An opinion recently issued by the Texas Attorney General appears to call into question the ability of county governments to grant property tax abatements for wind energy generation equipment. Given both the large investment in generation equipment required for wind energy development and the important role that property tax abatements play in project economics, the opinion is generating a great deal of discussion and uncertainty in Texas amongst wind energy developers and local elected officials alike.
At issue in the opinion was a situation involving a wind farm that was sited on land that was being leased by the developer/owner of the project and for which property tax abatement was being sought. The opinion begins with the proposition that Section 312.402(a) of the Tax Code authorizes counties to "execute a tax abatement agreement with the owner of taxable real property." The opinion additionally notes that real property is defined under the Tax Code to include fixtures and improvements. However, citing case law, the opinion observes that "[f]ixtures and improvements owned by the owner of real property are also real property, but ordinarily improvements owned by a lessee of real property are personalty." Therefore, the opinion concludes that since the fixtures and improvements in the situation at hand were owned by the developer and not the land owner, the improvements are personalty and are not eligible for an abatement under Section 312.402(a).
To read the opinion, click here.
A similar issue has now been raised with respect to school district tax limitation agreements under Chapter 313 of the Tax Code in an opinion request filed with the Office of the Attorney General by the Comptroller of Public Accounts. In the request, the Comptroller notes that proposed rules issued last year would have defined the owner of a leasehold interest as an "owner" under the definition of "qualified property" for purposes of Section 313.021(2). However, one commenter questioned this aspect of the rule and cited a prior Attorney General opinion relating to tax-exempt property under Chapter 312 as well as some statutory language in Chapter 313 to argue that only the "owner of the land" can seek a limitation agreement under Chapter 313. No opinion has been issued by the Attorney General in connection with this request, but it is indicative of the potential for additional property tax issues with impacts for wind development.
Both the opinion in GA-0600 and the request filed by the Comptroller with respect to Chapter 313 create uncertainty with respect to economic development incentives of vital importance to the continued successful development of wind energy facilities in Texas.
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