                      The Attorney                General              of Texas
                                          December        15.   1978

JOHN L. HILL
Attorney General


                   Honorable Jim W. Weatherby, Chairman                Opinion No. H- 1287
                   School Tax Assessment Practices Board
                   3301 Northland Drive, Suite 500                     Re: Can article 8, section l-d
                   Austin, Texas 78731                                 “agricultural use” tax treatment
                                                                       be applied to land owned by a
                                                                       partnership?

                   Dear Mr. Weatherby:

                          You ask whether land “owned in partnership” can qualify for agricultural
                   use valuation when each of the partners can “meet the other qualification
                   requirements” of article 8, section l-d of the Texas Constitution.          That
                   provision of the Constitution begins:

                               (a)     All land owned by natural persons which is
                                       designated for agricultural    use in accordance
                                       with the provisions of this Section shall be
                                       assessed for all tax purposes on the consideration
                                       of only those factors relative to such agricultural
                                       use.

                   (Emphasis added).

                             If land “owned in partnership” is not land “owned by natural persons,” it
                   is apparent that the provision does not apply. “Persons are of two kinds:
                   artificial and natural. . . .” 70 C.J.S., Person at 688. “A natural person is a
                   human being. . . .‘I 65 C.J.S., Natural at          The Texas Supreme Court has
                   made it clear that land owned by a partnership formed pursuant to the Texas
                   Uniform Partnership Act, V.T.C.S. article 6132b, is to be treated for ad
                   valorem tax purposes as property owned by a separate legal entity, an
                   artificial person, end not as property owned by the partners as individuals.
                   Nacogdoches lnd. Sch. Dist. v. McKinney, 504 S.W.2d 832 (Tex. 1974). It
                   follows that land owned by a Texas partnership cannot qualify for special tax
                   treatment under article 8, section l-d of the Constitution.

                                                                             the Supreme Court
                                                                            S.W.2d 161 (Tex. Civ.
                   APP. - Tyler 1973), but in doing so it expressly agreed with the holding of the
                   intermediate court that




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    Honorable Jim W. Weatherby      -   Page 2   (H-1287)



               [ulnder the existing statutory law of this state, . . . for ad
               velorem tax purposes, a partnership      constitutes   a legal
               entity.

    489 S.W.2d 169. In that case, a taxpayer assessed personally for taxes against
    property held by two partnerships argued that he, though a partner, was not
    individually liable for the taxes because the property was owned by the partnership
    as a separate entity, and not by the partners themselves.      The Supreme Court
    agreed.

           Dicta of the Beaumont Court of Civil Appeals in Driscoll Foundation v.
    Nueces County, 445 S.W.%d1 (Tex. Civ. App. - Beaumont 1969), writ ref’d n.r.e. per
    curiam, 450 S.W.Zd 320 (Tex. 1970) concluded that “natural persons such as
    partners, cotenants and trustees, etc.” were “owners” not excluded from the classes
    benefited by the article 8, section l-d amendment, but the Texas Supreme Court
    refused to concur, explaining that its action on the writ of error in the case should
    not be interpreted es approving the “natural persons” conclusion of the lower court.
    450 S.W.2d 320.

          The lower court there apparently reasoned that property held by partnerships,
    trust estates, and associations is owned by natural persons inasmuch as it is not
    owned by corporations.     The dichotomy is based on language in article 8, sectio;;-i
    of the Constitution which specifies that all private property in the state “whether
    owned’by natural persons or by corporations” shall be taxed. But in 1878 when that
    language was placed in the Constitution, the term “corporation,” (particularly when
    used in state constitutions) often embraced all artificial persons recognized in law
    as legal entities.   Andrews Bras. Co. v. Youngstown Coke Co., 86 F.585 (8th Cir.
    1898). See Ala. Const. art. XIV, S 13 (1875); MO. Const. art XII, S 11 (18751; Pa.
    Const. KXVI,       S 13 (1874). Cf. Great Southern Fire Proof Hotel Co. v. Jones, 177
    U.S. 449 (1900) (limited partnership “corporation” for some purposes, but not for
    ourooses of federal court~iurisdictionl.  A‘%atural oerson” then as now~was a human
    being. Rapelje end Lawrence’s Law Dictionary (18881, vol. II at 954.

           In City of Mesquite v. Melouf, 553 S.W.2d 639 (Tex. Civ. App. - Texarkana
    1977, writ ref’d n.r.e.1, the Texarkana Court of Civil Appeals approached the matter
    in a. manner similar to that used by the Beaumont Court, but concluded that the
    beneficiaries   of a trust, rather than the trustees, “owned” the trust assets within
    the meaning of article 8, section l-d of the Constitution.   That court’s discussion of
    the matter must also be regarded as inconclusive because the only holding of the
    court was that the trustees and particular beneficiaries      involved there were not
    entitled to the benefit of the provision. Cf. V.T.C.S. art. 7425&25(k) (trusteeto
    pay taxes against trust estate).      Whether=    not the Texas Supreme Court would
    agree that the individual beneficiaries of a trust are owners of the trust property
     for ad valorem tax purposes, it has come to a different conclusion with respect to
    partners and partnership property. Nacogdoches Ind. Sch. Dist. v. McKinney, supra.
    -Cf. H. Rouw Co. v. Texas Citrus Commission, 247 S.W.2d 231 (Tex. 1952) (“natural



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            Honorable Jim W. Weatherby     -   Page 3    (H-1287)



            persons” statutorily contrasted with “firms, associations and corporations?; Miller
            V. Davis, 159 S.W.2d 973 (Tex. 194U (“public charitable non-profit body corps=
            with powers of unincorporated foundation was corporation within article 12, section
            1 of the Constitution).

                   In our opinion, the Texas Supreme Court, if faced squarely with the issue,
            would probably hold that land owned by a Texas partnership cannot quaIify for
            “agricultural use” tax treatment   under the present article 8, section l-d of the
            Texas Constitution.     For a discussion of the background and purpose of the
            povish,      e   Grape! v. Cayuga Ind. Sch. Dist., 539 S.W.2d 861 (Tex. 19761,
            particularly note 2 at 864.

                                               SUMMARY

                       The Texas Supreme Court would probably hold that land
                       owned by a Texas partnership cannot qualify for “agricul-
                       tural use” tax treatment under the present article 8, section
                       l-d of the Texas Constitution.




            DAVID M. KENDALL, First Assistant




            C. ROBERT HEATH, Chairman
            Opinion Committee




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