Shelby County faces thousands of dollars in property tax refunds tied to litigation going on statewide
Shelby County taxpayers will likely be footing the bill for hundreds of thousands of dollars worth of property tax refunds being forced upon them due to lawsuits filed against the appraisal district stemming from a Texas Supreme Court ruling which changed the way heavy equipment is valued in the state.
Deborah Riley, Shelby County Tax Assessor-Collector, told the county commissioners at an April 24 meeting that compressors which have been on local tax rolls since 2012 will now have to be removed from tax rolls with local taxing entities like the county being forced to issue refunds on taxes paid.
“This is something we did not have budgeted and that we have received some judgments on some lawsuits,” she said. “These are coming on all across Texas, not just Shelby County.”
Shelby County Chief Appraiser Robert Pigg said the problem likely will end up costing the county several hundred thousands of dollars in required refunds to companies.
“The 2011 Legislature changed the special inventory law with regards to heavy equipment, and made leased equipment available for sale, part of that,” Pigg, said. “They screwed it up royally when they let leased equipment be part of it. It worked fine when it was sales of automobiles, boats and ATVs, but the minute they let leased equipment be involved it became a mess.”
Heavy equipment compressors used in the energy industry and other industries are now being forced off local tax rolls all the way back to 2012 with refunds due the companies for 2013, 2014, 2015, 2016 and 2017.
“This is an unintended consequence of this 2011 bill that nobody saw coming,” Pigg said. “This went all the way to the (state) Supreme Court and the Supreme County ruled against appraisal districts and in favor of the heavy equipment operators and saved them millions of dollars when they did … and that funneled down to us.”
In Shelby County the appraised values of the heavy equipment compressors between 2012 and going forward through 2017 was about $168.4 million.
So far, Riley said the county has refund payments pending of about $124,000, which it has 60 days to process and pay refunds to the heavy equipment operators. She said about $32,751 worth of those refunds were submitted to the commissioners to be paid in April.
Pigg said the county has no choice in the matter.
“This ruling came down in the early part of 2018,” Pigg said. “This is reality, and it is a tremendous burden on counties and school districts that are involved.”
Riley said local officials need to determine how they are going to pay the refunds. Pigg said as an example of the impact, a compressor on the tax rolls in 2011 for a value of about $474,000 would have resulted in taxes to local entities of about $8,900. After the ruling that same piece of equipment would only result in taxes of about $234.
Pigg said it is likely the county could be paying out much more in tax refunds along with 7.5 percent interest in coming months. The is fear among taxing entities that the adverse rulings could be expanded beyond heavy compressors to oil wells and gas wells to give big business favorable tax rulings.
“This is the worst law I've ever seen passed by our legislature,“ Pigg said. “This is money taken from Shelby County is losing that the rest of us have to make up in taxes. It is taken from our tax base permanently.”
Shelby County Auditor Clint Porterfield recommended the county set up a special compressor litigation account so the refunds are not co-mingled with other accounts. He said the county going to be required to make the refunds
“Right now this is going to have to come out of our contingency (fund),” Porterfield said. But, he said, the county's contingency fund can only cover about one-third of what is being required to be paid.
Porterfield said the county does have a cash balance which, with amendments to the budget, could be used to help pay towards the refunds in the future.
Riley recommended commissioners and other concerned about the issue contact their legislators to voice their feelings.