Court Opinion

ID: 4342597
Source: CourtListenerOpinion
Date Created: 2018-11-19 09:31:25.834864+00
Date Added: 2024-06-11T14:49:02.138927
License: Public Domain

IN THE SUPREME COURT OF TEXAS
                                         ══════════
                                           No. 15-0970
                                         ══════════

REEVES COUNTY APPRAISAL DISTRICT AND LOVING COUNTY APPRAISAL DISTRICT,
                             PETITIONERS

                                                 v.

      VALERUS COMPRESSION SERVICES, A TEXAS LIMITED PARTNERSHIP AND
             VALERUS COMPRESSION SERVICES MANAGEMENT, LLC,
     A TEXAS LIMITED LIABILITY COMPANY, GENERAL PARTNER, RESPONDENTS

            ══════════════════════════════════════════
                         ON PETITION FOR REVIEW FROM THE
                 COURT OF APPEALS FOR THE EIGHTH DISTRICT OF TEXAS
            ══════════════════════════════════════════

                                          PER CURIAM

       Valerus Compression Services owns and leases out compressor stations used to deliver

natural gas into pipelines. Some of these compressors are in use in Reeves and Loving counties.

In response to a 2012 amendment to the Tax Code that included leased heavy equipment in a

statutory formula used to value heavy equipment held by dealers for sale, Valerus began paying

taxes on the compressors located in Reeves and Loving counties to Harris County, where Valerus

contends it maintains its principal place of business. But Reeves and Loving counties continued to

place the compressors on their appraisal rolls at full market value, arguing that their presence

within the counties fixes taxable situs there.

       The respective appraisal-review boards sided with the counties. Valerus sought judicial

review. In the trial court, the counties argued Tax Code sections 23.1241 and 23.1242—the
provisions the legislature amended in 2012—are unconstitutional on their face and as applied

because the statutory formula for valuing leased heavy equipment bears no relationship to any

measure of market value as required by the Texas Constitution. The counties also argued that taxes

on the compressors were due to Reeves and Loving counties, not Harris County. Finally, they

argued the compressors are not “heavy equipment” under Tax Code section 23.1241(a)(6), and

therefore do not fall under the challenged statutory framework. The trial court sided with the

counties on the first two issues but with Valerus on the third.

       Both parties appealed, but the counties dropped their argument that Valerus’s compressors

are not “heavy equipment” under section 23.1241(a)(6). The court of appeals reversed the trial

court’s determination that sections 23.1241 and 23.1242 are unconstitutional but affirmed its

conclusion that the compressors’ taxable situses are Reeves and Loving counties rather than Harris

County. See 478 S.W.3d 20, 27–35 (Tex. App.—El Paso 2015).

       Both parties sought our review and this case was consolidated for briefing with four other

similar cases. On March 2, 2018, we issued an opinion in EXLP Leasing, LLC v. Galveston Central

Appraisal District, 554 S.W.3d 572 (Tex. 2018). That opinion is largely dispositive of the issues

presented in this petition for review.

       In EXLP Leasing, we considered the same constitutional challenges considered by the court

of appeals in this case and held that the Galveston County appraisal district failed to rebut the

presumed constitutionality of Tax Code sections 23.1241 and 23.1242. Specifically, we rejected

the district’s argument that “for constitutional purposes, ‘value’ under article VIII, section 1(b)

means the actual market value a willing buyer would pay a willing seller for the compressors at

issue.” Id. at 576. Instead, we acknowledged that it is the legislature’s province to set valuation for

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tax purposes so long as it does not act unreasonably, arbitrarily, or capriciously. Id. at 576–81. We

also rejected the same argument made in this case that sections 23.1241 and 23.1242 violate the

constitution’s equal-and-uniform provision found in article VIII, section 1(a). Id. at 580–81.

       The court of appeals in this case likewise concluded that “the constitution does not

prescribe a particular formula or standard for determining the ‘market value’ of property.” 478
S.W.3d at 28. Noting that the method for valuing leased heavy equipment in sections 23.1241 and

23.1242 is “neither novel nor unique,” the court of appeals considered it “eminently reasonable to

require dealers of inventory held for lease or rent in the ordinary course of business to pay taxes

only on inventory actually leased or rented.” Id. at 29–30. The court of appeals went further than

we did by considering the reasonableness of the underlying statutory framework. Cf. EXLP

Leasing, 554 S.W.3d at 580 (concluding we “need not consider” EXLP’s “vigorous defense of

sections 23.1241 and 23.1242 as an efficient and equitable statutory scheme” because “[t]he county

made its stand on the idea that the constitution compels a market-value approach” and “offers no

other reason why the statute is unconstitutional”). Nonetheless, the court of appeals’ holding that

the appraisal districts failed to establish sections 23.1241 and 23.1242 are unconstitutional on the

basis that property must be taxed in proportion to its market value is consistent with our opinion

in EXLP Leasing. Similarly, its conclusion that the counties failed to establish that those provisions

violate the constitution’s equal-and-uniform provision is consistent with our rejection of that

argument in EXLP Leasing. Id. at 580–81. On these issues, the court of appeals’ judgment is

affirmed.

       On the question of where the compressors at issue are properly taxed, however, the court

of appeals’ conclusion differs from ours in EXLP Leasing. We concluded that “sections 23.1241

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and 23.1242, read together, reflect the legislature’s intent to fix the situs of dealer-held heavy

equipment at the location where the dealer maintains its inventory rather than at the various

locations where the equipment might otherwise by physically located.” Id. at 583. Accordingly,

we held that Tax Code section 21.02, which contains default provisions for determining taxable

situs, “does not control the taxable situs of property covered by section 23.1242.” Id. at 585. The

court of appeals, however, concluded that Valerus failed to rebut the presumption that Reeves and

Loving counties are the compressors’ taxable situses under section 21.02. See 478 S.W.3d at 35.

Because we held differently in EXLP Leasing, we reverse the court of appeals’ judgment on the

issue and render judgment that the taxable situses of Valerus’s compressors located in Reeves and

Loving counties are controlled by Tax Code sections 23.1241 and 23.1242.

       Valerus further moved for summary judgment that taxes on the compressors at issue “were

properly declared and paid in Harris County, not in Loving County.” On the record before us,

however, we cannot say that Valerus was entitled to judgment that taxes were properly paid in

Harris County. In EXLP Leasing, we held that “sections 23.1241 and 23.1242, read together,

reflect the legislature’s intent to fix the situs of dealer-held heavy equipment at the location where

the dealer maintains its inventory rather than at the various locations where the equipment might

otherwise by physically located.” 554 S.W.3d at 583. We went on to hold that the compressors at

issue, which were physically located in Galveston County, were properly taxable in Washington

County because they were part of EXLP’s “Gulf Coast Region fleet” and, as such, were “assigned”

to EXLP’s “business location and storage yard in Washington County,” which EXLP used to

“manage the inventory of compressors in the Gulf Coast region.” Id. at 585–86.

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       In this case, however, Valerus paid taxes in Harris County, where Valerus says it maintains

its principal place of business. Our holding in EXLP Leasing, however, clarifies that taxable situs

is tethered to “the location where the dealer maintains its inventory.” Id. at 583. See also id. (“The

process for prepayment of taxes indicates legislative intent to fix the tax situs for heavy equipment

at the business location where the dealer maintains its inventory . . . .”). Valerus does not argue

that the compressors at issue in this case are part of an inventory maintained in Harris County,

though that may be so. But if it is, that fact is not established simply because Harris County is

Valerus’s principal place of business.

       For these reasons, and without hearing oral argument, see TEX. R. APP. P. 59.1, we affirm

the court of appeals’ judgment in part and reverse in part, rendering judgment that sections 23.1241

and 23.1242 control the taxable situs of the compressors at issue in this case. However, because

summary judgment could not have been granted on Valerus’s argument that it properly paid taxes

in Harris County, we remand to the trial court for further proceedings on where taxes for the

compressors at issue are due under Tax Code sections 23.1241 and 23.1242.

OPINION DELIVERED: November 16, 2018

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