Honorable William P. Hobby Opinion No. H-1022
Lieutenant Governor of Texas
State Capitol
Austin, Texas
Honorable Bill Clayton
Speaker of the House Re: Valuation of property
State Capitol for ad valorem taxation
Austin, Texas purposes.
Dear Governor Hobby and Speaker Clayton:
You have asked our opinion on four questions relating to
ad valorem taxation and the distribution of funds for public
school purposes.
Your first question is:
Ray the' Legislature, in exercising its
duty under Articl.e 8, Section 1, of the
Texas Constitution, to provide by law how
value is to be ascertained for ad valorem
tax purposes, constitutionally provide that
land used to produce agricultural products
be valued for ad valorem tax purposes ac-
cording to some standard of value other
than market value, such as valuation on
the basis of use or capability to produce
agricultural products?
We initially note that the first question is directed
solely to article a, section 1 and does not involve article
9, section l-d which is discussed in your second question
and which involves valuation of certain agricultural land.
Article a, section 1 of the Texas Constitution provides in
part:
Taxation shall be equal and uniform. All
property in this State, whether owned by
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Honorable William P. Hobby
Honorable Bill Clayton - Page 2 (H-1022)
natural persons or corporations, other
than municipal, shall be taxed in propor-
tion to its value, which shall be ascer-
tained as may be provided by law.
On several occasions Texas courts have specifically in-
dicated that the term "value," as used in article 8, section
1, means market value. Lively v. Missouri, K. & T. Ry. of
Texas, 120 S.W. 852, 856 (Tex. 1909); Rowland v. City of Tyler,
5.2d 756, 760 (Tex. Comm'n App. 1928, jdgmt adoptea) Har-
lingen Independent School Dist. v. DunlaE, 146 S.W.2d 235, m
(Tex. Civ. App. -- San Antonio 1940, writ ref'd); Atlantic
Richfield Co. v. Warren Independent School Dist., 453 S.W..2d
190 19/ (Tex. Civ. App. -- Beaumont 1970 writ ref'd n.r.e.);
Diekrich v. Phipps, 438 S.W.2d 900, 902 (&ex. Civ. App. --
Houston [lst Dist) 1969, no writ). See Whelan v. State, 282
-
S.W.2d 378, 380 (Tex. 1955); State v. Whittenburq, 26 5 S.W.Zd
569, 572 (Tex. 1954). While it can be argued that the portion
of article a, section l,.which refers to a~scertainment of value
"as provided by law" permits the Legislature to establish a
standard of value for taxation purposes other than market value,
the courts have clearly ruled otherwise. See also Tex. Const.
art. 8, § 20. Accordingly, it is our opinion that article 8,
section 1 of the Constitution does not permit the Legislature
to provide for the taxation of property other than in propor-
tion to its market value.
Your second question is:
If the answer to question #l is negative,
could the Legislature constitutionally .pro-
vide for use of a standard of value other
than market value for taxation of agricul-
tural land if Article 8, section l(d), of the
Texas Constitution were repealed?
Article a, section l-d permits assessment of certain land
at its agricultural use value. While this technique is based
on market value principles, see King v. Real, ~466 S.W.Zd 1
(Tcx. Civ. App. -- San Antonliol971, writ ref'd n.r.e.); At-
torney General Opinion H-863 (1976). it will generally result
in a lower value than assessment at full market value.
If article 8, section l-d were repealed the standard of
value would be determined by the requirements of article 8,
section 1. In light of the judicial authority reviewed in
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Honorable William P. Robby
Honorable Bill Clayton - Page 3 (H-1022)
discussion of your first question, it is apparent that the
repeal of article a, section l-d, would leave the Legislature
without authority to value agricultural land other than in
proportion to its market value.
Your third question is:
May the Legislature, by statute, consti-
tutionally provide that single-family res-
idences be valued for tax purposes on the
basis of a percentage of market value?
We understand this question to involve the power of the
Legislature to provide for the assessment of residential prop-
erty at a different percentage of market value than other prop-
erty. As noted above, article 8, section 1 of the Texas Con-
stitution requires that taxation be equal and uniform. The
courts have found schemes to tax one class of property at a
percentage of its value and another class at a differentper-
centage to be unconstitutional. Among the plans the courts
have overturned include an omission of certain types of pro-
perty from the tax rolls, City of Arlington v. C%Inon, 251
S.W.2d 414, 416 (Tex. 1954); the assessment of railroad intan-
gible property at full market value while all other property
was assessed at 67 percent of value,