Does an Arkansas improvement district keep its property-tax exemption on lots that owners just signed over by quitclaim deed instead of losing them to foreclosure?

Currency note

This opinion was issued in 2013. 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.

Plain-English summary

A prosecuting attorney asked whether a suburban improvement district (SID) that accepts a quitclaim deed to a lot from an owner who won't pay delinquent assessments, instead of taking the property through the statutory foreclosure process, keeps the constitutional property-tax exemption that clearly applies to foreclosed improvement-district property. He also asked whether an SID reselling such lots for profit affects its tax status as a "nonprofit."

The opinion found the first question genuinely unresolved. Arkansas's leading case, Pulaski County v. Carriage Creek, held that property an improvement district obtains through judicial foreclosure for unpaid assessments counts as "used exclusively for public purposes" and is therefore tax-exempt, so long as the district isn't using it to generate income while holding it. But the opinion noted that case, and the underlying statutes governing SID collection remedies, all assumed the district obtained the property through court-ordered foreclosure, not a simple negotiated quitclaim. The opinion laid out the strongest arguments on both sides but concluded that only a court could decide whether the exemption extends to quitclaimed property, calling it a question of first impression outside the Attorney General's authority to resolve. On the second question, the opinion clarified that an SID is a public entity, not a nonprofit corporation, so the "nonprofit" framing doesn't apply, and that realizing an incidental profit on resale wouldn't by itself make otherwise tax-exempt property taxable.

Background and analysis (as of 2013)

Arkansas's constitution exempts "public property used exclusively for public purposes" from property taxation, a two-part test requiring (1) public ownership and (2) exclusive public use, with tax exemptions construed strictly against the party claiming them. The opinion found the "public property" prong easily satisfied, since Arkansas courts have long treated improvement districts as government agents exercising delegated taxing power. The harder question was whether quitclaimed lots meet the "exclusive public use" prong.

The opinion explained that ordinarily, public property held purely for rental or resale doesn't serve a "public purpose." But Carriage Creek carved out an exception for improvement-district property obtained through judicial foreclosure of delinquent assessments, reasoning (drawing on the earlier Robinson case involving a levee district) that holding and reselling such property is itself a governmental function necessary to recover the assessments needed to fund the district's operations. The opinion noted that Arkansas's statutory scheme for collecting SID delinquencies offers three separate paths, county certification for third-party auction sale, chancery foreclosure, or (for certain large districts) self-collection via civil proceedings, and that all three contemplate the district obtaining title only through a judicial process when a public auction fails to recover the debt, never through a private quitclaim. Because the Code nowhere authorizes or even mentions quitclaim as a collection method, and because the statute defining SID purposes never lists land speculation among them, a strong argument existed that quitclaimed property was obtained "ultra vires" and therefore couldn't qualify as being used in a legitimate governmental capacity. But the opinion also credited the counterargument that quitclaimed lots serve exactly the same practical function (recovering delinquent assessments) as foreclosed ones, and that no case had yet drawn a line between the two. On resale profit, the opinion applied Arkansas's "predominant use" test for indivisible public property, concluding an incidental profit on an otherwise legitimately-held exempt lot wouldn't convert the property into a taxable asset.

Citations and references

Statutes (as they stood in 2013):

• Ark. Const. art. 16, § 5, exempting public property used exclusively for public purposes
• A.C.A. § 14-92-219, listing the permissible purposes for organizing an SID (not including land speculation)
• A.C.A. § 14-92-220(c), § 14-92-228, and § 14-92-210(1), SID powers and remedies against tax delinquency
• A.C.A. § 14-92-223, authorizing an SID's board to sell acquired land on terms it deems best
• A.C.A. § 14-92-232(b), (c), the certification-for-auction and chancery-foreclosure collection alternatives
• A.C.A. § 14-94-122(g), conveyance of foreclosed property to the SID board "in consideration of the total amount rightfully due to the district"
• A.C.A. §§ 14-92-601 to -603, the self-collection alternative for larger "eligible" SIDs
• A.C.A. §§ 26-37-201(b)(5), 26-37-202(b), the Commissioner of State Lands' certification and sale procedure

Cases:

• City of Little Rock v. McIntosh, 319 Ark. 423 (1995); City of Fayetteville v. Phillips, 306 Ark. 87 (1991), the two-part public-property/public-purpose test for Article 16, Section 5 exemptions
• Quapaw Central Business Improvement District v. Bond-Kinman, Inc., 315 Ark. 703 (1994), improvement districts are agents of the state exercising delegated taxing power
• Pulaski County v. Carriage Creek Property Owners Improvement District No. 639, 319 Ark. 12 (1994), foreclosed improvement-district property held for resale to recover delinquent assessments is used exclusively for public purposes
• Robinson v. Indiana & Arkansas Lumber & Manufacturing Co., 128 Ark. 550 (1917), a levee district holding foreclosed land pending resale was exercising a governmental function and not subject to taxation in the interim
• School District of Fort Smith v. Howe, 62 Ark. 481 (1896), public property benefiting the public only indirectly through resale generally does not qualify for exemption
• Gazaway v. Greene County Equalization Bd., 314 Ark. 569 (1993), the expressio unius canon of statutory construction
• Arkansas Conference of Seventh Day Adventists v. Benton County, 304 Ark. 95 (1990), the "predominant use" test for indivisible property with mixed uses

Source

• Landing page: https://arkansasag.gov/divisions/opinions-foia/attorney-general-opinions-search/

Original opinion text

STATE OF ARKANSAS

THE ATTORNEY GENERAL
DUSTIN McDANIEL

Opinion No. 2013-086

November 13, 2013

Robert T. Rogers, II, Prosecuting Attorney
19th Judicial District - East

202 North Springfield

Post Office Box 536

Berryville, Arkansas 72206-1220

Dear Mr. Rogers:

I am writing in response to your request for my opinion on the following
questions:

1. When a suburban improvement district takes ownership of lots
   through a quitclaim deed and not through the foreclosure
   procedure, are these lots exempt from local property taxes? It is
   my understanding that these lots are being deeded to the district
   by property owners who won't or don't pay their assessment
   and/or property taxes.

2. If the district is actively reselling such lots for profit, would that
   affect their status as a nonprofit entity? How would that affect
   their tax status?

RESPONSE

Your first question is essentially whether a suburban improvement district (an
"SID"), in the absence of express statutory authority to do so, may accept a
quitclaim deed to property in lieu of assessments without losing what might have
been its constitutional exemption from taxation on that property had it been
deeded the property through statutorily authorized judicial foreclosure. No court

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Robert T. Rogers, II, Prosecuting Attorney
19th Judicial District - East

Opinion No. 2013-086

Page 2

has addressed this precise question, and I cannot predict with certainty how a court
would rule on this issue. As discussed below, judicial clarification of the
underlying legal issues is warranted.

With respect to your second question, an SID is not properly characterized as "a
nonprofit entity"; rather, it is a public entity in the nature of a political subdivision,
which accordingly has no "tax status" as a "nonprofit entity." With regard to its
"tax status" as the owner of property, I do not believe the fact that an SID realized
a profit upon selling property received in lieu of assessments would be of any
significance in determining whether the property is exempt from taxation under
Article 16, § 5 of the Arkansas Constitution.

Question 1: When a suburban improvement district takes ownership of lots
through a quitclaim deed and not through the foreclosure procedure, are these
lots exempt from local property taxes? It is my understanding that these lots are
being deeded to the district by property owners who won't or don't pay their
assessment and/or property taxes.

At issue is the application of Article 16, § 5 of the Arkansas Constitution, which
exempts from property taxation "public property used exclusively for public
purposes." Determining whether this exemption applies entails conducting a two-
part inquiry into (1) whether the property is indeed "public"; and (2) whether the
property, if "public," is indeed being used "exclusively for public purposes."
Statutes are strictly construed against granting exemptions from taxation,1 and any
party claiming an exemption must prove entitlement thereto beyond a reasonable
doubt.2

A suburban improvement district ("SID") is clearly a "public" entity of the sort
contemplated in Article 16, § 5. As one of my predecessors has noted:

[A] suburban improvement district is a statutorily authorized local
taxing unit....3 Moreover, as the Arkansas Supreme Court noted

1 See City of Little Rock v. McIntosh, 319 Ark. 423, 892 S.W.2d 462 (1995) and City of Fayetteville v.
Phillips, 306 Ark. 87, 811 S.W.2d 308 (1991) (acknowledging that both the "public property" and the
"public purpose" prongs of the test must be met to warrant granting a tax exemption under Article 16, § 5);
accord Ops. Att'y Gen. 2004-206 and 98-089.

2 City of Fayetteville v. Phillips, 306 Ark. 87, 91-92, 811 S.W.2d 308 (1991).

3 Ragland v. Dumas, 292 Ark. 715, 532 S.W.2d 308 (1991).

Robert T. Rogers, II, Prosecuting Attorney
19th Judicial District - East

Opinion No. 2013-086

Page 3

in Quapaw Central Business Improvement District v. Bond-Kinman,
Inc., 315 Ark. 703, 706, 870 S.W.2d 390 (1994):

Improvement districts are agents of the state and derive their
limited powers and duties of a public nature by legislative
delegation through the taxing power of the state, and
"constitute a separate and distinct species of taxing districts
as contradistinguished from counties, municipal
corporations and school districts." ... Further, there is a
wealth of case law acknowledging the agency status of
improvement districts as governmental in nature.

If, as you indicate in your question, the property in question has been conveyed to
the SID by quitclaim deed, it would thus appear to qualify as "public property"
under Article 16, § 5. For purposes of determining whether the constitutional
exemption applies, the remaining question is whether the property is being used
"exclusively for a public purpose."

This question is necessarily one of fact, to be made in the first instance by the
county assessor, subject to review as provided by law.4 Certain principles of law,
however, bear directly on this question.

It is generally the case that property held by a public entity purely for purposes of
rental or sale does not qualify as serving a "public purpose" triggering an Article
16, § 5 exemption from property taxation. As the Arkansas Supreme Court has
noted:

4 See A.C.A. §§ 14-92-220(c) and -228 (Repl. 1998).

Robert T. Rogers, II, Prosecuting Attorney
19th Judicial District - East

Opinion No. 2013-086

Page 4

It seems clear that the intention was to exempt only that public
property which in itself directly subserved some public purpose by
actual use, as distinguished from property belonging to the public
but not used by it, and from which a benefit accrues to the public,
not by the immediate use thereof by the public, but indirectly
through selling or renting the same to private parties.5

This general rule might be mitigated, however, by a corollary principle,
illustrated in the leading case of Pulaski County v. Carriage Creek Property
Owners Improvement District No. 6396 pursuant to which judicially foreclosed
property held by an improvement district in satisfaction of delinquent assessments
is deemed to be "used exclusively for a public purpose" and hence is exempt from
taxation so long as it is not used to generate income while in inventory.7 Your
question appears to be whether this principle would apply to property obtained by
an SID not through statutorily approved foreclosure proceedings, but rather
through voluntary relinquishment of the delinquent property by quitclaim deed.

An SID in possession of such quitclaimed property might argue that this question
should be answered in the affirmative, disputing the taxability of the property by
characterizing it as materially indistinguishable from that deemed exempt from
taxation in Carriage Creek. In support of this conclusion, the SID might argue
that regardless of whether it obtained the property through judicial foreclosure or
by negotiated quitclaim, it is holding the property (a) purely in lieu of payment of
delinquent assessments and (b) purely for the purpose of selling it in order to
recover at least some or all of the delinquent assessments. Assuming these
conditions are both met, the property might be characterized as "used" in

5 School District of Fort Smith v. Howe, 62 Ark. 481, 486, 37 S.W. 717 (1896) (cited in McIntosh, supra,
319 Ark. at 430).

6 319 Ark. 12, 888 S.W.2d 652 (1994).

7 Id. at 14-15. The application to SIDs of A.C.A. § 14-94-122, the statute at issue in Carriage Creek, is
discussed at note 18, infra, and accompanying text. See also Op. Att'y Gen. 2003-188 (discussing the
application to the principle set forth in Carriage Creek to SIDs).

The significance of the fact that the property in Carriage Creek was obtained through judicial foreclosure
appears to be reinforced by the court's reliance upon Robinson v. Indiana & Arkansas Lumber &
Manufacturing Co., 128 Ark. 550, 194 S.W. 870 (1917). In Robinson, as the Carriage Creek court
expressly pointed out, the levee district deemed exempt from taxation had likewise "obtained the lands
through a [statutory] foreclosure for failure to pay the levee taxes due...." 319 Ark. at 15. For a further
discussion of the principles set forth in Robinson and Carriage Creek, see Op. Att'y Gen. 2010-159.

Robert T. Rogers, II, Prosecuting Attorney
19th Judicial District - East

Opinion No. 2013-086

Page 5

fulfillment of precisely the "governmental function" that warranted exempting
from taxation the property at issue in Carriage Creek.8

In response, a proponent of taxation might argue that the principle set forth in
Carriage Creek, which applies to "lands held by an improvement district in its
governmental capacity," should not extend to properties conveyed in a manner
not expressly approved by the legislature.9 This argument would be premised
upon the theory that a non-judicial quitclaim transaction is not an authorized
means of collecting delinquent assessments, and that consequently an SID is
foreclosed from claiming such property as constitutionally exempt from taxation.

The court in Robinson, discussed in note 9, supra, concluded that the levee district, by pursuing its
statutory remedy through "a suit to enforce the collection of delinquent levee taxes and to buy in the lands
at a sale therefor when no one else offered to bid thereat," had "acquired the land in the exercise of its
governmental functions, and during the interval between its purchase and resale of the lands, they were not
subject to taxation." 128 Ark. at 558. The court in Robinson offered the following remarks on the
"governmental function" at issue:

It is absolutely essential that taxes should be levied in order to carry out the purpose for
which the levee district was organized, and if the property, which the levee district, to
protect itself, purchased at a levee tax sale, was subject to State and county taxes while in
its hands, the property owners of the levee district would have to pay additional taxes.
The levee district only held the lands . . . until it was practical to dispose of them again.
They were not held for any purpose of gain or as income producing property. When sold
the proceeds took the place of levee taxes, for the enforcement of which and the expenses
incident thereto, they were sold, and in this way we think the lands were directly and
immediately used exclusively for public purposes within the meaning of the Constitution,
and were not subject to taxation.

Id. (emphasis added).
9 319 Ark. at 13.

To the extent that this objection involves rejecting the non-judicial quitclaim remedy because the Code
only expressly authorizes a district to take title through judicial foreclosure, this argument would implicate
the following principle of statutory interpretation:

The phrase expressio unius est exclusio alterius is a fundamental principle of statutory
construction that the express designation of one thing may properly be construed to mean
the exclusion of another.

Gazaway v. Greene County Equalization Bd., 314 Ark. 569, 575, 864 S.W.2d 233 (1993); accord Chem-
Ash, Inc. v. Arkansas Power & Light Co., 296 Ark. 83, 751 S.W.2d 353 (1988); Venhaus v. Hale, 281 Ark.
390, 663 S.W.2d 930 (1984).

Robert T. Rogers, II, Prosecuting Attorney
19th Judicial District - East

Opinion No. 2013-086

Page 6

A proponent of taxing such property might arguably draw on the Code for support.
One of my predecessors has summarized the pertinent law as follows:

As a general matter, delinquent assessments in suburban
improvement districts are certified to the Commissioner of State
Lands,10 unless the district has chosen to enforce collection by
chancery proceedings pursuant to § 14-92-232(c), in which case
A.C.A. § 14-94-122 will govern the procedural requirements.
However, A.C.A. §§ 14-92-601 to -603 must also be considered in
this regard. These sections apply to "eligible" suburban
improvement districts "organized and existing pursuant to the
provisions of § 14-92-201 et seq. with an area of not less than five
thousand (5,000) acres and not more than seven thousand (7,000)
acres." A.C.A. § 14-92-601. Such districts may elect to collect their
own assessments, in which case they will also be responsible for
collecting delinquencies. A.C.A. §§ 14-92-602 and -603(a). Even if
they have not elected to do their own collection, they may
nevertheless elect, by resolution, to collect their own delinquent
assessments. A.C.A. § 14-92-603(b).11

This excerpt accurately summarizes current law.

Any statutory sale pursuant to the first of these statutory alternatives, authorized
by A.C.A. § 14-92-232(b), does not allow for a conveyance of the property to the
SID under any circumstances. Rather, it contemplates the certification of the
delinquent property to the Commissioner of State Lands for sale to a third party
for a sum equaling "at least the amount of delinquent taxes, penalties, interest, and
the costs of the sale."12 A sale at a lower price might be negotiated at a later date
if the auction bids prove inadequate to defray these recited costs,13 in which case
the SID will have to settle for a partial recovery of the delinquency.

10 Such certification is authorized pursuant to A.C.A. § 14-92-232(b) (Repl. 1998), which directs that these
lands be subject to "redemption or sale, pursuant to Act 626 of 1983, as amended." Act 626, which sets
forth the procedures for redemption or sale, is codified in title 26, chapter 37 of the Arkansas Code (Repl.
2012), as amended by Acts 2013, Nos. 556; 574, § 1; 1135 §§ 6 & 7; 1231; and 1485.

11 Op. Att'y Gen. 2003-122, at note 1.

12 A.C.A. § 26-37-201(b)(5) (Repl. 2012), as amended by Acts 2013, § 1.

13 A.C.A. § 26-37-202(b) (Repl. 2012).

Robert T. Rogers, II, Prosecuting Attorney
19th Judicial District - East

Opinion No. 2013-086

Page 7

Under the latter two of the three statutory schemes summarized in the passage just
quoted, an SID may obtain title to property delinquent in assessments only upon
being awarded the property by a court in lieu of payment of assessments. Each of
these alternatives involves a judicial foreclosure proceeding that may under
sharply limited circumstances result in the SID's obtaining the delinquent
property.14

It appears significant that none of the three alternative means of seeking to recover
delinquencies involves a delinquent property owner's simply quitclaiming his
property to the SID, a remedy that, if pursued as a matter of course in the face of
delinquencies, would potentially result in an SID's amassing what might best be
described as an inventory of investment properties. Rather, the statutory
alternatives are arguably designed to limit any SID's inventory of delinquent
properties to those judicially conveyed when a delinquency cannot be recovered
by means of a properly advertised public auction process.

Further supporting the argument that such property might be subject to taxation is
the fact that A.C.A. § 14-92-219, which sets forth the purposes for which an SID
may be organized, at no point includes the enterprise of land speculation.15

14 See, e.g., A.C.A. § 14-92-228(c)(1) (Repl. 1998) ("The remedy against the levy of taxes shall be by suit
in chancery."); accord A.C.A. § 14-92-232(c). Specifically, under the statutory foreclosure procedure
authorized in A.C.A. § 14-92-232(c), in the event the highest bid at a court-ordered auction sale fails to
match or exceed certain specified costs that include delinquent assessments, the court may direct that title
vest in the SID board, subject to the condition that this conveyance "shall be conclusively presumed to be
in consideration of the total amount rightfully due to the district." A.C.A. § 14-94-122(g) (Repl. 1998).
Under the third statutory alternative, set forth in chapter 6 of title 14, chapter 92 of the Code, the SID may
obtain title to the property subject to precisely the same conditions. Subsection 14-92-603(d) (Supp. 2011)
provides that the collection of delinquencies shall be enforced by civil proceedings in circuit court "in the
manner provided by §§ 14-121-426 - 14-121-432." Subsection 14-121-430(b) (Supp. 2011) provides for
conveyance of the delinquent property to the district "in consideration of the total amount rightfully due to
the district" in the event an auction bid proves inadequate to discharge the delinquency in assessments.

15 Section 14-92-219 (Supp. 2011) defines a range of permissible purposes to be served by an SID,
including the construction, purchase and operation of waterworks; sewage, drainage and solid waste
systems; parks; utilities; fire departments; hospitals; and libraries. In my opinion, these permitted purposes
serve as a backdrop for and a restriction upon the following statutory provision permitting an SID to engage
in the sale of land:

Any land that may be acquired by any improvement district organized under this
subchapter may be sold by the board of commissioners for the price and on the terms it
deems best.

A.C.A. § 14-92-223 (Repl. 1998).

Robert T. Rogers, II, Prosecuting Attorney
19th Judicial District - East

Opinion No. 2013-086

Page 8

Indeed, the related statute itemizing the powers of an SID affords no authority to
obtain real property for any purpose unrelated to the "improvements and facilities"
expressly authorized.16 The closest authority in the latter statute that might
support an SID's accepting a quitclaim of delinquent property in lieu of
assessments is the catch-all power "to do any and all other actions which shall be
deemed necessary in order to purchase, construct, accept as a gift, operate, and
maintain any and all improvements and facilities authorized in this subchapter."17
An SID board of commissioners is additionally granted authority to "[m]ake and
execute all contracts, leases, conveyances, and other instruments of the district,"
to "[d]o all things incidental or auxiliary to the exercise of the express powers
granted by this subchapter,"18 and to "[p]erform all actions useful to carry out the
purposes of this subchapter, unlimited by any express provision of it."19 Under
these limited grants of authority, then, an SID might be deemed authorized to
pursue only those remedies for the collection of delinquent assessments that
qualify as "necessary" to the fulfillment of the SID's authorized purposes.

The problem with the practice described in your question is that the Code at no
point contemplates, much less characterizes as "necessary," any such non-judicial
quitclaim transaction. On the contrary, the legislative range of remedies available
to an SID in its efforts to collect delinquent assessments is arguably intended to
avoid saddling an SID with unused realty unless doing so is judicially sanctioned
as the only option in light of the inability to recover delinquent assessments by
auctioning the property to a third party. A proponent of taxing property
quitclaimed to an SID might consequently maintain that the SID obtained the
property ultra vires, thereby foreclosing any claim that the property is being
"used" in a legitimate "governmental capacity" to fulfill a "public purpose."
Under this reasoning, the property would arguably not be exempt from taxation
pursuant to Article 16, § 5.20

16 A.C.A. § 14-92-220 (Repl. 1998).

17 Id. at subsection (a) (emphasis added).

18 A.C.A. § 14-92-210(1) (Repl. 1998).

19 Id. at subsection (4).

20 Id. at subsection (5).

24 I recognize that this argument is logically problematic in that it seems inconsistent to suggest both (1)
that a governmental entity lacks the authority to obtain property and (2) that the assessor should
nevertheless tax the property to that entity. For purposes of this discussion, however, I will accept as true
your apparent assumption that the SID indeed owns the property by valid quitclaim conveyance.

Robert T. Rogers, II, Prosecuting Attorney
19th Judicial District - East

Opinion No. 2013-086

Page 9

No court has yet addressed, much less resolved, the tension between these
positions. I will note in this regard that the properties at issue in the leading cases
of Carriage Creek and Robinson had been judicially foreclosed, leaving open the
question of whether the court's analyses would extend to improvement district
properties obtained by quitclaim without express statutory sanction. As an
executive official, I am neither authorized nor inclined to resolve the essentially
judicial question, which I consider one of first impression, regarding the
application of Article 16, § 5 under the circumstances you have posited. Under the
circumstances, I can do no more than echo my previous acknowledgment that
determining the taxability of property is, in the first instance, the duty of the
county assessor. In exercising this duty, I assume the assessor will consider the
factors discussed above.

Question 2: If the district is actively reselling such lots for profit, would that
affect their status as a nonprofit entity? How would that affect their tax status?

The first of these two questions appears mistakenly to assume that an SID is a
"nonprofit entity." As noted in my response to your previous question, an SID is a
statutorily authorized public entity, not a private nonprofit corporation. It is even
recognized in the Code as included within the category of "political
subdivisions."21 It consequently has no "status as a nonprofit entity."

The second part of your question appears primarily concerned with whether an
SID may remain exempt from taxation on a quitclaimed lot if it resells the lot for a
profit. Assuming the SID indeed has clear title to such a lot and is marketing it to
recoup a delinquency in assessments, the fact that the SID realizes an incidental
profit upon its sale should not bear on the question of its taxability. As a general
rule, when public property is incapable of being divided into taxable and
nontaxable parcels, as in an instance of this sort, a "predominant use" test will
apply to determine its taxability.22 Carriage Creek, although not directly

21 See A.C.A. § 14-92-210(2) (authorizing an SID to join with "other political subdivisions" in pursuing
improvement projects).

22 The Arkansas Supreme Court has somewhat paradoxically acknowledged that an "incidental" use that is
not in itself exempt will not render the "primary" use something other than "exclusive":

In Arkansas the rule of strict construction applies to tax exemptions, therefore, the term
"exclusively" is to be narrowly construed. [Citation omitted.] To determine whether
property is used "exclusively" for a particular purpose, generally it is necessary to look to
the primary use to which the property is put and not to secondary use. [Citation omitted.]
If the primary use is one allowed under the exemption, a secondary or incidental use,
even if for a purpose not within the exemption, is irrelevant.

Arkansas Conference of Seventh Day Adventists v. Benton County, 304 Ark. 95, 97, 800 S.W.2d 426
(1990). See also McIntosh, supra, 319 Ark. at 429 (noting that "[w]hen the exemption from ad valorem
taxation depends upon the use of the property," a "mere occasional" commercial use that cannot be
characterized as "interfering with the primary use of the property" will not "affect the exemption"), citing 2
Thomas M. Cooley, The Law of Taxation 686, at 1435-37 (4th ed. 1924). Compare Op. Att'y Gen.
2012-010 (discussing this principle as applicable when property is indivisible, as compared to instances in
which commercially used portions of publicly owned property otherwise used for a public purpose may be
segregated for purposes of taxation).

Robert T. Rogers, II, Prosecuting Attorney
19th Judicial District - East

Opinion No. 2013-086

Page 10

addressing the issue of profits, establishes generally that foreclosed lots held for
sale in a "governmental capacity" to recover delinquencies are being "used
exclusively for public purposes." This conclusion would suggest that an incidental
profit realized on the sale of such property would not in itself render the property
subject to taxation. For reasons discussed above, the question remains, however,
whether any impropriety in the SID's obtaining of the property might render its
use something other than public.

Assistant Attorney General Jack Druff prepared the foregoing opinion, which I
hereby approve.

Sincerely,

DUSTIN McDANIEL
Attorney General

DM/JHD:cyh