Part I.
Texas Natural Resource Conservation Commission
Chapter 17.
Tax Relief for Property Used for Environmental Protection
30 TAC §17.1, 17.2, 17.4, 17.6, 17.10, 17.12, 17.20
The Texas Natural Resource Conservation Commission (TNRCC
or commission) proposes new §§17.1, 17.2, 17.4, 17.6, 17.10, 17.12,
and 17.20, concerning Tax Relief for Property Used for Environmental Protection.
The proposed new chapter will replace existing 30 TAC Chapter 277, concerning
Use Determination for Tax Exemptions for Pollution Control Equipment, which
will be repealed in concurrent action in this edition of the
Texas Register.
The primary revisions are procedural clarifications
to existing §277.12 and §277.20 (new §17.12 and §17.20),
concerning Application Review Schedule and Application Fees. The proposed
changes to §17.12 and §17.20 clarify the procedures for reviewing
applications for use determinations when the applicant does not adequately
respond to a deficiency notice. As part of the commission's regulatory reform
initiative, the former provisions of Chapter 277 (now §§17.1, 17.2,
17.4, 17.6, 17.10, 17.12, and 17.20) are rewritten for clarity, readability,
and improved organization. The new chapter has been renamed Tax Relief for
Property Used for Environmental Protection as a part of the regulatory reform
effort in order to clarify the intent of the rules.
The commission has also conducted its review of the rules in 30 TAC Chapter
277, as required by the General Appropriations Act, Article IX, §167.
The results of that review are concurrently published in the Rules Review
section of this edition of the
Texas Register.
EXPLANATION OF PROPOSED RULES
The program for providing tax relief for pollution control property was
established under a constitutional amendment listed as Proposition 2 on the
state ballot on November 2, 1993. This amendment added §1-1 to Article
VIII of the Texas Constitution. The 73rd Legislature added §11.31, concerning
Pollution Control Property, to Chapter 11 of the Tax Code and §26.045,
concerning Rollback Relief for Pollution Control Requirements, to Chapter
26 of the Tax Code to implement the new constitutional provision. Chapter
277 was adopted on September 30, 1994, to establish the procedures for obtaining
a tax exemption under Proposition 2. The enacting legislation was to encourage
business, industry, and political subdivisions to take voluntary steps to
reduce pollution through prevention, control, monitoring, or reduction of
pollution.
The commission proposes to move the regulations currently located in Chapter
277 to new Chapter 17 to be consistent with the commission's policy to place
general or multimedia rules within the Chapter 1-99 series of the commission's
rules in Title 30 of the Texas Administrative Code. The 200 number range is
intended for water related rules. Since the tax exemption program is multimedia,
covering air, water, and waste, it should be located with the rules of general
applicability, which is in the 1-99 range. This chapter redesignation will
require the repeal of Chapter 277 in concurrent action with the adoption of
the new Chapter 17. In addition, as part of the commission's regulatory reform
initiative, the former provisions in Chapter 277 are rewritten for clarity,
readability, and improved organization. These changes are for purposes of
simplification and clarification only and do not involve substantive changes
in the requirements of this chapter. In general, these changes involve using
shorter sentences, limiting each citation to one main concept, reordering
requirements into a more logical sequence, and using more commonplace terminology.
Changes made for regulatory reform purposes will not be specifically noted
in this preamble.
The definition of Predetermination in §17.2 (former §277.2) is
renamed to "Predetermined equipment list" and revised to better reflect the
concept of using a list of property that is predetermined to be pollution
control property. A new §17.4(c) states that the executive director will
maintain a list of property that is predetermined, either wholly or partially,
to be pollution control property. The current practice of periodically updating
that list will not be changed by the proposed revisions to this rule.
The proposed change to §17.12 (former §277.12) will clarify the
consequences of an applicant failing to respond adequately to a notice of
deficiency. The current rule language merely states that the application will
be returned, during either the administrative completeness review or the technical
review, if the applicant fails to provide an adequate response to a notice
of deficiency within the 30-day time period. Some applicants have interpreted
"returned" to mean that the deficiencies can be addressed after the end of
the 30-day response period and that the application can continue to be reviewed
by the executive director. The intent of this section has always been to completely
terminate the review of the application. This intent was demonstrated by the
existing language allowing applicants to refile their applications if one
was returned. Further, §17.20(b) (former §277.20(b)) states that
fees are forfeited for applications that are returned. To clarify the intent
of the rule, the term "returned" will be replaced in §17.12(2)(A) and
(B) (former §277.12(2)) with "sent back to the applicant without further
action by the executive director and the application fees will be forfeited
under §17.20(b) of this title."
The proposed change to §17.20(c) (former § 277.20(c)) deletes
the words "Proposition 2" and the reference to the TNRCC Proposition 2 Section.
The proposed revision allows the fees to be sent to the address indicated
on the application for a use determination and will allow the program to be
renamed without a rule change.
FISCAL NOTE
Jeff Grymkoski, Strategic Planning and Appropriations Section, has determined
that for the first five-year period the sections are in effect, there will
be no significant fiscal implications for state or local government as a result
of enforcing or administering the sections. There are no fiscal implications
caused by repealing the provisions of Chapter 277 and readopting them in the
new Chapter 17. The clarification for the treatment of applications with deficiencies
is not a new requirement, so there will be no new fiscal implications. The
regulatory reform changes have no fiscal impacts.
PUBLIC BENEFIT
Mr. Grymkoski also has determined that for each year of the first five
years the sections are in effect, the anticipated public benefit will be a
better understanding of the rules, resulting in more efficient operation of
the program. The proposed concurrent repeal of Chapter 277 and adoption of
new Chapter 17 will clarify for the public and the regulated community the
specific intent of the rules, which were established to provide the procedure
and mechanism for an owner, including political subdivisions, of pollution
control property, to apply to the commission for a finding, either negative
or positive, that the property is used wholly or partly for the prevention,
monitoring, control, or reduction of air, water, or land pollution. A person
is entitled to a property tax exemption for all or part of real and personal
property that the person owns that is used wholly or partly as a facility,
device, or method for the control of air, water, and land pollution. Removing
the program name from the rules will allow future changes to the program name
without requiring a rule change and will relate better to the actual purpose
and function of the program. Current rule language regarding actions taken
by the executive director on deficient applications is often confusing to
applicants. The proposed revisions are intended to eliminate this confusion.
Recodification of the rules from Chapter 277 to Chapter 17 will comply better
with the commission's policy regarding general or multimedia rules. There
are no changes to the fundamental procedures of this voluntary program.
SMALL BUSINESS ANALYSIS
The proposed concurrent repeal of Chapter 277 and adoption of new Chapter
17 clarifies the specific intent of the rules, which were established to provide
the procedure and mechanism for an owner, including political subdivisions,
of pollution control property, to apply to the commission for a finding, either
negative or positive, that the property is used wholly or partly for the prevention,
monitoring, control, or reduction of air, water, or land pollution. A person
is entitled to a property tax exemption for all or part of real and personal
property that the person owns that is used wholly or partly as a facility,
device, or method for the control of air, water, and land pollution. The rules
provide ad valorem property tax relief through tax exemptions for capital
expenditures for pollution control. Small businesses are not required to participate
in the program. There are no changes to the fundamental procedures of this
voluntary program nor are there adverse economic impacts to small businesses.
DRAFT REGULATORY IMPACT ANALYSIS
The commission has reviewed the proposed rulemaking in light of the regulatory
analysis requirements of Texas Government Code (the Code), §2001.0225,
and has determined that the rulemaking is not subject to §2001.0225 because
it will not adversely affect in a material way the economy, a sector of the
economy, productivity, competition, jobs, the environment, or the public health
and safety. The proposal does not meet any of the four applicability requirements
listed in §2001.0225(a).
This proposal does not exceed a standard set by federal law and is specifically
required by state law. The proposed rule changes do not exceed a standard
set by federal law. Federal law does not require states to allow tax abatements
for the installation of pollution control property.
This proposal does not exceed an express requirement of state law and is
not specifically required by federal law. The proposed rules are required
to implement Tax Code, §11.31 and 26.045. The proposed changes do not
exceed any of the requirements of the Texas Constitution, Article VIII, §1-1,
or of Tax Code, §11.31 or §26.045.
This proposal does not exceed the requirements of a delegation agreement
or contract between the state and federal government as there is no agreement
or contract between the commission and the federal government concerning tax
abatements for pollution control property.
The rules are not proposed solely under the general powers of the commission
aside from a specific state law. Rather, the rules are proposed under Texas
Water Code, §5.102 and §5.103, and Tax Code, §11.31 and §26.045.
TAKINGS IMPACT ANALYSIS
The staff has prepared a takings impact assessment for these rules under
Texas Government Code, §2007.043. The following is a summary of that
assessment. Chapter 277 implements the provisions of the Texas Constitution,
Article VIII, §1-1, and Tax Code, §11.31 and §26.045, which
provide ad valorem property tax relief through tax exemptions for capital
expenditures for pollution control property. There is an economic benefit
to businesses and industries that participate in the program in the form of
a tax exemption for capital expenditures for pollution control property. Many
changes throughout the rules are intended to implement the commission's guidelines
on regulatory reform, as well as provide clarifications to existing rule language.
The proposed rule revisions do not substantively change the program requirements
that are already in place. The proposed rules will not make existing rules
less stringent. Adoption and enforcement of the rule amendments and repeals
will not create a burden on private real property.
COASTAL MANAGEMENT PROGRAM CONSISTENCY REVIEW
The commission has determined that the proposed rulemaking does not meet
the criteria for an action or actions subject to the Texas Coastal Management
Program (CMP) in accordance with the Coastal Coordination Act of 1991, as
amended (Texas Natural Resources Code, §§33.201 et seq.), and the
commission's rules in 30 TAC Chapter 281, Subchapter B, concerning Consistency
with the Texas Coastal Management Program. As required by 31 TAC §505.11(b)(2)
and §505.22(a) and 30 TAC §281.45(a)(3) relating to actions and
rules subject to the CMP, agency rules governing air pollutant emissions,
on-site sewage disposal systems, or underground storage tanks must be consistent
with applicable CMP goals and policies. The rules are not agency rules governing
air pollutant emissions, on-site sewage disposal systems or underground storage
tanks. The purpose of the rules is to encourage the installation of pollution
control property by ensuring that the capital investment used to comply with
environmental mandates does not result in an increase in a facility's property
taxes. Therefore, this rulemaking is not subject to the CMP.
SUBMITTAL OF COMMENTS
Comments may be submitted to Lisa Martin, Office of Policy and Regulatory
Development, MC 205, P.O. Box 13087, Austin, Texas 78711-3087 or faxed to
(512) 239-4808. All comments should reference Rule Log Number 98050-277-AD.
Comments must be received by 5:00 p.m., March 15, 1999. For further information,
please contact Gary McArthur, Office of the Chief Engineer, (512) 239-1917,
or Forrest Brooks, Office of Policy and Regulatory Development, (512) 239-0578.
STATUTORY AUTHORITY
The new sections are proposed under Texas Water Code, §5.102 and §5.103,
which provide the commission with the authority to adopt rules necessary to
carry out its powers, duties, and policies, and Tax Code, §11.31 and
§26.045, which designate the commission as the reviewing authority to
make the pollution control property use determinations.
The proposed new sections implement Texas Water Code, §5.102 and §5.103,
and Tax Code, §11.31 and §26.045.
§17.1. Scope and Purpose.
The purpose of this chapter is to establish the procedure and mechanism
for an owner, including political subdivisions, of pollution control property,
to apply to the commission for a determination of pollution control use.
§17.2. Definitions.
Unless specifically defined in the TCAA, the TSWDA, the Texas Water
Code (TWC), or the Texas Health and Safety Code (THSC), or in the rules of
the commission, the terms used by the commission have the meanings commonly
ascribed to them in the field of pollution control. In addition to the terms
which are defined by the TCAA, the TSWDA, TWC, and THSC, the following words
and terms, when used in this chapter, shall have the following meanings, unless
the context clearly indicates otherwise.
(1)
Installation-The act of establishing, in a designated
place, something that is put into place for use or service.
(2)
Pollution control property-A facility, device, or
method for control of air, water, or land pollution as defined by the Tax
Code, §11.31(b).
(3)
Predetermined equipment list-A list of property,
either wholly or partially, that the executive director has determined is
pollution control property.
(4)
Use determination-A finding, either positive or negative,
by the executive director that the property is used wholly or partially for
pollution control purposes.
§17.4. Applicability.
(a)
To obtain a positive use determination, the pollution
control property must be used, constructed, acquired, or installed wholly
or partly to meet or exceed laws, rules, or regulations adopted by any environmental
protection agency of the United States, Texas, or a political subdivision
of Texas, for the prevention, monitoring, control, or reduction of air, water,
or land pollution. In addition, pollution control property must meet the following
conditions.
(1)
Property must have been constructed, acquired, or installed
after January 1, 1994.
(2)
Land must include only the portion of the land acquired
after January 1, 1994, that actually contains pollution control property.
(3)
Equipment, structures, buildings, or devices must
not have been taxable by any taxing unit in Texas on or before January 1,
1994, except that if construction of pollution control property is in progress
on January 1, 1994, that portion of the property constructed, acquired, or
installed after January 1, 1994, is eligible for a positive use determination.
(4)
Property purchased from another owner is eligible
for a positive use determination if it is acquired, constructed, or installed
by the new owner after January 1, 1994, will be used as pollution control
property, and was not taxable by any taxing unit in which the property is
located on or before that date.
(b)
The executive director shall determine the portion of
the pollution control property eligible for a positive use determination.
(c)
The executive director shall maintain a predetermined
equipment list of property that is predetermined to qualify, either wholly
or partially, as pollution control property.
§17.6. Property Ineligible for Exemption from Taxation.
The following are not exempt from taxation and are not entitled to
a positive use determination under this chapter:
(1)
property is not entitled to an exemption from taxation
solely on the basis that the property is used to manufacture or produce a
product or provide a service that prevents, monitors, controls, or reduces
air, water, or land pollution;
(2)
property that is used for residential purposes, or
for recreational, park, or scenic uses as defined by Tax Code, §23.81;
(3)
motor vehicles; and
(4)
property that was subject to a tax abatement agreement
executed before January 1, 1994. However, property acquired, constructed,
or installed after expiration of a tax abatement agreement could be eligible
for a positive use determination.
§17.10. Application for Use Determination.
(a)
In order to be granted a use determination a person or
political subdivision shall submit to the executive director:
(1)
a Texas Natural Resource Conservation Commission application
form or a similar reproduction; and
(2)
the appropriate fee, under §17.20 of this title
(relating to Application Fees).
(b)
An application must be submitted for each unit of pollution
control property or for each facility consisting of a group of integrated
units which have been, or will be, installed for a common purpose.
(c)
If the applicant, other than a political subdivision,
desires to apply for a use determination for a specific tax year, the application
must be postmarked no later than January 31 of the following year. Applications
postmarked after this date will not be processed until after review of all
applications postmarked by the due date is completed and without regard for
any appraisal district deadlines.
(d)
The application shall contain at least the following:
(1)
the anticipated environmental benefits from the installation
of the pollution control property for the control of air, water, or land pollution;
(2)
the estimated cost of the pollution control property;
(3)
the purpose of the installation of such facility,
device, or method, and the proportion of the installation that is pollution
control property;
(4)
the specific law, rules, or regulations that are
being met or exceeded by the use, installation, construction, or acquisition
of the pollution control property;
(5)
if the installation includes property that is not
used wholly for the control of air, water, or land pollution, sufficient cost
or other information, presented by the person or political subdivision seeking
the use determination, that demonstrates to the satisfaction of the executive
director the proportion of the installation that is pollution control property;
(6)
any information that the executive director deems
reasonably necessary to determine the eligibility of the application;
(7)
if the property for which a use determination is
sought has been purchased from another owner who previously used the property
as pollution control property, a copy of the bill of sale or other information
submitted by the person or political subdivision that demonstrates, to the
satisfaction of the executive director, that the transaction involves a bona
fide change in ownership of the property and is not a sham transaction for
the purpose of avoiding tax liability; and
(8)
the name of the appraisal district for the county
in which the property is located.
§17.12. Application Review Schedule.
Following submission of the information required by §17.10 of
this title (relating to Application for Use Determination), the executive
director shall determine whether the pollution control property is used wholly
or partly for the control of air, water, or land pollution. If the determination
is that the property is used partly for pollution control, the executive director
shall determine the proportion of the property used for pollution control.
(1)
As soon as practicable, the executive director shall send
notice by regular mail to the chief appraiser of the appraisal district for
the county in which the property is located that the person has applied for
a use determination under this chapter.
(2)
Within 30 days of receipt of an application for use
determination, the executive director shall mail written notification informing
the applicant that the application is administratively complete or that it
is deficient.
(A)
If the application is deficient, the notification shall
specify the deficiencies, and allow the applicant 30 days to provide the requested
information. If the applicant does not submit an adequate response, the application
will be sent back to the applicant without further action by the executive
director and the application fee will be forfeited under §17.20(b) of
this title (relating to Application Fees).
(B)
Additional technical information may be requested within
60 days of issuance of an administrative completeness letter. If the applicant
does not provide the requested technical information within 30 days, the application
will be sent back to the applicant without further action by the executive
director and the application fee will be forfeited under §17.20(b) of
this title.
(C)
If an application is sent back to the applicant under
subparagraph (A) or (B) of this paragraph, the applicant may refile the application
and pay the appropriate fee as required by §17.20 of this title.
(3)
The executive director shall determine whether
the property is used wholly or partly to control pollution. The executive
director is authorized to grant positive use determinations for some or all
of the property included in the application that is deemed pollution control
property.
(A)
If a positive use determination is made, the executive
director shall issue a use determination letter to the applicant which describes
the proportion of the property that is pollution control property.
(B)
If a negative use determination is made, the executive
director shall issue a denial letter explaining the reason for the denial.
§17.20. Application Fees.
(a)
Fees shall be remitted with each application for a use
determination as required in paragraphs (1)- (3) of this subsection.
(1)
Tier I Application-A $50 fee shall be charged for applications
for property that is on the predetermined equipment list, as long as the application
seeks no variance from that use determination.
(2)
Tier II Application-A $1,000 fee shall be charged
for applications for property that is used wholly for the control of air,
water, and/or land pollution, but not designated as eligible for predetermination.
(3)
Tier III Application-A $2,500 fee shall be charged
for applications for property used partially for the control of air, water,
and/or land pollution.
(b)
Fees shall be forfeited for applications for use determination
which are sent back under §17.12(2) of this title (relating to Application
Review Schedule). An applicant who submits an insufficient fee will receive
a deficiency notice in accordance with the procedures in §17.12(2) of
this title. The fee must be remitted with the response to the deficiency notice
before the application will be deemed complete.
(c)
All fees shall be remitted in the form of a check or money
order made payable to the Texas Natural Resource Conservation Commission (TNRCC)
and delivered with the application to the TNRCC, at the address listed on
the application form.
This agency hereby certifies that the proposal has been reviewed
by legal counsel and found to be within the agency's legal authority to adopt.
Filed with the Office of the Secretary of State, on
January 29, 1999.
TRD-9900604
Margaret Hoffman
Director, Environmental Law Division
Texas Natural Resource Conservation Commission
Proposed date of adoption: June 9, 1999
For further information, please call: (512) 239-1966
Chapter 277.
Use Determinations for Tax Exemptions for Pollution Control Property