After the Texas Veterans' Land Board forfeits a veteran's land-sale contract, do property taxes and earlier tax penalties keep accruing?

Veterans' Land Board property became tax-exempt after forfeiture, but earlier penalties continued

Plain-English summary

The Veterans' Land Board received current and delinquent property-tax bills for land that it had sold to qualifying veterans and later repossessed after the veterans defaulted. The General Land Office asked whether new taxes accrued after forfeiture and whether penalties and interest on earlier taxes continued.

The Attorney General concluded that no new ad valorem taxes accrued once forfeiture was complete and both equitable and legal title returned to the Board. Article III, section 49-b of the Texas Constitution declared land in the Veterans' Land Fund held for a governmental purpose. The Board provided financing to qualifying veterans rather than private residential housing for compensation, so the opinion found that Tax Code section 11.11(d) did not make the repossessed land taxable.

The veteran-purchaser held equitable title and possession while the sale contract remained in force, so taxes imposed during that period were valid. Forfeiture did not erase those preexisting liabilities. Penalties and interest continued to accrue on unpaid delinquent taxes after title returned to the state.

The opinion relied on Jones v. Williams for the conclusion that statutory interest and penalties on delinquent taxes were penalties rather than taxes or ordinary commercial interest. The Legislature could waive those penalties by general law, but the opinion found no statute granting a waiver for Veterans' Land Board forfeitures. Tax Code section 33.011 addressed only failures caused by an act or omission of the taxing unit.

The tax lien remained in force but could not be enforced against the state while the Board held title. It could be enforced against a later private purchaser, and the veteran against whom the taxes were imposed remained personally liable.

Currency note

This opinion was issued in 1989. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

What the opinion said for affected groups in 1989

Veterans' Land Board

After a completed forfeiture returned full title to the Board, the property belonged to the state and no new ad valorem taxes could be imposed while the state retained title. Existing liens were suspended as against the state rather than extinguished.

Veteran-purchasers

A veteran remained taxable while holding equitable title under the purchase contract. Default and forfeiture did not eliminate personal liability for taxes imposed during that ownership period or stop related penalties and interest from accruing.

Taxing units and appraisal districts

Taxing units could not levy new property taxes for the period after full title reverted to the Board. Their liens for earlier delinquent taxes remained in force and could reach a later purchaser after the property left state ownership.

Later purchasers

A subsequent purchaser could take property still burdened by the earlier tax lien. The opinion found no general-law waiver removing the lien or the accrued penalties and interest in this setting.

Common questions

When did the property become exempt from new taxes?

After the forfeiture was completed and both equitable and legal title vested in the Veterans' Land Board. Before that point, the veteran-purchaser's equitable ownership remained taxable.

Did Tax Code section 11.11(d) treat the Board as a compensated housing provider?

No. The opinion said the Board supplied purchase financing to qualifying veterans rather than residential housing for compensation.

Did forfeiture cancel delinquent taxes already imposed on the veteran?

No. Those taxes had been validly levied while the veteran held equitable title. The veteran remained personally liable, and the associated lien remained in force.

Why did penalties and interest continue after the land became tax-exempt?

The Texas Supreme Court had treated those exactions as penalties for delinquency, not as new property taxes. The exemption stopped new taxation of state-owned land but did not itself waive penalties tied to earlier delinquent taxes.

Could the tax lien be foreclosed while the state held title?

No. The opinion said the lien was unenforceable against the state during state ownership, but enforceable against a subsequent purchaser.

Could the Legislature waive the penalties and interest?

Yes, by general law. The opinion concluded that the Legislature had not enacted a waiver covering this situation.

Background and legal framework

The Veterans' Land Board used public funds to buy land selected by eligible veterans and resold it under contracts for deed. The veteran received possession and equitable title, while the state retained legal title until the purchase price, interest, and fees were paid. Natural Resources Code sections 161.311 through 161.324 authorized forfeiture and repossession after default.

Article VIII, sections 1 and 2 of the Texas Constitution governed taxation and public-property exemptions. Tax Code section 11.11 implemented the exemption for state-owned property used for public purposes. Article III, section 49-b specifically declared Veterans' Land Fund property held for a governmental purpose and made individual purchasers taxable while they held their purchase interests.

Maverick County Water Control & Improvement District No. 1 v. State addressed the same program. It held that property repossessed by the Board after a veteran's default was not subject to taxes or special assessments levied after the veteran's rights ended. JM-1085 concluded that later statutes and cases had not displaced that result.

The opinion distinguished taxes from penalties and interest. Article VIII, section 15 addressed liens for delinquent taxes and penalties, while Tax Code section 32.01 created a statutory lien. Jones v. Williams held that delinquency additions were penalties that the Legislature could remit by general law before final judgment. Because no applicable waiver had been enacted, the additions continued.

Key citations

• Tex. Const. art. III, § 49-b
• Tex. Const. art. VIII, §§ 1, 2, 10, and 15
• Tax Code §§ 11.11, 32.01, 33.01, and 33.011
• Natural Resources Code §§ 161.001 et seq. and 161.311-161.324
• Maverick County Water Control & Improvement Dist. No. 1 v. State, 456 S.W.2d 204 (Tex. Civ. App. - San Antonio 1970, writ ref'd)
• City of Beaumont v. Fertitta, 415 S.W.2d 902 (Tex. 1967)
• Satterlee v. Gulf Coast Waste Disposal Authority, 576 S.W.2d 773 (Tex. 1978)
• Jones v. Williams, 45 S.W.2d 130 (Tex. 1931)
• State v. City of San Antonio, 209 S.W.2d 756 (Tex. 1948)
• Childress County v. State, 92 S.W.2d 1011 (Tex. 1936)
• Lubbock Indep. School Dist. v. Owens, 217 S.W.2d 186 (Tex. Civ. App. - Amarillo 1948, writ ref'd)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/jim-mattox/jm-1085
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1989/jm1085.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Obvious character-level OCR errors have been corrected where verified against the scan and the embedded text; minor errors may remain. The linked PDF is authoritative.

THE ATTORNEY GENERAL
OF TEXAS

August 9, 1989
JIM MATTOX

ATTORNEY GENERAL

Honorable Garry Mauro Opinion No. JM-1085
Commissioner
General Land Office Re: Whether taxes accrue

Stephen F. Austin Building against real property held in

1700 North Congress Avenue the Veterans’ Land Fund after

Austin, Texas 78701 forfeiture in a contract of
sale by the Veterans’ Land
Board (RQ-1697)

Dear Mr. Mauro:

You inform us that the Veterans’ Land Board . recently
received tax bills from taxing units for current and
delinquent ad valorem taxes levied on real property that had
been conveyed by contract of sale to qualifying veterans but
reverted to the board after forfeiture of such contracts.
Consequently, you ask two questions regarding the taxation
of real property comprising the Veterans’ Land Fund:

1. Do taxes accrue against real property
   held in the Veterans Land Fund after
   forfeiture of a contract of sale by the
   Veterans Land Board?

2. Do penalties and interest on pre-
   existing tax liabilities continue to accrue
   against the real property after forfeiture
   reverts full title to the property in the
   State of Texas?

We answer your first question in the negative. Taxes
may not be imposed against real property held in the
Veterans’ Land Fund after there has been a forfeiture of a
contract of sale and equitable and legal title to the
property has reverted to the possession and control of the
board. We answer your second question in the affirmative.
Penalties and interest continue to accrue on preexisting tax
liabilities against real property after forfeiture vests
full title to the property in the state. We also note,
however, that while the tax lien created by the previous

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Honorable Garry Mauro - Page 2. (JM-1085)

owner’s failure to properly tender his taxes remains in
force during that period when the title to the real property
reverts to the Veterans’ Land Board, such a lien is
unenforceable against the state. Such a lien would be
enforceable against any subsequent purchaser, and the
veteran-purchaser against whom the taxes were originally
imposed, of course, remains personally liable.

The Veterans’ Land Board [hereinafter the board] was
created by amendment to the Texas Constitution in 1946 in
order to make low-interest loans available to eligible
veterans who served in the armed forces of the United States
during specified periods. Tex. Const. art. III, § 49-b,
interp. commentary (Vernon 1984): see generally Nat. Res.
Code § 161.001 et seq. The Veterans’ Land Board, using
public funds, purchases a particular plot of land at the
request of an eligible veteran. The land then is resold by
the state to the veteran under a contract for a deed. The
contract delivers equitable title and possession to the
veteran; the state, through the board, retains legal title
until the full purchase price, interest, and fees have been
paid. See Venable v. Patti, 490 S.W.2d 194 (Tex. Civ. App.

• Texarkana 1973, writ ref’d n.r.e.); City of Garland v.
  Wentzel, 294 S.W.2d 145 (Tex. Civ. App. - Dallas 1956, writ

ref’d n.r.e.)?} see also Attorney General Opinion JM-774
(1987).

If a purchaser defaults on a contract, then the board
may declare a forfeiture and take possession of the
property. Nat. Res. Code §§ 161.311-161.324. Once for-
feiture proceedings have been completed, both equitable and
legal title are vested in the Veterans’ Land Board, and the
property belongs to the state. See Maverick County Water
Control & Improvement Dist. No. 1 v. State, 456 S.W.2d 204
(Tex. Civ. App. - San Antonio 1970, writ ref’d).

Article VIII, section 1, of the Texas Constitution
provides in relevant part: "All real property and tangible

personal property in this State... shall be taxed in
proportion to its value, which shall be ascertained as may
be provided by law." Article VIII, section 2, provides in

relevant part that "(t]he legislature may, by general laws,
exempt from taxation public property used for public

p. 5665

Honorable Garry Mauro - Page 3 (JM-1085)

purposes. "1 Pursuant to article VIII, section 2, the
legislature enacted section 11.11 of the Tax Code, governing
the taxation of public property, which provides in pertinent
part:

(a) Except as provided by Subsections (b)
and (c) of this section, property owned by
this state or a political subdivision of this
state is exempt from taxation if the property
is used for public purposes.

(d) Property owned by the state that is
not used for public purposes is taxable.
Property owned by a state agency or insti-
tution is not used for public purposes if the
property is... used to provide private
residential housing for compensation to
members of the public other than students and
employees of the state agency or institution
owning the property, unless the residential
use is secondary to its use by an educational
institution primarily for institutional
purposes. Any notice required by Section
25.19 of this code shall be sent to the
agency or institution that owns the property,
and it shall appear in behalf of the state in
any protest or appeal related to taxation of
the property. (Emphasis added.)

It is suggested that the real property that comprises
the Veterans’ Land Fund is taxable under subsection (d)
because such property appears to be "used to provide private
residential housing for compensation to members of the

1. Article XI, section 9, of the Texas Constitution
   by its terms exempts "property of counties, cities and

towns, owned and held only for public purposes, ... and
all other property devoted exclusively to the use and
benefit of the public... from taxation... ." This
section is self-executing. Because the last clause has

never been construed to apply to property owned by the
state, we need not discuss the cases involving counties and
cities that rely upon this provision.

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Honorable Garry Mauro - Page 4 (JM-1085)

public other than students and employees of the state agency
or institution owning the property." It is also suggested
that such property is not used for a public purpose, that
the board stands in no different legal position from that
ef any other mortgage company that is required to pay ad
valorem taxes on any real property on which its mortgagors
default, and that real property comprising the fund falls
squarely within subsection (d) of section 11.11 of the Tax
Code,

The quoted language of subsection (d) of section 11.11
of the Tax Code does not require the taxation of real
property comprising the Veterans’ Land Fund when legal title
to such real property rests with the state. The Veterans’
Land Board does not provide "residential housing for com-
pensation to members of the public... ." Rather, it
provides the financing needed to purchase private residen-
tial housing, and it offers it only to qualifying veterans
of the United States’ armed forces.

In addition, the legislative history of subsection
11.11(a) does not indicate that the legislature intended to
deviate from the long-accepted practice of exempting from ad
valorem taxation the real property comprising the Veterans’

2. A brief submitted to us argues that the fact that
   only qualifying veterans may participate in the land program
   necessarily means that the program is not for a public
   purpose under article VIII of the Texas Constitution. | We
   disagree. The test for determining whether public property
   is tax exempt is whether it is used primarily for the
   health, comfort, and welfare of the public. It is not
   essential that it be used for governmental purposes; it is
   sufficient that it be used for "proprietary" purposes.
   A. & M. Consol. Indep. School Dist. v. City of Bryan, 184
   S.W.2d 914 (Tex. 1945). It is immaterial whether only
   residents of a taxing unit are benefitted or whether others
   benefit as well; the fact that property is owned by the
   public and is used primarily for the health, comfort, and
   welfare of the public of some portion of the state is
   sufficient to entitle such property to tax-exempt status.
   State v. Houston Lighting & Power Co., 609 S.W.2d 263 (Tex.
   Civ. App. - Corpus Christi 1980, writ ref’d n.r.e.);
   see also Attorney General Opinions JM-405 (1985); MW-430
   (1982); MW-391 (1981).

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Honorable Garry Mauro - Page 5 (JM-1085)

Land Fund. See Hearings on Tex. H.B. 30 before the Senate
Finance Committee, 67th Leg. 22-31 (August 5, 1981) (trans-
cript available from Senate Staff Services). It appears
that the legislature intended that property owned by a
political subdivision but not used for the public purpose
for which it was originally acquired should not be tax
exempt. The real property at issue here, however, is being
used for the purpose for which it was acquired originally,
namely the creation of a "land fund" to facilitate the
purchase of real property by veterans through the granting
of low-interest loans. Article III of the Texas Constitu-
tion was amended by the addition of section 49-b to permit
the legislature to do what the constitution otherwise would
prevent it from doing, namely the "giving or lending, of the
credit of the State in aid of, or to any person..." or
the granting of "public moneys to any individual." See Tex.
Const. art. III, §§ 50, 51. The very establishment of such
a fund in the Texas Constitution impresses upon it the
nature of a public purpose.

Moreover, the Texas Constitution exempts real property
comprising the Veterans’ Land Fund from ad valorem taxation
after the purchaser of such property has defaulted on his
payments and full title to the property reverts to the
control of the state. Section 49-b of article III of the
Texas Constitution provides in relevant part:

Such lands heretofore or hereafter purchased
and comprising a part of said Fund are hereby
declared to be held for a governmental pur-
pose, although the individual purchasers
thereof shall be subject to taxation to the
same extent and in the same manner as are
purchasers of lands dedicated to the
Permanent Free Public School Fund.

We recently declared in Attorney General Opinion
JM-1049 (1989) that the interest in real property comprising
the permanent school fund that is retained by the state when
it leases such real property to private businesses is exempt
from ad valorem taxation, but the leasehold estates conveyed
to the private businesses are themselves taxable. The
reasoning that we employed in Attorney General Opinion
JM-1049, regarding the proper construction of both the Texas
Constitution and the relevant Tax Code provisions, is
equally applicable here. By its terms, section 49-b of
article III likewise would exempt from ad valorem taxation
real property comprising the Veterans’ Land Fund.

p. 5668

Honorable Garry Mauro - Page 6 (JM-1085)

Finally, case law in this area of law compels us to
answer your first question in the negative. On the basis of
Maverick County Water Control & Improvement Dist. No. 1 v.
State, supra, we conclude that real property comprising the
Veterans’ Land Fund, equitable title to which has reverted
back to the state after the default of the purchaser, is not
subject to taxation while it is in the hands of the state.

In Maverick County, the Veterans’ Land Board sought a
declaration that certain real property owned by the board
was free of all claims for taxes or other charges made,
levied, or assessed by a water control and improvement
district, an independent school district, and a county. A
veteran had purchased real property comprising part of the
Veterans’ Land Fund in 1956; he failed to make the required
payments and the board declared his rights under the
contract forfeited in 1962. After the forfeiture, the board
held full legal and equitable title to the property. The
trial court declared that the land was free of all taxes and
other charges levied by the taxing units after the rights of
the veteran under the contract of sale were terminated,
i.e., after the veteran had defaulted and the state reac~
quired both the equitable and legal title to the property.
The court of appeals agreed. It held that where real
property had been purchased by the board and sold to an
eligible veteran but subsequently repossessed, the real
property, thereafter, was subject neither to ad valorem
taxation nor to special assessments levied during the
veteran’s possession.

It has been suggested that Maverick County is no longer
controlling law in this area. It is contended, first, that
section 11.11 of the Tax Code was enacted after Maverick
County was handed down and constitutes the legislature’s
most recent statement regarding its intention to tax
publicly-owned property that is not used for the public
purpose for which the property was originally acquired. As
we noted earlier, the 1981 amendment to section 11.11 does
not compel us to conclude that real property comprising the
Veterans’ Land Fund is taxable. Neither the actual language
used in the amendment nor the legislative history indicating
the evident intention of the legislature in passing the
amendment supports such a reading. And, as we stated above,
we believe that the real property comprising the Veterans’
Land Fund is being used for the precise public purpose for
which the real property was acquired by the board in the
first place.

p. 5669

Honorable Garry Mauro - Page 7 (JM-1085)

It is also contended that the Maverick County case is
suspect because it appears to be predicated upon a Texas
Supreme Court case that is itself of doubtful precedential
value. We agree that the court in Maverick County did rely
in part on a Texas Supreme Court case whose precedential
value has been undermined by subsequent decisions, but we
disagree that a court considering the matter again would
reach a different result.

The case that the Maverick County court cited is City
of Beaumont v. Fertitta, 415 S.W.2d 902 (Tex. 1967). In
Fertitta, the court considered whether real property owned
by a city, though leased to private persons for the purpose
of carrying on a private commercial enterprise, was exempt
from ad valorem taxation regardless of the fact that the use
to which the property was put was not public. The court in
Fertitta departed from the method of constitutional analysis
that courts traditionally had invoked when the issue was
whether property owned by a political subdivision was
entitled to receive tax-exempt status. See Fertitta, supra,
(dissenting opinion).

Prior to Fertitta, courts had always looked to whether
the property was both owned by a political subdivision and
used or held for a public purpose, and assuming that it was
not so used, it would be taxable under article VIII,
sections 1, and 2, of the Texas Constitution. See A. & M. Consol. Indep. School Dist. v. City of Bryan, 184 S.W.2d 914
(Tex. 1945); Daugherty v. Thompson, 9 S.W. 99 (Tex. 1888);
City of Abilene v. State, 113 S.W.2d 631 (Tex. Civ. App. -
Eastland 1937, writ dism’d) (holding disapproved of on other
grounds in Fertitta). The court in Fertitta departed from
the traditional mode of constitutional analysis in declaring
that the constitution does not require that property owned
by a municipality but not used for a public purpose be
taxed. It only requires that private property held by
natural persons or private corporations be taxed.
Therefore, since the constitution does not require municipal
property to be taxed, the legislature needs no
constitutional authority to exempt it. It chose to do so in
the now-repealed article 7145, V.T.C.S. This statute
required that all property, except that which is expressly
exempted, be taxed. The now-repealed article 7150,
V.T.C.S., exempted "“Cajll property, whether real or
personal, belonging exclusively to this State, or any
political subdivision thereof, or the United States ... ."
Public ownership was enough; no public use was required.

p. 5670

Honorable Garry Mauro ~ Page 8 (JM-1085)

The dissent in Fertitta correctly pointed out that this
constitutional and statutory construction is novel; indeed,
earlier decisions, which went to great length discussing the
holding and using requirements of public property, make
sense only if one accepts the claim that the constitution
requires al] property to be taxed unless it is specifically
exempted pursuant to a constitutional provision, i.e., that
public property, in order that it be deemed tax-exempt, must
fall within the limitations set forth in article VIII,
section 2, or article XI, section 9, of the Texas Constitu-
tion. No subsequent case explicitly has employed such an
analysis. Moreover, the Texas Supreme Court clearly
narrowed the reach of Fertitta in Leander Indep. School

Dist. v. Cedar Park Water Supply Corp., 479 S.W.2d 908 (Tex.
1972) and in Satterlee v. Gulf Coast Waste Disposal Authority,
576 S.W.2d 773 (Tex. 1978).

The Leander case did not concern property owned by a
political subdivision leased to a private person for the
purpose of a private commercial enterprise; rather, it
concerned: property owned by a private person but used for
public purposes. In overturning a lower court judgment
sustaining the tax-exempt status of such property, the court
specifically held that property, to be exempt, must be used
for public purposes. The court in Leander did not, however,
explicitly reject the’ mode of constitutional analysis
employed in Fertitta. In Satterlee, the court reaffirmed
the requirement that there be a public use before property
owned by a political subdivision be declared tax-exempt.

If the traditional method of analysis were applied to
the instant situation, namely that public property must be
put to a public use before it may be exempt from ad valorem
taxation, we think that a court would hold that by virtue of
the inclusion of section 49-b of article III of the Texas
Constitution, the real property comprising the Veterans’
Land Board is exempt from taxation so long as full title to
that property rests with the state. If the Fertitta test
were adopted, on the other hand, a court would disregard any
necessity that such property be used for a public purpose
and look only to whether the property was owned and
controlled by the state or a political subdivision of the
state; it would conclude, although for different reasons,
that the property described here is tax-exempt.

We note, moreover, that the argument undermining

Maverick County because of its reliance on Fertitta is
refuted effectively by the fact that the Texas Supreme Court

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Honorable Garry Mauro - Page 9 (JM-1085)

explicitly reaffirmed in a later case its approval of the
Maverick County case. In Satterlee, the court concluded
that certain real property and the improvements located
thereon that were purportedly "owned" by local taxing units
were not exempt from taxes because the ownership interest
of the taxing units was not exclusive. In discussing the
public use and public ownership requirements for tax exemp-
tion, the court declared:

After Fertitta, we approved without qualifi-
cation the opinion of the Court of Civil

Appeals in Maverick County Water Control &

Improvement District #1 v. State, 456 S.W.2d
204 (Tex. Civ. App. 1970, writ ref’d). There

the Court recognized Fertitta but cited State
v. Bexar-Medina-Atascosa Counties Water

Improvement District, 310 S.W.2d 641 (Tex.
Civ. App. 1958, writ ref’d), also approved by

this Court, where it was held that land did
not belong exclusively to the State while the
contract with the Veterans Land Board
remained in effect. As to this, the Court in
Maverick wrote that ‘While the contract was
in effect, the land was "owned by the
Veteran," 310 S.W.2d at 643, with the State
holding only the legal title.’ The Court
upheld the tax exemption in Maverick for the
reason as stated in the opinion that the
Veterans Land Board ‘held full legal and
equitable title to the land.’ We approved
the principles of law declared in the opinion
by unqualified refusal of writ of error.

Our conclusion that the Authority was not
vested with the requisite exclusive ownership
renders unnecessary a re-examination of the
holding in Fertitta that Article 7150, § 4,
provides for the exemption from taxation of
municipal property regardless of the use to
which it is put or the purposes for which it
is held.

576 S.W.2d at 777-8.
Therefore, we answer your first question in the
negative and conclude that real property comprising part of

the Veterans’ Land Fund is exempt from ad valorem taxation
while legal and equitable title to such real property is

p. 5672

Honorable Garry Mauro - Page 10 (JM-1085)

vested in the state. Such real property is taxable to the
purchaser under the contract for sale so long as the
contract is in effect; after the purchaser defaults and
legal title reverts to the control of the state, such real
property is exempt from taxation. We now turn to your
second question.

You next ask:

Do penalties and interest on preexisting
tax liabilities continue to accrue against
the real property after forfeiture reverts
full title to the property in the State of
Texas?

Section 33.01 of the Tax Code governs the imposition of
penalties and interest on delinquent taxes and provides the
following:

(a) A delinquent tax incurs a penalty of
six percent of the amount of the tax for the
first calendar month it is delinquent plus
one percent for each additional month or
portion of a month the tax remains unpaid
prior to July 1 of the year in which it
becomes delinquent. . However, a tax delin-
quent on July 1 incurs a total penalty of
twelve percent of the amount of the delin-
quent tax without regard to the number of
months the tax has been delinquent.

(b) If a person who exercises the split-
payment option provided by Section 31.03 of
this code fails to make the second payment
before July 1, the second payment is delin-
quent and incurs a penalty of twelve percent
of the amount of unpaid tax.

(c) A delinquent tax accrues interest at
a rate of one percent for each month or
portion of a month the tax remains unpaid.

You assert that penalties and interest may not continue
to accrue on preexisting tax liabilities after the state
again assumes both legal and equitable title to the real
property against which delinquent taxes are due. You
suggest two different arguments in support of your

p. 5673

Honorable Garry Mauro - Page 11 (JM-1085)

proposition. First, you claim that such a result is
required by the Maverick County case. We disagree.
As we noted previously, Maverick County involved an

action by the Veterans’ Land Board for a declaration that
real property whose title had reverted to the board after a
veteran defaulted on his payments was free of all liens for
taxes or other charges made, levied, or assessed on the
property by a water control and improvement district, an
independent school district, and a county. Specifically at
issue were tax liens created when the veteran-purchaser
failed to pay both taxes properly levied on his property by
the school district and the county and assessments in the
form of flat rate fees imposed by the water control and
improvement district.

The court of appeals described the trial court judgment
in the following fashion: "The trial court’s judgment
declares the land free from taxes and other charges levied
by defendants after the rights of the veteran under the
contract of sale were terminated." 456 S.W.2d at 205. It
is not clear from the court of appeals’ decision whether the
trial court distinguished between those taxes and flat rate
assessments imposed while the veteran’s contract was still
in force and those that the taxing units sought to enforce
after the full title had reverted to the state.

The court of appeals in Maverick County held that taxes
cannot be imposed on real property comprising the Veterans’
Land Fund after the title to the property reverts to the
state; the property in question was subject to taxation only
during that period of time during which the veteran-pur-
chaser owned the equitable title. Based upon an earlier
case, the court also held that liens for pre-existing taxes,
ji.e., taxes levied on the property while the contract with
the veteran was still in force, were still in effect. The
court, however, apparently did hold that no lien for the
assessment of the flat rate taxes was created by the
veteran’s failure to tender such assessments.

You rely upon the language from the Maverick County
case declaring the property free from taxes "or other
charges levied" by the taxing units to support the proposi-
tion that penalties and interest on the preexisting taxes do
not continue to accrue. You apparently construe this to
mean that any penalties and interest imposed for failing to
pay the taxes levied in a timely fashion may not continue to
accrue after title reverts to the state. In other words,

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Honorable Garry Mauro ~ Page 12 (JM-1085)

you assert that the phrase "or other charges" includes
penalties and interest imposed when accrued taxes become
delinquent. You state in your request for an opinion:

The Court affirmed the determination of the
trial court that the property itself is ‘free
of all liens and claims for taxes or other
charges .. . made, levied or assessed’ by
any taxing entities. Id. at 205.

Brief of Texas Veterans Land Board at 8.

We disagree with this construction of Maverick County.
The "charges" referred to by the court do not include
interest and penalties. The "charges," when understood in
the context of Maverick County and the authorities it cites,
are special assessments made by the water district.
Se e.g., City of Wichita Falls v. Williams, 26 S.W.2d 910

(Tex. 1930); Harris County v. Boyd, 7 S.W. 713 (Tex. 1888);
Wichita County Water Improvement Dist. No. 2 v. City of
Wichita Falls, 323 S.W.2d 298 (Tex. Civ. App. ~- Fort Worth
1959, writ ref’d n.r.e.); see also Attorney General Opinions
JM-1035 (1989); JM-523 (1986). The Maverick County court
merely held that a special district could not impose flat
rate fees against the property in that instance while title
to it was held by the state. Maverick County does not stand
for the proposition that penalties and interest for
delinquent taxes may not be imposed on real property that
has reverted to the state; it does not even mention
penalties and interest.

Your second argument in support of the proposition that
penalties and interest may not continue to accrue against
real property whose title has reverted to the Veterans’ Land
Board is that permitting such accrual of penalties and
interest is tantamount to permitting the taxation of such
property, however indirectly. On the other hand, a brief
submitted to us suggested that the lien created by the
veteran’s failure to properly tender the taxes due extends
also to the penalties and interest that accrue.

Both arguments rest on the presupposition that penal-
ties and interest are to be treated as though they were
taxes. On the one hand, if accrued penalties and interest
are the equivalent of taxes and if taxes may not be imposed
upon real property while title is in the possession and
control of the Veterans’ Land Board, it can be argued that
penalties and interest likewise may not continue to accrue

p. 5675

Honorable Garry Mauro - Page 13 (JM-1085)

against such real property. On the other hand, if accrued
penalties and interest are the equivalent of taxes and if an
enforceable lien is created by the veteran’s failure to
properly tender the taxes before they became delinquent, it
can be argued that any waiver of accrued penalties and
interest violates the Texas constitutional prohibitions
against releasing or extinguishing the indebtedness of any
individual owed to the state or to any political subdivision
of the state, Tex. Const. art. III, § 55, or against the
release from the payment of taxes. Id. art. VIII, § 10.

A surface reading of article VIII, section 15, of the
Texas Constitution lends support to your presupposition that
penalties and interest should be treated as though they were
taxes. That section provides:

The annual assessment made upon landed
property shall be a special lien thereon;
and all property, both real and personal,
belonging to any delinquent taxpayer shall be
liable to seizure and sale for the payment of
all the taxes and penalties due by such
delinquent; and such property may be sold for
the payment of the taxes and penalties due by
such delinquent, under such. regulations as
the Legislature may provide.

While section 15 clearly does not create a lien on any
property for failing to pay any penalties and interest that
are imposed along with delinquent taxes,3 it might be argued
that, at least as to summary seizure and sale and judicial
sale and execution, penalties and interest are treated in
the same manner as the delinquent taxes on which the
calculation of such penalties and interest are based.
However, the Texas Supreme Court has not construed section
15 to require that penalties and interest be treated as
though they were taxes that were levied.

3. While section 15 of article VIII of the Texas
   Constitution does not create a lien for failing to pay any
   penalties and interest imposed, section 32.01 of the Tax
   Code does. Of course, any lien that the legislature sees
   fit to create by statute can also be amended by the legisla-
   ture by statute.

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Honorable Garry Mauro - Page 14 (JM-1085)

In Jones v. Williams, 45 S.W.2d 130 (Tex. 1931), the

Texas Supreme Court upheld the constitutionality of a
statute that provided:

That all interest and penalties accrued and
as now fixed by law, on all... taxes...
other than (taxes of] incorporated cities and
towns, delinquent up to and including October
20, 1931, shall be, and the same are hereby
released, provided said taxes are paid on or
before January 31, 1932.

Jones, supra, at 131.

The court in Jones first rejected the assertion that
the statute could be sustained by reference to section 10
of article VIII of the Texas Constitution. Section 10 pro-
vides:

The Legislature shall have no power to
release the inhabitants of, or property in,
any county, city or town from the payment of
taxes levied for State or county purposes,
unless in case of great public calamity in
any such county, city or town, when such
release may be made by a vote of two-thirds
of each House of the Legislature.

If the exactions (i.e. penalty and interest) imposed upon
taxpayers for failing to timely tender payment of accrued
taxes are themselves "taxes" for purposes of article VIII,
section 10, then the court, after concluding that the
statute at issue was not enacted pursuant to the "great
public calamity" requirement, would perforce have struck
down the statute. Because it did not, it is clear that the
court did not conclude that such exactions constitute
"taxes,"

Nor did the court in Jones consider such exactions an
instance of an "indebtedness, liability, or obligation" for
purposes of article III, section 55, of the Texas Constitu-
tion. Section 55 provides:

The Legislature shall have no power to
release or extinguish, or to authorize the
releasing or extinguishing, in whole or in
part, the indebtedness, liability or obliga-
tion of any corporation or individual, to

p.- 5677

Honorable Garry Mauro - Page 15 (JM-1085)

this State or to any county or defined
subdivision thereof, or other municipal
corporation therein, except delinquent taxes
which have been due for a period of at least
ten years.

If the court in Jones had concluded that such exactions were

in reality interest eo nomine imposed by the state as
compensation for the detention of its money, rather than
viewing such exactions as a form of "penal interest," the

statute would have run afoul of sections 51 and 55 of
article III. The court set forth the history surrounding
attempts to enforce public revenue and tax collection
procedures and declared:

On the whole, we have concluded that the
impositions made for delinquency in rendering
property for taxation, and for failure to
pay taxes, whether these impositions are
denominated ‘penalties,’ ‘interest,’ ‘for-
feitures,’ or whether prescribed without
definition or name, are all in reality
penalties imposed for delinquency or failure
of duty, and all enacted in aid of the
state’s revenue, rather than as charges made
by the state for the use or detention of its
money. In other words, the exactions are
‘penalties’ rather than ‘interest’ in the
commercial or statutory sense. (Emphasis in
original.)

45 S.W.2d at 133. The court concluded:

We think the act is constitutional for the
reason that the Legislature has the power to
release, cancel, annul, or suspend penalties
previously accrued for delinquent taxes, so
long as these penalties have not been reduced
to final judgment.

Id.

Finally, in response to the claim that the statute at
issue violated article III, section 56, of the Texas
Constitution, which prohibits the legislature from passing
certain local and special laws remitting penalties, the
Jones court concluded that the legislature by implication
could remit such penalties by general law:

p. 5678

Honorable Garry Mauro - Page 16 (JM-1085)

The only express limitation on the right
of the Legislature to remit penalties is that
specified in section 56 of article 3, which
prohibits the Legislature from ‘remitting
fines, penalties, and forfeitures by special

w.’ The necessary implication from the
language used is that ‘fines, penalties and
forfeitures’ may be remitted by general laws,
such as the one before us. ... Nor do we
think that the Legislature is prohibited,
either expressly or by necessary implication,
by the language of any other section of
the Constitution. If it be said that the
provisions of sections 51 and 55 apply to
penalties imposed for tax delinquency, then,
for the same reason, we would be compelled to
say they apply to all classes of penalties,
and to fines and forfeitures as well. Such a
construction would render meaningless the
power clearly reserved to the Legislature by
the terms of section 56 of article 3, to
release ‘fines, penalties and forfeitures’ by
general law. (Citations omitted.) (Emphasis
in original.)

Id. at 137.

Clearly, if the Texas Supreme Court construed article
VIII, section 15, of the Texas Constitution to require that
penalties and interest be accorded the same treatment as
taxes are accorded, then the court would not have concluded
in Jones that the statute then at issue was constitutional.
Therefore, we reject both your assertion and the suggestion
by the law firm submitting a brief: it is not the case that
penalties and interest must be waived, nor is it the case
that penalties and interest cannot be waived. °

It is clear that the legislature is empowered to enact
a statute that effectively would waive the penalties and
interest accrued on unpaid delinquent taxes levied on real
property whose title has reverted to the possession and
control of the Veterans’ Land Board. See, e.g., Attorney
General Opinion WW-780 (1960) (upholding and construing
statute that permitted that state to tender unpaid and
delinquent taxes on Veterans’ Land Fund land in order
for the state to clear title thereto); see also Attorney
General Opinion M-139 (1967) (distinction between "tax" and
"penalty" well established in law). It is equally clear

p. 5679

Honorable Garry Mauro - Page 17 (JM-1085)

that the legislature has not so acted. Section 33.011 of
the Tax Code permits the governing body of a taxing unit to
waive penalty and interest under certain circumstances and
provides:

The governing body of a taxing unit may
provide for the waiver of penalties and
interest on a delinquent tax if an act or
omission of an officer, employee, or agent of
the taxing unit caused the taxpayer’s failure
to pay the tax before delinquency and if the
tax is paid within 21 days after the taxpayer
knows or should know of the delinquency.

No other provision of the Tax Code addresses the waiver of
penalty and interest.

Because the Texas Constitution does not require it and
because the legislature has not provided for it, we conclude
that penalties and interest will continue to accrue on the
unpaid delinquent taxes levied upon real property comprising
the Veterans’ Land Board whose title has reverted to the
board due to the default of the veteran-purchaser.

We note, however, that while the tax lien created by
the previous owner’s failure to properly’ tender his taxes
remains in force during that period when the title to the
real property reverts to the Veterans’ Land Board, such a
lien is unenforceable against the state. See, e.g., State
v. City of San Antonio, 209 S.W.2d 756 (Tex. 1948);
Childress County v. State, 92 S.W.2d 1011 (Tex. 1936);
Lubbock Indep. School Dist. v. Owens, 217 S.W.2d 186 (Tex.
Civ. App. - Amarillo 1948, writ ref’d). Such a lien would
be enforceable against any subsequent purchaser, and the
veteran-purchaser against whom the taxes originally were
imposed, of course, remains personally liable. Tax Code
§ 32.01; Attorney General Opinions JM-1049 (1989); MW-523
(1982); H-1108 (1977).

SUMMARY

Taxes may not be imposed upon real
property comprising the Veterans’ Land Fund
after the contract of sale has been forfeited
and full title to the property has reverted
to the possession and control of the state.
Penalties and interest on unpaid delinquent
taxes imposed on real property whose title

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Honorable Garry Mauro - Page 18 (JM-1085)

has reverted to the state continue to accrue.
While the tax lien created by the previous
owner’s failure to properly tender his taxes
remains in force during that period when the
title to the real property reverts to the
Veterans’ Land Board, such a lien is unen-
forceable against the state. Case authority
of long standing dictates that such a lien
would be enforceable against any subsequent
purchaser. The legislature could have, but
has not, provided for waiver of such a lien
against subsequent purchasers, and until it
acts, the land remains charged with the lien.
The veteran-purchaser against whom the taxes
originally were imposed, of course, remains
personally liable.

Very truly yours,
JIM MATTOX

Attorney General of Texas

MARY KELLER
First Assistant Attorney General

LOU MCCREARY
Executive Assistant Attorney General

JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General

RICK GILPIN
Chairman, Opinion Committee

Prepared by Jim Moellinger
Assistant Attorney General

p. 5681