THEA'ITORNEY GENERAL
OF TEXAS
.,.
Deoember 2, 1960
Honorable Joe Resweber Opinion No. WW-970
County Attorney
Harris County Re: Is the royalty int,erest
Houston, Texas of a ohuroh exemp$ from
ad valorem taxation ‘where
such interest is In a
pooling utit of which ‘i..‘.
the church site is a
Dear Mr. ,Reeweber: pa&t?
Your letter requesting our opinion upon the referenced
question sets.out the following facts:
“(The First Methodist Church of Tomball)
owns six small lots located in the Tomball 011
Addition, composing an area of 250 feet by 140
feet; that the Church and Sunday School
buildings occupy:,;most of the surface; that many
years ago the Humble 011 and Refining Company
pooled some sixty to seventy of these oil
lots, Including those owned by the Church.
The Company brought in a well on the pooled
unit, but not on the Church property. The
Church receivea approxlmately,,.elghteen ($18?00)
f;E;:;, royalty per annum as its pro-rata
Your question is phrased as follows:
"Are royalty paymenta from an oil and gas
lease on lots owned by the First Methodist
Church of Tomball, Texas, which are used solely
for Church and Sunday School purposes, exempt
from ad valorem taxes?”
tie are uncertain whether you wish to determine the
taxable status of the actual royalty interest OS the Church,
or of the actual payments received by it. We therefore answer
yoMr que8tlon as follows:
(a) The royalty Interest of the Church In the
minerals In place is exempt from ad valorem
taxation.
Honorable Joe Resweber, Page 2 (Opinion No. WW-970)
(b) The royalty payments themselves are subject
to ad valorem taxation IS the money, so
received was owned by the Church on
January 1 of the taxable year.
Under the authority granted to the Legislature by
Article 8, Sec. 2 of the Constitution of Texas, certain
classes of property were provided exemptions Srom taxation
by Article 7150, R.C.S. Section 1 of this Article exempts
certain shcool and church property and reads in part as
sollows:
“The Sollowlng property shall be exempt from
taxation, to-wltr
“1. .actual places of religious worship,
also any’property owned by a church or by a
strictly religious sooiety;the books and
furniture therein and the grounds attached to
such buildings necessary for the properocou-
panoy, use and enjoyment of the same, and which
yields no revenue whatever to suoh church or
religious society ;. 0 . 11(Emphasis added)
Attorney Qeneralts Opinion No. V-1568 (1952) held
that a retained royalty interest In land comprising the campus
of Jarvls Christian College was exempt from ad valorem taxation
under that portion of Article 7150, Sec. 1, which deals with
exemptions to educational Institutions and-which reads in part
as follows:
IID e .A11 public colleges, public academies,
and all endowment funds of institutions of learning
and religion not used with a view to profit, and
when the same are invested in bonds or mortgages,
and all such buildings used exclusively and owned
by persons or associations of persons for school
purposes; . q .‘I
Opinion No. v-1568 correctly concludes that (a) the
surface of the producing property there in question was owned
by persons or an association of ‘persons (b) “exclusively for
school purposes” and (c) “not used with a view to profit .‘I
(This final quallflcatlon has been determined to require that
the orooerts-not be used with a view to private gain or profit.
Harris v. City of Fort Worth, 142 Tex. 6bO. 180 S.W.2d. 131
?1944) 1. The theorv of ‘the-opinion was that the lease under
k&h production was-obtained was actually a conveyance of a
determinable See in seven-eighths of the minerals In place, but
did not constitute a severance of the remaining one-eighth
Honorable Joe Resweber, Page 3 (Opinion No. WW-970)
from the surface of the estate. Since the lessor continued
his ownership in both the surface and one-eighth of the
minerals, the quoted exemption extended to the retained one-
eighth royalty Interest.
‘Although that opinion dealt with the exemption
provided educational lnstltutlbns under Article 7150, last
quoted above, which is separate and distinct from that provided
for churches, the rule Is equally applicable to the present
situation. The royalty Interest itself, being an Interest in
the minerals In place, is a part of the realty and hence not
taxable. A sale of a part of these minerals would simply be
a sale of a portion of the church’s realty and hence would not
constdtute “revenue” from the property within the meaning of
Article 7150. Such payments would be taxable just as any other
personal propety, if possessed by the church on January ist of
the taxable year.
SUMMARY
The royalty Interest retained by a Church In
a pooling unit of which the church site is a
part is exempt from ad valorem taxation. Actual
payments received by the Church as consideration
for minerals produced from this interest are
taxable, if the money so received was owned by
the Churqh on January 1 of the taxable year.
Yours very truly,
WILL WILSON
Attorney General of Texas
JRI:,jp
APPROVED:
:
OPINION COMMITTE
W. V. Geppert, Chairman
W. ‘Ray Scruggs
Harris To1e.r.
Linward, Shiv&s :
B. H. Timmins, Jr.
REVIEWED P&HTHE ATTORNRY
GENERAL
By:, Leonard Passmore