TCEQ DENIES PROPERTY TAX EXEMPTION

The executive director of the TCEQ recently denied several Prop 2 requests from oil refineries to remove from the tax rolls “hydrotreaters,” which are used to remove sulfur from motor fuels. “Prop 2” is a constitutional amendment adopted by voters in 1993 that provides ad valorem tax relief for certain pollution control equipment.  Applications for an exemption must be filed with Texas Commission on Environmental Quality (TCEQ) for a determination of whether the equipment qualifies.  Since the passage of the law, some companies have been trying to stretch its meaning to avoid paying their fair share of property taxes.

The refineries argued that – because the hydrotreaters make fuel that is used in vehicle motors and other engines burn cleaner – TCEQ should exempt them from property taxes.  The executive director disagreed, reasoning that the refineries’ request goes beyond the original purpose of the exemption.  The exemption was intended to only apply to pollution control equipment installed to reduce pollution at a manufacturing or industrial facility, not to end products that control or reduce pollution.

The executive director’s decision is promising news for cities and other local governments, which collectively stood to lose hundreds of millions of dollars in property tax revenue to oil refineries. The refineries did not appeal the executive director’s decision, but the issue is probably far from dead.

The League will continue to monitor the issue and will provide updates should the refineries choose to appeal the decision. 


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