Co-author Isreal Miller
Local taxing authorities frequently look to out-of-towners to bear what the locals consider the outsiders’ fair share of the burdens of increased oil and gas activity. The counties are often small and rural. (See the Dimmit County road tax).You can’t blame them, but Reeves County (county seat: Pecos, 2010 pop. 13,783), Loving (county seat: Mentone, 2010 pop. 1,340), and Ward (county seat: Monahans, 2010 pop. 10,658) have been reminded by the big guys and gals in Austin that these efforts are not likely to succeed. It didn’t work for Huey Long and it isn’t working well now.
The Texas Supreme Court issued four opinions addressing the taxation of compressors used to deliver natural gas into pipelines: All four were consolidated for briefing with another case, EXLP Leasing, LLC v. Galveston Central Appraisal District. EXLP v. Galveston addressed most, if not all, of the issues raised in each of the four cases at hand. Specifically, the court upheld Texas Tax Code § 23.1241(b), which values the compressors based on the lease revenue they generated during the previous tax year divided by twelve. EXLP v. Galveston also determined that the taxable situs for the compressors was the county in which EXLP Leasing maintained a business address and storage yard (Washington County) and not in the various counties in which the equipment might otherwise be physically located or leased (e.g., Galveston County).
Ward County Appraisal District v. EES Leasing LLC et al, raised a third issue: Whether the compressors are “heavy equipment” under Texas Tax Code § 23.1241(a)(6). The court determined that they were. The compressors are as self-powered as any heavy equipment that relies on an integrated combustion engine.
In Reeves County Appraisal District and Loving County Appraisal District v. MidCon Compression, L.L.C., the court addressed the same two issues from EXLP v. Galveston but noted that the parties had not asked it to determine whether taxes were properly paid in Ector and Gray Counties (where MidCon contended it maintained yards from which the compressors located in Reeves and Loving were leased). The parties only asked the court to determine whether the compressors were taxable in Reeves and Loving Counties. The court held that the compressors were not taxable in Reeves and Loving and concluded it need not decide whether MidCon properly paid taxes in Ector and Gray Counties.
In Reeves County Appraisal District and Loving County Appraisal District v. Valerus Compression Services, et al Valerus moved for summary judgment that taxes on the compressors were properly declared and paid in Harris County, not in Loving County. The court remanded the case to the trial court for additional evidence to determine whether Harris County (which Valerus contends is its principal place of business) was the proper tax situs for the compressors. But EXLP v. Galveston clarifies that taxable situs is tethered to where the dealer maintains its inventory. The company did not argue that the compressors are part of an inventory maintained in Harris County. If it is, that fact was not established simply because Harris County is Valerus’s principal place of business.
Loving County Appraisal District v. EXLP Leasing, et al tracked perfectly the issues and holdings of EXLP v. Galveston.
Four cases deserve two musical interludes:
We often pay tribute to rock and rollers who’ve passed on to the big encore in the sky. Here’s a great one whom you might think is dead. He’s still alive at 86. This next one is so bad it it’s neither musical nor an interlude.”Cultural appropriation” often isn’t, but here is a grievous example of one that is.
Here’s a musical trifecta: girl band you haven’t heard of; great girl guitar player; sad, classic country song done well.