The 15th Court of Appeals has upheld a trial court order granting SOAH’s and a SOAH ALJ’s plea to the jurisdiction in a case in which a taxpayer asked SOAH to conduct an evidentiary hearing on whether Harris County Appraisal District properly classified certain personal property as industrial property.
Exxon Mobil Global Services v. State Office of Administrative Hearings and Keneshia Washington in her Official Capacity as Administrative Law Judge (No. 15-24-00034-CV; December 5, 2025) arose from a dispute over the Harris County Appraisal District’s (HCAD) appraisal of certain property owned and operated by an Exxon subsidiary, Exxon Mobil Global Services (EMGS), in Houston. For the tax year 2020, HCAD appraised certain computer and telecommunications equipment at $45,487,537. During that year, as part of a consolidation of Exxon’s operations, EMGS moved out of its leased premises in Houston to a new site in northern Harris County. Despite EMGS’s assertion that most of the equipment had been moved prior to the January 1, 2021 assessment date, HCAD simply rolled over the 2020 appraisal to 2021. EMGS duly filed a protest, which the Harris County ARB denied. EMGS appealed to SOAH instead of district court. HCAD moved to dismiss, arguing that it had classified EMGS’s property as industrial and that SOAH had no jurisdiction over appeals involving the appraisal of industrial property. The ALJ granted the plea and dismissed the appeal. EMGS filed a petition for mandamus in Travis County district court, seeking to compel SOAH and the ALJ to withdraw the ruling and conduct an evidentiary hearing regarding whether the property was in fact industrial property. SOAH and the ALJ filed a plea to the jurisdiction, which the trial court granted. EMGS appealed.
In an opinion by Justice Field, the court of appeals affirmed. In 2014 the Legislature extended statewide the pilot program under which an aggrieved taxpayer could opt to pursue a property tax appeal in either district court or SOAH. Pursuant to the statute (§ 2003.904, Government Code), however, a taxpayer may not appeal to SOAH an ARB order establishing the appraised value of industrial property. SOAH’s jurisdiction over property tax appeals was thus statutorily limited. The court further observed that EMGS could have challenged HCAD’s classification of its property as industrial under § 41.41(a)(10), Tax Code, which authorizes a property owner to protest “any other action of the chief appraiser, appraisal district, or appraisal review board that applies to and adversely affects the property owner.” EMGS opted not to protect the classification and went to SOAH instead.
EMGS argued that the ALJ’s refusal to hold an evidentiary hearing on the classification issue was ultra vires, i.e., the ALJ had a ministerial duty to hold the hearing. The court held that she did not such a duty because the Legislature did not authorize it. And, unlike a district court, which must consider its own jurisdiction in every case, SOAH can only consider what the Legislature tells it to. Because the Legislature specifically excluded industrial property from SOAH’s jurisdiction, the ALJ could not have ruled otherwise and did not act ultra vires. Had the ALJ held the hearing, she would have acted ultra vires. EMGS argued further that the ALJ violated procedural due process, but the court rejected this claim for the same reason: no legislatively conferred jurisdiction, no violation of due process. Besides, the court added, EMGS could have challenged the classification by protest and appeal to district court, but chose not to do so.
Chief Justice Brister dissented. He would have held that the ALJ should have heard the evidence and made a determination of whether the property was industrial or personal property, a finding which would have determined SOAH’s jurisdiction one way or the other.
This is an interesting decision, and he split decision may well attract SCOTX’s attention. Perhaps it would be helpful to briefly review the public policy rationale for the initial SOAH appeal pilot program (2009) and its extension in 2014. As both opinions observe, the idea of giving a taxpayer an alternative appeal sprung from a desire to allow taxpayers to weigh the costs of the alternatives and pick their poison accordingly. So why did the Legislature exclude industrial property from a SOAH appeal in the first place? This distinction dates way back to the adoption of the Peveto Act in 1979, which established appraisal districts, the ARB process, and the de novo appeal to district court. Alongside the appraisal process, however, the Comptroller conducts a Property Value Study (PVS) for purposes of assuring that appraisal districts are appraising property at or within a small confidence interval of market value. Since school district property values determine the amount of state funding for school districts, and in order for such funding to be equitably distributed, every appraisal has to do its job. If they don’t, the Comptroller will step in and do it for them, whether the ISD or appraisal district likes it or not.
The Comptroller requires appraisal districts to classify property in one of 23 categories (industrial and manufacturing real property are F2; industrial and manufacturing property are L2). As the Comptroller’s 2022 Texas Property Tax Assistance Classification Guide states, the misclassification of property “leads to inaccurate taxable value estimates,” and appraisal districts “should review property classifications annually and make corrections within their systems” prior to submitting the data to the Comptroller. If a district fails to correct an error, the Comptroller may send a “Methods and Assistance Program” team to review the district’s methodology. This is a long way of saying that Chief Justice Brister is correct that getting the classification right is of the utmost importance, not only to the taxpayer but to the state.
The Comptroller defines “industrial real property” (F2) as the land and improvements used by businesses that add value to the product through development, manufacturing, fabrication, or processing of that product.” It defines personal industrial and manufacturing property (L2) as “the personal property of businesses that add value to a product through development, manufacturing, processing or storage of that product.” This category includes “manufacturing machinery and equipment, computers, barges, commercial watercraft, trucks, heavy equipment, inventory stock, drilling rigs, portable tools, furniture and fixtures, raw materials, goods in process and finished goods.” So, when § 2003.904 allows an appeal to SOAH “only … of a determination of the appraised or market value made by an appraisal review board in connection with real or personal property, other than industrial property,” it refers to property classified as F2 or L2.
Because industrial and manufacturing facilities have such high taxable values, and many of them have unique characteristics, they are the subject of much haggling between property owners and appraisal districts. In general, both sides employ experts in the valuation of industrial real and personal property to make their best case to the ARB, in the event a negotiated value cannot be reached. One of the reasons the Legislature exempted industrial property from SOAH review is intensive attention that such property already receives from expert appraisers. If there is a problem with classification, it should be flagged and addressed at this stage. As a practical matter, industrial facilities have generally been in place for a long time, and the contours of the F2 and L2 categories are generally clear to appraisers on both sides of the table.
As an experienced appraiser will tell you, “market value” doesn’t exist, only a range of possible values. Where industrial property is concerned, this is particularly true. The exclusion of industrial property from SOAH appeal represents a political compromise, largely involving appraisal districts with significant concentrations of such property (like Harris County). These districts have long experience in dealing with this category and well-established relationships with property owners and property tax consultants. If a dispute can’t be resolved in the ARB process both sides (as well as the taxing units whose revenue depends on the outcome, including the school districts whose state funding is on the line) generally want to preserve a judicial appeal in the county where the property is located, not in Austin before an ALJ. This allows them to put their experts on the stand in a bench or jury trial where the stakes are highest. And, truth be told, many legislators from these areas like it that way and don’t want SOAH involved in appraising these enormous economic assets in their districts.
All of this is to say that perhaps the Legislature is the best place to address the scope of SOAH’s jurisdiction in one way or another. If SOAH becomes embroiled in second-guessing the appraisal district’s classification of industrial property, it might well undo the current law in some respects. If we want SOAH to hear appeals involving industrial property, let’s change the law to take out the exclusion. Or, if we want SOAH to determine its own jurisdiction in an appeal by holding an evidentiary hearing on whether the appraisal district erred in classifying property, let’s do that.
The current system seeks to maintain an exceedingly delicate balance between taxpayers and taxing units. The appraisal districts stand between them. It is important to note that the Legislature has done a lot since 2009 to improve the professional qualifications for chief appraisers and make the system more taxpayer-friendly. There is a significant consensus among property tax professionals who do business in multiple states that Texas has the best property tax system in the country. Individual taxpayers may disagree with that when they get their appraisal notices in the spring, but Texas has more due process and more remedies for taxpayers (including a robust unequal appraisal standard) than anywhere else. Is it perfect? Of course not; no system of taxation is. Property taxes now account for nearly half of total state and local tax revenue in Texas, dwarfing the biggest state tax—the sales tax—by nearly double. It’s also levied every year, which makes it visible and contentious (unlike the sales tax, which we ordinarily pay as part of the cost of a taxable good or service). Consequently, changes in the property tax system are among the most important policy decisions the Legislature can make. And from what we can tell, there will be a lot of decisions to be made in 2027.
