HBA-SEP C.S.H.B. 3121 77(R)BILL ANALYSIS Office of House Bill AnalysisC.S.H.B. 3121 By: Ritter Ways & Means 4/8/2001 Committee Report (Substituted) BACKGROUND AND PURPOSE Current law entitles a person to an exemption from ad valorem taxation for all or part of real and personal property used to control pollution. However, there has been some dispute over what is a reasonable percentage to be exempted because of changes to or the addition of new production equipment that results in an environmental improvement. C.S.H.B. 3121 specifies that rules adopted by the Texas Natural Resource Conservation Commission establish specific standards by which applications for the determination of whether property is used for pollution control be uniform and equal and ensure that property used for the production of goods and services not be exempt. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the Texas Natural Resource Conservation Commission in SECTION 1 (Section 11.31, Tax Code) of this bill. ANALYSIS C.S.H.B. 3121 amends the Tax Code to require the executive director of the Texas Natural Resource Conservation Commission (TNRCC) to send by regular mail a copy of a letter stating the determination of whether property is used for pollution control to the chief appraiser of the appraisal district for the county in which the property is located. Not later than the 20th day after the date of receipt of the issued letter, the person seeking the exemption or the chief appraiser is authorized to appeal the determination to TNRCC. TNRCC is required to consider the appeal at the next regularly scheduled TNRCC meeting for which adequate notice may be given. The person seeking the determination and the chief appraiser are authorized to testify at the meeting. The bill authorizes TNRCC to remand the matter to the executive director for a new determination or deny the appeal and affirm the executive director's determination. The same procedure applies for a new determination as it does for an original. The bill requires, rather than authorizes, TNRCC to adopt rules to implement provisions regarding such property that establish specific standards for considering applications for determinations. The rules are required to be sufficiently specific to ensure that determinations are equal and uniform and allow for determinations that distinguish the proportion of property that is used to control, monitor, prevent, or reduce pollution from the proportion of property that is used to produce goods or services. The bill prohibits the executive director of TNRCC from making a determination that property is pollution control property unless the property meets the specified standards. A chief appraiser is required to accept a final determination by the executive director as conclusive evidence that the facility, device, or method is used wholly or partly as pollution control property. EFFECTIVE DATE September 1, 2001. COMPARISON OF ORIGINAL TO SUBSTITUTE C.S.H.B. 3121 modifies the original by setting forth appeal procedures regarding determinations of whether property is used for pollution control rather than requiring the chief appraiser to challenge the determination under the Administrative Procedure Act. The substitute requires the executive director of the Texas Natural Resource Conservation Commission (TNRCC) to send a copy of the letter stating the determination by regular mail to the chief appraiser of the appraisal district in which the property is located. While the original requires TNRCC rules to ensure that property used for the production of goods and services be determined not exempt, the substitute specifies that TNRCC rules must allow for determinations that distinguish the proportion of property that is used to control, monitor, prevent, or reduce pollution from the proportion of property that is used to produce goods or services.