A recent Texas Supreme Court ruling could cause Henderson and many other counties to make a hefty repayment of taxes they previously collected on heavy equipment.
The Henderson County Commissioners Court on Tuesday heard from Kurt Sweeney, attorney for the Henderson County Appraisal District, concerning the Supreme Court decision and resulting litigation filed by companies attempting to receive a refund for the years the suit was being argued. There was no action taken regarding the issue on Tuesday.
"Henderson County is looking at a base tax refund, were we to "wave the flag" on this litigation today, of $58,376," Sweeney said. "If you add interest to that, which they are statutorily entitled to that's $73,574."
The interest total is only an estimate, because it's a moving target.
"Our inclination is to fight this, because we've got some good legal arguments." Sweeney said.
Most entities being sued are opting to "wave the flag," and agree to pay, to avoid the risk of growing interest charges.
About 24 entities are choosing to fight the litigation.
Sweeney said Henderson County will not be hit as hard as some heavily industrialized counties. One in East Texas is facing a bill of about $3 million. The LaPoynor Independent School District could have to pay $182,000.
"What we don't know and really have very little way of knowing, if any way of knowing, is how many other companies are out there that might sue," Sweeney said.
The change in designation of heavy equipment will cause the state to lose about 6.5 % of its taxable value, Sweeney said.
"That doesn't sound huge, but that amounts to a 6.5% tax increase for the rest of us." Sweeney said.
In the tax code, heavy equipment is defined as self-propelled, self-powered, or pulled type equipment that weighs at least 1,500 pounds and is intended to be used for agricultural, construction, industrial, maritime, mining, or forestry uses.
According to the Texas Comptroller's Office, the state Supreme Court released its opinion in EXLP Leasing LLC et al. v. Galveston Central Appraisal District, on Friday, March 2, 2018. The Court reversed the Fourteenth Court of Appeals’ decision and rendered judgment in favor of the petitioners.
In 2011, the Texas Legislature amended the Texas Tax Code to streamline the appraisal process for all such “heavy equipment inventory” that is held by a dealer for sale or lease. The Galveston Central Appraisal District, and over 100 other appraisal districts, refused to follow the new regulations. The appraisal districts contended that the statute does not tax heavy equipment inventory at fair market value, and thus violates Article VIII, Section 1 of the Texas Constitution.
They argued the gas compressors should not be classified as heavy equipment because they are not self-propelled (they are mounted on skids), not self-powered, and once installed at a gas well, they are there permanently.
They also argued that because they were located in a specific location for more than a temporary time, they acquired a taxable situs in the county where they were located.
The Court ruled against the Appraisal Districts.