EXLP Leasing LLC and EES Leasing LLC v. Loving County Appraisal District
08-13-00348-CV
| Tex. Crim. App. | Sep 23, 2015Background
- EXLP Leasing LLC and EES Leasing LLC leased 43 compressor packages in Loving County as part of a larger pool of about 1,025 units; they earned $15,632,670 in rent/lease income in 2011.
- The legislature amended Texas Tax Code §§ 23.1241–23.1242 effective January 1, 2012, changing how heavy equipment inventory held for lease or rent is valued for ad valorem tax; the formulas now use 12 months of total revenue (sales plus lease payments).
- Appellants argued the 43 Loving County compressors qualify as heavy equipment and should be taxed using the new lease-based valuation; LCAD argued they were taxable personal property in Loving County with market value set by the appraisal roll.
- The trial court held the compressors were heavy equipment but ruled Sections 23.1241–23.1242 unconstitutional as applied and placed situs in Loving County for tax purposes.
- On appeal, the court reversed in part and affirmed in part, holding the statutes not unconstitutional as applied and upholding Loving County as the proper taxable situs for the 43 units.
- The court reasoned that the 12-month revenue-based method for inventory held for lease or rent is constitutionally permissible and that equal/uniform taxation is not violated, and it rejected the argument that situs must be fixed at a dealer’s business address.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| constitutionality of 23.1241–23.1242 as applied | LCAD contends the statutes are unconstitutional as applied because they ignore willing-buyer/seller market value. | EXLP/EES assert the statutes are a constitutionally valid method to value leaseinventory and reflect actual income. | Statutes are not unconstitutional as applied. |
| taxable situs of the compressor packages | Situs should not be in Loving County; dealer-situs concepts and forms imply Midland County as the proper location. | Situs is properly Loving County under the mobilia rule and related provisions; the statute does not fix situs at a dealer’s business address. | Taxable situs in Loving County was proper; trial court did not err. |
Key Cases Cited
- Enron Corp. v. Spring Independent School Dist., 922 S.W.2d 931 (Tex. 1996) (taxation must be uniform; value determined as provided by law)
- FM Properties Operating Co. v. Fort Worth, 947 S.W.2d 724 (Tex. 1997) (inventory valuation may differ by type and be income-based for certain inventories)
- Expo Motorcars, L.L.C. v. Harris County Appraisal Dist., 2009 WL 2232017 (Tex.App.—Houston [1st Dist.] 2009) (inventory valuation based on market consideration for motor vehicles upheld)
- City of Austin v. Cannizzo, 267 S.W.2d 808 (Tex. 1954) (definition of market value for tax purposes; willing buyer–seller concept)
- Davis v. City of Austin, 632 S.W.2d 331 (Tex. 1982) (presumption of tax situs in the taxing jurisdiction; burden to rebut)
- Tenet Hospitals Ltd. v. Rivera, 445 S.W.3d 698 (Tex. 2014) (facial vs. as-applied challenges to statutes)