, 9 S.W. 99)
           In order to permit such taxation,   except
        for state purposes, Sec. 6a was added to the
        Constitution in 1927.

See also 2 Braden, m,     at 533-34.




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Honorable Garry Mauro - Page 8     (JM-1049)




land and land comprising the various county permanent school
funds, serve as exceptions    to the general principles   set
forth in subsections   (a) and (d).   The express mention  or
enumeration of one person, thing, consequence, or class is
tantamount to an express exclusion of all others. State v.
Mauritz-Wells Co., 175 S.W.2d 238 (Tex. 1943); Ex carte
McIver, 586 S.W.Zd 851 (Tex. Crim. App. 1979). We conclude
that the express inclusion of subsections (b) and (c), which
indicates the intention of the legislature    to require the
taxation of certain specified   state-owned land as provided
by the Texas Constitution, likewise indicates the intention
of the legislature not to require the taxation of permanent
school fund land.

     Second, we agree with your assertion that the sale or
lease of land dedicated by article VII, section 2, of the
Texas Constitution,  with the proceeds   from such sale or
lease becoming part of the permanent school fund, is the
precise public purpose for which such land was dedicated  in
the first instance. Even a cursory reading of the relevant
provisions of article VII of the constitution makes it clear
that the legislature  that proposed those sections and the
voters who adopted them did not intend, not that the land
itself would be used for educational   purposes, but rather
that the income derived from its sale or lease would be so
used. The establishment    of such a fund in the Texas
Constitution impresses upon the fund the nature of a public
purpose. Absent specific constitutional language   requiring
taxation, the state's interest in such dedicated lands is
tax exempt.

     Subsections (a) and (d) of section 11.11 of the code,
taken together,   provide the following:     (1) that   all
property owned by the state or a political subdivision   is
exempt from taxation if the property is used for a public
purpose; (2) that property so owned that is not used for a
public purpose is taxable: and,  (3) that property so owned
that 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 political  subdivision, except under certain specified
exceptions, is not used for a public purpose and therefore
is taxable.

     If the legislature had intended that land owned by
either the permanent university  fund, the various   county
permanent school funds, or the permanent  school fund fall
within the ambit of (3) above      (or, more specifically,
subsection  (d) of section ll.ll), it would have been




                                 P. 5449
Honorable Garry Mauro - Page 9    (JM-1049)




unnecessary to include subsections (b) and     (c) in section
11.11, making land owned by the permanent university     fund
and by the various county permanent    school funds taxable.
The very terms of subsection (d) ordinarily would require
the taxation of such dedicated lands.     If the legislature
had assumed that such dedicated     lands would be taxable,
subsections (b) and   (c) would be mere suf;;z;a;z and the
earlier amendments adding section 6a and              article
VII would have been unnecessary.    The legislature is never
presumed to do a useless act. H unter v.
corr,., 620 S.W.2d 547 (Tex. 1981): State v. Citv of Dallas,
319 S.W.Zd 767 (Tex. Civ. App. - Austin 1958), aff'd, State
v. Citv of Austin,    331 S.W.Zd 737 (Tex. 1960). Had the
legislature intended that permanent    school fund lands be
taxable, it is reasonable   to assume that it would have so
provided.

      Finally, when construing section 11.11 of the Tax Code,
we must presume that the legislature       intended compliance
with the Texas Constitution.    Gov't Code, g 311.021(l).  The
legislature could not have intended that section 11.11 of
the Tax Code be construed to require the state's interest in
permanent school fund land that is leased to a private
business enterprise be taxed, because to do so would violate
subsection (a) of section 5 of article VII. That subsection
provides in relevant part:      "Except as provided by this
section, no law shall ever be enacted appropriating any part
of the permanent     or available   school' fund to any other
purpose whatever    . . . .@I This subsection has been con-
strued to prevent the use of any proceeds for any purpose
not specifically authorized. gg, e.q., Greene v. Robison,
8 S.W.2d 655    (Tex. 1928) and companion cases: Jerniaan   v.
Finlev, 38 S.W. 24 (Tex. 1896); Attorney General Opinions
H-881, H-878     (1976); V-147    (1947).   We have found no
authorization permitting proceeds to be expended       for ad
valorem taxation, either in the Texas Constitution or in the
Tax,~ Education, or Natural Resources Codes.

     We deem it significant that those        constitutional
provisions that govern both the permanent university     fund
and the various county permanent school funds do not contain
restrictive language comparable to that found in section    5
governing the permanent school fund. Moreover, we deem it
significant that sections 6a, 6b and 16(a) of article VII
had to be added before permanent university    land and the
lands comprising the various county permanent school funds
were taxed.




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Honorable Garry Mauro - Page 10   (JM-1049)




     Accordingly, we answer your first question      in the
affirmative; the state's interest in lands owned by the
permanent school fund that are rented or leased to private
business enterprises is exempt from ad valorem taxation.

     You next 'ask:

        If any of the tracts mentioned above are not
        fully exempt, are the leasehold estates taxed
        according to Tex. Tax Code Ann. 523.13 and if
        so, to what extent, if any, is the Permanent
        School Fund liable for any taxes that may be
        assessed?

     Section 25.07 of the Tax Code requires that certain
leasehold and other possessory interests in exempt property
be listed in the appraisal rolls in the name of the owner of
the possessory  interest. Section 25.07 of the Tax Code
provides in part:

           (a) Except as provided by Subsection    (b)
        of this section,      a leasehold or     other
        possessory  interest in property    that    is
        exempt from taxation to the owner of the
        estate or    interest   encumbered   by    the
        possessory interest shall be listed in the
        name of the owner of the possessory  interest
        if the duration of the interest may be at
        least one year.

           (b) Except as provided by Subsections (b)
        and (c) of Section 11.11 of this code, a
        leasehold or other possessory    interest in
        exempt property may not be listed if:

                 (1) the   property      is   permanent
           university fund land;

                (2) the property   is county     public
           school fund agricultural land.

     Section 23.13 of the Tax Code governs the appraisal   of
such taxable leaseholds and provides:

           A taxable  leasehold or other possessory
        interest in real property that is exempt from
        taxation to the owner of the estate or
        interest   encumbered   by   the   possessory
        interest is appraised at the market value of




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Honorable Garry Mauro - Page 11     (JM-1049)




        the leasehold or other possessory   interest.
        However, the appraised value may not be less
        than the total rental paid for the interest
        for the current tax year.

     Sections 25.07 and 23.13 of the code and           their
predecessor statutes have been construed to provide for the
taxation of a leasehold interest in real property, even in
an instance in which the real property       is exempt   from
taxation to the owner.     See, e.a., Martin v. Citv of
Mesouite, 590 S.W.Zd 793 (Tex. Civ. App. - Dallas 1979, Writ
ref'd n.r.e.); Irvina Indew. School Dist. v. Delta Airlines,
Inc., 534 S.W.2d 365 (Tex. Civ. App. - Texarkana 1976, writ
ref'd n.r.e.) (predecessor statute to section 23.13 of the
Tax Code specifically held to be constitutional):    Attorney
General Opinions WW-281, WW-270   (1957); O-4661 (1942).   We
conclude that, by the clear terms of sections 11.11, 25.07
and 23.13 of the Tax Code, the leasehold interests in land
comprising part of the permanent school fund are taxable to
the owners of those interests. The permanent school fund
itself is not liable for such taxes.

     We have already concluded that permanent school fund
land is not taxable to the state; we know of no reason why
section 23.13 of the Tax Code does not require the taxation
of the leasehold estate. Id.7     In such an instance, the
permanent school fund would not be liable in the event that
the owner of the leasehold estate fails to tender properly
any taxes imposed.

     You next ask:




      7. You rely principally upon Dauahertv v. Thomwson, 9
S.W. 99 (Tex. 1888) and two cases which rely upon Dauahertv,
Davis v. Burnett, 13 S.W. 613 (Tex. 1890), and Montaomerv v.
Peach River Lumber Co., 117 S.W. 1061 (Tex. Civ. App. 1909),
in suwoort of the nrooosition  that a leasehold interest in
exempt-land  is aiso-  exempt. In a case discussing      the
history of the predecessor statutes to section 23.13 of the
Tax Code, the Supreme Court of Texas declared,   inter alia,
that Dauaherty  is no longer controlling     on the issue.
Philliws Chemical co. v. Dumas Indew. School Dist., 316
S.W.2d 382 (Tex. 1958), rev/d on other arounds, 361 U.S. 376
(1959).




                                  p- 5452
Honorable Garry Mauro - Page 12   (JM-1049)




        If a leasehold estate is subject to taxation,
        and the lease is terminated or forfeited  for
        failure to comply with the lease   agreement,
        what party remains liable for the payment  of
        taxes?  If the tract of land is  subsequently
        leased to another entity, does the        tax
        liability continue to encumber the property
        or does it remain a personal liability of the
        previous lessee?

     The person owning the possessory   interest when the
assessment is imposed is the person who remains liable for
any unpaid taxes. Section 32.01 of the Tax Code governs the
creation of tax liens and provides:

           On January  1 of each year, a tax lien
        attaches to property to secure the payment of
        all taxes, penalties, and interest ultimately
        imposed for the year on the property, whether
        or not the taxes are imposed in the year the
        lien attaches. The lien exists in favor of
        each taxing unit having power to tax the
        property.

     Section 32.07 of the Tax Code governs in an instance in
which the person who owned a taxable interest in property
when the tax liability was imposed no longer owns such an
interest:

           (a) Except as provided by Subsection    (b)
        of this section, property taxes are the
        personal obligation of the person who owns or
        acquires the property on January 1 of the
        year for which the tax is imposed. A nerson
        is not relieved of the obliaation because he
        no lonaer owns the wroaertv.         (Emphasis
        added.)

     Section 32.07 of the code and its predecessor   statutes
have been construed    to preclude the imposition on        a
purchaser of land that was subject to a lien for taxes and
penalties  of personal   liability    for those taxes     and
penalties.  Citv of San Antonio v. Toewwerwein, 133 S.W. 416
(Tex. 1911): Attorney General Opinions V-441 (1947): O-6293
(1944); O-5062 (1943). By the clear terms of section 32.07
of the Tax Code, the person in whose name the possessory
interest is listed remains personally liable for any unpaid
taxes, penalty, and interest. We note, however, that the
taxable interest in the property   is itself subject to sale




                              P* 5453
Honorable Garry Mauro - Page 13          (JM-1049)




for the satisfaction    of unpaid taxes validly     assessed
against it, whoever might have been its owner when the taxes
originally accrued.   Tax Code 5 32.01; Attorney     General
Opinions MN-523 (1982); H-1108 (1977).

     You next ask:

        If leasehold estates are subject to taxation
        by the authority of Tex.' Tax Code Ann.
        511.11(d) and    925.07(a),   are    easements
        granted by the School Land Board also taxable
        to the holder of the easement?    If so, what
        is the value of the taxable interest? Is the
        value equal to the consideration paid for the
        easement or the value of the property   encum-
        bered or some other measure?

     Section 33.103 of the Natural Resources Code specifies
those interests that may be granted by the School Land
Board:

           The board    may  grant  the  following
        interests in coastal public land for the
        indicated purposes:

           (1)    leases for public purposes;

            (2)   easements   for        purposes    connected
        with:

                  (A)   ownership of littoral        property;
           or

                 (B) the operation of a     facility
           operated by an existing channel and dock
           corporation that was issued articles of
           incorporation under Chapters 13 and 14,
           Title 32, Revised Statutes:

           (3) permits authorizing limited continued
        use of previously unauthorized structures   on
        coastal public land     not connected     with
        ownership of littoral property: and

            (4) channel easements to the holder of
        any surface or mineral interests in coastal
        public  land   for purposes    necessary or
        appropriate to the use of the interests.




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Honorable Garry Mauro - Page 14   (JM-1049)




     Section 33.111 of the Natural Resources Code governs
the granting of easements by the board and provides:

           (a) The board may grant easement    rights
        to the owner of adjacent littoral property
        authorizing-the  placement or location of a
        structure~on coastal public land for purposes
        connected with the, ownership of littoral
        property.

            (b) The board may grant easement rights
        to construct  channels, wharves,  docks, and
        marinas to an existing corporation that was
        issued articles    of   incorporation   under
        Chapters 13 and 14, Title 32, Revised   Stat-
        utes.

           (c) Notwithstanding any provision in its
        charter or articles of incorporation to the
        contrary, a corporation   described  in Sub-
        section (b) of this section may only obtain
        the use of or acquire property from the state
        as provided by that subsection.

We understand  you to ask about    the taxability   of   these
easements granted by the board.

     As we stated in answer to your third question, sections
23.13 and 25.07 of the Tax Code impose tax liability       on
"leaseholds and other possessory interests in property   that
is exempt to the owner of the estate or interest encumbered
by the possessory  interest."   In Attorney General   Opinion
JM-59 (1983), we construed section 23.13 of the Tax Code to
require a two-step procedure:     first, there had to be a
determination that the real property in question was exempt
in the hands of the owner; second, there had to be a
determination that the rights conferred by the owner of the
fee constitute a llpossessory interest in property."  We have
already concluded  that the real property     comprising  the
permanent school fund is exempt in the hands of the state.
We held in Attorney General Opinion JM-59 that concession
rights in a state park for the construction and operation of
a golf course granted by the Department        of Parks and
Wildlife was a sufficient "possessory interest" for purposes
of section 25.07 of the Tax Code. The issue is whether     an
easement granted by the board likewise constitutes such a
"possessory interest."




                                        ‘;)

                              P. 5455
Honorable Garry Mauro - Page 15    (JM-1049)




     Section 1.04(16) of the Tax    Code defines   ~~possessory
interest" in the following way:

           \Possessory interest' means an interest
        that exists as a result of possession      or
        exclusive use of a right to possession     or
        exclusive use of a property and that is
        unaccompanied by ownership of a fee simple or
        life estate in     the property.     However,
        \possessory interest' does not include an
        interest, whether of limited or indeterminate
        duration, that involves a right to exhaust a
        portion of real property.

     Generally, an "easement" is a right one person has to
use the land of another for a specific purpose.      Maanolia
Petroleum Co. v. Caswell 1 S.W.2d 597 (Tex. Comm'n App.
1928, judgm't adopted); Biller v. Babb, 263 S.W. 253     (Tex.
Comm'n App. 1924, judgm't adopted). Section 33.111 of the
Natural Resources Code specifies the purpose for which the
board can grant easements, i.e., "the placement or location
of a structure on coastal public land for purposes connected
with the ownership of littoral property."      By the cl;;:
terms of section 33.111 of the Natural Resources Code,
interest or easement granted is clearly a tVpossessory
interest" for purposes of the Tax Code.        Therefore,   we
conclude that an easement granted by the board pursuant     to
section 33.103 of the Natural Resources    Code falls within
the ambit of sections 25.07 and 23.13 of the Tax Code and iS
taxable.   Any such easement granted must be appraised
pursuant to section 25.07 of the Tax Code.

     Finally, you ask:

        If any interest held by the Permanent  School
        Fund is not exempt from ad valorem  taxation,
        and if the Permanent School Fund has cause to
        question the notice given by the taxing
        authority, the listing of the property in the
        name of the Permanent School Fund, or the
        valuation of the subject property, what is
        the appropriate procedure  for the Permanent
        School Fund to protest such notice, listing,
        or valuation  and to what extent would the
        Attorney General be required to represent the
        Permanent School Fund in such protest?

     In view of our answers to your previous questions,     we
need not answer your last question.




                               P. 5456
Honorable Garry Mauro - Page 16     (JM-1049)




                       SUMMARY

           The state's interest in real property
        comprising  the permanent   school fund      '
        exempt from ad valorem taxation, even in ttz
        event that the property      is leased to a
        private business  enterprise.   The leasehold
        estates  in land comprising     the permanent
        school fund are taxable to the lessees.     If
        such a leasehold   is terminated    and taxes
        remain unpaid  in the leasehold estate, the
        tax liability becomes a personal liability of
        the lessee who possessed the leasehold estate
        when the tax was imposed and the lien against
        the leasehold estate     remains   in   force.
        Easements granted by the School Land Board in
        coastal and upland public     lands that are
        dedicated to the permanent    school fund are
        taxable pursuant to sections 11.11 and 23.13
        of the Tax Code; such easements must be
        appraised pursuant to the provisions        of
        section 25.07 of the Tax Code.




                                   Ll iii&L
                                     Very truly yo

                                           L
                                     JIM     MATTOX
                                     Attorney General of Texas

MARY KELLER
First Assistant Attorney General

LOU MCCREARY
Executive Assistant Attorney General

JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General

RICK GILPIN
Chairman, Opinion Committee

Prepared by Jim Moellinger
Assistant Attorney General




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