Since 2012, Baker Botts has filed over 800 lawsuits, on behalf of multiple taxpayers, against more than 100 appraisal districts that have refused to recognize that oil field compressors held for lease should be taxed under the favorable “heavy equipment” provisions of Section 23.1241 Texas Tax Code. Appraisal districts contend that the statute violates Article VIII, Section 1 of the Texas Constitution by not taxing heavy equipment at fair value. Five cases have been decided by district and appellate courts, and are currently pending before the Texas Supreme Court.
In four of the cases—two filed by Archrock and two filed by other taxpayers—the Eighth Court of Appeals (El Paso) ruled in favor of the taxpayers on constitutionality. In the fifth case, the Fourteenth Court of Appeals (Houston) remanded for further evidence on whether the statute is constitutional. In doing so, the Fourteenth Court conflated the legal question of the Legislature’s reasonableness in enacting a statute, with the factual question of whether a particular outcome was reasonable.
Archrock successfully petitioned the Texas Supreme Court to review the Fourteenth Court’s decision. The Texas Supreme Court, however, has not granted review of the appraisal districts’ petitions regarding the Eighth Court’s decisions.
These cases have generated legislative activity during each of the last three sessions. Currently there are four bills that could impact this matter—and more have been promised.
The Baker Botts team included Evan Young, Paul Elliott and Ben Geslison, in the Litigation Department; Renn Neilson, Matt Larsen, Derek Young, and Gordon Martens in the Tax Department; and paralegal assistance from Evelyn Lazear and Nan Kennedy.
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