Could new gas-and-electricity study rules be applied retroactively to support equipment, and could Texas require engineer-prepared or reviewed energy audits?

Plain-English summary

The Executive Counsel concluded that the rule concerning support equipment should not be applied retroactively. Instead, it was to apply prospectively. Energy studies therefore had to divide use into periods before and after the rule's effective date because support equipment could not be counted for exemption purposes after that date.

The attached August 28 response addressed a separate objection to requiring future energy audits to be performed or reviewed by an engineer. It said the emergency rule responded to inadequate audits and did not change the taxpayer's underlying duty to prove that electricity or gas was used predominantly for exempt purposes. It cited Texas Attorney General Opinion JM-756 as supporting the engineer requirement.

What this means for you

The historical correspondence separated retroactivity from proof standards. The support-equipment change applied only going forward, but future exemption studies still had to follow the new engineer-review requirement.

Common questions

Was the support-equipment rule applied retroactively? No.

Why did studies need separate periods? Support equipment could be considered before, but not after, the rule's effective date.

Could Texas require an engineer to prepare or review future audits? The letter said yes and cited Attorney General Opinion JM-756.

Does the body discuss restaurants? No.

Citations and references

• Texas Attorney General Opinion JM-756 (1978), cited as authority for requiring engineer-prepared or reviewed energy studies

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8709L0846F07

Original ruling text

September 8, 1987

Dear ***:

I apologize for not answering your second question, I did not realize you were
asking a question concerning the application of the rules to support equipment.

While my answer to your initial question remains unchanged, I am of the opinion
the rule should not be applied retroactively to support equipment.

As you point out, this would very likely result in equal treatment of
taxpayers.

Therefore, I have advised the tax policy section the rule should be applied
prospectively regarding the support equipment. This, of course, will require
any studies you submit to be divided as to periods before and after the
effective date of the rule since the support equipment can not be taken into
account for exemption purposes for periods after that date.

I hope this satisfactorily answers your second question.

Sincerely,

Wade Anderson
Executive Counsel

August 28, 1987

Dear ***:

Mr. Bullock asked me to respond to your letter of August 21, 1987, concerning
the amendment to our rule on gas and electricity.

Specifically, you object to the requirement that all energy audits in the
future must be performed or reviewed by an engineer.

In answer to your objections, the rule was filed on an emergency basis because
there were so many inadequate energy audits being conducted. This ultimately
cost taxpayers if refunds are made, and it is later discovered the energy
studies are incorrect.

Taxpayers qualifying for the exemption now are not being discriminated as
against those who qualified in the past. Both were under the same obligation
to establish electricity and/or gas was used predominantly in an exempt manner.

As you are aware, the Attorney General advised us in Tex. Atty. Gen. Op. No.
JM-756 (1978) that we could require energy studies to be prepared or reviewed
by engineers. Following your reasoning, such a study could not be required for
years since the energy was used and the sales tax paid prior to any rule.

In summary, manufacturers and processors have always been required to provide
the predominant use of their electricity and/or gas was for exempt purposes if
they were to be exempted. The new rule does not change this; it simply
protects taxpayers who might otherwise be persuaded to submit inadequate
studies to their detriment.

Sincerely,

Wade Anderson
Executive Counsel