Proposition 2: Tax Exemptions For Pollution Control Property

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Proposition 2Tax ExemptionsFor Pollution
Control Property
Presentation by Trey J. BlockerTexas
Aggregates Concrete Association
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What is the Proposition 2 Program?

• In 1993, Texas voters approved a constitutional
  amendment (Proposition 2) to provide a property
  tax exemption for property that a company
  installs in response to an environmental rule,
  regulation or law.
• The intent of the law was to ensure that capital
  expenditures made to comply with environmental
  rules do not raise a facilitys property taxes.
• Only property that has been installed after
  January 1, 1994, can be considered.

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What does this tax exemption mean to you?

• A tax exemption for pollution control property
  reduces your tax liability effectively lowering
  the cost of controlling pollution.
• If you add a baghouse, remediate soil, or do some
  other project to comply with local, state, or
  federal environmental regulations, all or part of
  the cost of that project can be exempt from
  property taxes.
• Even a change that increases productivity can
  qualify for a partial exemption if there is an
  environmental benefit.

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How do you get the tax exemption?

• Send the Texas Commission on Environmental
  Quality a written application seeking a use
  determination for your equipment.
• If the property qualifies, TCEQ will send you a
  positive use determination letter.
• The use determination letter must be submitted to
  the county tax appraisal district to receive the
  tax exemption.

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Property that is not eligible

• The following types of property are not eligible
  
• motor vehicles
• residential property
• property for recreational, park, or scenic uses
• property subject to a tax-abatement agreement
  executed before January 1, 1994, except for
  property acquired, constructed, or installed
  after the agreement has expired.
• While land is eligible, only the part that
  actually contains the pollution control property
  is eligible land used solely as a buffer zone is
  not eligible.

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Types of Eligible Equipment

• dedicated-purpose vehicles used solely for
  pollution control (vacuum trucks, street
  sweepers, surface-watering trucks, spill-response
  vehicles)
• land (acquired after January 1, 1994) with
  pollution control property (e.g., the actual
  square footage containing a baghouse, scrubber,
  settling pond, or wastewater containment) and
• used equipment (if it has been acquired,
  constructed, or installed by the new owner after
  January 1, 1994 and if it has not been taxable by
  the propertys taxing unit).

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Predetermined Equipment List

• The TCEQ has a list of equipment it determined
  is either wholly or partially pollution control
  property. Most of the property in the PEL is
  rated at 100 percent pollution control. For
  equipment rated at less than 100 percent
  (partial), TCEQ staff has determined the
  appropriate percentages that qualify as pollution
  control property.

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Partial Determinations

• Property that is not used solely for pollution
  control is eligible for only a partial use
  determination. This includes property that has
  both an environmental benefit and a production
  increase or process improvement. There may also
  be a by-product generated that has resale or
  reuse value.
• Example replacing a process reactor vessel
  with one that produces a higher-quality product
  at a higher or more efficient production rate,
  and also generates fewer waste streams or air
  emissions. The environmental benefits make it
  eligible for a partial determination. Partial
  determinations, or Tier III applications, must
  use the cost analysis procedure.

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Examples of Equipment on PEL Baghouse
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Examples of Equipment on PEL Paint Booth
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Examples of Equipment on PEL Sweeper Truck
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Examples of Equipment on PEL Dust Collector
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Examples of Equipment on PEL Water Truck
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Examples of Equipment on PEL Retention Pond
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Examples of Equipment on PEL Shredder
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How Much Money?

• Building Materials
• Applications Received 703
• Total Dollar Value 643,184,611
• Average per Application 148,114
• Minimum 1,252
• Maximum 167,600,000

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How Much Money?

• Manufacturing Equipment
• Applications Received 443
• Total Dollar Value 448,384,016
• Average per Application 181,249
• Minimum 500
• Maximum 102,662,044

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Application Fees

• Tier I for property on the predetermined
  equipment list (PEL), with no variances
  requested, the fee is 150 all property on the
  application must be on the PEL or be necessary to
  install equipment on the PEL.
• Tier II for property not on the PEL and used
  100 for pollution control, the fee is 1,000.
• Tier III for property not on the PEL and
  partially used for pollution control, the fee is
  2,500.

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Appealing a Determination

• An applicant, or the chief appraiser of the
  county where the property is located, may appeal
  a use determination.
• A written request must be received by the TCEQ
  Chief Clerk within 20 days of receiving the
  determination.
• The appeal must contain the Use Determination
  application number, the name of the applicant,
  name of facility, the appropriate appraisal
  district, and the basis for the appeal.

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Frequently Asked Questions

• Q When should you apply?
• A Applications must be postmarked by January
  31st for property constructed or installed during
  the previous calendar year.
• The county tax appraisal district may have a May
  1 deadline for businesses to submit tax appraisal
  information.

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Frequently Asked Questions

• Q What if I install identical or similar
  equipment at more than one location?
• A You may submit a single application for all
  equipment.
• Q Do I need to apply each year?
• A No. You only have to apply with TCEQ once.
  The positive use determination is good for the
  life of the property. The appraisal district may
  require you to refile your exemption request each
  year, but they must send you notice.

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Frequently Asked Questions

• Q What do I do if my facility is located in more
  than one county?
• A If the pollution control property is located
  in one county, then list that appraisal district
  on the application. If the property is located
  in more than one county, list all appraisal
  districts on the application.
• Q What if my project includes equipment that is
  on the PEL and nonlisted equipment?
• A The application must be filed at the
  appropriate level for the non-listed equipment.
  The PEL-listed items would be included in that
  application.

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Frequently Asked Questions

• Q What happens if I fail to file for a use
  determination during the year that the property
  was installed?
• A The property will be placed on the tax roles
  and you will pay property taxes on it. You may
  file a use determination in a subsequent year and
  have the property removed from the tax roles.
  You will not receive a refund for the taxes that
  have been paid.
• Q Will an inspector come look at my facility?
• A No. The filing of a use determination
  application will not trigger an inspection of
  your facility.

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