Untitled Texas Attorney General Opinion

THE ATTORNEY GENERAL
OF TEXAS

Honorable Carlos Valdez Opinion No. JM-893
Nueces County Attorney
Nueces County Courthouse Re: Whether a tax exemption
Room 206, 901 Leopard for non-income-producing
Corpus Christi, Texas 78401 recreational boats applies
to all such boats that we're
on the tax rolls as of
the effective date of the
statute (RQ-1188)

Dear Mr. Valdez:

The 70th Legislature amended section 11.14 of the Tax
Code, to provide what is essentially a "local option"
exemption from ad valorem taxation for recreational
boats. See. e.a Attorney General Opinion MN-11 (1979)
(authority of the' legislature to permit taxing units to
exempt automobiles from property tax on a local option
basis). The bill, Senate Bill No. 367, became effective
on May 26, 1987. Essentially, the amendment provides that
non-income-producing boats are exempt from ad valorem
taxation. However, the governing body of any taxing unit
by order or resolution may provide for the taxation of
such boats. By enacting Senate Bill No. 367, the legisla-
ture chose the so-called "local option" scheme of taxation
in order to enforce uniformity state-wide, while at the
same time preserving the right of those taxing units that,
all along, have been discovering, listing, and appraising
recreational boats to continue doing so.

You ask:

Does the exemption apply to all applicable
boats which were already on the tax rolls
before the effective date of the statute, or
is it only to be applied to boats which
would have been on the tax rolls after the
effective date of the act?

p. 4380
Honorable Carlos Valdez - Page 2 0X-893)

We conclude that the statutory exemption provisions apply
to all boats located in a taxing unit as of January 1,
1987 but only in those taxing units that had not certified -
their tax rolls as of the effective date of the enactment.
Because you do not ask, we do not consider the
constitutionality of the statutory amendments to section
11.14 of the Tax Code; we limit our discussion to matters
of statutory construction only.1

Section 11.14 of the Tax Code was amended by the 70th
Legislature to read as follows:

Sec. 11.14. HOUSEHOLD GOODS AND PERSONAL
EFFECTS.

(a) An individual is entitled to an
exemption from taxation of his household
goods and personal effects that are not held
or used for production of income.

(b) In this section:

(1) 'Household goods' means furnishings,
appliances, utensils, and other tangible
personal property used primarily in or
around a residence by the residents and
their guests.

1. We note that the Bill Analysis for Senate Bill
No. 367 indicates that the legislature was concerned about
the lack of uniformity in the taxation of personal
property in Texas. Accordingly, the House Select
Committee on Central Appraisal Districts, which was
created in 1985 and charged with the review of certain
aspects of local property taxation, recommended that all
non-income-producing tangible personal property be
exempted from taxation. Therefore, in addition to Senate
Bill No. 367, the 70th Legislature passed a proposed
constitutional amendment, Senate Joint Resolution No. 12,
that authorizes the legislature to exempt from ad valorem
taxation all non-income-producing tangible personal
property, except mobile homes. The proposed amendment
was passed by the voters at the general election in
November 1987 and became effective November 3, 1987.

p. 4381
 Honorable Carlos Valdez - Page 3 (JM-893)

(2) 'Personal effects' means tangible
personal property that normally is worn or
.- carried by an individual or that is used by
an individual in personal, recreational, or
other activities that do not involve produc-
tion of income. Boats which are owned and
used bv a familv or individual f r r cr a
tional activities and are not heyd ore uze,
for the Droduction of income are exemvt
under this section. A familv owns a boat for
purDoses of this section if anv member of
the familv owns the boar .

al 'Personal effects' does not include
a motor vehicle, boat (other than as des-
cribed in Subdivision (2) of this sub-
section), or other means of transportation,
a trailer that must be registered for
operation on a highway, or a mobile home or
similar vehicle designed for occupancy as a
dwelling.

(c) The aovernina bodv of a taxinq
unit bv ordinarv resolution or order,
deDendina uDon the method Drescribed bv law
for official action bv that aovernina bodv,
mav DrOVide for taxation of all boats
exemDted under Subsection a. If the
aovernina bodv of a taxina unit Drovides for
taxation of all boats as Drovided bv this
subsection, the exemDtion Drescribed bv
subsection (a) does not aDD1v to that unit.

(d) The central aDDraisa1 district for
the countv shall determine the cost of
aDDraisina boats recuired bv a aoverninq
bodv under the Drovisions of Subsection (c)
and shall assess those costs to the taxing
unit or taxina units which Drovide for the
taxation of boats. (Amended language under-
scored.)

In Attorney General Opinion MW-4 (1979), this office
considered whether enabling legislation providing certain
r- ad valorem tax exemptions could be made effective as of
January 1, the traditional "assessment date" (see Tax Code
§21.01), of the year in which the legislation was enacted.
The tax exemptions at issue in that opinion constituted
the enabling legislation that implemented the so-called
"Tax Relief Amendment I'that,became effective on January 1,

p. 4382
Honorable Carlos Valdez - Page 4 (JR-893)

1979. The opinion analyzed various constitutional
provisions and concluded that legislation could constitu-
tionally apply to tax liabilities that had not been fixed _,
by levy and assessment as of the statute's effective date.

Article I, section 16, forbids the enactment of
retroactive laws, but this prohibition does not extend to
all statutes. The legislature may enact retrospective
legislation where no impairment of vested rights results.
Deacon v. Citv of Euless, 405 S.W.Zd 59, 62 (Tex. 1966);
cox v. Robinson, 150 S.W. 1149 (Tex. 1912); Attorney
General Opinions H-634 (1975); H-14 (1973). Where private
rights are not involved, the legislature may impose
retroactive legislation on political subdivisions. Deacon
v. Citv of Euless, m at 62; cf. Love V. Citv of
Dallas, 40 S.W.2d 20 (Tex. 1931) (constitution protects
property that political subdivision holds in trust for
people). The vested rights of taxpayers will not be
injured by the grant of tax exemptions effective January
1, 1987, since such a grant creates rather than destroys
a right. See Attorney General Opinion M-413 (1969).
Although statutes are generally presumed to operate
prospectively, they will be given retrospective effect
where the legislative intention is clear, and where no
impairment of vested rights results. Deacon v. Citv of
Euless, suora at 61; see Gov't Code 5311.022 (statute
presumed to operate prospectively unless expressly made
retrospective).

Other constitutional provisions prohibit the state
from applying a tax exemption retrospectively when the tax
liability has matured. Article III, section 55, of the
Texas Constitution provides as follows:

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

A delinquent tax is a liability within this pro-
vision. State v. Pioneer Oil & Refinina Co., 292 S.W. 869
(Tex. Comm'n App. 1927, judgmt adopted). Once a tax
becomes a liability, article III, section 55, makes it
irrevocable, and the legislature cannot extinguish it by

p. 4383
Honorable Carlos Valdez - Page 5 Of-8931

repealing the statute that enacted it. See also Sloan v.
Calvert, 497 S.W.2d 125 (Tex. Civ. App. - Austin 1973, no
writ); Smith v. State, 420 S.W.2d 204 (Tex. Civ. App. -
Austin 1967), aff'd, 434 S.W.2d 342 (Tex. 1968); Attorney
General Opinions M-34 (1967); C-200 (1963). In addition,
article VIII, section 10, prohibits the legislature from
releasing the inhabitants of any county, city, or town
from the payment of taxes levied for state or county
purposes unless in case of great public calamity. See
Bass v. Aransas Countv I.S.D., 389 S.W.2d 165 (Tex. Civ.
APP. - Corpus Christi 1965, writ ref'd n.r.e.).
Moreover, a statute that attempts to grant an exemp-
tion with respect to a tax liability accruing before its
effective date might also violate article III, section 51,
of the Texas Constitution. This provision prevents the
state from making or authorizing a grant of public funds
to any individual, association of individuals or corpora-
tion, in the absence of a public purpose or consideration
moving to the state. State v. Citv of Austin, 331 S.W.2d
737 (Tex. 1960); Attorney General Opinion H-416 (1974).
Article III, section 52, also prevents the legislature
from authorizing political subdivisions to grant public
money to individuals and corporations. In Morris v.
Calvert, 329 S.W.2d 117 (Tex. Civ. App. - Austin 1959,
writ ref'd n.r.e.), the court held that a statute
providing an inheritance tax exemption applied only to
estates of persons dying after its effective date. Some
statutory language indicated that the legislature intended
that the exemption become effective when the governor
signed the bill, but the court rejected this interpreta-
tion as raising a serious question of constitutionality.
An inheritance tax is a lien upon property from the date
of death, and reducing it by a tax exemption that sub-
sequently became effective would violate sections 51 and
55 of article III of the Texas Constitution. *In re
Voorhees' Estate, 196 A. 365 (N.J. Prerog. Ct. 1938),
aff'd, 3 A.2d 891 (N.J. Sup. Ct. 1939), aff'd, 10 A.2d 650
(N.J. 1940) (statute retrospectively exempting taxes to
which state's right was fixed makes an unconstitutional
gift of public funds). See also In re Skinker, 303 P.2d
745 (Cal. 1956).

In our opinion consequently, sections 51, 52, and 55
of article III will prevent the legislature from enacting
a tax exemption statute applicable to tax liabilities that
have already accrued or matured. Thus, the resolution of
the issue that you raise will require a determination of
the date upon which ad valorem tax liabilities accrue,
mature, or become fixed.

p. 4384
Honorable Carlos Valdez - Page 6 04-893)

The Tax Code was enacted in 1979. Under pre-code
case law, the validity of an ad valorem tax rested upon
levy and assessment. State v. Pioneer Oil & Refinina Co.,
sunra; Zalinski v. Hackett, 552 S.W.2d 933 (Tex. Civ. App. -_'
- Austin 1977, writ ref'd n.r.e.). In the absence of a
valid assessment, there was no liability for the tax
within article III, section . 55,. of the constitution.
State v. Pioneer Oil . Cleaa V.
State, 42 Tex. 605 (18:5); ~e~u~lic"%u~'C!omn v
Hiahland Park I.S.D. of Dallas County 57 S.W.2d 62?(Tez:
Civ. App. - El Paso 1933, writ ref:d). Article VIII,
section 15, and section 32.01 of the Tax Code provide that
"[t]he annual assessment made upon landed property shall
be a lien thereon." This lien does not exist until
assessment is made in accordance with law. State v.
Farmer, 59 S.W. 541 (Tex. 1900); Hoae v. Garcia, 296 S.W.
982 (Tex. Civ. App. - San Antonio 1927, writ ref'd); cf.
C. B. Carswell & Co. v. Habberzettle, 87 S.W. 911 (Tex.
Civ. App. - 1905, no writ) (lien attaches January 1,
although the amount of taxes is not determined until
sometime subsequent). Of course, once the tax liability
is established, the lien becomes effective as of January
1. State of Texas v. Moodv's Estat e, 156 F.2d 698 (5th
Cir. 1946). ?
The terms "levy" and '*assessment1 were sometimes used
interchangeably. See Kinnev v. Zimnleman, 36 Tex. 554,
582 (1872); Amaimo v. Carter, 212 S.W>2d 950, 955 (Tex.
Civ. App. - Beaumont 1948, writ ref'd n.r.e.). The term
"assess" was thought to include the function of
appraising. Attorney General Letter Advisory No. 117
(1976). But with the 1980 amendment to article VIII,
section 18, of the Texas Constitution, those activities
that comprise the function of "appraising" were, in
effect, carved out from the activities comprising the
functions of "assessing." W'sn
~1 o v. Galveston Countv
Central A aoraisal District, 713 S.W.Zd 98 (Tex. 1986);
Attorney General Opinions JM-833 (1987); JM-35 (1983).
Under pre-code case law, then, qtlevy" referred to the
legislative act that imposes a tax and fixes its rate.
Cleaa v. State, sunra at 610-611: Amaimo v. Carter, suora;
Sussex Countv v. Jarratt, 106 S.E. 384, 387 (Va. 1921).
An order of the commissioners court "that the following
tax rates be levied" was held to be a valid tax levy.
Victorv v. State, 158 S.W.Zd 760 (Tex. 1942); see Cranfill ?
Bros. Oil Co. v. State, 54 S.W.2d 813 (Tex. Civ. App. - El
Paso 1932, writ ref'd); Attorney General Opinion H-1235
(1978) . "Assessment" referred to the administrative
process of applying the tax rate to the appraised value of
an individual's property and thereby determining the

p. 4385
Honorable Carlos Valdez - Page 7 KIM-893)

amount of taxes that he owes. Cleaa V. State, sunra;
Sussex Countv v. Jarratt, sunra.

The taxpayer's liability was fixed when these two
requirements were met: the assessment had been made
and there had been a legal levy. Cracker v. Santo
Consolidated 1.S.D 116 S.W.2d 750 (Tex. Civ. App. -
Eastland 1938, writ dism'd); Attorney General Opinions
C-457 (1965); V-943 (1949) (taxes do not accrue until
there has been both an assessment and levy). Under the
Tax Code, the statutory authority to @*levy" and l'assess,t'
,in the context in which Attorney General MW-4 (1979)
employed the terms, is set forth now in chapter 26 of the
Tax Code. Accordingly, we conclude that a taxpayer's tax
liability is fixed when a taxing unit has performed those
requirements provided for in chapter 26 of the code.

In Bass v. Aransas Countv I.S.D., sunra, the ;;c~;
discussed now-repealed article 7345d, V.T.C.S.,
authorized the commissioners court to reconsider and
adjust current or delinquent assessments. It stated in
dicta that it "would be inclined to hold the act unconsti-
tutional insofar as it authorizes reopening and recon-
sideration of valid assessments" as violating article III,
sections 52 and 53, and article VIII, section 10, of the
Texas Constitution. See also Attorney General Opinions
v-1517 (1952): O-6257 (1944) (statute violates article
III, section 55, and article VIII, section 10): O-930
(1939). Analogously, we conclude that the legislature
constitutionally may provide tax exemptions from the 1987
tax yearts taxes if the amending legislation became
effective before ad valorem tax liabilities were fixed by
chapter 26 of the Tax Code. However, any such legislation
constitutionally may not apply the tax exemptions to tax
liabilities that have been fixed by chapter 26 of the Tax
Code prior to the effective date of the amending legisla-
tion, because the taxpayer would receive thereby a gift
of public funds and remission of taxes in violation of
article III, sections 51, 52, and 55, and article VIII,
section 10, of the Texas Constitution.

As we noted earlier,'the amendments to section 11.14
of the Tax Code do not indicate any intention on the part
of the legislature that the statute apply either in the
event that Senate Joint Resolution 12 is adopted or
retrospectively to January 1, 1987. Yet, in this instance
no indication of any such intention is necessary. The
effective date of the statutory amendments was May 26,
1987. By statute as of that date, all recreational boats
were exempt from ad valorem taxation, regardless of

p. 4386
Honorable Carlos Valdez - Page 8 (JM-893)

whether they were then listed on the appraisal rolls.
Because tax liability is fixed not when property is listed
on the appraisal rolls but when the assessment procedures
set out in chapter 26 of the Tax Code have been completed,
the legislation is effective in those taxing units in
which tax liability has not been fixed. Accordingly, we
conclude that the statutory amendments to section 11.14 of
the Tax Code, which provide for a so-called "local optionl'
exemption from ad valorem taxation for
non-income-producing recreational boats, applies to all
boats in a taxing unit that had not certified its tax
rolls as of the effective date of the enactment.

SUMMARY

The statutory amendments to section 11.14
of the Tax Code, which provide for a
so-called "local option" exemption from ad
valorem taxation for non-income-producing
boats, apply to all boats in a taxing unit
that had not certified its tax rolls as of
the effective date of the enactment.

JIM MATTOX
Attorney General of Texas

MARY KELLER
First Assistant Attorney General

MU MCCREARY
Executive Assistant Attorney General

JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General

RICK GILPIN
Chairman, Opinion Committee

Prepared by Jim Moellinger
Assistant Attorney General

p. 4387