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How would a possessory interest tax operate if it did not distinguish among rights in public property on the basis of property law? More than thirty years ago, Frank Keesling of real estate license school argued against the traditional view that limited interests in property in the nature of licenses and privileges do not constitute property, and that their holders do not have the status of owners. "It is strongly urged that property rather than being an indivisible entity is instead an aggregate or bundle of rights and powers and that anyone having any of such rights and powers should properly be considered an owner of property." Would considering all legal rights in public property "possessory" realize the worst fears of the critics of "a tax without a test," a tax that does not distinguish the holder of a mineral lease from a Telegraph Avenue street artist? Would the "mere license" of postal patrons or dinner guests, the right of access that prevents their entry from constituting trespass, give rise to an avalanche of property tax assessments? On the contrary, a direct examination of the rental value of the taxpayer's rights in exempt property would identify interests appropriately subject to the property tax without interposition of legal categories developed for other purposes.
The aggregate of interests necessary for ownership status "is not a matter upon which any precise rule can be laid down."
Although it may seem self-evident that real property tax assessments should be limited to interests in tangible property, in fact the emphasis in these cases upon classification of a taxpayer's interest has obscured the threshold question of whether that constitutes an interest in such property at all. Criticism that taxation of a right to rent televisions in a municipal hospital reaches "not a right of possession but merely a right to provide a service" touches upon a crucial issue. Even if all interests in property were to be treated as possessory for tax purposes, when should the right to do business upon a government site be considered an interest in that real property? These considerations draw upon market data insofar as they question whether the taxpayer holds an interest in property that would yield rental income if assignable to others. Only rental income indicates the existence of a real property interest.
The Hawaii Supreme Court expressed concern that taxing the interest of licensees would produce great inequities. . . . Security guard companies and general construction contractors have authority to work on State land without possessing any property interest. Because such authority is equivalent to the traditional definition of a license we find that such a tax scheme would not serve legislative purposes.
The rental of television sets in a county hospital provides a good example of business rights which have some connection with publicly owned real property without necessarily conferring an interest in that property for tax purposes. How can such an interest be identified?
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