Bosque Disposal Sys., LLC v. Parker Cnty. Appraisal Dist.
555 S.W.3d 92
| Tex. | 2018Background
- Taxpayers (owners of Parker County tracts) each had saltwater disposal wells on their land; wells consist of subsurface formations plus surface and downhole equipment and generate income.
- For 2012–2014 the Parker County Appraisal District created separate appraisal accounts: one for the surface land and one for the "saltwater disposal facilities," valuing the wells by the income method.
- Taxpayers challenged, arguing separate appraisal of wells and land (which remain unsevered and commonly owned) was illegal double taxation and outside the Tax Code definitions of real property.
- Trial court granted taxpayers summary judgment declaring the separate "estate or interest" accounts void as double taxation; the court of appeals reversed and rendered judgment for the District on that issue and remanded other claims.
- The Texas Supreme Court granted review and, applying Matagorda County Appraisal District v. Coastal Liquids Partners, L.P., affirmed the court of appeals: separate appraisal of the wells and land is not per se unlawful; double taxation must be proven by evidence of actual double-counting.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether separately appraising unsevered saltwater disposal wells and surface land violates Tax Code/Constitution as illegal double taxation | Separate accounts for wells and land impermissibly tax the same property twice because the wells are part of the land and not separately owned | Separate accounts approximated total market value; District did not include wells' value in surface-land account, so summing accounts lawfully measures market value | Court: No per se illegality; Coastal Liquids controls — separate accounts permitted unless evidence shows value was actually counted twice |
| Whether the wells qualify as taxable real property rather than non-taxable intangibles | Wells are merely a "right to inject" (permit-dependent) and thus intangible and non-taxable | Wells have substantial physical components and increase land's market value, so they are taxable real property (improvement or estate/interest) | Court: Wells are tangible and part of real property; characterization as intangible does not defeat taxation absent proof |
| Whether use of the income method to value the wells improperly "taxes a business" | Using income method effectively taxes the taxpayer's business and thus is improper | Tax Code authorizes income method when appropriate; income from property can reflect market value of real property | Court: Income method is authorized and not per se improper; methodology can be challenged on remand if misapplied |
| Standard for proving double taxation when overlapping categories are used | Presume double taxation when the same aspect is labeled twice (or when not severed) | Require evidence showing the value was actually double-counted in appraisal accounts | Court: No presumption; plaintiff must prove actual double-counting based on what each account included (case-by-case factual inquiry) |
Key Cases Cited
- Matagorda Cty. Appraisal Dist. v. Coastal Liquids Partners, L.P., 165 S.W.3d 329 (Tex. 2005) (holds underground man-made storage facilities may be appraised separately; no presumption of double taxation; inquiry depends on what each account included)
- Valero Ref.-Tex., L.P. v. Galveston Cent. Appraisal Dist., 519 S.W.3d 66 (Tex. 2017) (appraisal districts may divide a tract and its improvements into separate components with separate accounts)
- Key Energy Servs., LLC v. Shelby Cty. Appraisal Dist., 428 S.W.3d 133 (Tex. App.-Tyler 2014) (upholds separate appraisal of saltwater disposal wells absent evidence the wells' value was double-counted)
- Combs v. Roark Amusement & Vending, L.P., 422 S.W.3d 632 (Tex. 2013) (tax law looks to economic realities, not legal abstractions)