ATTORNEY GENERAL OF TEXAS
GREG ABBOTT
September 16, 2008
The Honorable Susan Combs Opinion No. GA-0665
Comptroller of Public Accounts
Post Office Box 13528 Re: Whether an applicant who has a leasehold
Austin, Texas 78711-3528 interest in "qualified property" is eligible to apply
for a limitation on the appraised value of the
qualified property (RQ-0684-GA)
Dear Comptroller Combs:
Chapter 313 of the Tax Code, the Texas Economic Development Act, authorizes school
districts to limit the appraised value of property in the district for the purposes of district-imposed
maintenance and operation property taxes in accordance with the procedures and subject to the
limitations described in the statute. See TEX. TAX CODE ANN. §§ 313.025(a), .027(a) (Vernon 2008).
Tax Code section 313.025(a) authorizes "the owner ofqualified property" to apply for the limitation
on the appraised value "of the person's qualified property." Id. § 313.025(a). Section 313.021(2)
defines the term "qualified property." Id § 313.021(2). You ask "whether an applicant who has a
leasehold interest in qualified property as defined in [section] 313.021(2) is eligible under [section]
313.025(a) to apply for a limitation on the appraised value of the qualified property."}
I. Background
A. Tax Code sections 313.021(a) and 313.025
Tax Code section 313.025(a) addresses persons, including corporations and other business
entities, eligible to apply for the appraised value limitation. See TEX. TAX CODE ANN. § 313.025(a)
(Vernon 2008); see also ide §§ 313.004(2)(C) (stating that chapter 313 should not be construed to
allow a property tax or financial benefit to "a sole proprietorship, partnership, or limited liability
partnership"), .024(a) (providing that subchapters B through D "apply only to property owned by an
entity to which Chapter 171 [imposing franchise tax on "taxable entities"] applies"), 171.0002(a)
(defining "taxable entity" for the purposes of chapter 171). The statute provides that "[t]he owner
ofqualifiedproperty may apply to the governing body of the school district in which the property
1See Letter from Honorable Susan Combs, Comptroller ofPublic Accounts, to Honorable Greg Abbott, Attorney
General of Texas, at 2 (Feb. 27, 2008) (on file with the Opinion Committee, also available at http://www
.texasattorneygeneral.gov) [hereinafter Request Letter].
The Honorable Susan Combs - Page 2 (GA-0665)
is located for a limitation on the appraised value ... of the person's qualified property." Id
§ 313.025(a) (emphasis added). Section 313.021(2) defines "qualified property" to mean:
(A) land:
(i) that is located in an area designated as a
reinvestment zone under Chapter 311 or 312 or as an enterprise zone
under Chapter 2303, Government Code;
(ii) on which a person proposes to construct a new
building or erect or affix a new improvement that does not exist
before the date the owner applies for a limitation on appraised value
under this subchapter;
(iii) that is not subject to a tax abatement agreement
entered into by a school district under Chapter 312; and
(iv) on which, in connection with the new building or
new improvement described by Subparagraph (ii), the owner ofthe
land proposes to:
(a) make a qualified investment in an amount
equal to at least the minimum amount required by Section 313.023;
~d .
(b) create at least 25 new jobs;
(B) the new building or other new improvement described
by Paragraph (A)(ii); and
(C) tangible personal property that:
(i) is not subject to a tax abatement agreement entered
into by a school district under Chapter 312; and
(ii) except for new equipment described in Section
151.318(q) or (q-1), is first placed in service in the new building or
in or on the new improvement described by Paragraph (A)(ii), or on
the l~d on which that new building or new improvement is located,
if th~ personal property is ancillary and necessary to the business
conducted in that new building or in or on that new improvement.
Id § 313.021(2) (emphasis added); see also id § 313.024(b) (additionally providing that property
eligible for the appraised value limitation must be used in connection with the enumerated purposes).
The Honorable Susan Combs - Page 3 (GA-0665)
A "qualified investment" referenced in section 313.021(2)(A)(iv) is also a defined term that
overlaps to some extent with the definition of "qualified property." Compare id § 313.021(1) with
id § 313.021 (2)(B)-(C). In general, a "qualified investment" is an investment in (1) tangible
personal property that is used in connection with the manufacturing, processing, or fabrication in a
cleanroom environment of a semiconductor product, the operation of a nuclear power generation
facility, or the operation of an integrated gasification combined cycle electric generation facility; or
(2) a building or a permanent, nonremovable building component that houses authorized tangible
personal property. See id § 313.021(1). The land on which a building or building component is
located is not a qualified investment. Id § 313.024(c)(I); see also ide §,313.024(c)(2)-(3) (providing
that property leased under a capitalized lease may be considered a qualified investment, but not
property leased under an operating lease).
B. Proposed Comptroller rule and question presented
Your request is prompted by an objection to a rule proposed by your office setting forth who
maybe an "owner of the land" under section 313.021(2)(A). See Request Letter, supra note 1, at
1-2. An application to a school district for a limit on the appraised value is forwarded to
the Comptroller of Public Accounts (the "Comptroller"). See TEX. TAX CODE ANN. § 313 .025(b),
(d) (Vernon 2008). The Comptroller is required to recommend to the school district whether
the application should be approved or disapproved. Id § 313.025(d). The Comptroller's
recommendation must be based on the economic impact criteria set out in the statute and, after
December 31,2007, "on any other information available to the comptroller." Id. § 313.026(b).
Section 313.031 requires the Comptroller to "adopt rules and forms necessary" to implement and
administer chapter 313. Id. § 313.031(a); see also Request Letter, supra note' 1, at 1.
Recently, the Comptroller repealed the\~gency rules adopted when chapter 313 first became
effective in 2002, and proposed and adopted new rules. See Request Letter, supra note 1, at 1. One
of the newly-proposed rules provided "that a person with an ownership interest in land, including
[a] leasehold interest that is coextensive with the limitation agreement, is an 'owner' for purposes
of § 313.021(2)." Id. (emphasis added); see also 32 Tex. Reg. 8106 (2007) (setting out proposed
rule) (proposed Nov. 9,2007). This provision was included, you explain, "because we recognized
that many school districts had approved applications submitted under Chapter 313 by entities that
leased land on which the qualified property would be placed, and we believed that there was no
disagreement about the construction ofthe statute." Request Letter, supra note 1, at 1. During the
statutory thirty-day comment period for the proposed rules, a public comment was submitted
objecting and arguing that an "owner of' land does not include a lessee of land. See id 2 (Because
of the objection, the proposed rule was not adopted. Id at 2; see also 33 Tex. Reg. 274 (2008)).
Thus, although you frame your question in terms of an "applicant who has a leasehold interest in
qualifiedproperty," we understand your concern to be with whether an applicant who has a leasehold
2See also Brief from F. Scott McCown, Executive Director, Center for Public Policy Priorities, to Honorable
Greg Abbott, Attorney General of Texas, at 3 (Apr. 8, 2008) (on file with the Opinion Committee) [hereinafter CPPP
Brief] (objecting to the construction of "owner of land" proposed by the Comptroller of Public Account's rule).
The Honorable Susan Combs - Page 4 (GA-0665)
interest in land is eligible to apply for a limitation on the appraised value of qualified property to be
placed on that land. See Request Letter, supra note 1, at 1-2.
II. Analysis
A. Applicable principles of statutory construction
Your question requires us to construe sections 313.021(2) and 313.025.(a). We are guided
by the following general principles of statutory construction. The primary objective in construing
a statute is to give effect to the Legislature's intent. State v. Shumake, 199 S.W.3d 279, 284 (Tex.
2006). Like a court, we must seek that intent "first and foremost" in the statutory language.
Lexington Ins. Co. v. Strayhorn, 209 S.W.3d 83, 85 (Tex. 2006). We apply the definitions
prescribed by the Legislature and any technical or particular meaning the words have acquired. City
of Rockwall v. Hughes, 246 S.W.3d 621, 625 (Tex. 2008) (citing TEX. GOV'T CODE ANN.
§ 311.011 (b)). Otherwise, we construe the statutory words according to their plain and common
meaning, unless a contrary intent is apparent from the context in which the words are used or it leads
to absurd results. Id. at 625-26 (citing Tex. Dep't ofTransp. v. City ofSunset Valley, 146 S.W.3d
637, 642 (Tex. 2004), Taylor v. Firemen's and Policemen's Civil Servo Comm 'n, 616 S.W.2d 187,
189 (Tex. 1981), Univ. of Tex. Sw. Med Ctr. V. Loutzenhiser, 140 S.W.3d 351,356 n.20 (Tex.
2004)). We may also consider legislative history in construing a statute. City ofRockwall, 246
S.W.3d at 626 n.6 (citing TEX. GOV'T CODE ANN. § 311.023(3)).
In construing sections 313.021(2) and 313.025(a), we also adhere to the specific legislative
direction for determining the meaning ofterms used in chapter 313. Section 313.005 provides that
words and phrases that are not specifically defined in chapter 313 have the meanings given or
ascribed to them by Tax Code section 1.04 [general definition$] or by another section of Tax Code
title lor title 3. See TEX. TAX CODE ANN. § 313.005 (Vernon 2008).
B. Owner of qualified property
Keeping in mind these general and specific principles of statutory construction, we tum to
Tax Code chapter 313. Under section 313.025(a), "the owner of qualified property" is authorized
to apply for a limitation on the appraised value ofthe person's qualified property. Id § 313.025(a).
On its face, section 313.025(a) requires that the applicant own "qualified property," but not
necessarily land. See ide § 313.025(a); see id § 1.04(1) (defining the term "property" to mean "any
matter or thing capable of private ownership").
We consider then whether a land ownership requirement is imposed by the section
313.021 (2) definition of "qualified property." As legislatively defined, "qualified property" is: (A)
land (i) that is located in a reinvestment or enterprise zone, (ii) on which a "person" proposes to
construct a new building or erect a new improvement, (iii) that is not subject to a tax abatement
agreement, and (iv) on which "the.owner ofthe land proposes to" make qualified investments in at
The Honorable Susan Combs - Page 5 (GA-0665)
least the minimum amount and create at least twenty-five jobs, see id § 313.021(2)(A);3 (B) new
building or other new improvements "described by Paragraph (A)(ii)," i.e., land that is located in
a reinvestment or enterprise zone, see ide § 313.021(2)(A)(ii), (B); and (C) tangible personal
property (i) that is not subject to a tax abatement agreement and (ii) that is located in the new
building or on the other new improvement "described by Paragraph (A)(ii)," i.e., on land located in
reinvestment or enterprise zone, or on the land itself on which the building or other improvement
is located, see id § 313.021(2)(A)(ii), (C).
In sum, "qualified property" in section 313.021(2) comprises three categories of
property-land, building or other improvement on the land, andtangible personal property-and the
reference to "owner of the land" is contained in only one .of those described categories, land.
"Owner ofthe land" or "owner" is ~ limitation with respect to building or improvement or tangible
personal property only under a conjunctive view of section 313.021 (2). The proposed Comptroller
rule construing "owner of the land" to include an owner of a leasehold interest in the land implies
a conjunctive construction of section 313.021 (2).
C. Conjunctive/Disjunctive construction of qualified property.
Based on the use ofthe connector "and," it could be argued that "qualified property" requires
the existence of each of the described categories of property and, therefore, an "owner of qualified
property" must necessarily own land. In other words, the same person must own the land, building
or other improvement on the land, and tangible personal property in the building or improvement
or on the land. 4 Ordinarily, the conjunctive "and" is not read as the disjunctive "or." Bayou Pipeline
Corp. V. R.R. Comm 'n, 568 S.W.2d 122, 125 (Tex. 1978). However, the Texas Supreme Court has
ruled that "and" may be construed to mean "or" when it "is necessary to effectuate the Legislature's
intent or to prevent an ambiguity, absurdity, or mistake." Id Since that decision, appellate courts
across Texas have construed "and" as an "or" when necessary to effectuate the Legislature's intent.
See, e.g., State V. Carmaco,203 S.W.3d 596, 601 (Tex. App.-Houston [14th Dist.] 2006, no pet.)
(construing "and" as an "or" in a penal statute in order to effectuate the Legislature's intent where
such construction did not render the statute meaningless and where a contrary construction would
result in an absurdity); Bustillos V. Jacobs, 190 S.W.3d 728, 735 (Tex. App.-San Antonio 2005,
no pet.) (construing "and" as an "or" in a statute barring action against medical schools under certain
circumstances in order not to thwart the purpose of the statute); Neighborhood Comm. on Lead
Pollutionv. Bd ofAdjustment, 728 S.W.2d64, 68 (Tex. App.-Dallas 1987, writrefdn.r.e.) (noting
3See also TEX. TAX CODE ANN. §§ 313.025(f-l) (Vernon 2008) (authorizing school district's governing body
to "waive the new jobs creation requirement in Section 313.021(2)(A)(iv)(b) or 313.051(b)" in certain circumstances);
.051 (b) (providing that in school districts meeting the required criteria, "a property owner is required to create only at
least 10 new jobs on the owner's qualified property").
4The CPPP Brief argues that under the statutory defmition of "qualified property," only an owner of land is
authorized to propose qualified investments and create jobs; thus only such owner is eligible to apply for the appraised
value limitation. See CPPP Brief, supra note 2, at 2. This view implies that paragraphs (A), (B), and· (C) are
conjunctive, and the same person must own the land as well as the building or other improvement and personal property
located on the land.
The Honorable Susan Combs - Page 6 (GA-0665)
that "[0]ne ofthe recognized usages of 'and' is to refer to 'either or both' oftwo alternatives, when
'or' might be interpreted as referring to only one or the other").
To determine the Legislature's intent, we look "first and foremost" at the statutory language.
Lexington Ins. Co. , 209 S.W.3d at 85. First, we observe that the statute's use ofthe term the "owner"
with respect to land and a "person" with respect to building or other improvement constructed or
erected on the land indicates that the Legislature recognized that a person who owns the land may
not necessarily be the same as a person who owns the building or improvement constructed or
erected on the land. See TEx. TAX CODE ANN. § 313.021(2)(A) (Vernon 2008). Section
313.021 (2)(A)(ii) refers to the land "on which a person proposes to construct a new building or erect
or affix a new i~provementthat does not exist before the date the owner applies for a limitation on
appraised value under this subchapter." Id § 313.021(2)(A)(ii) (emphasis added). And subsection
(2)(A)(iv) refers to the land "on which, in connection with the new building ... described by
Subparagraph (ii), the owner ofthe land proposes to" make the required qualified investments and
create the required jobs. Id. § 313.021 (2)(A)(iv). The quoted language suggests that "owner" when
first used in paragraph (A)(ii) means the "owner of the land" later mentioned in paragraph (A)(iv).
See Ex parte Keller, 173 S.W.3d 492,498 (Tex. Crim. App. 2005) (stating that a word or phrase that
is used within a single statute generally bears the same meaning throughout the statute). And it
suggests that this "owner" may be different from the "person" referred to in paragraph (A)(ii) that
proposes to construct or install buildings or other improvements on the land. Cf Ex parte Keller,
173 S.W.3d at 498; see also City ofDallas v. Heard, 252 S.W.3d 98, 111 (Tex. App.-Dallas 2008,
no pet. h.) ("We assume the legislature used different language in each subsection for a reason."
(citing Dewitt v. Harris County, 904 S.W.2d 650, 653 (Tex. 1995))).
Second, the structure and language ofthe definition of "qualified property," while less than
a model of clarity, indicate that "building or other new improvement" and "tangible personal
property" each may constitute qualified property. These two categories are described separately in
paragraphs (B) and (C) from "land" described in paragraph (A). Additionally, the Legislature repeats
some, although not all, ··of the paragraph (A) land requirements for both "building or other new
improvement" and "tangible personal property" described in paragraphs (B) and (C). Paragraph (B)
describes building or other improvement with reference to paragraph (A)(ii)-land "on which a
person proposes to construct a new building or erect or affix a new improvement." TEX. TAX CODE
ANN. §313.021(2)(B) (Vernon 2008). This reference-incorporating the requirement that land on
which the building or improvement is constructed or erected is located in a reinvestment or
enterprise zone-would be unnecessary if the previously described land and the new building or
improvement together constituted "qualified property." See ide § 313.021(2)(A)(ii), (B). The
reinvestment or enterprise zone location requirement is similarly repeated with respect to paragraph
(C) tangible personal property described as "placed ... in the new building or in or on the new
improvement described by Paragraph (A)(ii), or on the land on which that new building or new
improvement is located." Id 313.021 (2)(A)(ii), (C). And the requirement ofnot having entered into
a tax abatement agreement found in paragraph (A) is also repeated with respect to tangible personal
property in paragraph (C). See id § 313.021(2)(A)(iii), (C). The repetition of some of the same
requirements with respect to each property category would be unnecessary ifland, buildings or other
improvements, and tangible personal property must be owned together to constitute "qualified
property."
The Honorable Susan Combs - Page 7 (GA-0665)
Third, the definition of and requirements for qualified investment indicate that "building[s]
or other new improvement[s]" and "tangible personal property" each constitute qualified property
independent ofland. See id § 313.021(1). The stated purpose ofchapter 313 is to "encourage large-
scale capital investments in this state, especially in school districts" and "create new, high-paying
jobs in this state." Id. § 313.003 (1)-(2). The "capital investment" sought here is defined expressly
in terms of "tangible personal property that is first placed in service" or "a building or a permanent,
nonremovable component of a building." Id §§ 313.021(1) (defining "qualified investment"),
.024(c) (providing additional requirements for determining eligibility for limitation). "Forpurposes
of determining an applicant's eligibility for a limitation[,] ... land ... is not considered a qualified
investment." Id. § 313.024(c). The fact that for the purposes of determining an applicant's
eligibility for the appraised value limitation, buildings or building components or tangible personal
property constitute qualified investment, while land does not, suggests that land ownership is not a
requisite for such eligibility.
Fourth, the section 313.021 (2) definition of "qualified property" largely tracks the general
definition of "property" in Tax Code section 1.04 encompassing any or all of land, buildings or
improvements, or tangible personal property. See id §§ 1.04(1), 313.021(2); see also id § 313.005
(directing that words and phrases in chapter 313 have the meanings given or ascribed in section 1.04
and other sections in titles 1 and 3 of the Tax Code). Under section 1.04, "property" means "any
matter or thing capable ofprivate ownership."/Id. § 1.04(1). Under this general definition, the term
"property" is broader than just "land"; it encompasses any or all of the following: land; buildings
or other improvements on land; or personal property, including tangible personal property. Id.; see
also ide § 1.04(2) (defining "real property" to includeJand, improvement, mine or quarry, mineral
in place, standing timber, an estate or interest in one of these items), (3) (defining "improvement"
as generally building or other structure affixed to land, or transportable structure designed to be '
occupied for residential or commercial purposes), (4) (defining "personal property" as property that
is not real property), (5) (defining "tangible personal property" as "personal property that can be
seen, weighed, measured, felt, or otherwise perceived by the senses"). We presume that the
Legislature was aware ofthe general definition of the term "property" when it adopted chapter 313
and crafted the definition of "qualified property." See Acker v. Tex. Water Comm'n, 790 S.W.2d
299, 301 (Tex. 1990) ("A statute is presumed to have been enacted by the [L]egislature with
complete knowledge of the existing law and with reference to it.").
Having considered "first and foremost" the statutory language, we tum to· the legislative
history of chapter 313, which suggests that the Legislature intended or understood chapter 313 to
allow a person who owns any of the three categories of property to apply for the appraised value
limitation. See HOUSE RESEARCH ORGANIZATION, BILL ANALYSIS, Tef{. H.B. 1200, 77th Leg., R.S.
(2001); see also City of Rockwall, 246 S.W.3d at 626 n.6 (stating that a court may consider
legislative history when construing a statute). The Legislature enacted in 2001 chapter 313 by
adopting House Bill 1200. See Act of May 24, 2001, 77th Leg., R.S., ch. 1505, §§ 1-5, 2001 Tex.
Gen. Laws 5362, 5362-73. A bill analysis of House Bill 1200 states that "[a]pplicants would have
to own qualified property, meaning land, new buildings or other new improvements, or tangible
personal property not part of a school abatement agreement . . . ." HOUSE RESEARCH
ORGANIZATION, BILL ANALYSIS, Tex. H.B. 1200, 77th Leg., R.S. (2001) at 2 (emphasis added).
The Honorable Susan Combs - Page 8 (GA-0665)
III. Conclusion
Based on the structure and language of section 313.021(2), other provisions of chapter 313,
the general Tax Code definition of "property," and legislative history, we believe that the intent of
the Legislature's use of the word "and" was to extend the availability of chapter 313 to an owner of
land, building or improvement, or tangible personal property, or any combination of such property.
See Lead Pollution, 728 S.W.2d at 68 (holding that "and" may mean "either or both" or "any and
all"). Accordingly, we construe section 313.021(2) disjunctively and determine that (A) land, (B)
building or other improvement, or (C) tangible personal property each or in any combination may
constitute "qualified property." Thus, a person who owns anyone of these categories of property
described in section 313.021(2)(A), (B), or (C) respectively, is an "owner of qualified property"
under section 313.025(a) eligible to apply for a limitation on the appraised value of the qualified
property. In answer to your question, we conclude that a person meeting the other requirements of
chapter 313 who owns a building, other improvement, or tangible personal property is "the owner
ofqualified property" under section 313 .025(a) and eligible to apply for a limitation on the appraised
value of the qualified property irrespective of whether the person owns or leases the land on which
such property is to be placed.
The Honorable Susan Combs - Page 9 (GA-0665)
SUMMARY
Tax Code section 313.025(a) authorizes "the owner of
qualified property" to apply to a school district for a limitation on the
appraised value of the qualified property for the purposes of school
district-imposed maintenance and operation property taxes. Under
Tax Code section 313.021(2), land, building or other improvement,
and tangible personal property each constitute "qualified property."
Accordingly, a person that owns a building or other improvement or
tangible personal property is an "owner of qualified property" under
section 313.025(a). Thus, a person meeting the other requirements of
chapter 313 who owns such qualified property-building or other
improvement or tangible personal property-is eligible to apply for
a limitation on the appraised value ofthe person's qualified property
irrespective of whether the person owns or leases the land on which
the qualified property is to be placed.
Very truly yours,
KENT C. SULLIVAN
First Assistant Attorney General
ANDREW WEBER
Deputy Attorney General for Legal Counsel
NANCY S. FULLER
Chair, Opinion Committee
Sheela Rai
Assistant Attorney General, Opinion Committee