The Attorney General of Texas
August 1, 1979
Honorable Joe Resweber Opinion No. 11-12 2 0
Harris County Attorney
Harris County Courthouse Re: Constitutionality of Acts
Houston, Texas 77002 1977, 65th Leg., ch. 816, at 2065
(House Bill 1076) and constitu-
tionality of Acts 1977, 65th Leg.,
ch. 790, at 1975 (Senate Bill
1076) which relates to assessment
of property owned by nonprofit
associations for the use, benefit,
and enjoyment of their members.
Dear Mr. Resweber:
You have requested our opinion regarding the constitutionality of two
statutes enacted by the 65th Legislature.
The first of them, article 7150& V.T.C.S., relates to, the assessment of
property owned by nonprofit associations for the use and benefit of their
members. In the typical-situation, the owners of a residential subdivision or
condominium complex seek to attract buyers by providing within the
development common areas which offer various recreational activities. The
common areas are held in the name of a nonprofit tenants’ association, which
maintains the facilities and assesses membership fees.
Article 7150 r requires that all property held by such a tenants’
association
shall be assessed for tax purposes on the basis of a
nominal value with respect to ail property taxes levied
by the State of Texas or any political subdivision of
the State of Texas.
Section 2. The statute is based upon a recognition that
the valuation for tax purposes of the property . . .
nominally held by such associations or corporations is
actually reflected in the enhanced valuation of the
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property owned by the individual members thereof, and to
assess such nominally owned property on the basis of its fair
market value would result in double taxation of such
property. . . .
Section 1.
In Attorney General Opinion H-1098.(1977), we held that nnother tax relief
statute, House Bill 22, was in contravention of article 8, section 1 of the Texas
Constitution because it specifically required a method of valuing certain
agricultural property which did not reflect. market value. As we noted therein,
Texas courts have
[oln numerous occasions . , . specifically indicated that it is
settled that the Texas Constitution, unless amended by the
people to provide otherwise, requires appraisal on the basis
of market value.
Attorney General Opinion H-1098, and decisions cited therein. Article 7150 1
likewise applies to a standard other than market value, &., “nominal value.” In our
opinion, the Texas Constitution does not permit such a basis for evaluating
property.
Of course, the easement will diminish the value of the servient estate and
increase the value of the dominant estate. To the extent that the value of one
piece of property is reduced and the other is increased, the assessment is required
to reflect that fact. We do not believe, however, that then Legislature can mandate
that the value of the servient estate is necessarily nominal.
By contrast, article 7150n, V.T.C.S., does not substitute some lesser standard
for that of market value. It merely requires that the assessor “shail consider no
factor other than those relative to the value of the land, as restricted.” Section
3(b). (Emphasis added). This does not constitute a change in current means of
establishing market value.
The important change which is made by the statute is the establishment of a
new means of restricting land. Article 7150n discusses the valuation of land which
is subject to a deed restriction or to a “restriction instrument.” Deed restrictions
nre, of course, often utilized in the conveyance of land. The act, however,
establishes criteria for the “restriction instrument.” It can be filed only on land
which consists of at least five or more acres, and it must limit the use of the land
to recreational, park, or open space use. The restriction must apply for a term of
years, and it can be enforced in the same manner as a deed restriction by the
county attorney or by any person owning or having any interest in the restricted
property. The act encourages renewal of the restriction by levying a penalty if it
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expires or is violated. The practical effect of the penalty provision is that the
owner will pay the amount of taxes due on an assessment based on market value
without restrictions plus double the amount of taxes due on the market value as
restricted. This amount, i+, taxes on unrestricted market value plus double the
taxes on restricted market value, must be paid for the current year and for the
preceding five years. Furthermore, if the restriction is violated an additional
penalty is due for that year which is equal to the taxes due on the difference
between the market value without restrictions and the market value as restricted.
In our opinion, article 7150n provides a means of restricting the use of
property and adopts the constitutional standard for valuing the property which is
restricted. “Market value” remains the standard, but market value must be
ascertained in light of the relevant deed restrictions or restriction instruments. As
we interpret article 7150n, the tax assessor is not required to ignore all factors
relating to the land’s value for purposes other than recreational or open space use.
The assessor must consider the effect any deed restriction or restriction instrument
has on the value of the property. The permanence and enforceability of the
restriction are factors for the assessor to consider. Presumably the value of land
burdened with a restriction will always be less than comparable land which is not so
burdened; however, the difference in the restricted and unrestricted value will
depend .on the permanence and the enforceability of the restriction. By
interpreting article 7150n in this manner, we believe it meets the requirement that
land be valued according to its market value and is thus constitutional.
SUMMARY
Article 71501, V.T.C.S., which permits the assessment of
certain property on a nominal basis, violates article 8,
section 1 of the Texas Constitution. Article 7150n, V.T.C.S.,
which requires that property be assessed at market value but
that certain deed restrictions be considered, is constitu-
tional.
APPROVED:
DAVID M. KENDALL, First Assistant
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Opinion Committee
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