In a significant tax development for the Texas oil and gas industry, the Texas Supreme Court has agreed to review the appellate court decision in Southwest Royalties v. Glenn Hegar, Comptroller of Public Accounts, setting oral arguments for March 8, 2016. The action sends an important signal of the high Court’s interest in the case, which addresses the taxability of oil and gas production equipment used “below ground.” View the oral arguments on the Texas Supreme Court website.
Ryan, LLC, the largest transaction tax practice in North America, serves as tax advisor to Southwest Royalties and played a key role in developing the case.
“We are encouraged by the Court’s decision to hear this case. It has long been the Firm’s contention that below-ground equipment used in the processing of oil and gas qualifies for the Texas manufacturing exemption,” said G. Brint Ryan, Chairman and CEO of Ryan.
The case was tried in 2012 before Travis County Judge John Dietz, who initially announced from the bench at the conclusion of oral arguments that he was inclined to agree with the taxpayer that “below-ground” equipment used in or during the actual processing of oil and gas qualified for the manufacturing exemption under Texas Tax Code Sec. 151.318. However, Dietz subsequently reversed himself in his written judgment, and the Texas Court of Appeals, Third District, upheld the decision on August 13, 2014.