Carbo v. Board of Tax Assessors

Summarized by Danielle Scott , U.S. Bankruptcy Court, Southern District of West Virginia
14 hours 23 min ago

Case Type:

Business

Case Status:

Reversed and Remanded

Citation:

24-20439 (5th Circuit, Mar 05,2026) Not Published

Tag(s):

Ruling:

The Fifth Circuit reversed both judgments of the bankruptcy and district courts. The Fifth Circuit held that the 2008 MOU requires tax assessors to consider economic obsolescence and inutility when valuing CARBO's property for CY 2018-2022.

Procedural context:

CARBO Ceramics ("CARBO") filed Chapter 11 in the Southern District of Texas in March 2020. Wilkinson County tax authorities filed a proof of claim for unpaid ad valorem taxes covering CY 2018-2020. CARBO initiated an adversary proceeding seeking to (1) object to the tax claims; (2) obtain a refund of alleged overpayments; and (3) assert that the tax authorities violated due process by failing to forward CARBO's tax appeals to the Georgia Board of Equalization in accordance with state law. The bankruptcy court determined that CARBO could not claim economic obsolescence or inutility deductions under the 2008 MOU. The bankruptcy court concluded that CARBO owed the County $3,395,872.59 with interest. The district court affirmed the bankruptcy court's decision. CARBO then appealed the decision to the United States Court of Appeals for the Fifth Circuit, challenging the bankruptcy and district courts' interpretation of the 2008 MOU.

Facts:

CARBO Ceramics ("CARBO") manufactures ceramic proppants used in hydraulic fracturing. Local government entities sought to attract CARBO to build manufacturing plants in Wilkinson County, Georgia. To provide tax incentives in compliance with the state constitution, CARBO entered into a bond-for-title agreement with the Development Authority of Wilkinson County ("Authority"). Under this arrangement, the Authority issued bonds and obtained title to CARBO's facilities, which CARBO then leased back. This arrangement allowed for the Authority's interest to be exempt from property taxes, but CARBO's leasehold interest was taxable. CARBO did not pay standard property taxes, but instead made payments in lieu of taxes (PILOTS). In the parties' 2008 Memorandum of Understanding ("2008 MOU") provided that the property would be valued at cost less depreciation, with depreciation calculated according to the Georgia Department of Revenue requirements. Those requirements incorporate the Georgia Appraisal Procedures Manual, which applies a cost approach valuation method that considers physical deterioration, functional obsolescence, and economic obsolescence. CARBO's products were in high demand until a market downturn after 2014. CARBO argued that this was a force majeure event that excused its compliance under the 2008 MOU, and that the tax assessors were required to consider inutility and economic obsolescence when valuing its property. The county tax assessors refused to consider those deductions when calculating taxes for the disputed tax years. CARBO filed for bankruptcy under Chapter 11.

Judge(s):

Jones, Graves, and Rodriguez

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