Private prison attempt to claim homeowner tax credit rebuffed

In an astonishing display of hubris, private prison corporation GEO Group has been trying to benefit from a Texas sales tax exemption available only to homeowners. In a  decision issued this month, a state appellate court halted GEO’s efforts, concluding that a prison is not a home even to the people locked inside. Geo Group, Inc. v. Hegar, No. 03-15-00726-CV, slip op. (Tex. Ct. App. Aug. 10, 2017).

Under Texas law, gas and electricity sold for “residential use” is not subject to the state’s sales tax. GEO claimed that facilities it owns or operates fit this description, thus it should not be required to pay almost $1.4 million in sales tax. The state comptroller of public accounts disagreed with GEO, as did a state trial court.

On appeal, the intermediate appellate court took issue with GEO’s insistence that its prisons serve a residential purposes. It’s true that inmates reside in GEO’s prisons, but it stretches the English language to claim that there is no meaningful difference between a home and a prison cell. There is a “qualitative difference” between the two, the appellate court concluded, noting that GEO’s “buildings used for confinement and detention, with housing being a necessary component of that detention.” Moreover, homeowners don’t operate their homes for a commercial purpose, as GEO does with its prisons. No word on whether GEO will appeal to the state’s highest court.

GEO’s position is outlandish, but not internally inconsistent. Like its major competitor, CoreCivic (formerly known as the Corrections Corporation of America), GEO fashions itself as a real estate company. Since 2013, both companies have formally been structured as real estate investment trusts (REITs). As the name suggests, REITs are financial vehicles through which people can invest in real estate. Styled like this, GEO sees itself as dealing in real estate rather than imprisoned people. Texas budget officials and courts, at least, can see past that.