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In 1993 the Texas legislature and the voters of Texas approved a constitutional amendment known as Proposition
2. This measure allows new property and equipment used for pollution control to be moved off the tax roles. With such a property-tax exemption, the state gives an incentive for companies to
meet and, in some cases, go beyond environmental rules, regulations, or statutes.
Under rules adopted in 1994 to implement Proposition 2, companies can apply to the TCEQ to have pollution
control property—a facility, device, or method used to control, reduce, measure or prevent pollution—designated as such. Once such a positive determination is made, the company would then
qualify for a property-tax exemption from the local tax assessor. The property must have been installed after January 1, 1994, thus keeping on the tax rolls any pollution control equipment
previously subject to property taxes. Examples of new equipment eligible for a Proposition 2 exemption include a scrubber put on an industrial smokestack to meet rules under the Federal Clean
Air Act; a dechlorination system in an industry's wastewater plant; or even a change in an industry's production process to prevent the release of a toxic chemical.
Thirty-three other states offer similar incentives to businesses, and supporters argue that without the
measure, industries might prefer locating in another state. Opponents, including some state environmental groups as well as local tax assessor associations, fear the proposal will result in a
massive giveaway of property tax revenue to large corporations. Instead, opponents maintained that keeping the environment clean is quite simply a cost of doing business, and businesses
should not be given incentives to merely comply with the law.
As of May 2000, 4,695 out of 4,827 applications for pollution control equipment or processes had been certified
by the TNRCC for a total of $7.1 billion. About 55 percent of the total valuation—$4.1 billion—was certified from industrial facilities in only three counties: Harris, Jefferson, and
Brazoria. Provided their local tax assessor concurs with the valuation, these applicants will not have to pay property taxes on this equipment.
However, following protests by local tax assessors -- who felt that some property was being improperly
designated as pollution control equipment or being placed at too high a value -- new legislation approved in 2001 by the Texas Legislature allows a local tax assessor to protest a positive
determination by the TCEQ. Thus, the decision can be appealed.* Following the legislation, the TCEQ also adopted new guidance to make the process more understandable both to the applicants and to the tax assessors.
(Sources: Information provided by TNRCC, Proposition Two Division, Status Report for 11/94-5/00; House
Research Organization, 1993 Constitutional Amendments: The November 2 Election [August 30, 1993].)
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