Aransas County Appraisal Review Bd. v. Texas Gulf Shrimp Co.

• Decision Date: 27 February 1986
• Docket Number: No. 13-85-344-CV,13-85-344-CV
• Parties: ARANSAS COUNTY APPRAISAL REVIEW BOARD and Aransas County Appraisal District, et al., Appellants, v. TEXAS GULF SHRIMP CO., et al., Appellees.
• Court: Texas Court of Appeals

Page 186

707 S.W.2d 186

ARANSAS COUNTY APPRAISAL REVIEW BOARD and Aransas County Appraisal District, et al., Appellants, v. TEXAS GULF SHRIMP CO., et al., Appellees.

No. 13-85-344-CV.

Court of Appeals of Texas,

Corpus Christi.

Feb. 27, 1986.

Rehearing Denied March 20, 1986.

Russell R. Graham, Austin, for appellants.

Dwight Martin, Asst. Atty. Gen., Austin, Wilson Calhoun, Corpus Christi, for appellees.

James R. Raborn, Baker & Botts, Glen A. Rosenbaum, James D. Penny, Vinson & Elkins, Houston, amicus curiae.

Before NYE, C.J., and BENAVIDES and DORSEY, JJ.

OPINION

NYE, Chief Justice.

This is a declaratory judgment action arising under the Texas Property Tax Code. ¹ Suit was originally brought as a petition for review, pursuant to Chapter 42 of the Code, by appellees, the owners of ninety-five gulf shrimping trawlers (hereinafter referred to as Taxpayers), seeking judicial review of the action of appellants (Tax Assessors) in denying a special allocation of value of these vessels for the 1984 tax year. Tax Assessors cross-petitioned against taxpayers, the Attorney General of the State of Texas, and the State Property Tax Board, ² seeking a declaratory judgment that Sections 21.03 and 21.031 of the Code are unconstitutional. The trial court denied Tax Assessors' cross-petition and entered judgment in favor of taxpayers. Appeal is taken from that judgment, which we reverse and render.

In summary, Tax Assessors argue that the relevant statutes are either unconstitutional or inapplicable to taxpayers' shrimp trawlers. Appellants contend the trial court erred in entering judgment for taxpayers because the judgment is necessarily based on the trial court's conclusion of law that Sections 21.03 and 21.031 are constitutional.

Section 21.03(a) provides: "If personal property that is taxable by a taxing unit is used continually outside this state, whether regularly or irregularly, the appraisal office shall allocate to this state the portion of the total market value of the property that fairly reflects its use in this state."

Section 21.031(a) provides:

If a vessel or other watercraft that is taxable by a taxing unit is used continually outside this state, whether regularly or irregularly, the appraisal office shall allocate to this state the portion of the total market value of the vessel or watercraft that fairly reflects its use in this state. The appraisal office shall not allocate to this state the portion of the total market value of the vessel or watercraft that fairly reflects its use in another state or country, in international waters, or beyond the Gulfward boundary of this state. (Emphasis added).

Tax Assessors challenge these provisions under TEX. CONST. ANN., Art. VIII, Sections 1 and 2, which provide in pertinent part: "Section 1. Taxation shall be equal and uniform. All real property and tangible personal property in this State, whether owned by natural persons or corporations, other than municipal, shall be taxed in proportion to its value, which shall be ascertained as may be provided by law;" and "Section 2(a) ... and all laws exempting property from taxation other than the property mentioned in this Section shall be null and void." (Emphasis added.)

The Constitution does not expressly exempt property from taxation, but it does authorize the legislature to provide specific exemptions by statute within certain specific parameters. Dickison v. Woodmen of the World Life Insurance Society, 280 S.W.2d 315, 317 (Tex.Civ.App.--San Antonio 1955, writ ref'd). While the legislature may restrict an exemption authorized in the Constitution, it may not go beyond the constitutional parameters. Any attempt to do so is null and void. If the legislature declares a specific exemption that is not expressly authorized by the Constitution, the exemption statute is unconstitutional. City of Amarillo v. Love, 356 S.W.2d 325, 327 (Tex.Civ.App.--Amarillo 1962, writ ref'd n.r.e.); see also City of Witchita Falls v. Cooper, 170 S.W.2d 777, 780 (Tex.Civ.App.--Fort Worth 1943, writ ref'd). When construing constitutional authorizations or statutory provisions which grant tax exemptions, our courts must resolve any doubts against the exemption because tax exemptions are never favored. Davies v. Meyer, 528 S.W.2d 864, 867 (Tex.Civ.App.--Fort Worth 1975), aff'd, 541 S.W.2d 827, 829 (Tex.1976); City of Wichita Falls, 170 S.W.2d at 780.

The facts of this case are undisputed. The parties are in agreement that the vessels owned by taxpayers are operated within the boundary of this state 30% of the year and are operated outside Texas waters 70% of the year. The parties also agreed that: 1) these vessels are domiciled in Texas and have a taxable situs in Aransas County; and 2) none have acquired a taxable situs in another state or nation or have been exposed to taxation in another state or nation. ³

The dispute in this case centers on the legal interpretation of these statutes and the constitutional provisions set out above. Tax Assessors have distilled their constitutional argument into four points. First, the challenged statutes create a tax exemption which, in order to be valid, must be authorized by the Texas Constitution or imposed by some overriding requirement of federal law. Second, there is no authorization in the Texas Constitution which allows for this partial exemption merely because the property is used regularly or irregularly outside the Gulfward boundary of this state. Third, there is no overriding federal requirement which would prevent taxation of property domiciled in this state at 100% of its value in absence of a showing that the property has also acquired a taxable situs in another state or nation. Fourth, in the absence of any authorization in the Texas Constitution or any requirement of federal law, such a statute which provides for the taxation of property domiciled and having a taxable situs in this state at less than its full value is, as a matter of law, unconstitutional. ⁴ The real issue in this case is the constitutional limitations on the authority of the Texas Legislature to define the tax situs of these vessels.

The only guidance the Texas Constitution gives regarding tax situs is Article VIII, Section 11, which provides that property "shall be assessed for taxation and taxes paid in the county where situated." The phrase "where situated" is not defined in the Constitution, but has been interpreted to be in accordance with the common law principle mobilia sequuntur personam (movables follow the person), that tangible personal property is taxable at the owner's domicile unless it has acquired an actual situs elsewhere or a statute directs that it be taxed elsewhere. Great Southern Life Insurance Co. v. City of Austin, 112 Tex. 1, 243 S.W.2d 778, 780-82 (1922); see also State v. Crown Central Petroleum Corp., 242 S.W.2d 457, 461 (Tex.Civ.App.--San Antonio 1951, writ ref'd). The Texas Supreme Court has interpreted this constitutional provision to allow for reasonable legislative action in fixing the tax situs of property. Dallas v. Texas Prudential Insurance Co., 156 Tex. 36, 291 S.W.2d 693, 695 (1956); Great Southern Life Insurance Co., 243 S.W.2d at 784. But the Supreme Court has never allowed the legislature to give preferential treatment to certain personal property not specifically authorized by the Constitution. Taxpayers contend that the trawlers may not be taxed at the domicile of the owners because a statute directs otherwise. The statutes do not direct that the property be taxed elsewhere, but rather that a portion of the property not be taxed at all.

We have found no cases testing the power of the legislature to fix the tax situs of personal property outside of this state and not inside another taxing jurisdiction. The cases cited by taxpayers which interpret this situs provision of the Constitution involve the legislature's power to fix tax situs among different taxing authorities within this state.

Taxpayers respond that Sections 21.03 and 21.031 do not provide a tax exemption, but merely define tax situs in accordance with federal constitutional restrictions. They interpret federal law to allow a state (even a domiciliary state) to tax property only when it is physically present within the state. They argue further that the Texas Constitution merely requires property located in this state to be taxed. Taxpayers take the position that sections 21.03 and 21.031 simply define tax situs and do not grant an exemption. They claim these statutes "are no more than a legislative declaration that the tax situs of vessels ... used continually beyond the Gulfward boundary of this state is where such property is located at any given time." In other words, "each vessel is taxed at full value, without reduction or exemption, for the portion of the year the vessel is actually within the state." The effect of this argument would be that the tax situs of these vessels would not be within any taxing jurisdiction for 70% of the year, therefore, 70% of the value of these vessels would go untaxed.

Although there are no Texas cases directly on point, a recent decision by the Dallas Court of Appeals is analogous and instructive on this question. Dallas County Appraisal District v. L.D. Brinkman and Co. (Texas), 701 S.W.2d 20 (Tex.App.--Dallas, 1985, no writ) (not yet reported) concerned whether a percentage of property (inventory), brought from out of the state and stored in warehouses awaiting shipment to other out-of-state destinations within 175 days of its arrival, was subject to ad valorem taxation in Texas. The trial court entered judgment in favor of the taxpayers by excluding 30% of the value of this inventory from taxation pursuant to Section 11.01(c) and (d). These provisions define this state's jurisdiction to tax certain kinds of property presumed to be in interstate commerce. They provide that Texas has no jurisdiction to tax such property if it is only temporarily located in...