Honorable Joe Resweber     Opinion No. w-.691
County Attorney
Harris County Courthouse   Re:   Severabilityof improve-
Houston 2, Texas                 ments from land and classifi-
                                 cation thereof as realty
                                 or personalty for tax pur-
Dear Mr. Resweber:               poses.
        We quote from your opinion request as follows:
          "'OnMarch lst, 1957 this office, at the :
        request of Mr. Carl S. Smith, Tax Assessor
        and Collector of Harris County, rendered an
        opinion regarding the severabilityof improve-
        ments erected by a lessee on land owned by
        another party, but under lease to said lessee,
        and the classificationof such improvementsas
        realty or personalty.
          "It is the feeling of this writer that the
        provisions of Article 7146, V.C.S., are very clear   c
        and definite as to what Is real property for the
        purpose of taxation. It is our further feeling
        that the effects of this Statute cannot be varied
        by contracts or.agreementsto the contrary be-
        tween private parties.
          "On March 34d, 1943 your Office rendered Its
        Opinion No. O-5059 regarding a similar situation
        where improvementshad been erected by the vendee
        under a contract for deed. In this opinion views
        similar to ours were expressed. However, with the
        great number of leases currently in existence in
        Harris County providing that the improvements
        shall remain the property of the Lessee and that
        the Lessee shall have the right to remove such at
        the terminationof the lease, (with taxes becoming
        delinquent on many of such improvements),Mr. Smith
        feels that anopinion should be requested from your
        Office."
         Article 7146, Vernon's Annotated Civil Statutes,
provides that:
Honorable Joe Resweber,page 2          Opinion NO. WW-691


           "Real property for the purpose of taxation,
         shall be construed to include the land Itself,
         whether laid out in town lots or otherwise, and
         all buildings, structures and improvements,or
         other fixtures of whatsoever kind thereon, and
         all the rights and privileges belonging or in
         anywise appertainingthereto, and all mines,
         minerals, quarries and fossils in and under the
         same. Id."
          The early case of W. J. Hutchins v. Masterson and
 Street, 46 Tex. 551, 26 Am. Rep. 28b (l&%77),established t ee
 criteria for determiningwhether improvements should be classed
 as real orpersonal property: (1) there must be a real or
 constructiveannexationof the article in question to the
 realty; (2) the article mustbe adapted to the uses or pur-
 poses of the realty to which it is connected; (3) the party
'makingthe annexationmust intend that the improvementbe-
 come a permanent accession to the freehold. Of the three
 tests, pre-eminence is given the question of intention.
 See Maro Company v. State, 168 S.W.2d 510 (Tex.Civ.App.,1943,
 error refused). However, the rules of common law which govern
'the right of private persons to fixtures are not necessarily
 controllingIn the field of taxation. This question turns
 primarily upon the intention;of the Legislature as expressed '-.
 in the tax statutes and construed by the courts. 1% A.L.R.
 1309, 1311.
         The A.L.R. Annotation cited above discusses the
varying treatment of this problem,by different jurisdictions.
Certain jurisdictionshold that the improvements are part of
the realty and as such are taxable to the lessor. Other jur-
isdictionshold that the improvementsmay be severed for the
purpose of taxation but are taxable to the lessee as realty.
A third school of though taxes the improvements to the
lessee as personalty. Texas falls,within the third group.
          The case of Maro Company v. State, supra, held tha
 casings, rods, tubing, pumps and tanks which the lessee was
 entitled to remove from-the leasehold were personal property
 for the purpose of taxation. In reaching its conclusion,
 the court stated:,
            "Appellee tries to make a distinction between
         -the rule making accessories orappliances such
          as these a part of the realty for taxable pur-
          poses and any other rules governing the question
          of.whether such appliances or accessories are
          personal property or a part of the realty. After
    ,


                                                       :m5
Honorable Joe Resweber, page 3         Opinion No. W-691


         making an exhaustive research we have failed to
         find any distinction or any difference in the
         rules applicable in such cases."
         To the same effect is Shugart v. Nocona Independent
School District, 288 S.W.2d 243 (Tex.Clv.App.,1956).
         The case of Armstrong v. Mission Independent School
District, 195 S.W. 895 (Tex.Civ.App.1917) specifically
stated that certain buildings constituting a cotton mill
located on the property of a lessor were
and not real estate because "it
improvements placed upon the lan of a railroad company
by a lessee with an agreement that it was for the use of
the lessee and with the further agreement that it could be
removed." This case was reversed in Mission v. Armstrong
222 S.W. 201 (Tex.Com.App.1920, opinion approved), but o;ly
upon the point of whether or not the school district had a
lien for taxes upon the personal property in question.~
         For further support of the proposition that Texas
regards the general principles of the law of fixtures as
controlling the determinationof whether property is real
or personal for the purposes of taxation, see the case of
900 Main, Inc. v. City of Houston, 150 S.W.2d 468 (Tex.Civ.
App. 1941, Dism.Judg.Cor.),in Which it was held that an
air conditioning system was realty for the purpose of taxa-
tion; the court rested its decision on the general law of
fixtures and in particular upon the intention of the parties
as evidenced by the contract between the lessor and lessee.
         In view of the foregoing authorities, you are
respectfully advised that improvementsplaced upon demised
premises by the lessee which remain the property of the
lessee and which may be removed at the termination of the
lease are personal property for the purpose of taxation.

                         SUMMARY

               Improvementsplaced upon leased land
          by a lessee which remain the property of the
          lessee and which may be removed at the termina-
          tion of the lease are severable for the purpose
,‘?f?.3c-
 ,J:P.-LFP
  Honorable Joe Resweber, page 4             Opinion No. w-691


             of taxation and are classified as personalty.
                                Yours very truly,
                                 WILL WILSON
                                 Attorney General




  JNP:cm
  APPROVED:
  OPINION COMMITTEE:
  Geo. P. Blackburn, Chairman
   C. K. Richards
   J. Arthur Sandlin
   Howard Mays
                           ... .._
   REVIEWED FOR THE ATTORNEY GENERAL
   By: W. V. GEPPERT