Texas AG Issues Opinions on ARB, Aircraft
Texas Attorney General John Cornyn issued two opinions that addressed questions dealing with the Property Tax Code. One opinion reviewed the eligibility for service on an appraisal review board (ARB), and the other concerned the taxation of certain business aircraft.ARB eligibility
In Opinion No. JC-0192, issued March 9, 2000, General Cornyn ruled that an individual who serves as legal counsel to an appraisal district was not eligible to be appointed to the ARB. The opinion held that ineligibility of an ARB member does not affect actions by the board during the member’s tenure.Business aircraft
Cornyn also held that Property Tax Code Section 6.412, as amended by the Texas Legislature, did not contain a "grandfather clause" and was applicable to all members of an ARB on the effective date of the amendment.
Section 6.412 addresses eligibility of a person to serve as an ARB member. House Bill (H. B.) 79, passed by the Texas Legislature in 1999 and effective June 18, 1999, amended Section 6.412 to provide that a person who had previously served at least three terms on the ARB may not be appointed. The bill also contained language that the change in law applied only to a member appointed on or after the effective date of H. B. 79. The opinion stated: "Accordingly, a member of an appraisal review board who, on June 18, 1999, had served all or part of three terms prior to the term he was then serving, became ineligible for continued service on the board."
In responding to questions from El Paso County Attorney Jose’ R. Rodriquez, Cornyn discussed in the opinion whether a paid legal advisor to the appraisal district or the ARB constituted "appearance before the board for compensation." Section 6.412(d)(3) provides that a person is disqualified for ARB service if the person has appeared before the ARB for compensation.
Cornyn found that a paid legal advisor was ineligible for appointment because of Section 6.413(a), not Section 6.412. Section 6.413(a) provides that a person may not serve if the person or a business entity in which the person has a substantial interest is a party to a contract with the appraisal district or a taxing unit in the district. In the capacity as attorney to the appraisal district, the legal advisor is a party to "some kind of contract" with the appraisal district.
On the effect of an ineligible member’s actions taken on the ARB, the opinion held that an ineligible individual is a de facto officer. It stated that "the acts of neither the individual board member nor the board as a whole are subject to collateral attack on the ground that the particular member was ineligible for continued service." The opinion concluded that a member’s ineligibility did not affect actions taken by the ARB during the member’s tenure.
On Feb. 8, 2000, General Cornyn in Opinion No. JC-0180 addressed new Property Tax Code Section 21.055. In 1999, the Texas Legislature added Section 21.055 concerning the taxation of business aircraft to the Property Tax Code, effective June 18, 1999. The opinion held that the new section applied to the taxation of business aircraft for the 1999 tax year, but not for tax years 1995 through 1998.State Senator J. E. "Buster" Brown, Chair of the Natural Resources Committee, asked whether the recently enacted Section 21.055 applied to tax years 1995 through 1999.
Brown also asked whether a taxpayer may file a motion to change the appraisal roll under Section 25.25(c)(3) of the Code for tax years 1995 through 1998.
Section 21.055 provides that a taxing unit may not tax that portion of the fair market value of a business aircraft attributable to it use outside the state of Texas. The section establishes a formula for determining the portion of value taxable to Texas. A business aircraft "is an aircraft, like a corporate jet, that is used for business purposes by the owner, ... but, unlike a commercial aircraft, is not used to transport cargo, passengers, or equipment for others for consideration." Section 21.05 of the Code addresses the allocation of value for commercial aircraft.
Section 25.25(c)(3) provides for correcting the appraisal roll in a prior year for "the inclusion of property that does not exist in the form or at the location described in the appraisal roll."
The opinion reviewed the state’s jurisdiction to tax, taxable situs, allocation statutes and federal limitations on taxing property used in interstate commerce.
Cornyn concluded that Section 21.055 did not apply to prior tax years. The opinion also noted that the United States Constitution did not require the retroactive application of Section 21.055.
For tax year 1999, the opinion stated: "If an appraisal office fails to allocate the value of qualifying business aircraft for tax year 1999 according to section 21.055, the taxpayer may petition the appraisal review board to correct the appraisal roll under section 25.25(c)(3) of the Tax Code, as construed by the court in Himont U.S.A. v. Harris County Appraisal District ... " It further found that "Himont does not support the contention that section 25.25(c)(3) permits changes based on a subsequently effective statute."
The Himont case dealt with a taxpayer filing a petition under Section 25.25(c)(3) because the appraisal district had not allocated the value of railway cars used in interstate commerce. The court in the Himont case ruled that the portion of the railway cars used in other states did not exist at the location described in the appraisal roll and ordered the appraisal district to correct the appraisal roll to show the allocated value.
Cornyn ended his opinion with the sentence: "Of course Himont would support a section 25.25(c)(3) petition to change an appraisal roll in a prior tax year based on an appraisal office’s failure to allocate the value of a business aircraft under section 21.03."