A recent determination by the Texas Commission on Environmental Quality (TCEQ) could lead to an expansion of the property tax exemption for pollution control equipment, also known as the “Prop 2” exemption.  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 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.

On December 5, the executive director of TCEQ recommended that the TCEQ commissioners deny the exemption to several companies seeking to exempt heat recovery steam generators from property taxation.  The executive director reasoned that, because heat recovery steam generators are used only for energy-recovery in the production process and don’t actually limit emissions from output exhaust, they don’t fit the definition of “pollution control” property.  However, the TCEQ commissioners have unanimously disapproved the executive director’s recommendation, finding that the legislature likely intended at least a partial exemption for the equipment because of its dual-production and pollution control benefits.  The commissioners vacated the executive director’s recommendation, and remanded the exemption applications for further consideration. 

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