Texas Supreme Court
Charter Loses Final Appeal Challenging
Property Taxes on Leased Campus Facility
Ruling: A charter can’t claim tax exemption status for property it is subleasing from a private entity, even if the lease agreement requires the charter to pay the property taxes. Odyssey 2020 Academy, Inc. v. Galveston Central Appraisal District, No. 19-0962 (majority and dissenting opinions). Issued June 11.
Majority Opinion
The Texas Supreme Court (TSC), via a 6-3 majority opinion, rejected claims by Odyssey 2020 that the part of the property it has been subleasing since 2009 from the HEB grocery chain for its main campus should be declared tax exempt because the agreement requires the charter to pay the property taxes. (HEB is subleasing the property from other private owners, and the charter does not have the right, under its lease with HEB, to buy the property.)
The charter, to support its position, pointed to Texas Education Code §12.128(a) that says property purchased or leased by a charter school with state funds is “public property for all purposes under state law.”
The majority TSC opinion concluded the Texas Constitution overrides any law the Legislature may have enacted. The Texas Constitution prohibits an otherwise non-tax exempt leased property from being tax exempt, a fact that doesn’t change even if the charter is required to pay the property taxes under the lease agreement.
“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,” the majority opinion states.
Dissenting Opinion
But, a three-member dissenting panel of justices — in an opinion authored by Eva Guzman on her final day as a TSC justice (because she resigned to run for state attorney general) — concluded the charter is entitled to a property tax exemption, a conclusion based on their interpretation of the Texas Constitution and applicable state law.
The charter appealed to the TSC after being on the losing end of rulings issued by the Galveston County Central Appraisal District, a trial court judge and a state appeals court in Houston.
- Note: A part of the HB3610-Gervin-Hawkins charter school bill as passed during the just-ended legislative session addresses property tax exemptions for property leased to charter schools.