Odyssey 2020 Acad., Inc. v. Galveston Cent. Appraisal Dist.

• Decision Date: 11 June 2021
• Docket Number: No. 19-0962,19-0962
• Citation: 624 S.W.3d 535
• Court: Texas Supreme Court
• Parties: ODYSSEY 2020 ACADEMY, INC., Petitioner, v. GALVESTON CENTRAL APPRAISAL DISTRICT, Respondent

624 S.W.3d 535

ODYSSEY 2020 ACADEMY, INC., Petitioner,

v.GALVESTON CENTRAL APPRAISAL DISTRICT, Respondent

No. 19-0962

Supreme Court of Texas.

Argued February 23, 2021

Opinion delivered: June 11, 2021

Lee A. Mencacci, Anthony P. Brown, Galveston, for Respondent.

John Joyce III, Harolyn Denise Nance Pierce, Joseph E. Hoffer, Robert Allen Schulman, San Antonio, for Petitioner.

Elizabeth G. Bloch, Dale Wainwright, Austin, for Amicus Curiae Texas Charter Schools Association.

Kathryn E. Boatman, Leah Nommensen, Houston, Paige Dusthimer, Thomas Anderson Sage, Houston, for Amicus Curiae Charter School Solutions d/b/a Harmony Education Foundation and Harmony Public Schools.

Justice Busby delivered the opinion of the Court, in which Justice Lehrmann, Justice Boyd, Justice Devine, Justice Blacklock, and Justice Bland joined.

This tax-exemption case concerns privately owned real property in Galveston County. Petitioner Odyssey 2020 Academy subleases the property and uses it to operate a public open-enrollment charter school. Odyssey contractually agreed to pay the property owners’ ad valorem taxes, and it requested that the Galveston Central Appraisal District exempt the property from taxation under section 11.11(a) of the Tax Code as "property owned by this state." Odyssey relies on section 12.128(a) of the Education Code, which provides that property a charter school purchases or leases with state funds "is considered to be public property for all purposes under state law."

The District denied Odyssey's exemption request and Odyssey sought review in district court, which granted summary judgment for the District. The court of appeals affirmed, reasoning that Odyssey has only a leasehold interest and section 12.128 does not in fact give Odyssey either legal or equitable title to the property.

We agree with the District, trial court, and court of appeals: Odyssey is not entitled to an exemption from the ad valorem tax. Property encumbered by a lease is taxed to the lessor who owns the underlying fee interest, and not even Odyssey contends that section 12.128 actually strips the private lessors of their fee ownership. We assume that section 12.128 "consider[s]" property to be publicly owned for tax purposes if a charter school has a leasehold interest in it. But our Constitution does not allow the Legislature to recharacterize a property interest that is not in fact publicly owned so that it qualifies for an exemption.

The Texas Constitution sets detailed limits on the Legislature's authority to create exemptions because they undermine the guarantee that "[t]axation shall be equal and uniform,"¹ imposing a greater burden on some taxpayers rather than sharing the burden among all taxpayers equally. We have long enforced these constitutional limits, and our precedent is clear that the Legislature may not treat the public as the owner of a fee estate it does not actually own. See Tex. Tpk. Co. v. Dallas County , 153 Tex. 474, 271 S.W.2d 400, 402 (1954) ("Public ownership, for tax-exemption purposes, must grow out of the facts ... [and] may not be created or conferred by mere legislative, or even contractual, declaration."). To hold that the Legislature can alter the facts by statute in order to trigger an exemption, we would have to overrule many of our decisions. Moreover, we would eliminate the constraining force of the carefully drawn constitutional limits on exemptions—limits that the Constitution ranks as important enough to provide expressly that laws exceeding them are null and void.

If the people of Texas want to exempt any property owner who leases to a charter school and take that additional tax burden on themselves, they can do so by amending the Constitution. And such an exemption may very well be good policy. But so far, the people have seen fit to permit an exemption for real property leased to a school only if that property "is owned by a church or by a strictly religious society." TEX. CONST. art. VIII, § 2. It is not our place to override their policy judgment. See Tex. So. Univ. v. Villarreal , 620 S.W.3d 899, –––– (Tex. 2021). We therefore hold that the Constitution does not permit an exemption for Odyssey on these facts.

BACKGROUND

The State of Texas has authorized Odyssey to operate public open-enrollment charter schools and provide public education to children in Galveston County and surrounding areas. Some Odyssey schools are located on property that Odyssey owns, and the District has designated that property as exempt from ad valorem taxation. Part of Odyssey's main campus is located on property it does not own but uses under a long-term sublease from private owners. This dispute concerns whether the property subleased by Odyssey is exempt from taxation.

The owners of the property are Aneff, LLC and Alisan, LLC, Delaware Limited Liability Companies based in Boca Raton, Florida. Safeway Stores, Inc. leased the property from the LLCs beginning in 1976. Safeway subsequently assigned its tenancy under the lease to HEB Grocery Company, L.P.

HEB subleased the property to Odyssey in 2009. Under the sublease, Odyssey agreed to pay HEB monthly rent. Odyssey also agreed to pay ad valorem taxes assessed against the property. Odyssey has no right to purchase any of the leased premises.

In December 2016, Odyssey requested that the District exempt the property from ad valorem taxes as "property owned by this state" under section 11.11 of the Tax Code, pointing out that section 12.128(a) of the Education Code considers property purchased or leased by a charter school to be "public property for all purposes." Odyssey sought the exemption for the 2009 tax year and all subsequent years. The District denied Odyssey's exemption request, and Odyssey exhausted its administrative remedies by protesting the denial to the appraisal review board. The board denied the protest, and Odyssey sued in district court in Galveston County. In its petition, Odyssey sought review of the denial under Chapter 42 of the Tax Code and also requested a declaratory judgment and injunctive relief establishing its entitlement to an exemption, as well as attorneys’ fees. Both the District and Odyssey moved for summary judgment.

The trial court granted summary judgment for the District, ordering that Odyssey take nothing. Odyssey appealed and the Fourteenth Court of Appeals affirmed, concluding that the property is not publicly owned as required for a section 11.11 exemption. 585 S.W.3d 530, 534–35 (Tex. App.—Houston [14th Dist.] 2019). The court reasoned that section 12.128 of the Education Code does not provide a tax exemption, nor does it "purport to confer legal or equitable title in leased property to a charter school that leases the property from a private entity...." Id. at 536. It also held that Odyssey's claim for declaratory relief was properly dismissed as redundant. Id. We granted Odyssey's petition for review.

ANALYSIS

I. Standard of review and applicable law

We review the trial court's summary judgment de novo. Provident Life & Accident Ins. Co. v. Knott , 128 S.W.3d 211, 215 (Tex. 2003). On cross-motions for summary judgment, each party bears the burden of establishing that it is entitled to judgment as a matter of law. City of Garland v. Dall. Morning News , 22 S.W.3d 351, 356 (Tex. 2000). When the trial court grants one motion and denies the other, the reviewing court must determine all questions presented and render the judgment that the trial court should have rendered. Id.

This case also involves the interpretation of constitutional and statutory language, which we review de novo "to ascertain and give effect to the Legislature's intent." Entergy Gulf States, Inc. v. Summers , 282 S.W.3d 433, 437 (Tex. 2009). We look for that intent first and foremost in the plain language of the constitutional or statutory provision. Lippincott v. Whisenhunt , 462 S.W.3d 507, 509 (Tex. 2015). We give effect to all words of a provision and avoid constructions that would render any part of it meaningless. Spradlin v. Jim Walter Homes, Inc. , 34 S.W.3d 578, 580 (Tex. 2000).

These summary judgment motions require us to decide whether Odyssey is entitled to claim a tax exemption. A foundational principle of our Texas tax system is that "[t]axation shall be equal and uniform." TEX. CONST. art. VIII, § 1 (a). Applying this principle, the Constitution provides that real and tangible personal property "shall be taxed in proportion to its value"—so-called ad valorem taxation—"unless exempt as required or permitted by this Constitution." Id. § 1(b). The Constitution requires certain exemptions and specifies additional exemptions that it permits the Legislature to adopt by statute. See, e.g., id. § 1 (d). But the Constitution also provides that "all laws exempting [other] property from taxation ... shall be null and void." Id. § 2(a).

The Tax Code's chapter on taxable property begins by reiterating the constitutional command that "[a]ll real and tangible personal property that this state has jurisdiction to tax is taxable unless exempt by law." TEX. TAX CODE § 11.01(a). "Statutory exemptions from taxation are subject to strict construction because they undermine equality and uniformity by placing a greater burden on some taxpaying businesses and individuals rather than placing the burden on all taxpayers equally." N. Alamo Water Supply Corp. v. Willacy Cnty. Appraisal Dist. , 804 S.W.2d 894, 899 (Tex. 1991).² Thus, we have held that "an exemption cannot be raised by implication, but must affirmatively appear." Tex. Student Housing Auth. v. Brazos Cnty. Appraisal Dist. , 460 S.W.3d 137, 141 (Tex. 2015) (quoting Bullock v. Nat'l Bancshares Corp. , 584 S.W.2d 268, 271 (Tex. 1979) ). The taxpayer has the burden to "clearly show" that an exemption applies, and all doubts are resolved against the granting of an exemption. Id. But construing exemptions narrowly does not mean disregarding the words used by the Legislature. See AHF–Arbors at Huntsville I, LLC v. Walker Cnty....