Texas Supreme Court upholds property tax exemption for Student Housing Authority’s dormitory used by summer campers

Texas Supreme Court upholds property tax exemption for Student Housing Authority’s dormitory used by summer campers

On April 24, 2015, the Texas Supreme Court in Texas Student Housing Authority v. Brazos County Appraisal District and Appraisal Review Board for Brazos County Appraisal District rejected a county appraisal district’s argument that dormitory-like property owned by the Texas Student Housing Authority (TSHA) lost its property tax exemption by providing summer lodging to non-college students attending summer camps at Texas A&M University (TAMU).

The TSHA is a nonprofit organization that owned the Cambridge, a student-residential facility that exclusively housed college students a majority of the year.  The students attended nearby TAMU and Blinn College. During the summers of 2005 through 2008, the Cambridge housed summer camp participants at TAMU, in addition to college students who attended TAMU and Blinn.

Exemption voided due to use by non-college students. On the basis of housing the non-college participants, the Brazos County Appraisal District (BCAD) voided TSHA’s tax-exempt status for years 2005 through 2008 and assessed millions of dollars in back taxes. TSHA argued it was entitled to the exemption under the Texas Education Code and Texas Tax Code. TSHA was unsuccessful at the administrative level and trial court level. The Texas Court of Appeals reversed the denial of the exemption for 2005, distinguishing it from the other years on the basis that the Cambridge exclusively housed non-college students from programs which had “definite and intimate relationships with TAMU” that summer; the programs were “forged or supported by legislative mandate.” (Page 3, ¶ 3.) The Texas Court of Appeals affirmed the denial of the exemption for 2006 through 2008, holding TSHA did not satisfy the exemption’s requirement under the Texas Education Code that a student housing authority property be “devoted exclusively to the use and benefit of the students, faculty and staff members of an accredited institution of higher education.” (Page 3, ¶ 2) The Court of Appeals also rejected TSHA’s exemption argument under the Tax Code.

Ownership, not use, determined exemption.  In a matter of first impression, the Texas Supreme Court phrased the issue as whether TSHA established its tax-exempt status as a matter of law. If TSHA was a higher education facility authority, the property tax exemption for Cambridge was absolute. The Court cited to Texas Educ. Code § 53.46, titled “Authority Exempt From Taxation,” and found that the statute declares higher education authorities tax-exempt and focuses on whether the owner is such an authority, not how the property is used. Because the Cambridge was owned by a higher education authority, the property tax exemption was absolute. However, the Court stated an authority has no power to acquire, hold, or use property beyond its statutory authorization. It further concluded that a potentially injured party with standing, such as the BCAD, could seek to constrain allegedly non-exempt use violations via an appropriate remedy, such as injunctive relief. However, the Court observed that the question of whether a denial of the property tax exemption for a higher education authority is appropriate is a policy judgment best left to the Legislature.

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