Mid-Level Texas Appeals Court Clarifies Procedures for Challenging TCEQ Tax Exemption Decisions

The Dallas Court of Appeals, a mid-level Texas appeals court, issued an opinion clarifying the procedures for challenging a TCEQ tax exemption decision, Panda Sherman Power v. Grayson Central Appraisal District.

The opinion makes clear that challenges to a TCEQ tax exemption determination may only be made through an appeal in Travis County (Austin) District Court.  TCEQ’s determination may not be challenged by appeal of the local appraising authority’s action.

Tax Exemption for Pollution Abatement Equipment
Texas law allows certain pollution abatement equipment to receive exemptions from property taxes; the exemption can be for all or part of the cost.  To get the exemption an entity must apply to the Executive Director (“ED”) of the Texas Commission on Environmental Quality (“TCEQ”) who will determine the extent of exemption.

Panda Sherman applied for an exemption for some heat recovery steam generators and the ED determined no exemption.  Panda Sherman appealed the ED’s determination to TCEQ’s full Commission, which upheld the ED’s determination of no exemption.  Panda Sherman did not appeal the full Commission’s determination to the Travis County District Court, where appeals of TCEQ action generally must be taken.  Instead, after Grayson Central Appraisal District (“GCAD”) indicated, based on TCEQ’s determination, it would not allow the tax exemption, Panda Sherman appealed GCAD’s action to the court in Grayson County.

No Local Discretion and No Local Appeal
Panda Sherman argued that GCAD had discretion to allow the exemption despite TCEQ’s determination.  Panda Sherman also argued that TCEQ’s determination was a misinterpretation of Texas law and, as a purely legal matter, it was allowed an exemption.

According to the Dallas Court, GCAD had no discretion but must follow TCEQ’s determination of no exemption.  Further, to the extent Panda Sherman wanted to argue TCEQ’s determination was a misinterpretation of Texas law, the only procedure for making that argument was to file a direct appeal of TCEQ’s determination in Travis County District Court.  By failing to take that action, Panda Sherman had no basis to argue TCEQ’s determination was a misinterpretation of Texas law.

Appeal Tax Exemption Determinations to TCEQ and then in Austin
Unless this case is reversed by the Texas Supreme Court, entities wishing to challenge the ED’s tax exemption determinations should do so by direct appeal first to the full TCEQ Commission and then to Travis County District Court; courts where the local taxing authorities are located will not be able to help.

For a copy of the Dallas Court’s opinion http://search.txcourts.gov/SearchMedia.aspx?MediaVersionID=cd7bdd5f-4beb-475c-9be9-a418483b9d96&MediaID=76ad23a1-b2c2-44d3-be75-bdcc5cda2a88&coa=%22%20+%20this.CurrentWebState.CurrentCourt%20+%20@%22&DT=Opinion