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Valero Refining-Texas, L.P. v. Galveston Central Appraisal District: Strategic Opportunity?

The Texas Supreme Court recently handed an owner of a Texas oil refinery a significant victory in Valero Refining-Texas, L.P. v. Galveston Central Appraisal District, No. 15-0492, 2017 WL 727276 (Tex. Feb. 24, 2017).  In a suit relating to the 2011 tax year, Valero asserted that the Galveston Central Appraisal District (GCAD) had appraised its refinery unequally as compared to other refineries.  GCAD had appraised various components of Valero’s refinery in several separate tax accounts; Valero’s challenge related to the appraisals of some, but not all, of those accounts.  One of the issues was whether Valero was required to compare the entire value of its refinery to the entire value of other refineries in its unequal appraisal analysis.  The Supreme Court concluded that, as a matter of law, Valero was entitled to limit its property tax suit to the selected tax accounts and the portions of its refinery to which they corresponded.

In its opinion, the Supreme Court focused on the practical effect of GCAD’s having assigned the various parts of Valero’s refinery to different tax accounts.  The Court reasoned that because GCAD had discretion in determining how to appraise Valero’s property, including by assigning it to various tax accounts, it could not argue that Valero’s contest to the appraised value of some of those accounts was somehow deficient: “If component parts of a property cannot be valued in isolation, then as a matter of law, separate accounts are not appropriate.  It follows that if tax accounts are appropriate, then as a matter of law, the property in each account can be valued in isolation.  This is transposition logic, not a factual dispute.”

The Supreme Court’s decision is likely to give rise to strategic opportunities for both Texas property owners and appraisal districts.  When considering whether to contest a property tax appraisal, property owners — including owners of refining and industrial facilities, power generation facilities, and other complex properties — should carefully analyze and consider how their properties are assigned to tax accounts, how the appraisal district assigns similar properties to tax accounts, and which tax accounts to challenge.  Property owners should also be wary if an appraisal district re-assigns property among tax accounts and should carefully examine how such changes to their tax accounts may affect their ability to successfully contest future property tax appraisals.  It is worth noting that, during the pendency of this case, GCAD changed its appraisal system to contain the entire value of Valero’s refinery in a single account; it is possible that other appraisal districts could follow suit now that the Supreme Court has ruled in the property owner’s favor in this case.

Copyright 2020 K & L GatesNational Law Review, Volume VII, Number 61

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About this Author

Cynthia Ohlenforst, KL Gates Law Firm, Tax Law Attorney
Partner

Ms. Ohlenforst has a broad tax practice, and extensive experience in state and federal tax planning and controversy matters (including litigation) and in legislative work. Her dispute resolution practice includes multistate litigation and administrative proceedings, and her transactional practice includes contract negotiation, e-commerce, internet, and technology transactions. Ms. Ohlenforst frequently works with the energy, technology, broadcasting, transportation, and airline industries, and has worked with legislators on drafting multiple provisions of the Texas Tax...

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Sam Megally, KL Gates Law Firm, Tax Law Attorney
Partner

Mr. Megally focuses his state and local tax practice on both Texas and multi-state matters, particularly relating to tax planning and controversies involving income tax, sales tax, franchise tax, and property tax. As part of his controversy practice, he has extensive experience representing taxpayers in tax disputes, including administrative proceedings and litigation against the Texas Comptroller, departments of revenue in other states, and local taxing jurisdictions both in and outside of Texas. He has also worked extensively on tax-related legislative representations, both in Texas and in other states. He has substantial experience representing taxpayers in a broad range of industries, including both e-commerce and traditional brick & mortar retailers, travel and tourism companies, air carriers and private aircraft operators, and hospitals and pharmaceutical and health care companies.

214-939-5491
William LeDoux, KL Gates Law Firm, Tax Law Attorney
Associate

Mr. LeDoux’s practice has a broad state and local tax focus with experience in multistate tax planning and controversy matters involving sales, franchise, property, and income taxes and unclaimed property. He has assisted in the representation of taxpayers in administrative and judicial proceedings in various jurisdictions and has advised on the tax implications of various business transactions, including business acquisitions and restructurings, asset and product sales and leases, and tax incentive opportunities.

Mr. LeDoux has assisted in the...

214-939-4908